10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549  

_______________________________

FORM 10-Q

_______________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 001-38186

_______________________________  

Nesco Holdings, Inc.

(Exact name of registrant as specified in its charter)

_______________________________

Delaware	84-2531628
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6714 Pointe Inverness Way, Suite 220

Fort Wayne, IN 46804

(Address of principal executive offices, including zip code)

(800) 252-0043

(Registrant’s telephone number, including area code)

_______________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	NSCO	New York Stock Exchange
Redeemable warrants, exercisable for Common Stock, $0.0001 par value	NSCO.WS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     NO   o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   x    NO   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     YES   ☐     NO  x

The number of shares of common stock of NESCO Holdings, Inc. as of July 31, 2020 was 49,033,903.

Nesco Holdings, Inc. and Subsidiaries

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	Page Number
Item 1.	Unaudited Condensed Consolidated Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	3
	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019	4
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	6
	Unaudited Condensed Consolidated Statements of Stockholders' Deficit for the Three and Six Months Ended June 30, 2020 and 2019	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	35
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
	SIGNATURES	37

2

PART I - FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

Nesco Holdings, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(in $000s, except share data)	June 30, 2020		December 31, 2019
Assets
Current Assets
Cash	$	5,300	$	6,302
Accounts receivable, net of allowance of $4,881 and $4,654 respectively	57,438		71,323
Inventory	32,111		33,001
Prepaid expenses and other	5,369		5,217
Total current assets	100,218		115,843
Property and equipment, net	5,795		6,561
Rental equipment, net	369,269		383,420
Goodwill and other intangibles, net	307,327		308,747
Notes receivable	626		713
Total Assets	783,235		$	815,284
Liabilities and Stockholders' Deficit
Current Liabilities
Accounts payable	$	14,856	$	41,172
Accrued expenses	27,206		27,590
Deferred rent income	1,212		2,270
Current maturities of long-term debt	1,280		1,280
Current portion of capital lease obligations	8,080		5,451
Total current liabilities	52,634		77,763
Long-term debt, net	732,805		713,023
Capital leases	16,290		22,631
Deferred tax liabilities	13,267		12,288
Interest rate collar	8,476		1,709
Total long-term liabilities	770,838		749,651
Commitments and contingencies (see Note 11)
Stockholders' Deficit
Common stock - $0.0001 par value, 250,000,000 shares authorized, 49,033,903 shares issued and outstanding, at June 30, 2020 and December 31, 2019	5		5
Additional paid-in capital	433,589		432,577
Accumulated deficit	(473,831)		(444,712)
Total stockholders' deficit	(40,237)		(12,130)
Total Liabilities and Stockholders' Deficit	$	783,235	$	815,284

See accompanying notes to unaudited condensed consolidated financial statements.

3

Nesco Holdings, Inc.

Condensed Consolidated Statements of Operations (unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000s, except share and per share data)	2020		2019		2020		2019
Revenue
Rental revenue	$	46,984	$	48,125	$	97,978	$	93,767
Sales of rental equipment	4,982		4,332		14,075		11,731
Sales of new equipment	5,418		4,480		12,995		6,830
Parts sales and services	11,097		5,918		25,176		12,019
Total Revenue	68,481		62,855		150,224		124,347
Cost of Revenue
Cost of rental revenue	14,311		12,843		28,097		23,900
Depreciation of rental equipment	19,696		16,944		39,808		33,675
Cost of rental equipment sales	3,536		3,871		11,264		10,005
Cost of new equipment sales	4,777		3,697		11,431		5,303
Cost of parts sales and services	9,224		4,471		20,584		9,321
Major repair disposals	595		384		1,295		1,146
Total cost of revenue	52,139		42,210		112,479		83,350
Gross Profit	16,342		20,645		37,745		40,997
Operating Expenses
Selling, general and administrative expenses	11,018		7,305		22,636		14,884
Licensing and titling expenses	736		583		1,557		1,236
Amortization and non-rental depreciation	800		749		1,516		1,519
Transaction expenses	227		1,559		963		4,069
Other operating expenses	1,042		629		1,758		779
Total Operating Expenses	13,823		10,825		28,430		22,487
Operating Income	2,519		9,820		9,315		18,510
Other Expense
Interest expense, net	15,949		14,850		31,963		29,843
Other (income) expense, net	783		(9)		6,804		(22)
Total other expense	16,732		14,841		38,767		29,821
Loss Before Income Taxes	(14,213)		(5,021)		(29,452)		(11,311)
Income Tax Expense (Benefit)	(1,063)		402		(333)		836
Net Loss	$	(13,150)	$	(5,423)	$	(29,119)	$	(12,147)
Loss per Share:
Basic and diluted	$	(0.27)	$	(0.25)	$	(0.59)	$	(0.56)
Weighted-average-common shares outstanding:
Basic and diluted	49,033,903		21,660,638		49,033,903		21,660,638

See accompanying notes to unaudited condensed consolidated financial statements.

4

Nesco Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss (unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000s)	2020		2019		2020		2019
Net loss	$	(13,150)	$	(5,423)	$	(29,119)	$	(12,147)
Other comprehensive loss:
Interest rate collar (net of taxes of $173 and $285, respectively)	—		(476)		—		(388)
Other comprehensive loss	—		(476)		—		(388)
Comprehensive loss	$	(13,150)	$	(5,899)	$	(29,119)	$	(12,535)

There were no reclassifications from accumulated other comprehensive loss reflected in the Unaudited Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2020 and 2019.

See accompanying notes to unaudited condensed consolidated financial statements.

5

Nesco Holdings, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

	Six Months Ended June 30,
(in $000s)	2020		2019
Operating Activities
Net loss	$	(29,119)	$	(12,147)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation	40,369		34,176
Amortization - intangibles	1,462		1,448
Amortization - financing costs	1,515		1,380
Provision for losses on accounts receivable	1,421		1,112
Share-based payments	1,012		180
Gain on sale of rental equipment and parts	(3,838)		(3,260)
Gain on insurance proceeds - damaged equipment	(233)		(387)
Major repair disposal	1,295		1,146
Change in fair value of derivative	6,767		—
Deferred tax (benefit) expense	979		544
Changes in assets and liabilities:
Accounts receivable	10,935		(13,357)
Inventory	(4,313)		(8,864)
Prepaid expenses and other	(152)		(2,412)
Accounts payable	(6,988)		8,020
Accrued expenses and other liabilities	(385)		(683)
Unearned income	(1,058)		(1,719)
Net cash flow from operating activities	19,669		5,177
Investing Activities
Purchase of equipment - rental fleet	(55,421)		(51,734)
Proceeds from sale of rental equipment and parts	19,005		18,187
Insurance proceeds from damaged equipment	2,191		1,427
Purchase of other property and equipment	(1,089)		(3,655)
Other	87		—
Net cash flow from investing activities	(35,227)		(35,775)
Financing Activities
Borrowings under revolving credit facilities	37,574		43,000
Repayments under revolving credit facilities	(19,074)		(9,000)
Repayments of notes payable	(232)		(365)
Capital lease payments	(3,712)		(2,613)
Finance fees paid	—		20
Net cash flow from financing activities	14,556		31,042
Net Change in Cash	(1,002)		444
Cash at Beginning of Period	6,302		2,140
Cash at End of Period	$	5,300	$	2,584
Supplemental Cash Flow Information
Cash paid for interest	$	29,502	$	28,708
Cash paid for income taxes	156		240
Non-Cash Investing and Financing Activities
Transfer of inventory to leased equipment	5,203		2,618
Rental equipment and property and equipment purchases in accounts payable	2,316		19,021
Rental equipment sales in accounts receivable	2,453		623
Insurance recoveries accrued in accounts receivable	702		224

See accompanying notes to unaudited condensed consolidated financial statements.

6

Nesco Holdings, Inc.

Condensed Consolidated Statements of Stockholders' Deficit (unaudited)

				Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Deficit
	Common Stock
(in $000s, except share data)	Shares	Amount
Balance, December 31, 2019	49,033,903	$	5	$	432,577	$	(444,712)	$	—	$	(12,130)
Net loss	—	—		—		(15,969)		—		(15,969)
Share-based payments	—	—		559		—		—		559
Balance, March 31, 2020	49,033,903	$	5	$	433,136	$	(460,681)	$	—	$	(27,540)
Net loss	—	—		—		(13,150)		—		(13,150)
Share-based payments	—	—		453		—		—		453
Balance, June 30, 2020	49,033,903	$	5	$	433,589	$	(473,831)	$	—	$	(40,237)
				Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Deficit
	Common Stock
	Shares	Amount
Balance, December 31, 2018	21,660,638	$	2	$	259,298	$	(417,660)	$	(396)	$	(158,756)
Net loss	—	—		—		(6,724)		—		(6,724)
Share-based payments	—	—		128		—		—		128
Interest rate collar	—	—		—		—		88		88
Balance, March 31, 2019	21,660,638	$	2	$	259,426	$	(424,384)	$	(308)	$	(165,264)
Net loss	—	—		—		(5,423)		—		(5,423)
Share-based payments	—	—		52		—		—		52
Interest rate collar	—	—		—		—		(476)		(476)
Balance, June 30, 2019	21,660,638	$	2	$	259,478	$	(429,807)	$	(784)	$	(171,111)

See accompanying notes to unaudited condensed consolidated financial statements.

7

 Nesco Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1: Business and Organization

Organization

Nesco Holdings, Inc. (“Holdings”), a Delaware corporation, serves as the parent for our primary operating company, NESCO, LLC, an Indiana limited liability company, and its wholly owned subsidiaries (collectively, with Holdings, “we,” “our,” “us,” “Nesco,” or the "Company"), and is engaged in the business of providing a range of services and products to customers through rentals of specialty equipment, sales of parts related to the specialty equipment, and repair and maintenance services related to that equipment.

Our wholly-owned subsidiaries include: NESCO, LLC, an Indiana limited liability company, NESCO Holdings I, Inc., a Delaware corporation, NESCO Finance Corporation, a Delaware corporation, NESCO Investments, LLC, a Delaware limited liability company, NESCO International, LLC, a Delaware limited liability company, and NESCO El Alquiler S. de R.L. de C.V., an operating company in Mexico.

We are a specialty equipment rental provider to the electric utility transmission and distribution, telecommunications and rail industries in North America. Our core business relates to our fleet of specialty rental equipment that is utilized by service providers in infrastructure improvement work. Specifically, we offer our specialized equipment to a diverse customer base, including utilities and primarily contractors, for the maintenance, repair, upgrade and installation of critical infrastructure assets, including distribution and transmission electric lines, telecommunications networks and rail systems, as well as a small percentage for lighting and signage. We rent and sell a broad range of new and used equipment, including bucket trucks, digger derricks, line equipment, cranes, pressure diggers, and underground equipment, which forms our Equipment Rental and Sales ("ERS") segment. To complement our fleet, we also provide a one-stop shop for existing and prospective Nesco customers in the same end markets of electric lines, telecommunications networks and rail systems; to purchase or rent parts, tools, and accessories needed to outfit their specialty truck fleet. These activities form our Parts, Tools, and Accessories (“PTA”) segment. We are positioned to serve all 50 U.S. states and 13 Canadian provinces and territories via our network of over 70 locations in the United States and Canada.

Note 2: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim statements of the Company have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments and disclosures necessary for a fair statement of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year or for any other period. These interim statements should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

Use of Estimates

We prepare our consolidated financial statements in conformity with GAAP, which requires us to use judgment to make estimates that directly affect the amounts reported in our consolidated financial statements and accompanying notes. Significant estimates are used for items including, but not limited to, the useful lives and residual values of our rental equipment, and business combinations. In addition, estimates are used to test both long-lived assets, goodwill and indefinite-lived assets for impairment, and to determine the fair value of impaired assets, if any impairment exists. These estimates are based on our historical experience and on various other assumptions we believe to be reasonable under the circumstances. We review our estimates on an ongoing basis using information currently available, and we revise our recorded estimates as updated information becomes available, facts and circumstances change, or actual amounts become determinable. Actual results could differ from our estimates. In the opinion of management, these financial statements reflect all normal recurring adjustments necessary for a fair presentation of the interim period results.

8

Recently Issued Accounting Pronouncements

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. Accordingly, we have elected to comply with certain reduced public company reporting requirements related to effective dates for the adoption of newly issued standards issued by the Financial Accounting Standards Board (the “FASB”). An emerging growth company is permitted to apply the effective dates applicable to non-public entities, which generally are delayed in comparison to public entities that are non-emerging growth entities.

Leases

The FASB’s new guidance to account for leases (“Topic 842”) by entities that are lessees, requires (1) recognition of lease assets and lease liabilities on the balance sheet and (2) disclosure of key information about leasing arrangements. Topic 842 provides two classifications for leases: financing or operating.

Finance leases - The accounting and recognition for leases qualifying as finance leases is similar to the accounting and recognition required under ASC Topic 840, "Leases (“Topic 840”)," for capital leases. As of June 30, 2020, we have capital lease obligations of approximately $24.4 million. When we make our contractually required payments under the capital leases, we allocate a portion to reduce the capital lease obligation and a portion is recognized as interest expense. The assets leased under the capital leases are included in rental equipment, and depreciation thereon is recognized in cost of rental revenue.

Operating leases - Under Topic 842, operating leases result in the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. ROU assets represent our right to use the leased asset for the lease term and lease liabilities represent our obligation to make lease payments. Under Topic 842, operating lease ROU assets and liabilities are recognized at the lease commencement date and measured based on the present value of lease payments over the lease term. The operating lease ROU assets will also include any lease payments made and exclude lease incentives. Our lease terms may include options to extend or terminate the lease that we are reasonably certain to exercise. Lease expense under Topic 842 will be recognized on a straight-line basis over the lease term. Upon adoption of Topic 842, we expect to recognize operating lease ROU assets and lease liabilities that reflect the present value of these future payments, which we currently estimate to be in the range of $8.0 million to $10.0 million.

The FASB issued new guidance with respect to deferring the effective date of Topic 842 by one year. Accordingly, we will adopt Topic 842 effective January 1, 2022, using the transition method that allows us to recognize a cumulative-effect adjustment to the opening balance of accumulated deficit in the period of adoption. A modified retrospective approach is required for adoption for all leases that exist at or commence after the date of initial application with an option to use certain practical expedients. We expect to use the package of practical expedients that allows us to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases.

Under Topic 842, lessor accounting will remain substantially similar to the current accounting; however, certain refinements were made to conform the standard with the recently issued revenue recognition guidance in ASC Topic 606," Revenue from Contracts with Customers (“Topic 606”)," specifically related to the allocation and recognition of contract consideration earned from lease and non-lease revenue components. On July 30, 2018, the FASB issued ASU 2018-11, which created a practical expedient that provides lessors an option not to separate lease and non-lease components when certain criteria are met and instead account for those components as a single lease component. We are currently in the process of evaluating whether our lease arrangements will meet the criteria under the practical expedient to account for lease and non-lease components as a single lease component, which would alleviate the requirement upon adoption of Topic 842 that we reallocate or separately present lease and non-lease components.

Measurement of Current Expected Credit Losses

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," to update the methodology used to measure current expected credit losses (“CECL”). This ASU applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet credit exposures, such as loan commitments. This ASU replaces the current incurred loss impairment methodology with a methodology to reflect CECL and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings (deficit) in the period of adoption. For emerging growth companies electing the modified transition dates of non-public entities, this ASU is effective for fiscal years beginning after December 15, 2022. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

9

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350)," intended to simplify the subsequent accounting for goodwill acquired in a business combination. Prior guidance required utilizing a two-step process to review goodwill for impairment. A second step was required if there was an indication that an impairment may exist, and the second step required calculating the potential impairment by comparing the implied fair value of a reporting unit’s goodwill (as if purchase accounting were performed on the testing date) to the carrying amount of the goodwill. The new guidance eliminates the second step from the goodwill impairment test. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss should not exceed the total amount of goodwill allocated to the reporting unit). The guidance requires prospective adoption and will be effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2021. Early adoption of this guidance is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently assessing the expected impact on our financial statements.

10

Revenue Recognition

Following the adoption of Topic 606, as of January 1, 2018, we recognized revenue in accordance with two different accounting standards: 1) Topic 606 and 2) Topic 840, which addresses lease accounting, for which we will adopt an update to this standard using the modified retrospective approach, as described herein. For the three and six months ended June 30, 2020 and 2019, we recognized rental revenue in accordance with Topic 840, Leases, which is the lease accounting standard.

Under Topic 606, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected on behalf of third parties. A “performance obligation” is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account under Topic 606. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for such products or services. As reflected below, most of our revenue is accounted for under Topic 840. Our contracts with customers generally do not include multiple performance obligations. The inset below presents our revenue types based on the accounting standard used to determine the accounting.

	Three Months Ended June 30,						Three Months Ended June 30,
	2020						2019
(in $000s)	Topic 840		Topic 606		Total		Topic 840		Topic 606		Total
Rental:
Rental revenue	$	45,048	$	—	$	45,048	$	45,731	$	—	$	45,731
Shipping and handling	—		1,936		1,936		—		2,394		2,394
Total rental revenue	45,048		1,936		46,984		45,731		2,394		48,125
Sales and services:
Sales of rental equipment	—		4,982		4,982		—		4,332		4,332
Sales of new equipment	—		5,418		5,418		—		4,480		4,480
Parts and services	—		11,097		11,097		—		5,918		5,918
Total sales and services	—		21,497		21,497		—		14,730		14,730
Total revenue	$	45,048	$	23,433	$	68,481	$	45,731	$	17,124	$	62,855
	Six Months Ended June 30,						Six Months Ended June 30,
	2020						2019
(in $000s)	Topic 840		Topic 606		Total		Topic 840		Topic 606		Total
Rental:
Rental revenue	$	93,961	$	—	$	93,961	$	89,372	$	—	$	89,372
Shipping and handling	—		4,017		4,017		—		4,395		4,395
Total rental revenue	93,961		4,017		97,978		89,372		4,395		93,767
Sales and services:
Sales of rental equipment	—		14,075		14,075		—		11,731		11,731
Sales of new equipment	—		12,995		12,995		—		6,830		6,830
Parts and services	—		25,176		25,176		—		12,019		12,019
Total sales and services	—		52,246		52,246		—		30,580		30,580
Total revenue	$	93,961	$	56,263	$	150,224	$	89,372	$	34,975	$	124,347

Rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers as well as charges to customers for damaged equipment. Effective July 1, 2019, damage billings are classified in rental revenue, given that the amounts are directly related to the Company's rental arrangements with its customers. Amounts for damages in comparable prior periods have been reclassified to rental revenue from parts and services ($0.6 million and $1.4 million for the three and six months ended June 30, 2019, respectively). Additionally, sales of equipment, which are presented separately between sales of rental equipment and new equipment, were previously presented on a combined basis as equipment sales. For the three and six months ended June 30, 2019, sales of rental equipment were $4.3 million and $11.7 million, respectively, and sales of new equipment were $4.5 million and $6.8 million, respectively.

11

Inventory

Parts, tools and accessories inventory is primarily comprised of items purchased for resale or rent to customers. During the second quarter ended June 30, 2020, in connection with a new inventory management system, we elected to change our method for these inventories, which were previously valued using the first-in, first-out (“FIFO”) method, to the moving average cost method. We believe the change is preferable because it better reflects movement of the inventory and the corresponding value which provides a better reflection of periodic income from operations. This change was not applied retrospectively to prior periods, as the effect of the change was not material to our consolidated financial statements, including interim periods.

Also included within parts, tools and accessories inventory are materials and components that we carry to service our rental fleet and new equipment held for sale. These materials and components are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis.

Equipment inventory consists of equipment bought specifically for resale to customers. These new purchases are recorded directly to inventory when received. Equipment inventory is stated at the lower of cost or net realizable value, with cost determined on a specific identification basis.

Inventory consisted of the following:

(in $000s)	June 30, 2020		December 31, 2019
Parts, tools and accessories inventory	$	27,324	$	30,174
Equipment inventory	4,787		2,827
Inventory	$	32,111	$	33,001

Rental and Property and Equipment

Rental equipment consisted of the following:

(in $000s)	June 30, 2020		December 31, 2019
Rental equipment	$	669,231	$	658,564
Less: accumulated depreciation	(299,962)		(275,144)
Rental equipment, net	$	369,269	$	383,420

Property and equipment consisted of the following:

(in $000s)	June 30, 2020		December 31, 2019
Property and equipment	$	11,058	$	10,082
Less: accumulated depreciation	(7,684)		(7,168)
Construction in progress	2,421		3,647
Property and equipment, net	$	5,795	$	6,561

Note 3: Segments

We have two reportable business segments, Equipment Rental and Sales (“ERS”) and Parts, Tools, and Accessories (“PTA”). ERS provides rental solutions to utilities and contractors serving multiple infrastructure end-markets, including electric transmission and distribution, telecom, rail, lighting and signage. We rent and sell specialized equipment to utilities and utility contractors that build and maintain critical transmission and distribution infrastructure. Utilizing our national platform and rental fleet, we expanded our focus on equipment rental to the telecom, rail, lighting and signage end-markets. The majority of our existing equipment can be used across multiple end-markets and many of our customers operate in these multiple end-markets. We rent and sell a broad range of new and used equipment including bucket trucks, digger derricks, line equipment, cranes, pressure diggers, rail mounted equipment and underground equipment. Our PTA segment offers customers sale and rental solutions for parts, tools, and accessories to complement our specialty equipment line doing business servicing these same end-markets.

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Our reportable segments align with the information our chief operating decision maker (“CODM”) receives on a regular basis to evaluate the performance of the business and to allocate resources. The accounting principles applied at the operating segment level in determining gross profit are generally the same as those applied at the consolidated financial statement level. There are no inter-segment revenues, and cost allocations to operating segment cost of revenue are minimal; that is, revenue, cost of equipment and parts sold or rented, depreciation of rental equipment and gross profit are directly attributed to each of the operating segments. The following tables present our financial information by segment:

	Three Months Ended June 30,						Three Months Ended June 30,
	2020						2019
(in $000s)	ERS		PTA		Total		ERS		PTA		Total
Rental revenue(1)(2)	$	43,025	$	3,959	$	46,984	$	44,867	$	3,258	$	48,125
Sales of rental equipment	4,982		—		4,982		4,332		—		4,332
Sales of new equipment	5,418		—		5,418		4,480		—		4,480
Parts sales and services	—		11,097		11,097		—		5,918		5,918
Total revenues	53,425		15,056		68,481		53,679		9,176		62,855
Cost of revenue	21,549		10,894		32,443		19,561		5,705		25,266
Depreciation of rental equipment	18,559		1,137		19,696		15,889		1,055		16,944
Gross Profit	$	13,317	$	3,025	$	16,342	$	18,229	$	2,416	$	20,645
	Six Months Ended June 30,						Six Months Ended June 30,
	2020						2019
(in $000s)	ERS		PTA		Total		ERS		PTA		Total
Rental revenue(1)(2)	$	90,078	$	7,900	$	97,978	$	87,762	$	6,005	$	93,767
Sales of rental equipment	14,075		—		14,075		11,731		—		11,731
Sales of new equipment	12,995		—		12,995		6,830		—		6,830
Parts sales and services	—		25,176		25,176		—		12,019		12,019
Total revenues	117,148		33,076		150,224		106,323		18,024		124,347
Cost of revenue	48,869		23,802		72,671		38,215		11,460		49,675
Depreciation of rental equipment	37,535		2,273		39,808		31,550		2,125		33,675
Gross Profit	$	30,744	$	7,001	$	37,745	$	36,558	$	4,439	$	40,997

(1) As discussed in Note 2, Summary of Significant Accounting Policies, rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers as well as charges to customers for damaged equipment. Effective in 2019, billings to customers for damages are classified in rental revenue, given that the amounts are directly related to the Company’s rental arrangements with its customers. Amounts for damages in the comparable prior period have been reclassified to rental revenue from parts sales and services ($0.6 million and $1.4 million for the three and six months ended June 30, 2019, respectively).

(2) Amounts for equipment rental revenue of $0.7 million and $1.2 million for the three and six months ended June 30, 2019, respectively, previously reported in the PTA segment as rental revenue have been reclassified to the ERS segment to align the reportable segment information to the information our CODM began receiving on a regular basis in 2019.

Total assets by segment are not disclosed herein because asset by operating segment data is not reviewed by the CODM to assess performance and allocate resources.

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Gross profit is the primary operating result whereby our segments are evaluated for performance and resource allocation. The following table presents a reconciliation of consolidated gross profit to consolidated loss before income taxes:

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000s)	2020		2019		2020		2019
Gross profit	$	16,342	$	20,645	$	37,745	$	40,997
Selling, general and administrative expenses	11,018		7,305		22,636		14,884
Licensing and titling expenses	736		583		1,557		1,236
Amortization and non-rental depreciation	800		749		1,516		1,519
Transaction expenses	227		1,559		963		4,069
Other operating expenses	1,042		629		1,758		779
Other (income) expense	783		(9)		6,804		(22)
Interest expense, net	15,949		14,850		31,963		29,843
Loss before income taxes	$	(14,213)	$	(5,021)	$	(29,452)	$	(11,311)

We are positioned to serve all 50 U.S. states and 13 Canadian provinces and territories using our network of locations in North America. The following tables present revenue by country and total assets by country:

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000s)	2020		2019		2020		2019
Revenue:
United States	$	66,368	$	61,446	$	146,070	$	121,133
Canada	998		1,036		2,367		2,681
Mexico (1)	1,115		373		1,787		533
	$	68,481	$	62,855	$	150,224	$	124,347

(1) On September 27, 2019, the Company began commencing activities for the closure of its Mexican operations, which is part of the ERS segment. For the three and six months ended June, 30, 2020 and 2019, operations in Mexico generated a loss before income taxes of $0.6 million and $0.6 million, and $1.1 million and $1.8 million, respectively.

(in $000s)	June 30, 2020		December 31, 2019
Assets:
United States	$	774,377	$	802,516
Canada	6,573		8,152
Mexico	2,285		4,616
	$	783,235	$	815,284

Note 4: Business Combination

On September 20, 2019, we entered into a stock purchase agreement with Truck Utilities, Inc. (“Truck Utilities”). Truck Utilities is a specialty rentals, parts, tools and accessories sales, service, equipment sales and truck upfitting company serving the electric transmission, distribution, telecom, and other regional end-markets. On November 4, 2019, we closed on the acquisition for a purchase price of approximately $44.7 million (net of cash acquired of $3.1 million), prior to certain capital expenditure adjustments of approximately $3.8 million. Truck Utilities’ rentals, equipment sales and truck upfitting operations were added to our ERS segment, while its parts, tools and accessories sales and service were added to our PTA segment. The transaction was financed by drawing on the 2019 Credit Facility.

As of the date of this report, we were in the preliminary phases of preparing the valuation of the assets acquired and liabilities assumed. Accordingly, the purchase price allocation for this acquisition presented below is preliminary. Completion of the purchase price allocation, which we expect will be completed during the third quarter of 2020, will encompass the finalization of valuations for acquisition-date working capital, intangible assets, property and equipment, as well as completion of acquisition-related income tax

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assessments. We have estimated the fair values of the assets acquired and liabilities assumed using the information that was available. Upon completion of the valuation process, amounts recognized could change resulting in additional expenses recognized for depreciation and amortization of long-lived assets in future periods.

We accounted for the acquisitions using the acquisition method of accounting. The purchase price has been allocated to the fair value of the tangible and identifiable intangible assets acquired as determined by management with the assistance of independent third parties. The results of operations of Truck Utilities has been included with the Company’s results since the date of the acquisition. Transaction costs associated with the acquisitions were expensed as incurred.

The fair value (which remains provisional) of the assets acquired and liabilities assumed as of the acquisition date is presented below.

(in $000s)
Current assets, net of current liabilities	$	319
Property and equipment	78
Rental equipment	38,780
Customer relationships	2,820
Total identifiable assets acquired	41,997
Goodwill	9,523
Total consideration	$	51,520

The preliminary values of intangible assets and goodwill related to the acquisition of Truck Utilities consists largely of the synergies and economies of scale provided by the acquired rental equipment portion of the business, as well as additional service center locations in the central Midwestern region of the United States. During the three and six months ended June 30, 2020 we recorded adjustments to the preliminary fair value assigned to certain rental equipment, which reduced goodwill. These adjustments were not significant. Goodwill has been preliminarily allocated to the ERS and PTA reporting units in the amount of $6.0 million and $3.5 million, respectively.

The operating results of the acquisition have been reflected in the Company’s consolidated financial statements since the acquisition date. Truck Utilities reported revenue of $10.1 million and pretax income of $0.2 million in the three months ended June 30, 2020 ($22.5 million and $0.9 million in the six months ended June 30, 2020). The following pro forma information is presented for comparison purposes as if the Truck Utilities acquisition was completed as of January 1, 2019:

(in $000s)	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Total revenue	$	73,811	$	146,316
Net loss	(5,667)		(12,082)
Basic and diluted net loss per share	(0.26)		(0.56)

Note 5: Debt

Debt obligations and associated interest rates consisted of the following as of June 30, 2020 and December 31, 2019 :

	June 30,		December 31,		June 30,		December 31,
(in $000s)	2020		2019		2020		2019
2019 Credit Facility	$	268,500	$	250,000	3.0	%	4.2	%
Senior Secured Notes due 2024	475,000		475,000		10.0	%	10.0	%
Notes Payable	3,293		3,525
Total debt outstanding	746,793		728,525
Deferred finance fees	(12,708)		(14,222)
Net debt	734,085		714,303
Less current maturities	(1,280)		(1,280)
Long-term debt	$	732,805	$	713,023

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On March 10, 2020, we entered into an agreement (the “Incremental Agreement”) amending the 2019 Credit Facility. The Incremental Agreement amends the syndicate of banks for a new participant that increased the maximum amount of the facility by $35.0 million to a total of $385.0 million. As of June 30, 2020, there was $78.3 million (excluding cash) of availability under the 2019 Credit Facility.

Note 6: Goodwill and Intangible Assets

Goodwill and intangible assets consisted of the following:

(in $000s)	June 30, 2020		December 31, 2019
Goodwill	$	238,237	$	238,195
Nesco trade name	28,000		28,000
Other intangible assets:
Trade names	1,030		1,030
Non-compete agreements	380		380
Customer relationships	52,880		52,880
	82,290		82,290
Less: accumulated amortization	(13,200)		(11,738)
Intangible assets, net	69,090		70,552
Goodwill and intangible assets	$	307,327	$	308,747

Goodwill related to our ERS segment and PTA segment was $229.5 million and $8.7 million, respectively, as of June 30, 2020 and December 31, 2019.

We perform our annual goodwill impairment testing in the fourth quarter of each year. In addition to the annual impairment test, we regularly assess whether a triggering event has occurred which would require interim impairment testing. During the first quarter ended March 31, 2020, we qualitatively assessed whether it was more likely than not that the goodwill and indefinite-lived intangible assets were impaired. Based that interim impairment assessment, we determined that our goodwill and indefinite-lived intangible assets were not impaired. During the three months ended June 30, 2020, we did not identify any triggering events that necessitated an impairment test.

Note 7: Earnings per Share

The merger and other related transactions with Capitol Investment Corp. IV were accounted for as a reverse recapitalization. Earnings per share has been recast for all historical periods to reflect the Company's capital structure for all comparative periods.

Diluted net income (loss) per share includes the effects of potentially dilutive shares of common stock. Potentially dilutive effects include the exercise of warrants, contingently issuable shares, and share-based compensation, all of which have been excluded from the calculation of diluted net income (loss) per share because earnings are at a net loss and therefore, the potentially dilutive effect would be anti-dilutive. The share amounts of our potentially dilutive shares excluded aggregated 27.5 million and 27.1 million for the three and six months ended June 30, 2020, respectively.

The following table sets forth the computation of basic and dilutive loss per share:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net loss (in $000s)	$	(13,150)	$	(5,423)	$	(29,119)	$	(12,147)
Weighted-average basic and diluted shares outstanding	49,033,903		21,660,638		49,033,903		21,660,638
Basic and diluted net loss per share	$	(0.27)	$	(0.25)	$	(0.59)	$	(0.56)

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Note 8: Share-Based Compensation

During the second quarter ended June 30, 2019, the Company approved the 2019 Omnibus Incentive Plan, which authorizes up to 3,150,000 shares of common stock of Nesco Holdings, Inc. for issuance in accordance with the plan’s terms, subject to certain adjustments. On June 11, 2020, the Company's stockholders approved the Amended and Restated 2019 Omnibus Incentive Plan, which increased the total authorized shares of common stock of Nesco Holdings, Inc. to 6,150,000 (the "Plan"). The purpose of the Plan is to provide the Company's and its subsidiaries’ officers, directors, employees and consultants who, by their position, ability and diligence, are able to make important contributions to the Company’s growth and profitability, with an incentive to assist the Company in achieving its long-term corporate objectives, to attract and retain executive officers and other employees of outstanding competence and to provide such persons with an opportunity to acquire an equity interest in the Company. To accomplish these objectives, the Plan provides for awards of equity-based incentives through granting of restricted stock units, stock options, stock appreciation rights and other stock or cash based awards. At June 30, 2020, there were 2,241,000 shares in the share reserve still available for issuance.

The Company records share-based compensation awards using a fair value method and recognizes compensation expense for an amount equal to the fair value of the share-based payment issued in its financial statements. The Company’s share-based compensation plans include programs for stock options, restricted stock units ("RSUs"), performance share units ("PSUs"), and deferred compensation.

Compensation Expense

Share-based compensation expense was $0.6 million and $1.0 million for the three and six months ended June 30, 2020, respectively, and is included in selling, general, and administrative expenses within the unaudited condensed consolidated statements of operations. In the three and six months ended June 30, 2020, the Company's board of directors approved and awarded various share grants under the Plan, totaling approximately 1.2 million options and 0.8 million RSUs. As of June 30, 2020, there was approximately $10.1 million of total unrecognized compensation cost related to stock-based compensation arrangements under the Plan. That cost is expected to be recognized over a weighted average period of 3.4 years.

Note 9: Fair Value Measurements

FASB accounting standards provide a comprehensive framework for measuring fair value and sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. Levels within the hierarchy are defined as follows:

•Level 1 - Unadjusted quoted prices for identical assets and liabilities in active markets;

•Level 2 - Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable for the asset or liability, either directly or indirectly; and

•Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following table sets forth the carrying values (exclusive of deferred financing fees) and fair values of our financial liabilities:

	Carrying Value		Fair Value
(in $000s)			Level 1		Level 2		Level 3
June 30, 2020
2019 Credit Facility	$	268,500	$	—	$	268,500	$	—
Senior Secured Notes due 2024	475,000		—		477,375		—
Notes Payable	3,293		—		3,293		—
Derivative	8,476		—		8,476		—
December 31, 2019
2019 Credit Facility	$	250,000	$	—	$	250,000	$	—
Senior Secured Notes due 2024	475,000		—		494,000		—
Notes Payable	3,525		—		3,650		—
Derivative	1,709		—		1,709		—

Note 10: Financial Instruments

In the normal course of business, the Company uses various financial instruments, including derivative instruments, to manage the risks associated with interest rate exposure. These financial instruments are not used for trading or speculative purposes.

The fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets were as follows:

	Liability Derivatives
(in $000s)	June 30, 2020		December 31, 2019
Derivative instruments:
Interest rate collar	$	8,476	$	1,709
Total derivative instruments	$	8,476	$	1,709

Derivatives Not Designated as Hedges

On July 17, 2019, we entered into an interest rate collar agreement to mitigate the risk of changes in the interest rate paid during the contract period for $170.0 million of the Company's variable rate loans under the 2019 Credit Facility. Under the terms of the interest rate collar, we are required to pay the counterparty to the agreement an amount equal to the difference between a monthly LIBOR-based interest rate and a defined interest rate floor; conversely, we are entitled to receive from the counterparty an amount equal to the excess of a LIBOR-based interest rate and a defined interest rate cap. The required payments due to or due from the counterparty are calculated by applying the interest rate differential to the notional amount ($170.0 million) and are determined monthly through July 31, 2024. The interest rate collar expires in July 2024 and has not been designated as a cash flow hedge. Consequently, the change in fair value of the interest rate collar ($0.8 million and $6.8 million in the three and six months ended June 30, 2020, respectively) is recognized in our Unaudited Condensed Consolidated Statements of Operations within Other (income) expense, net.

Derivatives Instruments Designated as Hedges

When a derivative contract is entered into, the Company may designate the derivative instrument as a cash flow hedge of a forecasted transaction, a cash flow hedge of a recognized asset or liability or as an undesignated derivative. When a derivative is designated, the Company formally documents its hedge relationships, including identification of the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. This process includes linking derivative instruments that are designated as hedges to specific assets, liabilities or forecasted transactions.

The fair market value of derivative instruments is determined through market-based valuations and may not be representative of the actual gains or losses that will be recorded when these instruments mature due to future fluctuations in the markets in which they are traded.

The Company assesses at inception and at least quarterly thereafter, whether the derivatives used in cash flow hedging transactions are effective in offsetting the changes in the cash flows of the hedged item. To the extent the derivative is deemed to be an effective

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hedge, the fair market value changes of the instrument are recorded to accumulated other comprehensive loss and subsequently reclassified into net loss when the hedged transaction affects earnings. Changes in the fair market value of derivatives not deemed to be an effective hedge are recorded in net loss in the period of change. If the hedging relationship ceases to be effective subsequent to inception, or it becomes probable that a forecasted transaction is no longer expected to occur, the hedging relationship will be undesignated and any future gains and losses on the derivative instrument will be recorded in net loss.

We entered into an interest rate collar on December 4, 2018, to hedge the interest rate risk associated with our previous revolving credit facility, which was repaid on the date of the merger with Capitol Investment Corp. IV. The interest rate collar was designated as a cash flow hedge and had a term extending to September 30, 2020. On July 17, 2019, we terminated the interest rate collar, which resulted in the hedge becoming undesignated. Accordingly, $0.8 million (net of income taxes of $0.3 million) was reclassified from accumulated other comprehensive loss to Other income (expense) net, in our Condensed Consolidated Statements of Operations during the year ended December 31, 2019.

Note 11: Commitments and Contingencies

We record a liability when we believe that it is both probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. We review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information.

Legal Matters

We are subject to various claims and legal actions that arise primarily in the ordinary course of business. These matters include, but are not limited to, general liability claims (including personal injury, product liability, property, and auto claims), indemnification and guarantee obligations, employee injuries and employment-related claims, and contract and real estate matters. We maintain insurance coverage for our operations and employees. Our major policies include coverage for property, general liability, auto, directors and officers, health, and workers’ compensation insurances. The ultimate legal and financial liability with respect to such matters generally cannot be estimated with certainty and requires the use of estimates in recording liabilities for potential litigation settlements against us. Estimates for losses from litigation are made after consultation with outside legal counsel. In our opinion, after consultation with legal counsel, the disposition or ultimate resolution of such claims and actions will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

Purchase Commitments

We enter into purchase agreements with manufacturers and suppliers of equipment for our rental fleet and inventory. All of these agreements are cancelable within a specified notification period to the supplier.

Note 12: COVID-19

On March 11, 2020, the World Health Organization ("the WHO") declared the rapid spread of the Coronavirus Disease 2019 ("COVID-19") a global health pandemic. Beginning in March, governmental authorities began imposing restrictions on non-essential activities as part of social distancing measures. These measures have adversely affected the global and North American economies. The end markets Nesco operates in have been identified by the United States Cybersecurity and Infrastructure Security Agency ("CISA") as a critical markets that should continue operating throughout the pandemic, appropriately modified to adhere to the U.S. Centers for Disease Control workforce and customer protection guidance.

We have undertaken efforts intended to maintain the health and safety of our employees and their families and to ensure the Company's continued financial and operational viability, especially in relation to our position as a supplier to critical industries. Employees whose tasks can be completed offsite have been instructed to work from home.  Our service locations remain operational, and we are maintaining social distancing and enhanced cleaning protocols and usage of personal protective equipment, where appropriate.

While Nesco’s business is considered critical, we are unable to predict the impact that COVID-19 will have on our financial position and operating results due to numerous uncertainties. Some of our customers are delaying projects, deferring future capital equipment purchases and eliminating in-person sales meetings.  As a result, our business has been and will continue to be adversely impacted by the pandemic. Since the pandemic began, management has been focused on delivering for our customers and managing our costs and cash flows while preparing for a future recovery. We have reduced our capital spending, our working capital balances and undertaken cost reduction efforts including limited headcount reductions. At the same time, we have continued to make opportunistic investments

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in the fleet, systems and personnel to position the Company for long-term growth. We are continually monitoring the markets in which we operate and will take additional actions we believe are appropriate as the situation continues to develop.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Throughout this section, unless otherwise noted “we,” “us,” “our,” “Company,” or "Nesco” refers to Nesco Holdings, Inc. and its consolidated subsidiaries.

The information provided below supplements, but does not form part of, our financial statements. This discussion contains forward-looking statements that are based on the views and beliefs of Nesco’s management, as well as assumptions and estimates made by our management. Actual results could differ materially from such forward-looking statements as a result of various risk factors, including those that may not be in the control of management. For further information on items that could impact our future operating performance or financial condition, see the section entitled “Risk Factors” and in our Annual Report on Form 10-K, filed with the SEC on March 16, 2020, and our Quarterly Report filed with the SEC on May 7, 2020.

Overview of Markets and Related Industry Performance

The global and North American economies continue to face unprecedented uncertainty arising from the COVID-19 pandemic. The pandemic has necessitated governmental authorities, institutions and communities to take extraordinary actions. Nesco serves critical infrastructure sectors that have been identified by the by the United States Cybersecurity and Infrastructure Security Agency ("CISA") as vital to the U.S.

Accordingly, we have continued to meet the needs of our customers during the pandemic. We have also undertaken efforts intended to maintain the health and safety of our employees and their families, as well as our customers, vendors and communities.

While Nesco’s business is considered critical and while we delivered year-on-year increases in revenue and cash from operating activities during the second quarter of 2020 compared with the same period in 2019, we are unable to predict the impact that COVID-19 will have on our financial position and operating results due to ongoing uncertainties. Government and business mitigation efforts have varied from region to region as circumstances have unfolded at local levels. Some of our customers continue to delay projects, to defer capital equipment purchases and to minimize in-person sales meetings. As a result, our business has been and will continue to be adversely impacted by the pandemic.

The combination of our financial position, our available liquidity, the flexibility to reduce capital spending provided by our young fleet age and the critical nature of our end markets should help to lessen the impacts of COVID-19 on our financial performance. Should a prolonged downturn eventuate, sustained adverse impacts may affect our future valuation of certain assets and therefore may increase the likelihood of an impairment charge, write-off, or reserve associated with such assets, including goodwill, intangible assets, rental and property and equipment, inventories, accounts receivable and other assets.

Since the pandemic began, management has been focused on delivering for our customers and managing our costs and cash flows while preparing for a future recovery. We have reduced our capital spending, our working capital balances and undertaken cost reduction efforts including limited headcount reductions. At the same time, we have continued to make opportunistic investments in fleet, systems and personnel to position us for long-term growth. We are continually monitoring the markets in which we operate and will take additional measures we believe are appropriate as the situation continues to develop.

Starting in March, we saw a decline in demand from electric distribution customers in population centers where projects were delayed by efforts to promote social distancing. Electric distribution projects seem to have since stabilized. Electric transmission projects were more stable during the early part of the pandemic but experienced a normal seasonal summer slowdown starting in June. Electric distribution and transmission customers continue to have large backlogs of projects that must be undertaken to reduce fire hazards, to ensure the uninterrupted supply of electricity and to meet growing electricity demands of the future tied to increased household usages and vehicle electrification. We have experienced relative stability in the rail and telecom sectors. Telecom end-customers have announced intentions to continue to invest in 5G infrastructure and additional network enhancements designed to address deficiencies that became apparent with increased traffic during pandemic stay-at-home orders.

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FINANCIAL OVERVIEW

We use a variety of operational and financial metrics, including non-GAAP financial measures, such as Adjusted EBITDA, to enable us to analyze our performance and financial condition. We utilize these financial measures to manage our business on a day-to-day basis and believe that they are the most relevant measures of performance. Some of these measures are commonly used in our industry to evaluate performance. We believe these non-GAAP measures provide expanded insight to assess performance, in addition to the standard GAAP-based financial measures. There are no specific rules or regulations for determining non-GAAP measures, and as such, our non-GAAP financial measures may not be comparable to measures used by other companies within the industry.

The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. You should read this discussion and analysis of our results of operations and financial condition together with the consolidated financial statements and the related notes thereto also included within.

Measures Related to our Fleet

We consider the following key operational measures when evaluating our performance and making day-to-day operating decisions:

Equipment on rent - Equipment on rent is the original equipment cost (“OEC”) of units rented to customers at a given point in time. Average equipment on rent is calculated as the weighted-average equipment on rent during the stated period. OEC represents the original equipment cost, exclusive of the effect of adjustments to rental equipment fleet acquired in business combinations. This adjusted measure of OEC is used by our creditors pursuant to our credit agreements, wherein this is a component of the basis for determining compliance with our financial loan covenants. Additionally, the pricing of our rental contracts and equipment sales prices for our equipment is based upon OEC, and we measure a rate of return from our rentals and sales using OEC. OEC is a widely used industry metric to compare fleet dollar value independent of depreciation.

Fleet count - Fleet count represents the average or period end (defined as either) equipment units held in our rental fleet over any period.

Fleet utilization - Fleet utilization, with respect to the average equipment units held in our rental fleet over any period, is defined as the total number of days the rental equipment was rented during the period divided by the total number of days such rental equipment could have been rented during the same period, assuming that each piece of equipment could have been rented every day in the period (i.e. no maintenance or planned downtime is included in the calculation).

Rental rate per day - Rental rate per day for the period is calculated as total rental revenue excluding freight and billings to customers for damaged equipment divided by the total billed rental days.

Fleet age - Fleet age represents the number of years from the manufacturer chassis year of the rental equipment unit through the current year end. We evaluate fleet age for each equipment type and our fleet as a whole. In order to calculate average fleet age by type and average total fleet age, we weight the fleet age by the number of units within the relevant group.

Gross Profit, Income from Operations and Cash Flow from Operations

Gross profit, income from operations and cash flow from operations are financial performance measures that we use to monitor our results from operations and to measure our performance against our debt covenants.

Adjusted EBITDA

Adjusted EBITDA is also a financial performance measure that we use to monitor our results from operations, to measure our performance against our debt covenants and in measuring our performance relative to that of our competitors.

We believe the presentation of Adjusted EBITDA enhances an investor’s understanding of our financial performance because it is a useful financial metric to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business. Such items are excluded pursuant to the definition of Adjusted EBITDA in the 2019 Credit Facility and the Indenture, Adjusted EBITDA is the basis for several financial loan covenants contained in the 2019 Credit Facility. We believe that Adjusted EBITDA provides investors with a useful tool for assessing the comparability between periods of our ability to generate cash from operations sufficient to pay taxes, service debt and undertake capital expenditures. We use these financial measures for business planning purposes, for loan compliance purposes, and in measuring our performance relative to that of our competitors.

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Our use of the terms EBITDA and Adjusted EBITDA may vary from that of others in its industry and therefore are limited in their usefulness as comparative measures. These financial measures should not be considered as alternatives to net income (loss), operating income (loss) or any other performance measures derived in accordance with GAAP as measures of operating performance, operating cash flows or as measures of liquidity. Non-GAAP financial measures should not be relied upon to the exclusion of U.S. GAAP financial measures. We encourage investors to review our non-GAAP financial measures together with our U.S. GAAP results and historical consolidated financial statements, and not in isolation. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar measures used by other companies.

Adjusted EBITDA includes an adjustment to exclude the effects of purchase accounting adjustments when calculating the cost of used equipment sold. When equipment is purchased in connection with a business combination, the equipment is revalued to its then current fair value for accounting purposes. The consideration transferred (i.e., the purchase price) in a business combination is allocated to the fair value of equipment as of the acquisition date, with depreciation recorded thereafter following our accounting policies; however, this may not be indicative of our actual cost to acquire new equipment that we add to our fleet apart from a business acquisition. Additionally, the pricing of our rental contracts and equipment sales prices for our equipment is based upon OEC, and we measure a rate of return from our rentals and sales using OEC. As indicated above, the agreements governing our indebtedness define this adjustment to EBITDA, as such, and we believe this metric is a better indication of our true cost of equipment sales due to the removal of the purchase accounting adjustments.

Consolidated Operating Results Three and Six Months Ended June 30, 2020 and 2019

(in $000s)	Three Months Ended June 30, 2020		% of revenue	Three Months Ended June 30, 2019		% of revenue	Six Months Ended June 30, 2020		% of revenue	Six Months Ended June 30, 2019		% of revenue
Rental revenue	$	46,984	68.6%	$	48,125	76.6%	$	97,978	65.2%	$	93,767	75.4%
Sales of rental equipment	4,982		7.3%	4,332		6.9%	14,075		9.4%	11,731		9.4%
Sales of new equipment	5,418		7.9%	4,480		7.1%	12,995		8.7%	6,830		5.5%
Parts sales and services	11,097		16.2%	5,918		9.4%	25,176		16.8%	12,019		9.7%
Total Revenue	68,481		100.0%	62,855		100.0%	150,224		100.0%	124,347		100.0%
Cost of revenue	32,443		47.4%	25,266		40.2%	72,671		48.4%	49,675		39.9%
Depreciation of rental equipment	19,696		28.8%	16,944		27.0%	39,808		26.5%	33,675		27.1%
Gross Profit	16,342		23.9%	20,645		32.8%	37,745		25.1%	40,997		33.0%
Operating expenses	13,823			10,825			28,430			22,487
Operating Income	2,519			9,820			9,315			18,510
Other Expense	16,732			14,841			38,767			29,821
Loss Before Income Taxes	(14,213)			(5,021)			(29,452)			(11,311)
Income Tax Expense (Benefit)	(1,063)			402			(333)			836
Net Loss	$	(13,150)		$	(5,423)		$	(29,119)		$	(12,147)

Total Revenue. Total revenue for the second quarter 2020, increased by $5.6 million, or 9.0%, compared to the second quarter 2019. Rental revenue decreased $1.1 million, or 2.4%, compared to the same period in 2019. This was primarily a result of units coming off rent and lack of new project starts as customers delayed projects in response to COVID-19. This led to a decrease in average equipment on rent to $461.1 million in the current quarter from $464.7 million in the same quarter of 2019. Sales of rental equipment, which can vary from quarter to quarter, increased $0.7 million, or 15.0%, and sales of new equipment increased $0.9 million, or 20.9%, compared to the same period in 2019. Parts sales and service revenue increased $5.2 million, or 87.5%, compared to the same period in 2019 primarily due to the acquisition of Truck Utilities.

Total revenue for the six months ended June 30, 2020, increased by $25.9 million, or 20.8%, compared to the same period in 2019. Rental revenue increased $4.2 million, or 4.5%, compared to the same period in 2019 driven by investments made in 2019 and partially offset by delays in projects resulting from the COVID-19 pandemic in the second quarter. Sales of rental equipment increased $2.3 million, or 20.0%, and sales of new equipment increased $6.2 million, or 90.3%, compared to the same period in 2019. Parts sales and service revenue increased $13.2 million, or 109.5%, compared to the same period in 2019 primarily due to the acquisition of Truck Utilities.

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Cost of Revenue. Cost of revenue, excluding depreciation of $19.7 million, for the three months ended June 30, 2020, increased by $7.2 million, or 28.4%, compared to the same period in 2019 ($9.9 million, or 23.5%, including depreciation).

Cost of revenue, excluding depreciation of $39.8 million, for the six months ended June 30, 2020, increased by $23.0 million, or 46.3%, compared to the same period in 2019 ($29.1 million, or 34.9%, including depreciation). The vast majority of the increase in cost of revenue for both the three and six months ended June 30, 2020 is due to the costs related to increases in parts sales and service revenue and in equipment sales revenue.

Operating Expenses. Operating expenses for the three and six months ended June 30, 2020 increased $3.0 million, or 27.7%, and $5.9 million, or 26.4%, respectively, compared to the same periods in 2019. The increase is primarily due to increased selling, general and administrative expenses as a result of increased headcount with the expansion of the organization and additional expenses incurred as a result of being a public company. Offsetting this increase is a reduction in transaction expenses of $1.3 million ($3.1 million for the six month period ended June 30, 2020) compared to the same period in 2019, which were directly related to the merger with Capitol in 2019.

Other Expense. Other expense for the three and six months ended June 30, 2020 increased $1.9 million, or 12.7%, and $8.9 million, or 30.0%, respectively, compared to the same periods in 2019. This is primarily a result of the changes in fair value of an interest rate collar, which is an undesignated hedging instrument. The resulting expense in the current quarter related to the collar was approximately $0.8 million ($6.8 million for the six month period ended June 30, 2020). In addition, net interest expense in the current quarter increased by $1.1 million.

Income Tax Expense. Income tax expense was a benefit of $1.1 million and $0.3 million for the three and six months ended June 30, 2020, respectively. This is due to our recovery of taxes paid in prior years as a result of the United States CARES Act that was enacted in March 2020.

Financial Performance

We believe that our operating model, together with our highly variable cost structure, enables us to sustain high margins, strong cash flow generation and stable financial performance throughout various economic cycles. We are able to generate substantial free cash flow through our earnings, as well as sales of used equipment. Our highly variable cost structure adjusts with the utilization of our equipment, thereby reducing our costs to match our revenue. We principally evaluate financial performance based on five measurements: Adjusted EBITDA, fleet count, fleet utilization, equipment dollars ("OEC") on rent and rental rate per day. The following table summarizes these operating metrics.

The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

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Financial performance for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000s, except fleet count and rate per day)	2020	2019	change	(%)	2020	2019	change	(%)
Adjusted EBITDA (a)	$26,168	$30,477	$(4,309)	(14.1)	$58,229	$60,911	$(2,682)	(4.4)
Average equipment on rent (b)	$461,100	$464,700	$(3,600)	(0.8)	$480,400	$458,400	$22,000	4.8
Average fleet count	4,615	4,086	529	12.9	4,621	4,000	621	15.5
Average fleet utilization (c)	71.3%	80.2%	(8.9)%	(11.1)	73.6%	81.1%	(7.5)%	(9.2)
Average rental rate per day (d)	$136.71	$136.67	$0.04	—	$137.26	$137.06	$0.20	0.1

(a) EBITDA represents net income (loss) before interest, provision for income taxes, depreciation, and amortization. Adjusted EBITDA is defined as EBITDA as further adjusted for (1) non-cash purchase accounting impact, (2) transaction and process improvement costs, including the effect of the cessation of operations in Mexico, (3) major repairs, (4) share-based payments, and (5) the change in fair value of derivative instruments. These metrics are subject to certain limitations. See "Financial Overview—Adjusted EBITDA" and the reconciliation of Adjusted EBITDA to U.S. GAAP net income (loss) below.

(b) Average equipment on rent is the average original equipment cost of units on rent during the period. The measure provides a value dimension to the fleet utilization statistics. This metric has been adjusted to exclude Mexico, which the Company commenced exit activities in the third quarter of 2019.

(c) Average fleet utilization for the period is calculated as the total number of invoiced days divided by the total number of available equipment days. This metric has been adjusted to exclude Mexico, which the Company commenced exit activities in the third quarter of 2019.

(d) Average rental rate per day for the period is calculated as total rental revenue excluding freight and damaged billings divided by the total rental days, which represents the number of billable days in the period aggregated across all units in the fleet. This metric has been adjusted to exclude Mexico, which the Company commenced exit activities in the third quarter of 2019.

Adjusted EBITDA. Adjusted EBITDA decreased $4.3 million, or 14.1%, to $26.2 million for the three months ended June 30, 2020 compared to the same period in 2019. This decrease can be attributed to a combination of a $1.6 million decline in gross profit, excluding depreciation of $19.7 million, as well as the aforementioned increase in operating expenses.

Adjusted EBITDA decreased $2.7 million, or 4.4%, to $58.2 million for the six months ended June 30, 2020 compared to the same period in 2019. This decrease is primarily due to the aforementioned increase in operating expenses, offset by a $2.9 million increase in gross profit, excluding depreciation of $39.8 million.

The following is a reconciliation from U.S. GAAP net loss to Adjusted EBITDA for the three months ended June 30, 2020 and 2019.

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000s)	2020		2019		2020		2019
Net loss	$	(13,150)	$	(5,423)	$	(29,119)	$	(12,147)
Interest expense	15,949		14,850		31,963		29,843
Income tax expense (benefit)	(1,063)		402		(333)		836
Depreciation expense	19,992		17,180		40,369		34,176
Amortization expense	771		724		1,462		1,448
EBITDA	22,499		27,733		44,342		54,156
Adjustments:
Non-cash purchase accounting impact (1)	178		125		1,095		736
Transaction and process improvement costs (2)	1,639		2,183		3,718		4,693
Major repairs (3)	595		384		1,295		1,146
Share-based payments (4)	453		52		1,012		180
Change in fair value of derivative (5)	804		—		6,767		—
Adjusted EBITDA	$	26,168	$	30,477	$	58,229	$	60,911

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The following is a reconciliation from Adjusted EBITDA to net cash flow from operating activities for the six months ended June 30, 2020 and 2019.

	Six Months Ended June 30,
(in $000s)	2020		2019
Adjusted EBITDA	$	58,229	$	60,911
Adjustments:
Change in fair value of derivative (5)	(6,767)		—
Share-based payments (4)	(1,012)		(180)
Major repairs (3)	(1,295)		(1,146)
Transaction and process improvement costs (2)	(3,718)		(4,693)
Non-cash purchase accounting impact (1)	(1,095)		(736)
EBITDA	44,342		54,156
Add:
Interest expense	(31,963)		(29,843)
Income tax benefit (expense)	333		(836)
Amortization - financing costs	1,515		1,380
Share-based payments	1,012		180
Loss (gain) on sale of rental equipment and parts	(3,838)		(3,260)
Gain on insurance proceeds - damaged equipment	(233)		(387)
Major repair disposal	1,295		1,146
Change in fair value of derivative	6,767		—
Deferred tax (benefit) expense	979		544
Provision for losses on accounts receivable	1,421		1,112
Changes in assets and liabilities:
Accounts receivable	10,935		(13,357)
Inventory	(4,313)		(8,864)
Prepaid expenses and other	(152)		(2,412)
Accounts payable	(6,988)		8,020
Accrued expenses	(385)		(683)
Deferred rental income	(1,058)		(1,719)
Net cash flow from operating activities	$	19,669	$	5,177

Notes to EBITDA and Adjusted EBITDA reconciliations:

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

(2) 2020: Represents transaction costs related to Nesco’s acquisition of Truck Utilities (which include post-acquisition integration expenses incurred during the current quarterly and six month periods); 2019: Represents transaction expenses related to merger activities associated with the transaction with Capitol that was consummated on July 31, 2019. These expenses are comprised of professional consultancy, legal, tax and accounting fees. Also included are costs of startup activities (which include training, travel, and process setup costs) associated with the rollout of new PTA locations that occurred throughout the prior year into the current periods. Finally, the expenses associated with the Company's closure of its Mexican operations, which closure activities commenced in the third quarter of 2019, are included for the current quarterly and six month periods. Pursuant to Nesco’s credit agreement, the cost of undertakings to affect such cost savings, operating expense reductions and other synergies, as well as any expenses incurred in connection with acquisitions, are amounts to be included in the calculation of Adjusted EBITDA.

(3) Represents the undepreciated cost of replaced vehicle chassis and components from heavy maintenance, repair and overhaul activities associated with our fleet, which is an adjustment pursuant to our credit agreement.

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

(5) Represents the charge to earnings for our interest rate collar (which is an undesignated hedge) in the three and six months ended June 30, 2020.

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Equipment on Rent. Average equipment on rent was $461.1 million for the three months ended June 30, 2020, a decrease of $3.6 million or 0.8% over the same period in 2019. The decrease is primarily due to COVID-19 related customer project delays.

Average equipment on rent for the six months ended June 20, 2020 was $480.4 million up from $458.4 million for the same period in 2019. The increase is due to fleet investments made in 2019 and continued demand from customers during the first quarter, offset by project delays related to COVID-19 in the second quarter.

Fleet Count. Average fleet count was 4,615 for the three months ended June 30, 2020, an increase of 529 units from an average fleet count of 4,086 over the same period in 2019. Average fleet count for the six months ended June 30, 2020 was 4,621, an increase of 621 from an average fleet count of 4,000 over the same period in 2019. Bucket trucks represented the largest category of our year over year capital expenditures for the three and six months ended June 30, 2020, driven by strong demand in 2019 and the first quarter of 2020 that has been offset by project delays resulting from the COVID-19 pandemic.

Fleet Utilization. Fleet utilization was 71.3% for the three months ended June 30, 2020, compared to 80.2% the same period of 2019. Fleet utilization was 73.6% for the six months ended June 30, 2020, compared to 81.1% the same period of 2019. The decrease in both periods is primarily due to COVID-19 related customer project delays.

Rental Rate Per Day. Average rental rate per day was $136.71 for the three months ended June 30, 2020, a slight increase from $136.67 for the same period in 2019. Average rental rate per day was $137.26 for the six months ended June 30, 2020, a 0.1% increase from $137.06 for the same period in 2019. Consolidated rate remained steady year over year.

Fleet Age. We use fleet age by type to assist in our decision to sell and purchase a particular fleet category to ensure our fleet age remains competitive. Our overall average fleet age was 3.7 as of June 30, 2020, compared to 3.7 years at June 30, 2019. We believe the current age of our fleet is young and gives us flexibility from a capital allocation and sales perspective.

Fleet Composition. We own a diverse selection of equipment in order to meet the needs of our customers. Bucket trucks, digger derricks, line equipment and rail-mounted equipment make up a significant percentage of our fleet portfolio. We also carry cranes, pressure diggers, underground equipment, and other miscellaneous fleet items, making us a full service specialty equipment provider. All of our equipment is available for rent and our used equipment sales and new equipment purchases are partially driven by our desire to keep an optimal product mix and maintain a competitive fleet age.

The OEC of our ERS fleet was $640.4 million as of June 30, 2020, a $3.1 million, or 0.5%, increase from $637.3 million at December 31, 2019.

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Operating Results by Segment - Three and Six Months Ended June 30, 2020 and 2019

The Company manages its operations through two business segments: rental and sale of fleet and equipment along with repair and maintenance related to those assets (ERS), and the rental and sale of parts, tools, and accessories (PTA). See Note 3, Segments, to our unaudited condensed consolidated financial statements for additional information.

Equipment Rental and Sales Segment

	Three Months Ended June 30,								Six Months Ended June 30,
(in $000s)	2020		2019		$ change		% change		2020		2019		$ change		% change
Rental revenue	$	43,025	$	44,867	$	(1,842)	(4.1)	%	$	90,078	$	87,762	$	2,316	2.6	%
Sales of rental equipment	4,982		4,332		650		15.0	%	14,075		11,731		2,344		20.0	%
Sales of new equipment	5,418		4,480		938		20.9	%	12,995		6,830		6,165		90.3	%
Total revenues	53,425		53,679		(254)		(0.5)	%	117,148		106,323		10,825		10.2	%
Cost of revenue	21,549		19,561		1,988		10.2	%	48,869		38,215		10,654		27.9	%
Depreciation of rental equipment	18,559		15,889		2,670		16.8	%	37,535		31,550		5,985		19.0	%
Gross Profit	$	13,317	$	18,229	$	(4,912)	(26.9)	%	$	30,744	$	36,558	$	(5,814)	(15.9)	%

Total Revenues. Revenue in our ERS segment represented 78.0%. and 85.4% of our consolidated revenues for the three months ended June 30, 2020 and 2019, respectively. ERS segment revenue decreased by $0.3 million for the three months ended June 30, 2020 compared to the same period in 2019. Rental revenue decreased $1.8 million primarily as a result of COVID-19 project delays. Sales of rental and new equipment, which can vary from quarter to quarter, increased $1.6 million.

ERS segment revenue increased by $10.8 million or 10.2%, for the six months ended June 30, 2020 compared to the same period last year. Rental revenue increased by $2.3 million over the prior period driven by end-market demand in the first quarter and offset by pandemic-related project delays in the second quarter. New equipment sales increased by $6.2 million, or 90.3%, compared to the same period in 2019. Used equipment sales increased by $2.3 million due in part to dispose of aged units.

Cost of Revenue. The $2.0 million increase in cost of revenue for the three months ended June 30, 2020 compared to the prior year is primarily due to increased service costs on units coming off rent as well as costs related to increased sales of rental and new equipment.

Cost of revenue increased by $10.7 million year over year for the six months ending June 30, 2020, primarily due to a $7.4 million increase in cost of sales of new and rental equipment.

Depreciation. Depreciation of our rental fleet increased by $2.7 million and $6.0 million for the three and six months ended June 30, 2020, compared to the same periods in 2019, primarily due to growth in fleet count.

Gross Profit. Gross profit for the three months ended June 30, 2020, excluding depreciation of $18.6 million, decreased by $2.2 million compared to the same period in 2019 due primarily to a reduction in high margin rental revenue.

Gross profit for the six months ending June 30, 2020, excluding depreciation of $37.5 million decreased by $0.2 million in the first half of 2020 compared to the first half of 2019.

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Parts, Tools, and Accessories Segment

	Three Months Ended June 30,								Six Months Ended June 30,
(in $000s)	2020		2019		$ change		% change		2020		2019		$ change		% change
Rental revenue	$	3,959	$	3,258	$	701	21.5	%	$	7,900	$	6,005	$	1,895	31.6	%
Parts sales and services	11,097		5,918		5,179		87.5	%	25,176		12,019		13,157		109.5	%
Total revenues	15,056		9,176		5,880		64.1	%	33,076		18,024		15,052		83.5	%
Cost of revenue	10,894		5,705		5,189		91.0	%	23,802		11,460		12,342		107.7	%
Depreciation of rental equipment	1,137		1,055		82		7.8	%	2,273		2,125		148		7.0	%
Gross Profit	$	3,025	$	2,416	$	609	25.2	%	$	7,001	$	4,439	$	2,562	57.7	%

Total Revenues. PTA segment revenue increased $5.9 million or 64.1% for the three months ended June 30, 2020 compared to same period in 2019. For the six months ended June 30, 2020 PTA segment revenue increased by $15.1 million, or 83.5%. The increase in revenue is primarily due to the acquisition of Truck Utilities. The PTA segment would have grown more but experienced headwinds from COVID-19 social distancing measures in the last part of the first quarter and throughout the second quarter as a result of new project delays.

Cost of Revenue. Cost of revenue in the PTA segment increased $5.3 million and $12.5 million for the three and six months ended June 30, 2020, respectively. as a direct result of the increase in parts sales volume, as well as the expansion of operations from two PTA locations to seven over the course of 2019 with an eighth location partially opening during the second quarter of 2020.

Gross Profit. PTA gross profit, excluding $1.1 million of depreciation, increased $0.7 million, or 19.9%, and $2.7 million, or 41.3%, for the three and six months ended June 30, 2020, respectively, compared to the same periods in 2019. The increase in gross profit is driven by higher revenue in the segment, offset by a mix shift to lower margin parts sales and service revenue.

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Liquidity and Capital Resources

Historical Liquidity

Our principal sources of liquidity include cash generated by operating activities and borrowings under our 2019 Credit Facility. We believe that our liquidity sources and operating cash flows are sufficient to address our operating, debt service and capital requirements over the next twelve months, however, we are continuing to monitor the impact of COVID-19 on our business and the financial markets. We have proactively reduced our planned 2020 net capital expenditures (which we define to be purchases of rental and other property and equipment, net of proceeds from disposals of such assets) to help manage liquidity and optimize utilization. As of June 30, 2020, we had $5.3 million in cash compared to $6.3 million as of December 31, 2019. As of June 30, 2020, we had $268.5 million of outstanding borrowings under our 2019 Credit Facility with an additional $78.3 million in availability (subject to a borrowing base) compared to $250.0 million of outstanding borrowing under the 2019 Credit Facility as of December 31, 2019.

2019 Credit Facility

On July 31, 2019, we entered into the 2019 Credit Facility, which provides us with $350.0 million in aggregate principal amount of commitments pursuant to a first lien senior secured asset based revolving credit facility. On March 10, 2020, we entered into an agreement (the “Incremental Agreement”) that amended the syndicate of banks for a new participant that increased the maximum amount of the 2019 Credit Facility by $35.0 million to a total of $385.0 million.

The new 2019 Credit Facility has a five-year term and a floating rate of interest based on either the federal funds rate plus a margin ranging between 50 and 100 basis points or LIBOR plus a margin ranging between 150 and 200 basis points, in each case, depending on excess availability under the facility. Our availability under the 2019 Credit Facility is a percentage of the value of our accounts receivable, our parts inventory, our fleet inventory, and our cash, in each case, subject to certain eligibility criteria and periodic collateral evaluations. A portion of the 2019 Credit Facility may be used for the issuance of letters of credit. The 2019 Credit Facility is guaranteed by our wholly owned domestic subsidiaries, subject to customary exceptions, and is secured by substantially all of our assets and the guarantors. We can reduce the aggregate commitments under the 2019 Credit Facility without premium or penalty. The 2019 Credit Facility contains covenants which, among other things, limit the occurrence of additional indebtedness (including acquired indebtedness), issuance of certain preferred stock, the payment of dividends, making restricted payments and investments, the purchase or acquisition or retirement for value of any equity interests, the provision of loans or advances to restricted subsidiaries, the sale or lease or transfer of any properties to any restricted subsidiaries, the transfer or sale of assets, and the creation of certain liens. In addition, the 2019 Credit Facility requires the Company to comply with a financial maintenance covenant requiring the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00; provided that this covenant shall only be tested if availability under the 2019 Credit Facility is less than the greater of (i) 10% of the Line Cap and (ii) $30 million, and shall be tested until availability is no longer less than such amounts for 20 consecutive calendar days.

Senior Secured Notes due 2024

In connection with the closing of the merger and related transactions, on July 31, 2019 we completed a private offering for Senior Secured Second Lien Notes due 2024 (the "Senior Secured Notes") issued by Capitol Investment Merger Sub 2, LLC, our wholly owned and indirect subsidiary (the "Issuer"). The aggregate principal amount of the Senior Secured Notes was $475.0 million. The Senior Secured Notes bear interest at a rate of 10.0% per annum payable semi-annually, in cash in arrears, on February 1 and August 1 of each year, commencing on February 1, 2020. The Senior Secured Notes do not have registration rights.

A summary of the key provisions are as follows:

Guarantors - The Senior Secured Notes are guaranteed (the “Guarantees”) by Capitol Intermediate Holdings, LLC, our wholly owned subsidiary ("Holdings") and the wholly owned domestic subsidiaries of the Issuer (together, "Guarantors") that guarantee obligations under the 2019 Credit Facility or any future debt of Nesco or any other Guarantors.

Security - The Senior Secured Notes and the Guarantees are secured on a second-priority basis by all of our assets and the Guarantors that secure our obligations under the 2019 Credit Facility.

Ranking - The Senior Secured Notes and the Guarantees are general senior secured obligations. The Senior Secured Notes rank equally in right of payment with all of our existing and future senior debt and rank senior in right of payment to all of our future subordinated obligations. The Guarantees rank equally in right of payment with all of the Guarantors’ existing and future senior obligations and rank senior in right of payment to all of the Guarantors’ existing and future subordinated obligations. The Senior Secured Notes and the Guarantees rank effectively subordinated to all of the Guarantors’ and our first-priority secured debt, including borrowings under the 2019 Credit Facility.

30

Redemption and Repurchase - The Senior Secured Notes are redeemable, in whole or in part, at any time on or after the Closing Date at specified redemption prices. At any time prior to August 1, 2021, we may redeem all or part of the notes at a redemption price equal to 100.0% of the principal amount, plus an applicable premium, plus accrued and unpaid interest, if any, to the redemption date. We may also redeem some or all of the notes: from August 1, 2021, but before July 31, 2022, at a redemption price of 105.0% of the principal amount plus accrued and unpaid interest, if any, to the redemption date; from August 1, 2022, but before July 31, 2023, at a redemption price of 102.5% of the principal amount plus accrued and unpaid interest, if any, to the redemption date; and after August 1, 2023, at a redemption price of 100.0% of the principal amount plus accrued and unpaid interest, if any, to the redemption date. In addition, we may redeem up to 40.0% of the Senior Secured Notes until August 1, 2021, at a redemption price of 110.0% of the principal amount plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds from one or more equity offerings. In addition, we may be required to make an offer to purchase the Senior Secured Notes upon the sale of certain assets and upon a change of control.

Covenants - The Senior Secured Notes contain various restrictive covenants.

As of June 30, 2020, we were in compliance with all of the covenants and other provisions of the 2019 Credit Facility and the indenture governing the Senior Secured Notes disclosed above. Any failure to be in compliance with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations.

Due to the condition and relatively young age of our fleet, we have the ability to significantly reduce or suspend capital expenditures during difficult economic times, to generate additional cash flow during these periods. We believe that cash generated by our rental operations and cash received from the sale of equipment, as well as funds available under the 2019 Credit Facility will be adequate to meet our operating, investing and financing needs for the foreseeable future. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds. Our ability to meet our operating, investing and financing needs depends to a significant extent on our future financial performance, which will be subject in part to general economic, competitive, financial, regulatory and other factors that are beyond our control. In addition to these general economic and industry factors, the principal factors in determining whether our cash flows will be sufficient to meet our liquidity requirements will be changes in governmental regulations for the electric utility transmission and distribution industry, weather, and our customers’ ability to secure materials. In the event that we need access to additional cash, we may not be able to access the credit markets on commercially acceptable terms or at all. We expect to continually assess our performance, the economic environment and market conditions to guide our decisions regarding our uses of cash, including capital expenditures.

We may, from time to time, refinance, reprice, extend, retire or otherwise modify our outstanding debt to lower our interest payments, reduce our debt or otherwise improve our financial position. These actions may include repricing amendments, extensions, and/or opportunistic refinancing of debt. The amount of debt that may be refinanced, re-priced, extended, retired or otherwise modified, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations.

Historical Cash Flows

The following table summarizes our sources and uses of cash for the six months ended June 30, 2020 and 2019:

	Six Months Ended June 30,
(in $000s)	2020		2019
Net cash flow from operating activities	$	19,669	$	5,177
Net cash flow from investing activities	(35,227)		(35,775)
Net cash flow from financing activities	14,556		31,042
Net change in cash	$	(1,002)	$	444

As of June 30, 2020, we had cash of $5.3 million, a decrease of $1.0 million from December 31, 2019. Generally, we manage our cash flow by using any excess cash, after considering our working capital and capital expenditure needs, to pay down the outstanding balance under our 2019 credit facility.

Cash Flows from Operating Activities

Net cash provided by operating activities was $19.7 million for the six months ended June 30, 2020, as compared to net cash provided by operating activities of $5.2 million in same period of 2019. The increase in cash from operations was driven by prudent working capital management.

31

Cash Flows from Investing Activities

Net cash used in investing activities was $35.2 million for the six months ended June 30, 2020, as compared to cash used in investing activities of $35.8 million in 2019. The decrease in net cash used in investing activities is primarily due to decreased property and equipment investments, increased proceeds from the sale of rental equipment and parts and from increased insurance recoveries, partially offset by increased investments in rental equipment during the first quarter.

Cash Flows from Financing Activities

Net cash provided by financing activities was $14.6 million for the six months ended June 30, 2020, as compared to cash provided by financing activities of $31.0 million in 2019. The decrease is primarily due to borrowings, net of repayments, on the revolving credit facility decreasing by $15.5 million as our cash from operating activities improved.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets, or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any nonfinancial assets.

Critical Accounting Policies

For a discussion of our critical accounting policies and estimates, see “Critical Accounting Policies” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2019. For a summary of our significant accounting policies, see Note 2, Summary of Significant Accounting Policies, to the referenced Annual Report on Form 10-K. There have been no significant changes in our critical accounting policies and estimates during the quarterly period ended June 30, 2020.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, to our Annual Report on Form 10-K for a discussion of recently issued and adopted accounting pronouncements.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Any statements made in this report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast,” and other similar expressions. We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this report, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. Factors that may materially affect such forward-looking statements and projections include:

•the risks associated with cyclical demand for our services and vulnerability to industry downturns and regional and national downturns;

•the risk associated with the COVID-19 health pandemic on our business operations and the global economy in general;

32

•  fluctuations in our revenue and operating results;

• unfavorable conditions or further disruptions in the capital and credit markets;

•  our ability to generate cash, service our indebtedness and incur additional indebtedness;

•  competition from existing and new competitors;

• our relationships with equipment suppliers and dependence on key suppliers to obtain adequate or timely equipment;

• increases in the cost of new equipment and our ability to procure such equipment in a timely fashion;

•  our ability to pass on increased operating costs related to the aging of our fleet;

•  our ability to integrate any businesses we acquire;

• our ability to recruit and retain experienced personnel;

•  the effect of disruptions in our information technology systems, including our customer relationship management system;

•  risks related to legal proceedings or claims, including liability claims;

•  our dependence on third-party contractors to provide us with various services;

•  a need to recognize additional impairment charges related to goodwill, identified intangible assets and fixed assets;

•  our ability to obtain additional capital on commercially reasonable terms;

• laws and regulatory developments that may fail to result in increased demand for our services;

•  safety and environmental requirements that may subject us to unanticipated liabilities; and

•  other factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the three months ended June 30, 2020.

These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest rate risk

We are subject to interest rate market risk in connection with our long-term debt. Our principal interest rate exposure relates to outstanding amounts under the 2019 Credit Facility, which provides for variable rate borrowings of up to $385.0 million, subject to a borrowing base. Interest rate changes generally impact the amount of our interest payments and, therefore, our future net income and cash flows, assuming other factors are held constant. Assuming the 2019 Credit Facility is fully drawn, each one-eighth percentage point increase or decrease in the applicable interest rates would correspondingly change our interest expense on the 2019 Credit Facility by approximately $0.3 million per year. As of June 30, 2020, we had $268.5 million of outstanding borrowings against the 2019 Credit Facility.

We manage a portion of our risks from exposures to fluctuations in interest rates as part of our risk management program through the use of derivative financial instruments. The objective of controlling these risks is to limit the impact on earnings and cash flows caused by fluctuations, our primary exposure is from our variable-rate debt. We currently have an interest rate collar agreement in place as a hedge against fluctuations in the required interest payments due on our 2019 Credit Facility. All of our derivative activities are for purposes other than trading.

Fair values of our derivatives can change significantly from period to period based on, among other factors, market movements and changes in our positions. We manage counterparty credit risk (the risk that counterparties will default and not make payments to us according to the terms of our standard master agreements) on an individual counterparty basis.

33

Our interest rate collar contract (currently our only derivative contract) was executed under a standard master agreement that contains a cross-default provision to our borrowing agreement with the counterparty, which provides the ability of the counterparty to terminate the interest rate collar agreement upon an event of default under the borrowing agreement.

Exchange rate risk

During the three and six months ended June 30, 2020, we generated $1.0 million and $1.1 million of U.S. dollar denominated revenues in Canadian dollars and Mexican pesos, respectively. Each 100 basis point increase or decrease in the average Canadian dollar to U.S. dollar exchange rate or Mexican peso to U.S. dollar exchange rate for the year would have correspondingly changed our revenues by less than $0.1 million. We do not currently hedge our exchange rate exposure.

34

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("the Exchange Act"). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2020, the end of the period covered by this quarterly report, our disclosure controls and procedures were designed to provide and were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarterly period ended June 30, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In the normal course of business, we are involved in a variety of lawsuits, claims and legal proceedings. In our opinion, pending legal matters are not expected to have a material adverse impact on our results of operations, financial condition, liquidity or cash flows.

Item 1A. Risk Factors

Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report three months ended March 31, 2020. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

None.

35

Item 6. Exhibits

Exhibit No.	Description
10.1	Employment Agreement between the Company and Joshua A. Boone (incorporated by reference from Exhibit 10.1 to the Company's Form 8-K filed June 8, 2020)
10.2	Nesco Holdings, Inc. Amended and Restated 2019 Omnibus Incentive Plan (incorporated by reference from Annex A to the Company's definitive proxy statement filed May 1, 2020)
18.1 +	Letter from Deloitte & Touche LLP, Independent Registered Public Accounting Firm, Regarding Change in Accounting Principle
31.1 +	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 +	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 +	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS +	XBRL Instance Document
101.SCH +	XBRL Taxonomy Extension Schema Document
101.CAL +	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF +	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB +	XBRL Taxonomy Extension Label Linkbase Document
101.PRE +	XBRL Taxonomy Extension Presentation Linkbase Document

⁺ Filed or furnished herewith.

36

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NESCO HOLDINGS, INC. (Registrant)
Date:	8/6/2020	/s/ Lee Jacobson
		Lee Jacobson, Chief Executive Officer
Date:	8/6/2020	/s/ Joshua A. Boone
		Joshua A. Boone, Chief Financial Officer and Secretary

37

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lee Jacobson, certify that:

1 I have reviewed the Quarterly Report on Form 10-Q of Nesco Holdings, Inc. for the three and six months ended June 30, 2020;

2 Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3 Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Nesco Holdings, Inc. as of, and for, the periods presented in this report;

4 Nesco Holdings I, Inc.’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Nesco Holdings, Inc. and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Nesco Holdings, Inc., including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of Nesco Holdings, Inc.’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in Nesco Holdings, Inc.’s internal control over financial reporting that occurred during Nesco Holdings, Inc.’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5 Nesco Holdings, Inc.'s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Nesco Holdings, Inc.'s auditors and the audit committee of the Nesco Holdings, Inc.’s board of directors:

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Nesco Holdings, Inc.’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Nesco Holdings, Inc.’s internal control over financial reporting.

Date:	8/6/2020	/s/ Lee Jacobson
		Lee Jacobson
		Chief Executive Officer

EX-18.1

Exhibit 18.1

August 6, 2020

To the Board of Directors and Stockholders of

Nesco Holdings, Inc.

6714 Pointe Inverness Way, Suite 220

Fort Wayne, Indiana 46804

Dear Sirs/Madams:

At your request, we have read the description included in your Quarterly Report of Form 10-Q to the Securities and Exchange Commission for the quarter ended June 30, 2020, of the facts relating to the change in accounting principle for inventory from the first-in, first-out cost method to the moving average cost method for a portion of the Parts, Tool, and Accessories segment inventories. We believe, on the basis of the facts so set forth and other information furnished to us by appropriate officials of Nesco Holdings, Inc., that the accounting change described in your Form 10-Q is to an alternative accounting principle that is preferable under the circumstances.

We have not audited any consolidated financial statements of Nesco Holdings, Inc. and its subsidiaries as of any date or for any period subsequent to December 31, 2019. Therefore we are unable to express, and we do not express, an opinion on the facts set forth in the above-mentioned Form 10-Q, on the related information furnished to us by officials of Nesco Holdings, Inc., or on the financial position, results of operations, or cash flows of Nesco Holdings, Inc. and its subsidiaries as of any date or for any period subsequent to December 31, 2019.

Yours truly,

/s/ Deloitte & Touche LLP

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joshua A. Boone, certify that:

1 I have reviewed the Quarterly Report on Form 10-Q of Nesco Holdings, Inc. for the three and six months ended June 30, 2020;

2 Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3 Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Nesco Holdings, Inc. as of, and for, the periods presented in this report;

4 Nesco Holdings, Inc.’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Nesco Holdings, Inc. and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Nesco Holdings, Inc., including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of Nesco Holdings, Inc.’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in Nesco Holdings, Inc.’s internal control over financial reporting that occurred during Nesco Holdings, Inc.’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5 Nesco Holdings, Inc.'s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Nesco Holdings, Inc.'s auditors and the audit committee of the Nesco Holdings, Inc.’s board of directors:

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Nesco Holdings, Inc.’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Nesco Holdings, Inc.’s internal control over financial reporting.

Date:	8/6/2020	/s/ Joshua A. Boone
		Joshua A. Boone
		Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Nesco Holdings, Inc. (the “Company”) on Form 10-Q for the three months ended June 30, 2020, as filed with the Securities and Exchange Commission (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

August 6, 2020	/s/ Lee Jacobson
	Lee Jacobson
	Chief Executive Officer
August 6, 2020	/s/ Joshua A. Boone
	Joshua A. Boone
	Chief Financial Officer

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2020	Jul. 31, 2020
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2020
Document Transition Report	false
Entity File Number	001-38186
Entity Registrant Name	Nesco Holdings, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	84-2531628
Entity Address, Address Line One	6714 Pointe Inverness Way
Entity Address, Address Line Two	Suite 220
Entity Address, City or Town	Fort Wayne
Entity Address, State or Province	IN
Entity Address, Postal Zip Code	46804
City Area Code	800
Local Phone Number	252-0043
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		49,033,903
Entity Central Index Key	0001709682
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false
Common Stock
Document Information [Line Items]
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	NSCO
Security Exchange Name	NYSE
Redeemable Warrants
Document Information [Line Items]
Title of 12(b) Security	Redeemable warrants, exercisable for Common Stock, $0.0001 par value
Trading Symbol	NSCO.WS
Security Exchange Name	NYSE

XML

Condensed Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current Assets
Cash	$ 5,300	$ 6,302
Accounts receivable, net of allowance of $4,881 and $4,654 respectively	57,438	71,323
Inventory	32,111	33,001
Prepaid expenses and other	5,369	5,217
Total current assets	100,218	115,843
Property and equipment, net	5,795	6,561
Rental equipment, net	369,269	383,420
Goodwill and other intangibles, net	307,327	308,747
Notes receivable	626	713
Total Assets	783,235	815,284
Current Liabilities
Accounts payable	14,856	41,172
Accrued expenses	27,206	27,590
Deferred rent income	1,212	2,270
Current maturities of long-term debt	1,280	1,280
Current portion of capital lease obligations	8,080	5,451
Total current liabilities	52,634	77,763
Long-term debt, net	732,805	713,023
Capital leases	16,290	22,631
Deferred tax liabilities	13,267	12,288
Interest rate collar	8,476	1,709
Total long-term liabilities	770,838	749,651
Commitments and contingencies
Stockholders' Deficit
Common stock - $0.0001 par value, 250,000,000 shares authorized, 49,033,903 shares issued and outstanding, at June 30, 2020 and December 31, 2019	5	5
Additional paid-in capital	433,589	432,577
Accumulated deficit	(473,831)	(444,712)
Total stockholders' deficit	(40,237)	(12,130)
Total Liabilities and Stockholders' Deficit	$ 783,235	$ 815,284

XML

Condensed Consolidated Balance Sheets (unaudited) (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Allowance for accounts receivable	$ 4,881	$ 4,654
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, authorized (in shares)	250,000,000,000	250,000,000,000
Common stock, issued (in shares)	49,033,903	49,033,903
Common stock, outstanding (in shares)	49,033,903	49,033,903

XML

Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenue
Total Revenue	$ 68,481	$ 62,855	$ 150,224	$ 124,347
Cost of Revenue
Cost of rental revenue	32,443	25,266	72,671	49,675
Depreciation of rental equipment	19,696	16,944	39,808	33,675
Major repair disposals	595	384	1,295	1,146
Total cost of revenue	52,139	42,210	112,479	83,350
Gross Profit	16,342	20,645	37,745	40,997
Operating Expenses
Selling, general and administrative expenses	11,018	7,305	22,636	14,884
Licensing and titling expenses	736	583	1,557	1,236
Amortization and non-rental depreciation	800	749	1,516	1,519
Transaction expenses	227	1,559	963	4,069
Other operating expenses	1,042	629	1,758	779
Total Operating Expenses	13,823	10,825	28,430	22,487
Operating Income	2,519	9,820	9,315	18,510
Other Expense
Interest expense, net	15,949	14,850	31,963	29,843
Other (income) expense, net	783	(9)	6,804	(22)
Total other expense	16,732	14,841	38,767	29,821
Loss Before Income Taxes	(14,213)	(5,021)	(29,452)	(11,311)
Income Tax Expense (Benefit)	(1,063)	402	(333)	836
Net Loss	$ (13,150)	$ (5,423)	$ (29,119)	$ (12,147)
Loss per Share:
Basic and diluted net loss per share (USD per share)	$ (0.27)	$ (0.25)	$ (0.59)	$ (0.56)
Weighted-average-common shares outstanding:
Weighted-average basic and diluted shares outstanding (in shares)	49,033,903	21,660,638	49,033,903	21,660,638
Revenue
Revenue
Total Revenue	$ 46,984	$ 48,125	$ 97,978	$ 93,767
Cost of Revenue
Cost of rental revenue	14,311	12,843	28,097	23,900
Rental Equipment
Revenue
Total Revenue	4,982	4,332	14,075	11,731
Cost of Revenue
Cost of rental revenue	3,536	3,871	11,264	10,005
New Equipment
Revenue
Total Revenue	5,418	4,480	12,995	6,830
Cost of Revenue
Cost of rental revenue	4,777	3,697	11,431	5,303
Sales of new equipment
Revenue
Total Revenue	11,097	5,918	25,176	12,019
Cost of Revenue
Cost of rental revenue	$ 9,224	$ 4,471	$ 20,584	$ 9,321

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Condensed Consolidated Statements of Comprehensive Loss (unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Statement of Comprehensive Income [Abstract]
Net Loss	$ (13,150)	$ (5,423)	$ (29,119)	$ (12,147)
Other comprehensive loss:
Interest rate collar (net of taxes of $173 and $285, respectively)	0	(476)	0	(388)
Other comprehensive loss	0	(476)	0	(388)
Comprehensive loss	$ (13,150)	$ (5,899)	$ (29,119)	$ (12,535)

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Condensed Consolidated Statements of Comprehensive Loss (unaudited) Parenthetical - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Statement of Comprehensive Income [Abstract]
Interest rate collar, taxes	$ 173,000	$ 285,000
Reclassification from accumulated other comprehensive loss	$ 0	$ 0

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Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Operating Activities
Net loss	$ (29,119)	$ (12,147)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation	40,369	34,176
Amortization - intangibles	1,462	1,448
Amortization - financing costs	1,515	1,380
Provision for losses on accounts receivable	1,421	1,112
Share-based payments	1,012	180
Gain on sale of rental equipment and parts	(3,838)	(3,260)
Gain on insurance proceeds - damaged equipment	(233)	(387)
Major repair disposal	1,295	1,146
Change in fair value of derivative	6,767	0
Deferred tax (benefit) expense	979	544
Changes in assets and liabilities:
Accounts receivable	10,935	(13,357)
Inventory	(4,313)	(8,864)
Prepaid expenses and other	(152)	(2,412)
Accounts payable	(6,988)	8,020
Accrued expenses and other liabilities	(385)	(683)
Unearned income	(1,058)	(1,719)
Net cash flow from operating activities	19,669	5,177
Investing Activities
Purchase of equipment - rental fleet	(55,421)	(51,734)
Proceeds from sale of rental equipment and parts	19,005	18,187
Insurance proceeds from damaged equipment	2,191	1,427
Purchase of other property and equipment	(1,089)	(3,655)
Other	87	0
Net cash flow from investing activities	(35,227)	(35,775)
Financing Activities
Borrowings under revolving credit facilities	37,574	43,000
Repayments under revolving credit facilities	(19,074)	(9,000)
Repayments of notes payable	(232)	(365)
Capital lease payments	(3,712)	(2,613)
Finance fees paid	0	20
Net cash flow from financing activities	14,556	31,042
Net Change in Cash	(1,002)	444
Cash at Beginning of Period	6,302	2,140
Cash at End of Period	5,300	2,584
Supplemental Cash Flow Information
Cash paid for interest	29,502	28,708
Cash paid for income taxes	156	240
Non-Cash Investing and Financing Activities
Transfer of inventory to leased equipment	5,203	2,618
Rental equipment and property and equipment purchases in accounts payable	2,316	19,021
Rental equipment sales in accounts receivable	2,453	623
Insurance recoveries accrued in accounts receivable	$ 702	$ 224

XML

Condensed Consolidated Statement of Stockholder's Deficit (unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss
Balance (in shares) at Dec. 31, 2018		21,660,638
Balance at Dec. 31, 2018	$ (158,756)	$ 2	$ 259,298	$ (417,660)	$ (396)
Increase (Decrease) in Stockholders' Deficit [Roll Forward]
Net loss	(6,724)			(6,724)
Share-based payments	128		128
Interest rate collar	88				88
Balance at Mar. 31, 2019	(165,264)	$ 2	259,426	(424,384)	(308)
Balance (in shares) at Mar. 31, 2019		21,660,638
Balance (in shares) at Dec. 31, 2018		21,660,638
Balance at Dec. 31, 2018	(158,756)	$ 2	259,298	(417,660)	(396)
Increase (Decrease) in Stockholders' Deficit [Roll Forward]
Net loss	(12,147)
Interest rate collar	(388)
Balance at Jun. 30, 2019	(171,111)	$ 2	259,478	(429,807)	(784)
Balance (in shares) at Jun. 30, 2019		21,660,638
Balance (in shares) at Mar. 31, 2019		21,660,638
Balance at Mar. 31, 2019	(165,264)	$ 2	259,426	(424,384)	(308)
Increase (Decrease) in Stockholders' Deficit [Roll Forward]
Net loss	(5,423)			(5,423)
Share-based payments	52		52
Interest rate collar	(476)				(476)
Balance at Jun. 30, 2019	$ (171,111)	$ 2	259,478	(429,807)	(784)
Balance (in shares) at Jun. 30, 2019		21,660,638
Balance (in shares) at Dec. 31, 2019	49,033,903	49,033,903
Balance at Dec. 31, 2019	$ (12,130)	$ 5	432,577	(444,712)	0
Increase (Decrease) in Stockholders' Deficit [Roll Forward]
Net loss	(15,969)			(15,969)
Share-based payments	559		559
Balance at Mar. 31, 2020	$ (27,540)	$ 5	433,136	(460,681)	0
Balance (in shares) at Mar. 31, 2020		49,033,903
Balance (in shares) at Dec. 31, 2019	49,033,903	49,033,903
Balance at Dec. 31, 2019	$ (12,130)	$ 5	432,577	(444,712)	0
Increase (Decrease) in Stockholders' Deficit [Roll Forward]
Net loss	(29,119)
Interest rate collar	0
Balance at Jun. 30, 2020	$ (40,237)	$ 5	433,589	(473,831)	0
Balance (in shares) at Jun. 30, 2020	49,033,903	49,033,903
Balance (in shares) at Mar. 31, 2020		49,033,903
Balance at Mar. 31, 2020	$ (27,540)	$ 5	433,136	(460,681)	0
Increase (Decrease) in Stockholders' Deficit [Roll Forward]
Net loss	(13,150)			(13,150)
Share-based payments	453		453
Interest rate collar	0
Balance at Jun. 30, 2020	$ (40,237)	$ 5	$ 433,589	$ (473,831)	$ 0
Balance (in shares) at Jun. 30, 2020	49,033,903	49,033,903

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Business and Organization

6 Months Ended

Jun. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business and Organization

Note 1: Business and Organization

Organization

Nesco Holdings, Inc. (“Holdings”), a Delaware corporation, serves as the parent for our primary operating company, NESCO, LLC, an Indiana limited liability company, and its wholly owned subsidiaries (collectively, with Holdings, “we,” “our,” “us,” “Nesco,” or the "Company"), and is engaged in the business of providing a range of services and products to customers through rentals of specialty equipment, sales of parts related to the specialty equipment, and repair and maintenance services related to that equipment.

Our wholly-owned subsidiaries include: NESCO, LLC, an Indiana limited liability company, NESCO Holdings I, Inc., a Delaware corporation, NESCO Finance Corporation, a Delaware corporation, NESCO Investments, LLC, a Delaware limited liability company, NESCO International, LLC, a Delaware limited liability company, and NESCO El Alquiler S. de R.L. de C.V., an operating company in Mexico.

We are a specialty equipment rental provider to the electric utility transmission and distribution, telecommunications and rail industries in North America. Our core business relates to our fleet of specialty rental equipment that is utilized by service providers in infrastructure improvement work. Specifically, we offer our specialized equipment to a diverse customer base, including utilities and primarily contractors, for the maintenance, repair, upgrade and installation of critical infrastructure assets, including distribution and transmission electric lines, telecommunications networks and rail systems, as well as a small percentage for lighting and signage. We rent and sell a broad range of new and used equipment, including bucket trucks, digger derricks, line equipment, cranes, pressure diggers, and underground equipment, which forms our Equipment Rental and Sales ("ERS") segment. To complement our fleet, we also provide a one-stop shop for existing and prospective Nesco customers in the same end markets of electric lines, telecommunications networks and rail systems; to purchase or rent parts, tools, and accessories needed to outfit their specialty truck fleet. These activities form our Parts, Tools, and Accessories (“PTA”) segment. We are positioned to serve all 50 U.S. states and 13 Canadian provinces and territories via our network of over 70 locations in the United States and Canada.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Polices

Note 2: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim statements of the Company have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments and disclosures necessary for a fair statement of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year or for any other period. These interim statements should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

Use of Estimates

We prepare our consolidated financial statements in conformity with GAAP, which requires us to use judgment to make estimates that directly affect the amounts reported in our consolidated financial statements and accompanying notes. Significant estimates are used for items including, but not limited to, the useful lives and residual values of our rental equipment, and business combinations. In addition, estimates are used to test both long-lived assets, goodwill and indefinite-lived assets for impairment, and to determine the fair value of impaired assets, if any impairment exists. These estimates are based on our historical experience and on various other assumptions we believe to be reasonable under the circumstances. We review our estimates on an ongoing basis using information currently available, and we revise our recorded estimates as updated information becomes available, facts and circumstances change, or actual amounts become determinable. Actual results could differ from our estimates. In the opinion of management, these financial statements reflect all normal recurring adjustments necessary for a fair presentation of the interim period results.

Recently Issued Accounting Pronouncements

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. Accordingly, we have elected to comply with certain reduced public company reporting requirements related to effective dates for the adoption of newly issued standards issued by the Financial Accounting Standards Board (the “FASB”). An emerging growth company is permitted to apply the effective dates applicable to non-public entities, which generally are delayed in comparison to public entities that are non-emerging growth entities.

Leases

The FASB’s new guidance to account for leases (“Topic 842”) by entities that are lessees, requires (1) recognition of lease assets and lease liabilities on the balance sheet and (2) disclosure of key information about leasing arrangements. Topic 842 provides two classifications for leases: financing or operating.

Finance leases - The accounting and recognition for leases qualifying as finance leases is similar to the accounting and recognition required under ASC Topic 840, "Leases (“Topic 840”)," for capital leases. As of June 30, 2020, we have capital lease obligations of approximately $24.4 million. When we make our contractually required payments under the capital leases, we allocate a portion to reduce the capital lease obligation and a portion is recognized as interest expense. The assets leased under the capital leases are included in rental equipment, and depreciation thereon is recognized in cost of rental revenue.

Operating leases - Under Topic 842, operating leases result in the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. ROU assets represent our right to use the leased asset for the lease term and lease liabilities represent our obligation to make lease payments. Under Topic 842, operating lease ROU assets and liabilities are recognized at the lease commencement date and measured based on the present value of lease payments over the lease term. The operating lease ROU assets will also include any lease payments made and exclude lease incentives. Our lease terms may include options to extend or terminate the lease that we are reasonably certain to exercise. Lease expense under Topic 842 will be recognized on a straight-line basis over the lease term. Upon adoption of Topic 842, we expect to recognize operating lease ROU assets and lease liabilities that reflect the present value of these future payments, which we currently estimate to be in the range of $8.0 million to $10.0 million.

The FASB issued new guidance with respect to deferring the effective date of Topic 842 by one year. Accordingly, we will adopt Topic 842 effective January 1, 2022, using the transition method that allows us to recognize a cumulative-effect adjustment to the opening balance of accumulated deficit in the period of adoption. A modified retrospective approach is required for adoption for all leases that exist at or commence after the date of initial application with an option to use certain practical expedients. We expect to use the package of practical expedients that allows us to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases.

Under Topic 842, lessor accounting will remain substantially similar to the current accounting; however, certain refinements were made to conform the standard with the recently issued revenue recognition guidance in ASC Topic 606," Revenue from Contracts with Customers (“Topic 606”)," specifically related to the allocation and recognition of contract consideration earned from lease and non-lease revenue components. On July 30, 2018, the FASB issued ASU 2018-11, which created a practical expedient that provides lessors an option not to separate lease and non-lease components when certain criteria are met and instead account for those components as a single lease component. We are currently in the process of evaluating whether our lease arrangements will meet the criteria under the practical expedient to account for lease and non-lease components as a single lease component, which would alleviate the requirement upon adoption of Topic 842 that we reallocate or separately present lease and non-lease components.

Measurement of Current Expected Credit Losses

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," to update the methodology used to measure current expected credit losses (“CECL”). This ASU applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet credit exposures, such as loan commitments. This ASU replaces the current incurred loss impairment methodology with a methodology to reflect CECL and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings (deficit) in the period of adoption. For emerging growth companies electing the modified transition dates of non-public entities, this ASU is effective for fiscal years beginning after December 15, 2022. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350)," intended to simplify the subsequent accounting for goodwill acquired in a business combination. Prior guidance required utilizing a two-step process to review goodwill for impairment. A second step was required if there was an indication that an impairment may exist, and the second step required calculating the potential impairment by comparing the implied fair value of a reporting unit’s goodwill (as if purchase accounting were performed on the testing date) to the carrying amount of the goodwill. The new guidance eliminates the second step from the goodwill impairment test. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss should not exceed the total amount of goodwill allocated to the reporting unit). The guidance requires prospective adoption and will be effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2021. Early adoption of this guidance is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently assessing the expected impact on our financial statements.

Revenue Recognition

Following the adoption of Topic 606, as of January 1, 2018, we recognized revenue in accordance with two different accounting standards: 1) Topic 606 and 2) Topic 840, which addresses lease accounting, for which we will adopt an update to this standard using the modified retrospective approach, as described herein. For the three and six months ended June 30, 2020 and 2019, we recognized rental revenue in accordance with Topic 840, Leases, which is the lease accounting standard.

Under Topic 606, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected on behalf of third parties. A “performance obligation” is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account under Topic 606. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for such products or services. As reflected below, most of our revenue is accounted for under Topic 840. Our contracts with customers generally do not include multiple performance obligations. The inset below presents our revenue types based on the accounting standard used to determine the accounting.

	Three Months Ended June 30,						Three Months Ended June 30,
	2020						2019
(in $000s)	Topic 840		Topic 606		Total		Topic 840		Topic 606		Total
Rental:
Rental revenue	$	45,048	$	—	$	45,048	$	45,731	$	—	$	45,731
Shipping and handling	—		1,936		1,936		—		2,394		2,394
Total rental revenue	45,048		1,936		46,984		45,731		2,394		48,125
Sales and services:
Sales of rental equipment	—		4,982		4,982		—		4,332		4,332
Sales of new equipment	—		5,418		5,418		—		4,480		4,480
Parts and services	—		11,097		11,097		—		5,918		5,918
Total sales and services	—		21,497		21,497		—		14,730		14,730
Total revenue	$	45,048	$	23,433	$	68,481	$	45,731	$	17,124	$	62,855
	Six Months Ended June 30,						Six Months Ended June 30,
	2020						2019
(in $000s)	Topic 840		Topic 606		Total		Topic 840		Topic 606		Total
Rental:
Rental revenue	$	93,961	$	—	$	93,961	$	89,372	$	—	$	89,372
Shipping and handling	—		4,017		4,017		—		4,395		4,395
Total rental revenue	93,961		4,017		97,978		89,372		4,395		93,767
Sales and services:
Sales of rental equipment	—		14,075		14,075		—		11,731		11,731
Sales of new equipment	—		12,995		12,995		—		6,830		6,830
Parts and services	—		25,176		25,176		—		12,019		12,019
Total sales and services	—		52,246		52,246		—		30,580		30,580
Total revenue	$	93,961	$	56,263	$	150,224	$	89,372	$	34,975	$	124,347

Rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers as well as charges to customers for damaged equipment. Effective July 1, 2019, damage billings are classified in rental revenue, given that the amounts are directly related to the Company's rental arrangements with its customers. Amounts for damages in comparable prior periods have been reclassified to rental revenue from parts and services ($0.6 million and $1.4 million for the three and six months ended June 30, 2019, respectively). Additionally, sales of equipment, which are presented separately between sales of rental equipment and new equipment, were previously presented on a combined basis as equipment sales. For the three and six months ended June 30, 2019, sales of rental equipment were $4.3 million and $11.7 million, respectively, and sales of new equipment were $4.5 million and $6.8 million, respectively.

Inventory

Parts, tools and accessories inventory is primarily comprised of items purchased for resale or rent to customers. During the second quarter ended June 30, 2020, in connection with a new inventory management system, we elected to change our method for these inventories, which were previously valued using the first-in, first-out (“FIFO”) method, to the moving average cost method. We believe the change is preferable because it better reflects movement of the inventory and the corresponding value which provides a better reflection of periodic income from operations. This change was not applied retrospectively to prior periods, as the effect of the change was not material to our consolidated financial statements, including interim periods.

Also included within parts, tools and accessories inventory are materials and components that we carry to service our rental fleet and new equipment held for sale. These materials and components are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis.

Equipment inventory consists of equipment bought specifically for resale to customers. These new purchases are recorded directly to inventory when received. Equipment inventory is stated at the lower of cost or net realizable value, with cost determined on a specific identification basis.

Inventory consisted of the following:

(in $000s)	June 30, 2020		December 31, 2019
Parts, tools and accessories inventory	$	27,324	$	30,174
Equipment inventory	4,787		2,827
Inventory	$	32,111	$	33,001

Rental and Property and Equipment

Rental equipment consisted of the following:

(in $000s)	June 30, 2020		December 31, 2019
Rental equipment	$	669,231	$	658,564
Less: accumulated depreciation	(299,962)		(275,144)
Rental equipment, net	$	369,269	$	383,420

Property and equipment consisted of the following:

(in $000s)	June 30, 2020		December 31, 2019
Property and equipment	$	11,058	$	10,082
Less: accumulated depreciation	(7,684)		(7,168)
Construction in progress	2,421		3,647
Property and equipment, net	$	5,795	$	6,561

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Segments

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segments

Note 3: Segments

We have two reportable business segments, Equipment Rental and Sales (“ERS”) and Parts, Tools, and Accessories (“PTA”). ERS provides rental solutions to utilities and contractors serving multiple infrastructure end-markets, including electric transmission and distribution, telecom, rail, lighting and signage. We rent and sell specialized equipment to utilities and utility contractors that build and maintain critical transmission and distribution infrastructure. Utilizing our national platform and rental fleet, we expanded our focus on equipment rental to the telecom, rail, lighting and signage end-markets. The majority of our existing equipment can be used across multiple end-markets and many of our customers operate in these multiple end-markets. We rent and sell a broad range of new and used equipment including bucket trucks, digger derricks, line equipment, cranes, pressure diggers, rail mounted equipment and underground equipment. Our PTA segment offers customers sale and rental solutions for parts, tools, and accessories to complement our specialty equipment line doing business servicing these same end-markets.

Our reportable segments align with the information our chief operating decision maker (“CODM”) receives on a regular basis to evaluate the performance of the business and to allocate resources. The accounting principles applied at the operating segment level in determining gross profit are generally the same as those applied at the consolidated financial statement level. There are no inter-segment revenues, and cost allocations to operating segment cost of revenue are minimal; that is, revenue, cost of equipment and parts sold or rented, depreciation of rental equipment and gross profit are directly attributed to each of the operating segments. The following tables present our financial information by segment:

	Three Months Ended June 30,						Three Months Ended June 30,
	2020						2019
(in $000s)	ERS		PTA		Total		ERS		PTA		Total
Rental revenue(1)(2)	$	43,025	$	3,959	$	46,984	$	44,867	$	3,258	$	48,125
Sales of rental equipment	4,982		—		4,982		4,332		—		4,332
Sales of new equipment	5,418		—		5,418		4,480		—		4,480
Parts sales and services	—		11,097		11,097		—		5,918		5,918
Total revenues	53,425		15,056		68,481		53,679		9,176		62,855
Cost of revenue	21,549		10,894		32,443		19,561		5,705		25,266
Depreciation of rental equipment	18,559		1,137		19,696		15,889		1,055		16,944
Gross Profit	$	13,317	$	3,025	$	16,342	$	18,229	$	2,416	$	20,645
	Six Months Ended June 30,						Six Months Ended June 30,
	2020						2019
(in $000s)	ERS		PTA		Total		ERS		PTA		Total
Rental revenue(1)(2)	$	90,078	$	7,900	$	97,978	$	87,762	$	6,005	$	93,767
Sales of rental equipment	14,075		—		14,075		11,731		—		11,731
Sales of new equipment	12,995		—		12,995		6,830		—		6,830
Parts sales and services	—		25,176		25,176		—		12,019		12,019
Total revenues	117,148		33,076		150,224		106,323		18,024		124,347
Cost of revenue	48,869		23,802		72,671		38,215		11,460		49,675
Depreciation of rental equipment	37,535		2,273		39,808		31,550		2,125		33,675
Gross Profit	$	30,744	$	7,001	$	37,745	$	36,558	$	4,439	$	40,997

(1) As discussed in Note 2, Summary of Significant Accounting Policies, rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers as well as charges to customers for damaged equipment. Effective in 2019, billings to customers for damages are classified in rental revenue, given that the amounts are directly related to the Company’s rental arrangements with its customers. Amounts for damages in the comparable prior period have been reclassified to rental revenue from parts sales and services ($0.6 million and $1.4 million for the three and six months ended June 30, 2019, respectively).

(2) Amounts for equipment rental revenue of $0.7 million and $1.2 million for the three and six months ended June 30, 2019, respectively, previously reported in the PTA segment as rental revenue have been reclassified to the ERS segment to align the reportable segment information to the information our CODM began receiving on a regular basis in 2019.

Total assets by segment are not disclosed herein because asset by operating segment data is not reviewed by the CODM to assess performance and allocate resources.

Gross profit is the primary operating result whereby our segments are evaluated for performance and resource allocation. The following table presents a reconciliation of consolidated gross profit to consolidated loss before income taxes:

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000s)	2020		2019		2020		2019
Gross profit	$	16,342	$	20,645	$	37,745	$	40,997
Selling, general and administrative expenses	11,018		7,305		22,636		14,884
Licensing and titling expenses	736		583		1,557		1,236
Amortization and non-rental depreciation	800		749		1,516		1,519
Transaction expenses	227		1,559		963		4,069
Other operating expenses	1,042		629		1,758		779
Other (income) expense	783		(9)		6,804		(22)
Interest expense, net	15,949		14,850		31,963		29,843
Loss before income taxes	$	(14,213)	$	(5,021)	$	(29,452)	$	(11,311)

We are positioned to serve all 50 U.S. states and 13 Canadian provinces and territories using our network of locations in North America. The following tables present revenue by country and total assets by country:

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000s)	2020		2019		2020		2019
Revenue:
United States	$	66,368	$	61,446	$	146,070	$	121,133
Canada	998		1,036		2,367		2,681
Mexico (1)	1,115		373		1,787		533
	$	68,481	$	62,855	$	150,224	$	124,347

(1) On September 27, 2019, the Company began commencing activities for the closure of its Mexican operations, which is part of the ERS segment. For the three and six months ended June, 30, 2020 and 2019, operations in Mexico generated a loss before income taxes of $0.6 million and $0.6 million, and $1.1 million and $1.8 million, respectively.

(in $000s)	June 30, 2020		December 31, 2019
Assets:
United States	$	774,377	$	802,516
Canada	6,573		8,152
Mexico	2,285		4,616
	$	783,235	$	815,284

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Business Combination

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Business Combination

Note 4: Business Combination

On September 20, 2019, we entered into a stock purchase agreement with Truck Utilities, Inc. (“Truck Utilities”). Truck Utilities is a specialty rentals, parts, tools and accessories sales, service, equipment sales and truck upfitting company serving the electric transmission, distribution, telecom, and other regional end-markets. On November 4, 2019, we closed on the acquisition for a purchase price of approximately $44.7 million (net of cash acquired of $3.1 million), prior to certain capital expenditure adjustments of approximately $3.8 million. Truck Utilities’ rentals, equipment sales and truck upfitting operations were added to our ERS segment, while its parts, tools and accessories sales and service were added to our PTA segment. The transaction was financed by drawing on the 2019 Credit Facility.

As of the date of this report, we were in the preliminary phases of preparing the valuation of the assets acquired and liabilities assumed. Accordingly, the purchase price allocation for this acquisition presented below is preliminary. Completion of the purchase price allocation, which we expect will be completed during the third quarter of 2020, will encompass the finalization of valuations for acquisition-date working capital, intangible assets, property and equipment, as well as completion of acquisition-related income tax

assessments. We have estimated the fair values of the assets acquired and liabilities assumed using the information that was available. Upon completion of the valuation process, amounts recognized could change resulting in additional expenses recognized for depreciation and amortization of long-lived assets in future periods.

We accounted for the acquisitions using the acquisition method of accounting. The purchase price has been allocated to the fair value of the tangible and identifiable intangible assets acquired as determined by management with the assistance of independent third parties. The results of operations of Truck Utilities has been included with the Company’s results since the date of the acquisition. Transaction costs associated with the acquisitions were expensed as incurred.

The fair value (which remains provisional) of the assets acquired and liabilities assumed as of the acquisition date is presented below.

(in $000s)
Current assets, net of current liabilities	$	319
Property and equipment	78
Rental equipment	38,780
Customer relationships	2,820
Total identifiable assets acquired	41,997
Goodwill	9,523
Total consideration	$	51,520

The preliminary values of intangible assets and goodwill related to the acquisition of Truck Utilities consists largely of the synergies and economies of scale provided by the acquired rental equipment portion of the business, as well as additional service center locations in the central Midwestern region of the United States. During the three and six months ended June 30, 2020 we recorded adjustments to the preliminary fair value assigned to certain rental equipment, which reduced goodwill. These adjustments were not significant. Goodwill has been preliminarily allocated to the ERS and PTA reporting units in the amount of $6.0 million and $3.5 million, respectively.

The operating results of the acquisition have been reflected in the Company’s consolidated financial statements since the acquisition date. Truck Utilities reported revenue of $10.1 million and pretax income of $0.2 million in the three months ended June 30, 2020 ($22.5 million and $0.9 million in the six months ended June 30, 2020). The following pro forma information is presented for comparison purposes as if the Truck Utilities acquisition was completed as of January 1, 2019:

(in $000s)	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Total revenue	$	73,811	$	146,316
Net loss	(5,667)		(12,082)
Basic and diluted net loss per share	(0.26)		(0.56)

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Debt

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Debt

Note 5: Debt

Debt obligations and associated interest rates consisted of the following as of June 30, 2020 and December 31, 2019 :

	June 30,		December 31,		June 30,		December 31,
(in $000s)	2020		2019		2020		2019
2019 Credit Facility	$	268,500	$	250,000	3.0	%	4.2	%
Senior Secured Notes due 2024	475,000		475,000		10.0	%	10.0	%
Notes Payable	3,293		3,525
Total debt outstanding	746,793		728,525
Deferred finance fees	(12,708)		(14,222)
Net debt	734,085		714,303
Less current maturities	(1,280)		(1,280)
Long-term debt	$	732,805	$	713,023

On March 10, 2020, we entered into an agreement (the “Incremental Agreement”) amending the 2019 Credit Facility. The Incremental Agreement amends the syndicate of banks for a new participant that increased the maximum amount of the facility by $35.0 million to a total of $385.0 million. As of June 30, 2020, there was $78.3 million (excluding cash) of availability under the 2019 Credit Facility.

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Note 6: Goodwill and Intangible Assets

Goodwill and intangible assets consisted of the following:

(in $000s)	June 30, 2020		December 31, 2019
Goodwill	$	238,237	$	238,195
Nesco trade name	28,000		28,000
Other intangible assets:
Trade names	1,030		1,030
Non-compete agreements	380		380
Customer relationships	52,880		52,880
	82,290		82,290
Less: accumulated amortization	(13,200)		(11,738)
Intangible assets, net	69,090		70,552
Goodwill and intangible assets	$	307,327	$	308,747

Goodwill related to our ERS segment and PTA segment was $229.5 million and $8.7 million, respectively, as of June 30, 2020 and December 31, 2019.

We perform our annual goodwill impairment testing in the fourth quarter of each year. In addition to the annual impairment test, we regularly assess whether a triggering event has occurred which would require interim impairment testing. During the first quarter ended March 31, 2020, we qualitatively assessed whether it was more likely than not that the goodwill and indefinite-lived intangible assets were impaired. Based that interim impairment assessment, we determined that our goodwill and indefinite-lived intangible assets were not impaired. During the three months ended June 30, 2020, we did not identify any triggering events that necessitated an impairment test.

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Earnings Per Share

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Earnings Per Share

Note 7: Earnings per Share

The merger and other related transactions with Capitol Investment Corp. IV were accounted for as a reverse recapitalization. Earnings per share has been recast for all historical periods to reflect the Company's capital structure for all comparative periods.

Diluted net income (loss) per share includes the effects of potentially dilutive shares of common stock. Potentially dilutive effects include the exercise of warrants, contingently issuable shares, and share-based compensation, all of which have been excluded from the calculation of diluted net income (loss) per share because earnings are at a net loss and therefore, the potentially dilutive effect would be anti-dilutive. The share amounts of our potentially dilutive shares excluded aggregated 27.5 million and 27.1 million for the three and six months ended June 30, 2020, respectively.

The following table sets forth the computation of basic and dilutive loss per share:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net loss (in $000s)	$	(13,150)	$	(5,423)	$	(29,119)	$	(12,147)
Weighted-average basic and diluted shares outstanding	49,033,903		21,660,638		49,033,903		21,660,638
Basic and diluted net loss per share	$	(0.27)	$	(0.25)	$	(0.59)	$	(0.56)

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Share-Based Compensation

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

Note 8: Share-Based Compensation

During the second quarter ended June 30, 2019, the Company approved the 2019 Omnibus Incentive Plan, which authorizes up to 3,150,000 shares of common stock of Nesco Holdings, Inc. for issuance in accordance with the plan’s terms, subject to certain adjustments. On June 11, 2020, the Company's stockholders approved the Amended and Restated 2019 Omnibus Incentive Plan, which increased the total authorized shares of common stock of Nesco Holdings, Inc. to 6,150,000 (the "Plan"). The purpose of the Plan is to provide the Company's and its subsidiaries’ officers, directors, employees and consultants who, by their position, ability and diligence, are able to make important contributions to the Company’s growth and profitability, with an incentive to assist the Company in achieving its long-term corporate objectives, to attract and retain executive officers and other employees of outstanding competence and to provide such persons with an opportunity to acquire an equity interest in the Company. To accomplish these objectives, the Plan provides for awards of equity-based incentives through granting of restricted stock units, stock options, stock appreciation rights and other stock or cash based awards. At June 30, 2020, there were 2,241,000 shares in the share reserve still available for issuance.

The Company records share-based compensation awards using a fair value method and recognizes compensation expense for an amount equal to the fair value of the share-based payment issued in its financial statements. The Company’s share-based compensation plans include programs for stock options, restricted stock units ("RSUs"), performance share units ("PSUs"), and deferred compensation.

Compensation Expense

Share-based compensation expense was $0.6 million and $1.0 million for the three and six months ended June 30, 2020, respectively, and is included in selling, general, and administrative expenses within the unaudited condensed consolidated statements of operations. In the three and six months ended June 30, 2020, the Company's board of directors approved and awarded various share grants under the Plan, totaling approximately 1.2 million options and 0.8 million RSUs. As of June 30, 2020, there was approximately $10.1 million of total unrecognized compensation cost related to stock-based compensation arrangements under the Plan. That cost is expected to be recognized over a weighted average period of 3.4 years.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 9: Fair Value Measurements

FASB accounting standards provide a comprehensive framework for measuring fair value and sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. Levels within the hierarchy are defined as follows:

•Level 1 - Unadjusted quoted prices for identical assets and liabilities in active markets;

•Level 2 - Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable for the asset or liability, either directly or indirectly; and

•Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following table sets forth the carrying values (exclusive of deferred financing fees) and fair values of our financial liabilities:

	Carrying Value		Fair Value
(in $000s)			Level 1		Level 2		Level 3
June 30, 2020
2019 Credit Facility	$	268,500	$	—	$	268,500	$	—
Senior Secured Notes due 2024	475,000		—		477,375		—
Notes Payable	3,293		—		3,293		—
Derivative	8,476		—		8,476		—
December 31, 2019
2019 Credit Facility	$	250,000	$	—	$	250,000	$	—
Senior Secured Notes due 2024	475,000		—		494,000		—
Notes Payable	3,525		—		3,650		—
Derivative	1,709		—		1,709		—

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Financial Instruments

6 Months Ended

Jun. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Note 10: Financial Instruments

In the normal course of business, the Company uses various financial instruments, including derivative instruments, to manage the risks associated with interest rate exposure. These financial instruments are not used for trading or speculative purposes.

The fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets were as follows:

	Liability Derivatives
(in $000s)	June 30, 2020		December 31, 2019
Derivative instruments:
Interest rate collar	$	8,476	$	1,709
Total derivative instruments	$	8,476	$	1,709

Derivatives Not Designated as Hedges

On July 17, 2019, we entered into an interest rate collar agreement to mitigate the risk of changes in the interest rate paid during the contract period for $170.0 million of the Company's variable rate loans under the 2019 Credit Facility. Under the terms of the interest rate collar, we are required to pay the counterparty to the agreement an amount equal to the difference between a monthly LIBOR-based interest rate and a defined interest rate floor; conversely, we are entitled to receive from the counterparty an amount equal to the excess of a LIBOR-based interest rate and a defined interest rate cap. The required payments due to or due from the counterparty are calculated by applying the interest rate differential to the notional amount ($170.0 million) and are determined monthly through July 31, 2024. The interest rate collar expires in July 2024 and has not been designated as a cash flow hedge. Consequently, the change in fair value of the interest rate collar ($0.8 million and $6.8 million in the three and six months ended June 30, 2020, respectively) is recognized in our Unaudited Condensed Consolidated Statements of Operations within Other (income) expense, net.

Derivatives Instruments Designated as Hedges

When a derivative contract is entered into, the Company may designate the derivative instrument as a cash flow hedge of a forecasted transaction, a cash flow hedge of a recognized asset or liability or as an undesignated derivative. When a derivative is designated, the Company formally documents its hedge relationships, including identification of the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. This process includes linking derivative instruments that are designated as hedges to specific assets, liabilities or forecasted transactions.

The fair market value of derivative instruments is determined through market-based valuations and may not be representative of the actual gains or losses that will be recorded when these instruments mature due to future fluctuations in the markets in which they are traded.

The Company assesses at inception and at least quarterly thereafter, whether the derivatives used in cash flow hedging transactions are effective in offsetting the changes in the cash flows of the hedged item. To the extent the derivative is deemed to be an effective

hedge, the fair market value changes of the instrument are recorded to accumulated other comprehensive loss and subsequently reclassified into net loss when the hedged transaction affects earnings. Changes in the fair market value of derivatives not deemed to be an effective hedge are recorded in net loss in the period of change. If the hedging relationship ceases to be effective subsequent to inception, or it becomes probable that a forecasted transaction is no longer expected to occur, the hedging relationship will be undesignated and any future gains and losses on the derivative instrument will be recorded in net loss.

We entered into an interest rate collar on December 4, 2018, to hedge the interest rate risk associated with our previous revolving credit facility, which was repaid on the date of the merger with Capitol Investment Corp. IV. The interest rate collar was designated as a cash flow hedge and had a term extending to September 30, 2020. On July 17, 2019, we terminated the interest rate collar, which resulted in the hedge becoming undesignated. Accordingly, $0.8 million (net of income taxes of $0.3 million) was reclassified from accumulated other comprehensive loss to Other income (expense) net, in our Condensed Consolidated Statements of Operations during the year ended December 31, 2019.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 11: Commitments and Contingencies

We record a liability when we believe that it is both probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. We review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information.

Legal Matters

We are subject to various claims and legal actions that arise primarily in the ordinary course of business. These matters include, but are not limited to, general liability claims (including personal injury, product liability, property, and auto claims), indemnification and guarantee obligations, employee injuries and employment-related claims, and contract and real estate matters. We maintain insurance coverage for our operations and employees. Our major policies include coverage for property, general liability, auto, directors and officers, health, and workers’ compensation insurances. The ultimate legal and financial liability with respect to such matters generally cannot be estimated with certainty and requires the use of estimates in recording liabilities for potential litigation settlements against us. Estimates for losses from litigation are made after consultation with outside legal counsel. In our opinion, after consultation with legal counsel, the disposition or ultimate resolution of such claims and actions will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

Purchase Commitments

We enter into purchase agreements with manufacturers and suppliers of equipment for our rental fleet and inventory. All of these agreements are cancelable within a specified notification period to the supplier.

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COVID-19

6 Months Ended

Jun. 30, 2020

Subsequent Events [Abstract]

COVID-19

Note 12: COVID-19

On March 11, 2020, the World Health Organization ("the WHO") declared the rapid spread of the Coronavirus Disease 2019 ("COVID-19") a global health pandemic. Beginning in March, governmental authorities began imposing restrictions on non-essential activities as part of social distancing measures. These measures have adversely affected the global and North American economies. The end markets Nesco operates in have been identified by the United States Cybersecurity and Infrastructure Security Agency ("CISA") as a critical markets that should continue operating throughout the pandemic, appropriately modified to adhere to the U.S. Centers for Disease Control workforce and customer protection guidance.

We have undertaken efforts intended to maintain the health and safety of our employees and their families and to ensure the Company's continued financial and operational viability, especially in relation to our position as a supplier to critical industries. Employees whose tasks can be completed offsite have been instructed to work from home.  Our service locations remain operational, and we are maintaining social distancing and enhanced cleaning protocols and usage of personal protective equipment, where appropriate.

While Nesco’s business is considered critical, we are unable to predict the impact that COVID-19 will have on our financial position and operating results due to numerous uncertainties. Some of our customers are delaying projects, deferring future capital equipment purchases and eliminating in-person sales meetings.  As a result, our business has been and will continue to be adversely impacted by the pandemic. Since the pandemic began, management has been focused on delivering for our customers and managing our costs and cash flows while preparing for a future recovery. We have reduced our capital spending, our working capital balances and undertaken cost reduction efforts including limited headcount reductions. At the same time, we have continued to make opportunistic investments

in the fleet, systems and personnel to position the Company for long-term growth. We are continually monitoring the markets in which we operate and will take additional actions we believe are appropriate as the situation continues to develop.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation

Basis of PresentationThe accompanying interim statements of the Company have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments and disclosures necessary for a fair statement of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year or for any other period. These interim statements should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

Use of Estimates

Use of EstimatesWe prepare our consolidated financial statements in conformity with GAAP, which requires us to use judgment to make estimates that directly affect the amounts reported in our consolidated financial statements and accompanying notes. Significant estimates are used for items including, but not limited to, the useful lives and residual values of our rental equipment, and business combinations. In addition, estimates are used to test both long-lived assets, goodwill and indefinite-lived assets for impairment, and to determine the fair value of impaired assets, if any impairment exists. These estimates are based on our historical experience and on various other assumptions we believe to be reasonable under the circumstances. We review our estimates on an ongoing basis using information currently available, and we revise our recorded estimates as updated information becomes available, facts and circumstances change, or actual amounts become determinable. Actual results could differ from our estimates. In the opinion of management, these financial statements reflect all normal recurring adjustments necessary for a fair presentation of the interim period results.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. Accordingly, we have elected to comply with certain reduced public company reporting requirements related to effective dates for the adoption of newly issued standards issued by the Financial Accounting Standards Board (the “FASB”). An emerging growth company is permitted to apply the effective dates applicable to non-public entities, which generally are delayed in comparison to public entities that are non-emerging growth entities.

Leases

The FASB’s new guidance to account for leases (“Topic 842”) by entities that are lessees, requires (1) recognition of lease assets and lease liabilities on the balance sheet and (2) disclosure of key information about leasing arrangements. Topic 842 provides two classifications for leases: financing or operating.

Finance leases - The accounting and recognition for leases qualifying as finance leases is similar to the accounting and recognition required under ASC Topic 840, "Leases (“Topic 840”)," for capital leases. As of June 30, 2020, we have capital lease obligations of approximately $24.4 million. When we make our contractually required payments under the capital leases, we allocate a portion to reduce the capital lease obligation and a portion is recognized as interest expense. The assets leased under the capital leases are included in rental equipment, and depreciation thereon is recognized in cost of rental revenue.

Operating leases - Under Topic 842, operating leases result in the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. ROU assets represent our right to use the leased asset for the lease term and lease liabilities represent our obligation to make lease payments. Under Topic 842, operating lease ROU assets and liabilities are recognized at the lease commencement date and measured based on the present value of lease payments over the lease term. The operating lease ROU assets will also include any lease payments made and exclude lease incentives. Our lease terms may include options to extend or terminate the lease that we are reasonably certain to exercise. Lease expense under Topic 842 will be recognized on a straight-line basis over the lease term. Upon adoption of Topic 842, we expect to recognize operating lease ROU assets and lease liabilities that reflect the present value of these future payments, which we currently estimate to be in the range of $8.0 million to $10.0 million.

The FASB issued new guidance with respect to deferring the effective date of Topic 842 by one year. Accordingly, we will adopt Topic 842 effective January 1, 2022, using the transition method that allows us to recognize a cumulative-effect adjustment to the opening balance of accumulated deficit in the period of adoption. A modified retrospective approach is required for adoption for all leases that exist at or commence after the date of initial application with an option to use certain practical expedients. We expect to use the package of practical expedients that allows us to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases.

Under Topic 842, lessor accounting will remain substantially similar to the current accounting; however, certain refinements were made to conform the standard with the recently issued revenue recognition guidance in ASC Topic 606," Revenue from Contracts with Customers (“Topic 606”)," specifically related to the allocation and recognition of contract consideration earned from lease and non-lease revenue components. On July 30, 2018, the FASB issued ASU 2018-11, which created a practical expedient that provides lessors an option not to separate lease and non-lease components when certain criteria are met and instead account for those components as a single lease component. We are currently in the process of evaluating whether our lease arrangements will meet the criteria under the practical expedient to account for lease and non-lease components as a single lease component, which would alleviate the requirement upon adoption of Topic 842 that we reallocate or separately present lease and non-lease components.

Measurement of Current Expected Credit Losses

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," to update the methodology used to measure current expected credit losses (“CECL”). This ASU applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet credit exposures, such as loan commitments. This ASU replaces the current incurred loss impairment methodology with a methodology to reflect CECL and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings (deficit) in the period of adoption. For emerging growth companies electing the modified transition dates of non-public entities, this ASU is effective for fiscal years beginning after December 15, 2022. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350)," intended to simplify the subsequent accounting for goodwill acquired in a business combination. Prior guidance required utilizing a two-step process to review goodwill for impairment. A second step was required if there was an indication that an impairment may exist, and the second step required calculating the potential impairment by comparing the implied fair value of a reporting unit’s goodwill (as if purchase accounting were performed on the testing date) to the carrying amount of the goodwill. The new guidance eliminates the second step from the goodwill impairment test. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (although the loss should not exceed the total amount of goodwill allocated to the reporting unit). The guidance requires prospective adoption and will be effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2021. Early adoption of this guidance is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently assessing the expected impact on our financial statements.

Revenue Recognition

Following the adoption of Topic 606, as of January 1, 2018, we recognized revenue in accordance with two different accounting standards: 1) Topic 606 and 2) Topic 840, which addresses lease accounting, for which we will adopt an update to this standard using the modified retrospective approach, as described herein. For the three and six months ended June 30, 2020 and 2019, we recognized rental revenue in accordance with Topic 840, Leases, which is the lease accounting standard.

Under Topic 606, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected on behalf of third parties. A “performance obligation” is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account under Topic 606. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for such products or services. As reflected below, most of our revenue is accounted for under Topic 840. Our contracts with customers generally do not include multiple performance obligations.

Inventory

Parts, tools and accessories inventory is primarily comprised of items purchased for resale or rent to customers. During the second quarter ended June 30, 2020, in connection with a new inventory management system, we elected to change our method for these inventories, which were previously valued using the first-in, first-out (“FIFO”) method, to the moving average cost method. We believe the change is preferable because it better reflects movement of the inventory and the corresponding value which provides a better reflection of periodic income from operations. This change was not applied retrospectively to prior periods, as the effect of the change was not material to our consolidated financial statements, including interim periods.

Also included within parts, tools and accessories inventory are materials and components that we carry to service our rental fleet and new equipment held for sale. These materials and components are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis.

Equipment inventory consists of equipment bought specifically for resale to customers. These new purchases are recorded directly to inventory when received. Equipment inventory is stated at the lower of cost or net realizable value, with cost determined on a specific identification basis.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Schedule of Revenue Types Based On Accounting Standard

The inset below presents our revenue types based on the accounting standard used to determine the accounting.

	Three Months Ended June 30,						Three Months Ended June 30,
	2020						2019
(in $000s)	Topic 840		Topic 606		Total		Topic 840		Topic 606		Total
Rental:
Rental revenue	$	45,048	$	—	$	45,048	$	45,731	$	—	$	45,731
Shipping and handling	—		1,936		1,936		—		2,394		2,394
Total rental revenue	45,048		1,936		46,984		45,731		2,394		48,125
Sales and services:
Sales of rental equipment	—		4,982		4,982		—		4,332		4,332
Sales of new equipment	—		5,418		5,418		—		4,480		4,480
Parts and services	—		11,097		11,097		—		5,918		5,918
Total sales and services	—		21,497		21,497		—		14,730		14,730
Total revenue	$	45,048	$	23,433	$	68,481	$	45,731	$	17,124	$	62,855
	Six Months Ended June 30,						Six Months Ended June 30,
	2020						2019
(in $000s)	Topic 840		Topic 606		Total		Topic 840		Topic 606		Total
Rental:
Rental revenue	$	93,961	$	—	$	93,961	$	89,372	$	—	$	89,372
Shipping and handling	—		4,017		4,017		—		4,395		4,395
Total rental revenue	93,961		4,017		97,978		89,372		4,395		93,767
Sales and services:
Sales of rental equipment	—		14,075		14,075		—		11,731		11,731
Sales of new equipment	—		12,995		12,995		—		6,830		6,830
Parts and services	—		25,176		25,176		—		12,019		12,019
Total sales and services	—		52,246		52,246		—		30,580		30,580
Total revenue	$	93,961	$	56,263	$	150,224	$	89,372	$	34,975	$	124,347

Schedule of Inventory

Inventory consisted of the following:

(in $000s)	June 30, 2020		December 31, 2019
Parts, tools and accessories inventory	$	27,324	$	30,174
Equipment inventory	4,787		2,827
Inventory	$	32,111	$	33,001

Schedule of Rental Equipment

Rental equipment consisted of the following:

(in $000s)	June 30, 2020		December 31, 2019
Rental equipment	$	669,231	$	658,564
Less: accumulated depreciation	(299,962)		(275,144)
Rental equipment, net	$	369,269	$	383,420

Property and equipment consisted of the following:

(in $000s)	June 30, 2020		December 31, 2019
Property and equipment	$	11,058	$	10,082
Less: accumulated depreciation	(7,684)		(7,168)
Construction in progress	2,421		3,647
Property and equipment, net	$	5,795	$	6,561

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Segments (Tables)

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Summary of Financial Information by Segment

The following tables present our financial information by segment:

	Three Months Ended June 30,						Three Months Ended June 30,
	2020						2019
(in $000s)	ERS		PTA		Total		ERS		PTA		Total
Rental revenue(1)(2)	$	43,025	$	3,959	$	46,984	$	44,867	$	3,258	$	48,125
Sales of rental equipment	4,982		—		4,982		4,332		—		4,332
Sales of new equipment	5,418		—		5,418		4,480		—		4,480
Parts sales and services	—		11,097		11,097		—		5,918		5,918
Total revenues	53,425		15,056		68,481		53,679		9,176		62,855
Cost of revenue	21,549		10,894		32,443		19,561		5,705		25,266
Depreciation of rental equipment	18,559		1,137		19,696		15,889		1,055		16,944
Gross Profit	$	13,317	$	3,025	$	16,342	$	18,229	$	2,416	$	20,645
	Six Months Ended June 30,						Six Months Ended June 30,
	2020						2019
(in $000s)	ERS		PTA		Total		ERS		PTA		Total
Rental revenue(1)(2)	$	90,078	$	7,900	$	97,978	$	87,762	$	6,005	$	93,767
Sales of rental equipment	14,075		—		14,075		11,731		—		11,731
Sales of new equipment	12,995		—		12,995		6,830		—		6,830
Parts sales and services	—		25,176		25,176		—		12,019		12,019
Total revenues	117,148		33,076		150,224		106,323		18,024		124,347
Cost of revenue	48,869		23,802		72,671		38,215		11,460		49,675
Depreciation of rental equipment	37,535		2,273		39,808		31,550		2,125		33,675
Gross Profit	$	30,744	$	7,001	$	37,745	$	36,558	$	4,439	$	40,997

(1) As discussed in Note 2, Summary of Significant Accounting Policies, rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers as well as charges to customers for damaged equipment. Effective in 2019, billings to customers for damages are classified in rental revenue, given that the amounts are directly related to the Company’s rental arrangements with its customers. Amounts for damages in the comparable prior period have been reclassified to rental revenue from parts sales and services ($0.6 million and $1.4 million for the three and six months ended June 30, 2019, respectively).

(2) Amounts for equipment rental revenue of $0.7 million and $1.2 million for the three and six months ended June 30, 2019, respectively, previously reported in the PTA segment as rental revenue have been reclassified to the ERS segment to align the reportable segment information to the information our CODM began receiving on a regular basis in 2019.

Reconciliation of Segment Gross Profit to Consolidated Loss Before Income Taxes

The following table presents a reconciliation of consolidated gross profit to consolidated loss before income taxes:

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000s)	2020		2019		2020		2019
Gross profit	$	16,342	$	20,645	$	37,745	$	40,997
Selling, general and administrative expenses	11,018		7,305		22,636		14,884
Licensing and titling expenses	736		583		1,557		1,236
Amortization and non-rental depreciation	800		749		1,516		1,519
Transaction expenses	227		1,559		963		4,069
Other operating expenses	1,042		629		1,758		779
Other (income) expense	783		(9)		6,804		(22)
Interest expense, net	15,949		14,850		31,963		29,843
Loss before income taxes	$	(14,213)	$	(5,021)	$	(29,452)	$	(11,311)

Summary of Revenue by Country

The following tables present revenue by country and total assets by country:

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000s)	2020		2019		2020		2019
Revenue:
United States	$	66,368	$	61,446	$	146,070	$	121,133
Canada	998		1,036		2,367		2,681
Mexico (1)	1,115		373		1,787		533
	$	68,481	$	62,855	$	150,224	$	124,347

(1) On September 27, 2019, the Company began commencing activities for the closure of its Mexican operations, which is part of the ERS segment. For the three and six months ended June, 30, 2020 and 2019, operations in Mexico generated a loss before income taxes of $0.6 million and $0.6 million, and $1.1 million and $1.8 million, respectively.

Summary of Total Assets by Country

(in $000s)	June 30, 2020		December 31, 2019
Assets:
United States	$	774,377	$	802,516
Canada	6,573		8,152
Mexico	2,285		4,616
	$	783,235	$	815,284

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Business Combination (Tables)

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Schedule of Assets Acquired and Liabilities Assumed

The fair value (which remains provisional) of the assets acquired and liabilities assumed as of the acquisition date is presented below.

(in $000s)
Current assets, net of current liabilities	$	319
Property and equipment	78
Rental equipment	38,780
Customer relationships	2,820
Total identifiable assets acquired	41,997
Goodwill	9,523
Total consideration	$	51,520

Business Acquisition, Pro Forma Information

The following pro forma information is presented for comparison purposes as if the Truck Utilities acquisition was completed as of January 1, 2019:

(in $000s)	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Total revenue	$	73,811	$	146,316
Net loss	(5,667)		(12,082)
Basic and diluted net loss per share	(0.26)		(0.56)

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Debt (Tables)

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Schedule of Debt Obligations

Debt obligations and associated interest rates consisted of the following as of June 30, 2020 and December 31, 2019 :

	June 30,		December 31,		June 30,		December 31,
(in $000s)	2020		2019		2020		2019
2019 Credit Facility	$	268,500	$	250,000	3.0	%	4.2	%
Senior Secured Notes due 2024	475,000		475,000		10.0	%	10.0	%
Notes Payable	3,293		3,525
Total debt outstanding	746,793		728,525
Deferred finance fees	(12,708)		(14,222)
Net debt	734,085		714,303
Less current maturities	(1,280)		(1,280)
Long-term debt	$	732,805	$	713,023

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill

Goodwill and intangible assets consisted of the following:

(in $000s)	June 30, 2020		December 31, 2019
Goodwill	$	238,237	$	238,195
Nesco trade name	28,000		28,000
Other intangible assets:
Trade names	1,030		1,030
Non-compete agreements	380		380
Customer relationships	52,880		52,880
	82,290		82,290
Less: accumulated amortization	(13,200)		(11,738)
Intangible assets, net	69,090		70,552
Goodwill and intangible assets	$	307,327	$	308,747

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Computation of Basic and Dilutive Loss Per Share

The following table sets forth the computation of basic and dilutive loss per share:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net loss (in $000s)	$	(13,150)	$	(5,423)	$	(29,119)	$	(12,147)
Weighted-average basic and diluted shares outstanding	49,033,903		21,660,638		49,033,903		21,660,638
Basic and diluted net loss per share	$	(0.27)	$	(0.25)	$	(0.59)	$	(0.56)

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Carrying Values and Fair Values of Financial Liabilities

The following table sets forth the carrying values (exclusive of deferred financing fees) and fair values of our financial liabilities:

	Carrying Value		Fair Value
(in $000s)			Level 1		Level 2		Level 3
June 30, 2020
2019 Credit Facility	$	268,500	$	—	$	268,500	$	—
Senior Secured Notes due 2024	475,000		—		477,375		—
Notes Payable	3,293		—		3,293		—
Derivative	8,476		—		8,476		—
December 31, 2019
2019 Credit Facility	$	250,000	$	—	$	250,000	$	—
Senior Secured Notes due 2024	475,000		—		494,000		—
Notes Payable	3,525		—		3,650		—
Derivative	1,709		—		1,709		—

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Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments Within Condensed and Consolidated Balance Sheets

The fair values of derivative instruments included within the Unaudited Condensed Consolidated Balance Sheets were as follows:

	Liability Derivatives
(in $000s)	June 30, 2020		December 31, 2019
Derivative instruments:
Interest rate collar	$	8,476	$	1,709
Total derivative instruments	$	8,476	$	1,709

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Business and Organization (Details)	6 Months Ended
	Jun. 30, 2020 location state
Business Combination Segment Allocation [Line Items]
Number of location in which the entity operates | location	70
United States
Business Combination Segment Allocation [Line Items]
Number of states positioned to serve	50
Canada
Business Combination Segment Allocation [Line Items]
Number of states positioned to serve	13

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Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Jan. 01, 2021
Revenue from External Customer [Line Items]
Capital lease obligations	$ 24,400		$ 24,400
Revenues	45,048	$ 45,731	93,961	$ 89,372
Revenues	23,433	17,124	56,263	34,975
Forecast | Minimum
Revenue from External Customer [Line Items]
ROU assets					$ 8,000
Operating lease liability					8,000
Forecast | Maximum
Revenue from External Customer [Line Items]
ROU assets					10,000
Operating lease liability					$ 10,000
Revenue
Revenue from External Customer [Line Items]
Revenues	45,048	45,731	93,961	89,372
Revenues	1,936	2,394	4,017	4,395
Revenue | Reclassification Adjustment
Revenue from External Customer [Line Items]
Revenues		600		1,400
Rental Equipment
Revenue from External Customer [Line Items]
Revenues	0	0	0	0
Revenues	4,982	4,332	14,075	11,731
New Equipment
Revenue from External Customer [Line Items]
Revenues	0	0	0	0
Revenues	$ 5,418	$ 4,480	$ 12,995	$ 6,830

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Summary of Significant Accounting Policies - Schedule of Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenue from External Customer [Line Items]
Topic 840	$ 45,048	$ 45,731	$ 93,961	$ 89,372
Topic 606	23,433	17,124	56,263	34,975
Total	68,481	62,855	150,224	124,347
Revenue
Revenue from External Customer [Line Items]
Topic 840	45,048	45,731	93,961	89,372
Topic 606	1,936	2,394	4,017	4,395
Total	46,984	48,125	97,978	93,767
Rental Revenue, Excluding Shipping And Handling
Revenue from External Customer [Line Items]
Topic 840	45,048	45,731	93,961	89,372
Topic 606	0	0	0	0
Total	45,048	45,731	93,961	89,372
Rental Revenue, Shipping And Handling
Revenue from External Customer [Line Items]
Topic 840	0	0	0	0
Topic 606	1,936	2,394	4,017	4,395
Total	1,936	2,394	4,017	4,395
Sales and services
Revenue from External Customer [Line Items]
Topic 840	0	0	0	0
Topic 606	21,497	14,730	52,246	30,580
Total	21,497	14,730	52,246	30,580
Sales of rental equipment
Revenue from External Customer [Line Items]
Topic 840	0	0	0	0
Topic 606	4,982	4,332	14,075	11,731
Total	4,982	4,332	14,075	11,731
Sales of new equipment
Revenue from External Customer [Line Items]
Topic 840	0	0	0	0
Topic 606	5,418	4,480	12,995	6,830
Total	5,418	4,480	12,995	6,830
Sales of new equipment
Revenue from External Customer [Line Items]
Topic 840	0	0	0	0
Topic 606	11,097	5,918	25,176	12,019
Total	$ 11,097	$ 5,918	$ 25,176	$ 12,019

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Summary of Significant Accounting Policies - Schedule of Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Inventory [Line Items]
Inventory	$ 32,111	$ 33,001
Parts, tools and accessories inventory
Inventory [Line Items]
Inventory	27,324	30,174
Equipment
Inventory [Line Items]
Inventory	$ 4,787	$ 2,827

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Summary of Significant Accounting Policies - Schedule of Rental Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Accounting Policies [Abstract]
Rental equipment	$ 669,231	$ 658,564
Less: accumulated depreciation	(299,962)	(275,144)
Rental equipment, net	$ 369,269	$ 383,420

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Summary of Significant Accounting Policies - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Property, Plant and Equipment [Line Items]
Property and equipment	$ 11,058	$ 10,082
Less: accumulated depreciation	(7,684)	(7,168)
Property and equipment, net	5,795	6,561
Construction in Progress
Property, Plant and Equipment [Line Items]
Property and equipment	$ 2,421	$ 3,647

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Segments - Additional Information (Details)	6 Months Ended
	Jun. 30, 2020 state segment
Segment Reporting Information [Line Items]
Number of reportable segments | segment	2
United States
Segment Reporting Information [Line Items]
Number of states positioned to serve	50
Canada
Segment Reporting Information [Line Items]
Number of states positioned to serve	13

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Segments - Financial Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Segment Reporting Information [Line Items]
Revenues	$ 45,048	$ 45,731	$ 93,961	$ 89,372
Rental revenue	68,481	62,855	150,224	124,347
Cost of revenue	32,443	25,266	72,671	49,675
Depreciation of rental equipment	19,696	16,944	39,808	33,675
Gross Profit	16,342	20,645	37,745	40,997
ERS
Segment Reporting Information [Line Items]
Rental revenue	53,425	53,679	117,148	106,323
Cost of revenue	21,549	19,561	48,869	38,215
Depreciation of rental equipment	18,559	15,889	37,535	31,550
Gross Profit	13,317	18,229	30,744	36,558
PTA
Segment Reporting Information [Line Items]
Rental revenue	15,056	9,176	33,076	18,024
Cost of revenue	10,894	5,705	23,802	11,460
Depreciation of rental equipment	1,137	1,055	2,273	2,125
Gross Profit	3,025	2,416	7,001	4,439
Revenue
Segment Reporting Information [Line Items]
Revenues	45,048	45,731	93,961	89,372
Rental revenue	46,984	48,125	97,978	93,767
Cost of revenue	14,311	12,843	28,097	23,900
Revenue | ERS
Segment Reporting Information [Line Items]
Rental revenue	43,025	44,867	90,078	87,762
Revenue | PTA
Segment Reporting Information [Line Items]
Rental revenue	3,959	3,258	7,900	6,005
Sales of rental equipment
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Rental revenue	4,982	4,332	14,075	11,731
Cost of revenue	3,536	3,871	11,264	10,005
Sales of rental equipment | ERS
Segment Reporting Information [Line Items]
Rental revenue	4,982	4,332	14,075	11,731
Sales of rental equipment | PTA
Segment Reporting Information [Line Items]
Rental revenue	0	0	0	0
Sales of new equipment
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Rental revenue	5,418	4,480	12,995	6,830
Cost of revenue	4,777	3,697	11,431	5,303
Sales of new equipment | ERS
Segment Reporting Information [Line Items]
Rental revenue	5,418	4,480	12,995	6,830
Sales of new equipment | PTA
Segment Reporting Information [Line Items]
Rental revenue	0	0	0	0
Sales of new equipment
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Rental revenue	11,097	5,918	25,176	12,019
Cost of revenue	9,224	4,471	20,584	9,321
Sales of new equipment | ERS
Segment Reporting Information [Line Items]
Rental revenue	0	0	0	0
Sales of new equipment | PTA
Segment Reporting Information [Line Items]
Rental revenue	$ 11,097	5,918	$ 25,176	12,019
Reclassification Adjustment | Revenue
Segment Reporting Information [Line Items]
Revenues		600		1,400
Reclassification Adjustment | Revenue | ERS
Segment Reporting Information [Line Items]
Revenues		$ 700		$ 1,200

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Segments - Reconciliation of Segment Gross Profit (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Segment Reporting [Abstract]
Gross profit	$ 16,342	$ 20,645	$ 37,745	$ 40,997
Selling, general and administrative expenses	11,018	7,305	22,636	14,884
Licensing and titling expenses	736	583	1,557	1,236
Amortization and non-rental depreciation	800	749	1,516	1,519
Transaction expenses	227	1,559	963	4,069
Other operating expenses	1,042	629	1,758	779
Other (income) expense	783	(9)	6,804	(22)
Interest expense, net	15,949	14,850	31,963	29,843
Loss Before Income Taxes	$ (14,213)	$ (5,021)	$ (29,452)	$ (11,311)

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Segments - Revenue and Assets by Country (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Segment Reporting Information [Line Items]
Rental revenue	$ 68,481	$ 62,855	$ 150,224	$ 124,347
Loss before income taxes	14,213	5,021	29,452	11,311
Assets	783,235		783,235		$ 815,284
United States
Segment Reporting Information [Line Items]
Rental revenue	66,368	61,446	146,070	121,133
Assets	774,377		774,377		802,516
Canada
Segment Reporting Information [Line Items]
Rental revenue	998	1,036	2,367	2,681
Assets	6,573		6,573		8,152
Mexico
Segment Reporting Information [Line Items]
Rental revenue	1,115	373	1,787	533
Loss before income taxes	600	$ 1,100	600	$ 1,800
Assets	$ 2,285		$ 2,285		$ 4,616

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Business Combination - Narrative (Details) - USD ($) $ in Thousands		3 Months Ended	6 Months Ended
	Nov. 04, 2019	Jun. 30, 2020	Jun. 30, 2020	Dec. 31, 2019
Business Acquisition [Line Items]
Goodwill		$ 238,237	$ 238,237	$ 238,195
Truck Utilities, Inc
Business Acquisition [Line Items]
Purchase consideration	$ 44,700
Cash acquired	3,100
Capital expenditure adjustment	3,800
Goodwill	9,523
Revenues		10,100	22,500
Pretax income		$ 200	$ 900
Equipment Rental And Sales | Truck Utilities, Inc
Business Acquisition [Line Items]
Goodwill	6,000
Parts, tools and accessories inventory | Truck Utilities, Inc
Business Acquisition [Line Items]
Goodwill	$ 3,500

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Business Combination - Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Nov. 04, 2019
Business Acquisition [Line Items]
Goodwill	$ 238,237	$ 238,195
Truck Utilities, Inc
Business Acquisition [Line Items]
Current assets, net of current liabilities			$ 319
Property and equipment			78
Rental equipment			38,780
Total identifiable assets acquired			41,997
Goodwill			9,523
Total consideration			51,520
Customer relationships | Truck Utilities, Inc
Business Acquisition [Line Items]
Customer relationships			$ 2,820

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Business Combination - Pro Forma Information (Details) - Truck Utilities, Inc - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Business Acquisition [Line Items]
Total revenue	$ 73,811	$ 146,316
Net loss	$ (5,667)	$ (12,082)
Basic and diluted net loss per share	$ (260)	$ (560)

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Debt Schedule of Debt Obligations (Details) - USD ($)	Jun. 30, 2020	Mar. 10, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Total debt outstanding	$ 746,793,000		$ 728,525,000
Deferred finance fees	(12,708,000)		(14,222,000)
Net debt	734,085,000		714,303,000
Less current maturities	(1,280,000)		(1,280,000)
Long-term debt	732,805,000		713,023,000
Notes Payable
Debt Instrument [Line Items]
Total debt outstanding	3,293,000		3,525,000
2019 Credit Facility | Revolving Credit Facility | Line of Credit
Debt Instrument [Line Items]
Total debt outstanding	$ 268,500,000		$ 250,000,000
Debt interest rate	3.00%		4.20%
Increase in maximum borrowing capacity		$ 35,000,000.0
Maximum borrowing capacity		$ 385,000,000.0
Remaining borrowing capacity	$ 78,300,000
Senior Secured Notes due 2024 | Senior Notes
Debt Instrument [Line Items]
Total debt outstanding	$ 475,000,000		$ 475,000,000
Debt interest rate	10.00%		10.00%

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Goodwill and Intangible Assets - Schedule of Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Finite-Lived Intangible Assets [Line Items]
Goodwill	$ 238,237	$ 238,195
Nesco trade name	28,000	28,000
Intangible assets, gross	82,290	82,290
Less: accumulated amortization	(13,200)	(11,738)
Intangible assets, net	69,090	70,552
Goodwill and intangible assets	307,327	308,747
ERS
Finite-Lived Intangible Assets [Line Items]
Goodwill	229,500
PTA
Finite-Lived Intangible Assets [Line Items]
Goodwill	8,700
Trade names
Finite-Lived Intangible Assets [Line Items]
Other intangible assets	1,030	1,030
Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Other intangible assets	380	380
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Other intangible assets	$ 52,880	$ 52,880

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Earnings Per Share - Computation of Basic and Dilutive Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share [Abstract]
Potentially dilutive shares excluded in aggregate (in shares)	27,500,000				27,100,000
Net income (loss)	$ (13,150)	$ (15,969)	$ (5,423)	$ (6,724)	$ (29,119)	$ (12,147)
Weighted-average basic and diluted shares outstanding (in shares)	49,033,903		21,660,638		49,033,903	21,660,638
Basic and diluted net loss per share (USD per share)	$ (0.27)		$ (0.25)		$ (0.59)	$ (0.56)

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Share-Based Compensation - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Jun. 30, 2019	Jun. 11, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock authorized for issuance (in shares)			3,150,000	6,150,000
Shares of common stock reserved for issuance (in shares)	2,241,000	2,241,000
Share-based payments	$ 600	$ 1,012	$ 180
Unrecognized compensation cost	$ 10,100	$ 10,100
Weighted average period for recognition		3 years 4 months 24 days
Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock authorized for issuance (in shares)	1,200,000	1,200,000
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock authorized for issuance (in shares)	800,000	800,000

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Fair Value Measurements (Details) - Fair Value, Recurring - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative	$ 8,476	$ 1,709
Carrying Value | Notes Payable
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	3,293	3,525
Carrying Value | Senior Secured Second Lien Notes Due 2024 [Member] | Senior Notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	475,000	475,000
Carrying Value | Revolving Credit Facility | 2019 Credit Facility | Line of Credit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	268,500	250,000
Fair Value | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative	0	0
Fair Value | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative	8,476	1,709
Fair Value | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative	0	0
Fair Value | Notes Payable | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	0	0
Fair Value | Notes Payable | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	3,293	3,650
Fair Value | Notes Payable | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	0	0
Fair Value | Senior Secured Second Lien Notes Due 2024 [Member] | Senior Notes | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	0	0
Fair Value | Senior Secured Second Lien Notes Due 2024 [Member] | Senior Notes | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	477,375	494,000
Fair Value | Senior Secured Second Lien Notes Due 2024 [Member] | Senior Notes | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	0	0
Fair Value | Revolving Credit Facility | 2019 Credit Facility | Line of Credit | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	0	0
Fair Value | Revolving Credit Facility | 2019 Credit Facility | Line of Credit | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	268,500	250,000
Fair Value | Revolving Credit Facility | 2019 Credit Facility | Line of Credit | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	$ 0	$ 0

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Financial Instruments - Fair Value of Derivative Instruments (Details) - Cash Flow Hedging - Designated as Hedging Instrument - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Derivative [Line Items]
Total derivative instruments	$ 8,476	$ 1,709
Other liabilities | Interest Rate Collar
Derivative [Line Items]
Total derivative instruments	$ 8,476	$ 1,709

XML

Financial Instruments - Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019	Jul. 17, 2019
Derivative [Line Items]
Derivative instruments not designated as hedges, gain (loss)	$ 800,000		$ 6,800,000
Change in fair value of derivative			6,767,000	$ 0
Reclassification from accumulated other comprehensive loss	$ 0	$ 0	$ 0	$ 0
Not Designated as Hedging Instrument | Interest Rate Collar
Derivative [Line Items]
Interest rate collar amount						$ 170,000,000.0
Cash Flow Hedging | Designated as Hedging Instrument | Interest Rate Collar
Derivative [Line Items]
Reclassification from accumulated other comprehensive loss					$ 800,000
Cash flow hedge, tax expense (benefit) reclassified to earnings					$ 300,000