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 March 31, 2022

☐ 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

_______________________________  

CUSTOM TRUCK ONE SOURCE, 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.)

7701 Independence Ave

Kansas City, MO 64125

(Address of principal executive offices, including zip code)

(816) 241-4888

(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	CTOS	New York Stock Exchange
Redeemable warrants, exercisable for Common Stock, $0.0001 par value	CTOS.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   ☒     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   ☒    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 the definitions 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	☒
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  ☒

The number of shares of common stock outstanding as of April 28, 2022 was 247,589,922.

Custom Truck One Source, Inc. and Subsidiaries

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	Page Number
Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	3
	Unaudited Condensed Consolidated Statements of Net Income (Loss) for the Three Months Ended March 31, 2022 and 2021	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021	5
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2022 and 2021	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	38
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	49
	SIGNATURES	50

PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements

Custom Truck One Source, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(in $000s, except share data)	March 31, 2022		December 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	23,811	$	35,902
Accounts receivable, net	174,057		168,394
Financing receivables, net	36,487		28,649
Inventory	463,722		410,542
Prepaid expenses and other	14,847		13,217
Total current assets	712,924		656,704
Property and equipment, net	107,723		108,612
Rental equipment, net	834,645		834,325
Goodwill	713,832		695,865
Intangible assets, net	314,505		327,840
Operating lease assets	35,453		36,014
Other assets	26,997		24,406
Total Assets	$	2,746,079	$	2,683,766
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	108,484	$	91,123
Accrued expenses	61,963		60,337
Deferred revenue and customer deposits	25,684		35,791
Floor plan payables - trade	59,682		72,714
Floor plan payables - non-trade	220,300		165,239
Operating lease liabilities - current	5,283		4,987
Current maturities of long-term debt	4,950		6,354
Current portion of finance lease obligations	4,559		4,038
Total current liabilities	490,905		440,583
Long-term debt, net	1,324,396		1,308,265
Finance leases	2,313		5,109
Operating lease liabilities - noncurrent	30,718		31,514
Deferred income taxes	21,545		15,621
Derivative, warrants and other liabilities	17,693		24,164
Total long-term liabilities	1,396,665		1,384,673
Commitments and contingencies (see Note 14)
Stockholder's Equity
Common stock — $0.0001 par value, 500,000,000 shares authorized, 247,461,042 and 247,358,412 shares issued and outstanding, at March 31, 2022 and December 31, 2021, respectively	25		25
Treasury stock, at cost — 339,591 and 318,086 shares at March 31, 2022 and December 31, 2021, respectively	(3,307)		(3,020)
Additional paid-in capital	1,512,554		1,508,995
Accumulated deficit	(650,763)		(647,490)
Total stockholders' equity (deficit)	858,509		858,510
Total Liabilities and Stockholders' Equity	$	2,746,079	$	2,683,766

See accompanying notes to unaudited condensed consolidated financial statements.

3

Custom Truck One Source, Inc.

Condensed Consolidated Statements of Net Income (Loss) (unaudited)

	Three Months Ended March 31,
(in $000s, except share and per share data)	2022		2021
Revenue
Rental revenue	$	109,145	$	48,289
Equipment sales	227,186		17,987
Parts sales and services	30,145		12,023
Total revenue	366,476		78,299
Cost of Revenue
Cost of rental revenue	25,793		16,928
Depreciation of rental equipment	44,964		17,844
Cost of equipment sales	187,278		13,665
Cost of parts sales and services	23,948		9,643
Total cost of revenue	281,983		58,080
Gross Profit	84,493		20,219
Operating Expenses
Selling, general and administrative expenses	53,655		12,050
Amortization	13,335		754
Non-rental depreciation	3,047		21
Transaction expenses	4,648		10,448
Total operating expenses	74,685		23,273
Operating Income (Loss)	9,808		(3,054)
Other Expense
Interest expense, net	19,156		14,906
Financing and other expense (income)	(9,080)		5,857
Total other expense	10,076		20,763
Income (Loss) Before Income Taxes	(268)		(23,817)
Income Tax Expense (Benefit)	3,005		4,090
Net Income (Loss)	$	(3,273)	$	(27,907)
Basic and Diluted Earnings (Loss) Per Share	$	(0.01)	$	(0.57)
Weighted-Average Common Shares Outstanding	247,057,564		48,619,613

See accompanying notes to unaudited condensed consolidated financial statements.

4

Custom Truck One Source, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

	Three Months Ended March 31,
(in $000s)	2022		2021
Operating Activities
Net income (loss)	$	(3,273)	$	(27,907)
Adjustments to reconcile net income (loss) to net cash flow from operating activities:
Depreciation and amortization	62,500		19,905
Amortization of debt issuance costs	1,326		—
Provision for losses on accounts receivable	2,811		1,383
Share-based compensation	3,364		698
Gain on sales and disposals of rental equipment	(5,420)		(4,139)
Change in fair value of derivative and warrants	(5,767)		5,846
Deferred tax expense (benefit)	2,849		3,826
Changes in assets and liabilities:
Accounts and financing receivables	(33,520)		1,520
Inventories	(51,384)		(5,081)
Prepaids, operating leases and other	(4,637)		(5,545)
Accounts payable	29,869		(956)
Accrued expenses and other liabilities	(5,343)		(1,437)
Floor plan payables - trade, net	(13,031)		—
Customer deposits and deferred revenue	(10,115)		(199)
Net cash flow from operating activities	(29,771)		(12,086)
Investing Activities
Acquisition of business, net of cash acquired	(50,513)		—
Purchases of rental equipment	(45,945)		(11,368)
Proceeds from sales and disposals of rental equipment	49,961		15,416
Other investing activities, net	(1,961)		(76)
Net cash flow from investing activities	(48,458)		3,972
Financing Activities
Proceeds from debt	75		—
Share-based payments	(6)		—
Borrowings under revolving credit facilities	50,000		25,461
Repayments under revolving credit facilities	(34,844)		(16,431)
Repayments of notes payable	(1,872)		(182)
Finance lease payments	(2,275)		(955)
Acquisition of inventory through floor plan payables - non-trade	140,126		—
Repayment of floor plan payables - non-trade	(85,066)		—
Net cash flow from financing activities	66,138		7,893
Net Change in Cash and Cash Equivalents	(12,091)		(221)
Cash and Cash Equivalents at Beginning of Period	35,902		3,412
Cash and Cash Equivalents at End of Period	$	23,811	$	3,191

Custom Truck One Source, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited) — Continued

	Three Months Ended March 31,
(in $000s)	2022		2021
Supplemental Cash Flow Information
Interest paid	$	4,865	$	26,287
Income taxes paid	—		122
Non-Cash Investing and Financing Activities
Rental equipment and property and equipment purchases in accounts payable	—		6,285
Rental equipment sales in accounts receivable	23,551		1,505

See accompanying notes to unaudited condensed consolidated financial statements.

5

Custom Truck One Source, Inc.

Condensed Consolidated Statements of Stockholders' Equity (Deficit) (unaudited)

			Common Stock		Treasury Stock		Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Equity (Deficit)
	Shares
(in $000s, except share data)	Common	Treasury
Balance, December 31, 2021	247,358,412	(318,086)	$	25	$	(3,020)	$	1,508,995	$	(647,490)	$	858,510
Net income (loss)	—	—	—		—		—		(3,273)		(3,273)
Share-based payments	102,630	(21,505)	—		(287)		3,559		—		3,272
Balance, March 31, 2022	247,461,042	(339,591)	$	25	$	(3,307)	$	1,512,554	$	(650,763)	$	858,509
			Common Stock		Treasury Stock		Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Deficit
	Shares
(in $000s, except share data)	Common	Treasury
Balance, December 31, 2020	49,156,753	—	$	5	$	—	$	434,917	$	(465,989)	$	(31,067)
Net income (loss)	—	—	—		—		—		(27,907)		(27,907)
Share-based payments	62,630	—	—		—		597		—		597
Warrants liability reclassification (see Note 12)	—	—	—		—		(10,290)		—		(10,290)
Balance, March 31, 2021	49,219,383	—	$	5	$	—	$	425,224	$	(493,896)	$	(68,667)

See accompanying notes to unaudited condensed consolidated financial statements.

6

 Custom Truck One Source, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1: Business and Organization

Organization

Custom Truck One Source, Inc., formerly Nesco Holdings, Inc., a Delaware corporation, and its wholly owned subsidiaries are engaged in the business of providing a range of products and services to customers through rentals and sales of specialty equipment, rentals and sales of aftermarket parts and services related to the specialty equipment, and repair, maintenance and customization services related to that equipment. Immediately following the acquisition by Nesco Holdings II, Inc. of Custom Truck One Source, L.P. (“Custom Truck LP”) as discussed in Note 3: Business Combinations, on April 1, 2021 (the “Acquisition”), Nesco Holdings, Inc. (“Nesco Holdings”) changed its name to “Custom Truck One Source, Inc.” and changed The New York Stock Exchange ticker for its shares of common stock (“Common Stock”) from “NSCO” to “CTOS,” and the ticker of its redeemable warrants from “NSCO.WS” to “CTOS.WS.” Terms such as, “we,” “our,” “us,” or “the Company” refer to Nesco Holdings prior to the Acquisition, and to the combined company after the Acquisition. Unless the context otherwise requires, the term “Nesco” or “Nesco Holdings” as used in these financial statements means Nesco Holdings and its consolidated subsidiaries prior to the Acquisition, and the term “Custom Truck LP” means Custom Truck LP and its consolidated subsidiaries prior to and on the date of the Acquisition.

We are a specialty equipment provider to the electric utility transmission and distribution, telecommunications, rail and other infrastructure-related industries in North America. Our core business relates to our new equipment inventory and rental fleet of specialty equipment that is utilized by service providers in infrastructure development and improvement work. We offer our specialized equipment to a diverse customer base, including utilities and 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 for lighting and signage. We rent, produce, sell and service a broad range of new and used equipment, including bucket trucks, digger derricks, dump trucks, cranes, service trucks, and heavy-haul trailers. Following the Acquisition, we changed our reportable segments to be consistent with how we currently manage the business, representing three reporting segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”).

Equipment Rental Solutions (“ERS”) Segment

We own a broad range of new and used specialty equipment, including truck-mounted aerial lifts, cranes, service trucks, dump trucks, trailers, digger derricks and other machinery and equipment. The majority of our rental fleet can be used across a variety of end-markets, which coincides with the needs of many of our customers who operate in multiple end-markets. As is customary for equipment rental companies, we sell used equipment out of our rental fleet to end user customers. These sales are often made in response to specific customer requests. These sales offer customers an opportunity to buy well-maintained equipment with long remaining useful lives and enable us to effectively manage the age and mix of our rental fleet to match current market demand. We also employ rental purchase options on a select basis, which provide a buyout option with an established purchase price that decreases over time as rental revenue is collected. Customers are given credit against such purchase price for a portion of the amounts paid over the life of the rental, allowing customers the flexibility of a rental with the option to purchase at any time at a known price. Activities in our ERS segment consist of the rental and sale from the rental fleet, of the foregoing products.

Truck and Equipment Sales (“TES”) Segment

We offer a broad variety of new equipment for sale to be used across our end-markets, which can be modified to meet our customers’ specific needs. We believe that our integrated production capabilities and extensive knowledge gained over a long history of selling equipment have established us as a trusted partner for customers seeking tailored solutions with short lead times. In support of these activities, we primarily employ a direct-to-customer sales model, leveraging our dedicated sales force of industry and product managers, who are focused on driving national and local sales. We also opportunistically engage in the sale of used equipment purchased from third parties or received via trade-ins from new equipment sales customers. In all of these cases, we will sell used equipment directly to customers, rather than relying on auctions. Activities in our TES segment consist of the production and sale of new and used specialty equipment and vocational trucks, which includes equipment from leading original equipment manufacturers (“OEMs”) across our end-markets, as well as our Load KingTM brand.

7

Aftermarket Parts and Services (“APS”) Segment

The APS segment includes the sale of specialized aftermarket parts, including captive parts related to our Load KingTM brand, used in the maintenance and repair of the equipment we sell and rent. Specialized tools, including stringing blocks, insulated hot stick, and rigging equipment, are sold or rented to customers on an individual basis or in packaged specialty kits. We also provide truck and equipment maintenance and repair services, which are executed throughout our nationwide branch network and fleet of mobile technicians supported by our 24/7 call center based in Kansas City, Missouri.

COVID-19 and Supply Chain

Uncertainty remains regarding emerging variant strains of the Coronavirus Disease 2019 ("COVID-19") pandemic, and regarding the length of time it will take for the COVID-19 pandemic to subside, including the time it will take for vaccines to be broadly distributed and accepted in the United States and the rest of the world, and the effectiveness of such vaccines in slowing or stopping the spread of COVID-19 and mitigating the economic effects of the pandemic. The Company serves critical infrastructure sectors that have been identified by the United States Cybersecurity and Infrastructure Security Agency (“CISA”) as vital to the U.S., and the Company has continued to meet the needs of customers during the pandemic. The unprecedented nature of the COVID-19 pandemic continues to make it difficult to predict our future business and financial performance. The ensuing economic impacts from restrictions put in place around the globe to address the COVID-19 pandemic, including shutdowns and workplace changes, have led to issues, broadly, in the global flow of goods and services (the “supply chain”). The Company continues to monitor the impact of the COVID-19 pandemic and related restrictions on our supply chain, including, but not limited to, the commercial vehicle manufacturers that provide the chassis used in our production and manufacturing processes. Supply chain disruptions, such as the ongoing semiconductor shortage, could potentially limit the ability of these manufacturers to meet demand in future periods.

Note 2: Summary of Significant Accounting Policies

Basis of Presentation

Our accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and the accounting policies described below. Our consolidated financial statements include the accounts of all wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in accordance with GAAP requires that these Unaudited Condensed Consolidated Financial Statements and most of the disclosures in these Notes be presented on a historical basis, as of or for the current interim period ended or comparable prior period. The consolidated financial position and results of operations and cash flows (including segment information) presented herein include those of Custom Truck One Source, Inc. as of March 31, 2022 and since the date of the Acquisition. Financial information presented for periods prior to the Acquisition represent those of Nesco Holdings and its subsidiaries.

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, and the Condensed Consolidated Balance Sheet at December 31, 2021, has been derived from the audited consolidated financial statements of Custom Truck One Source, Inc. at that date. Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting 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 Custom Truck One Source, Inc. audited consolidated financial statements included in the Custom Truck One Source, Inc. Annual Report on Form 10-K for the year ended December 31, 2021.

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 the allocation of purchase price related to 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.

8

Trade Receivables and Allowance for Credit Losses

We are exposed to credit losses from trade receivables generated through our leasing, sales and service businesses. We assess each customer’s ability to pay for the products and services by conducting a credit review. The credit review considers expected billing exposure and timing for payment and the customer’s established credit rating. We perform a credit review of new customers at inception of the customer relationship and, for existing customers, when the customer transacts new leases or product orders after a period of dormancy. We also consider contract terms and conditions, country risk and business strategy in the evaluation.

We monitor ongoing credit exposure through an active review of customer balances against contract terms and due dates. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. The allowances for credit losses reflect the estimate of the amount of receivables that management assesses will be unable to be collected based on historical write-off experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. This estimate could require change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may be required to increase or decrease the allowances. We review the adequacy of the allowance on a quarterly basis. The allowance for doubtful accounts was $12.8 million and $10.8 million as of March 31, 2022 and December 31, 2021, respectively, and is included in accounts receivable, net on our Condensed Consolidated Balance Sheets.

Note 3: Business Combinations

Acquisition of Custom Truck One Source, L.P.

On December 3, 2020, Nesco Holdings and Nesco Holdings II, Inc., a subsidiary of Nesco Holdings (the “Buyer” or the “Issuer”), entered into a Purchase and Sale Agreement (as amended, the “Purchase Agreement”) with certain affiliates of The Blackstone Group (“Blackstone”) and other direct and indirect equity holders (collectively, “Sellers”) of Custom Truck One Source, L.P., Blackstone Capital Partners VI-NQ L.P., and PE One Source Holdings, LLC, an affiliate of Platinum Equity, LLC (“Platinum”), pursuant to which Buyer agreed to acquire 100% of the partnership interests of Custom Truck LP. In connection with the Acquisition, Nesco Holdings and certain Sellers entered into Rollover and Contribution Agreements (the “Rollover Agreements”), pursuant to which such Sellers agreed to contribute a portion of their equity interests in Custom Truck LP (the “Rollovers”) with an aggregate value of $100.5 million in exchange for shares of Common Stock, valued at $5.00 per share. We believe the Acquisition creates a leading, one-stop shop for specialty equipment, serving highly attractive and growing infrastructure end markets, including transmission and distribution, telecom, rail and other national infrastructure initiatives.

Also on December 3, 2020, Nesco Holdings entered into a Common Stock Purchase Agreement (the “Investment Agreement”) with Platinum, relating to, among other things, the issuance and sale to Platinum (the “Subscription”) of shares of Common Stock, for an aggregate purchase price in the range of $700 million to $763 million, with the specific amount calculated in accordance with the Investment Agreement based upon the total equity funding required to fund the consideration paid pursuant to the terms of the Purchase Agreement. The shares of Common Stock issued and sold to Platinum had a purchase price of $5.00 per share. In accordance with the Investment Agreement, on December 21, 2020, Nesco Holdings entered into Subscription Agreements (the “Subscription Agreements”) with certain investors (the “PIPE Investors”) to finance, in part, the Acquisition. Pursuant to the Subscription Agreements, concurrently with the closing of the transactions contemplated by the Investment Agreement, the PIPE Investors agreed to purchase an aggregate of 28,000,000 shares of Common Stock at $5.00 per share for an aggregate purchase price of $140 million (the “Supplemental Equity Financing”).

On April 1, 2021 (the “Closing Date”), in connection with (i) the Rollovers, the Company issued, in the aggregate, 20,100,000 shares of Common Stock to the parties to the Rollover Agreements, (ii) the Subscription, the Company issued 148,600,000 shares of Common Stock to Platinum, and (iii) the Supplemental Equity Financing, the Company issued, in the aggregate, 28,000,000 shares of Common Stock to the PIPE Investors.

Purchase Price

The Company issued 20,100,000 shares of Common Stock to Custom Truck LP equity interest holders, as well as paid cash and repaid debt obligations as consideration for the Acquisition. The trading price of the Common Stock was $9.35 per share on the Closing Date. The purchase price has been determined to be as follows:

9

(in $000s, except share and per share data)
Common stock issued	20,100,000
Common stock per share price as of April 1, 2021	$	9.35
Fair value of common stock issued	$	187,935
Cash consideration paid to equity interest holders	790,324
Repayment of debt obligations	552,600
Total purchase price	$	1,530,859

During the year ended December 31, 2021, the Company transferred an additional $3.4 million of cash consideration to the Sellers related to certain customary closing adjustments set forth in the Purchase Agreement.

Opening Balance Sheet

The acquisition of Custom Truck One Source, L.P. has been accounted for using the acquisition method of accounting, and the Company is considered the accounting acquirer. Under the acquisition method of accounting, we are required to assign the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the Closing Date. The excess of the purchase price over those fair values is recorded as goodwill. The total purchase price has been assigned to the underlying assets acquired and liabilities assumed based upon their fair values as of the Closing Date, and the estimated fair values have been recorded based on independent valuations, discounted cash flow analysis, quoted market prices, contributory asset charges, and estimates made by management, which estimates fall under “Level 3” of the fair value hierarchy (as defined in Note 11: Fair Value Measurements).

The following table summarizes the April 1, 2021 fair values of the assets acquired and liabilities assumed. Since the Closing Date, the Company identified and recorded certain measurement period adjustments to the preliminary purchase price allocation, which are reflected in the table below. These adjustments were not significant and related primarily to rental equipment and current liabilities. The measurement period adjustments, coupled with the additional cash consideration discussed above, increased goodwill by approximately $15.6 million during the year ended December 31, 2021. The final assessment of the fair value of the Custom Truck LP assets acquired and liabilities assumed was complete as of March 31, 2022.

(in $000s)
Accounts and financing receivables (a)	$	115,325
Inventory	431,648
Other current assets	13,201
Property and equipment (b)	104,721
Rental equipment	556,569
Intangible assets (c)	301,018
Operating lease assets	23,793
Other assets	18,223
Total identifiable assets acquired	1,564,498
Current liabilities	(410,276)
Long-term debt	(28,607)
Operating lease liabilities-noncurrent	(21,308)
Deferred tax and other liabilities	(31,261)
Total identifiable liabilities assumed	(491,452)
Total net assets	1,073,046
Goodwill (d)	457,813
Net assets acquired (purchase price)	$	1,530,859

a.The estimated fair value of accounts and financing receivables is $115.3 million, with the gross contractual amount being $122.4 million. The Company estimates approximately $7.0 million to be uncollectible.

b.Acquired property and equipment is primarily comprised of land, buildings and improvements with an estimated fair value of $67.9 million, and machinery, equipment and vehicles, with an estimated fair value of $31.1 million, as well as other property with an estimated fair value of $5.7 million.

c.The acquired identified intangible assets are comprised of trade names, with an estimated fair value of $151.0 million, and customer relationships, with an estimated fair value of $150.0 million. The weighted average useful lives of the trade names and the customer relationships are estimated to be 15 years and 12 years, respectively.

d.The goodwill recognized is attributable primarily to synergies and economies of scale provided by the acquired rental and new equipment sales businesses, as well as the assembled workforce of Custom Truck LP. Approximately $265.4 million of the goodwill is expected to be deductible for income tax purposes.

10

Goodwill attributable to the Acquisition is assigned to our Segments as follows:

(in $000s)
ERS	$	261,607
TES	167,307
APS	28,899

Financing Transactions

On the Closing Date, the Issuer issued $920 million in aggregate principal amount of 5.50% senior secured second lien notes due 2029 (the “2029 Secured Notes”). The 2029 Secured Notes were issued pursuant to an indenture, dated as of April 1, 2021, by and among the Issuer, Wilmington Trust, National Association, as trustee, and the guarantors party thereto (the “Indenture”). The Issuer will pay interest on the Notes semi-annually in arrears on April 15 and October 15 of each year, which commenced on October 15, 2021. Unless earlier redeemed, the 2029 Secured Notes will mature on April 15, 2029. The notes were offered pursuant to a private placement exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons outside of the United States in reliance on Regulation S under the Securities Act. The proceeds from the issuance and sale of the 2029 Secured Notes were used to consummate the Acquisition and to repay the Senior Secured Notes due 2024 previously issued by Nesco Holdings, repay certain indebtedness of Custom Truck LP and pay certain fees and expenses related to the Acquisition and financing transactions.

Also on the Closing Date, the Buyer, its direct parent, and certain of its direct and indirect subsidiaries entered into a senior secured asset-based revolving credit agreement (the “ABL Credit Agreement”) with Bank of America, N.A., as administrative agent and collateral agent, and certain other lenders party thereto, consisting of a $750.0 million first lien senior secured asset-based revolving credit facility with a maturity of five years (the “ABL Facility”), which includes borrowing capacity for revolving loans (with a swingline sub-facility) and the issuance of letters of credit. Proceeds from the ABL Facility were used to finance the repayment of certain indebtedness of (i) Custom Truck LP under that certain Credit Agreement, dated as of April 18, 2017 (the “Custom Truck LP Credit Facility”), by and among Custom Truck LP, the other entities party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent, and (ii) Buyer under that certain Credit Agreement, dated as of July 31, 2019 (the “2019 Credit Facility”), by and among Capitol Investment Merger Sub 2, LLC, the other entities party thereto and JPMorgan Chase Bank, N.A., as administrative agent, as well as to pay fees and expenses related to the Acquisition and the financing transactions.

Pro Forma Information

The below pro forma information is presented for the three months ended March 31, 2021 and uses the estimated fair value of assets and liabilities on the Closing Date, and makes the following assumptions: (1) removes acquisition-related costs and charges that were recognized in the Company's consolidated financial statements in the three months ended March 31, 2021 and applies these costs and charges as if the Acquisition and related financing transactions had occurred on January 1, 2020; (2) adjusts for the impacts of purchase accounting in the three months ended March 31, 2021; (3) adjusts interest expense, including amortization of debt issuance costs, to reflect borrowings on the ABL Facility and issuance of the 2029 Secured Notes, as if the funds had been borrowed and the notes had been issued on January 1, 2020 and used to repay Nesco’s 2019 Credit Facility, Nesco’s Senior Secured Notes due 2024 and the Custom Truck LP Credit Facility and term loan; and (4) adjusts for the income tax effect using a tax rate of 25%. The pro forma information is not necessarily indicative of the Company’s results of operations had the Acquisition been completed on January 1, 2020, nor is it necessarily indicative of the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies, synergies, or revenue opportunities that could result from the Acquisition.

	Three Months Ended March 31,
(in $000s)	2021
Revenue	$	394,770
Net income (loss)	$	(15,280)

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The following presents a summary of the pro forma adjustments that are directly attributable to the business combination:

		Three Months Ended March 31,
(in $000s)		2021
Increase (decrease) net income/loss:
Impact of fair value mark-ups on rental fleet depreciation	a	$	(3,817)
Intangible asset amortization and other depreciation expense	b	(2,390)
Transaction expenses	c	15,702
Interest expense and amortization of debt issuance costs	d	3,919
Income tax expense	e	(3,354)

a.Represents the adjustment for depreciation of rental fleet relating to the increase in the value of the rental fleet to its fair value.

b.Represents the differential in amortization and depreciation of non-rental equipment related to the respective fair values of the assets.

c.Represents adjustments for transaction expenses that are applied to the three months ended March 31, 2021.

d.Reflects the differential in interest expense, inclusive of amortization of capitalized debt issuance costs, related to our debt structure after the Acquisition as though the following had occurred on January 1, 2020: (i) borrowings under the ABL Facility; (ii) repayment of the 2019 Credit Facility; (iii) repayment of the Senior Secured Notes due 2024; (iv) repayment of the Custom Truck LP Credit Facility; and (v) the issuance of the 2029 Secured Notes.

e.Reflects the adjustment to recognize the tax impacts of the pro forma adjustments for which a tax expense is recognized using a statutory tax rate of 25%. This rate may vary from the actual effective rate of the historical and combined businesses.

Transaction Costs

The Company expensed approximately $10.4 million in transaction costs related to the Acquisition within Transaction expenses and other expense in the three months ended March 31, 2021.

Acquisition of HiRail

On January 14, 2022, a subsidiary of the Company, CTOS Canada, Ltd., closed a Share Purchase Agreement with certain affiliates of Ontario Limited (d/b/a HiRail Leasing), Ontario Inc. (d/b/a Heavy Equipment Repairs), and Ontario Limited (d/b/a Northshore Rail Contracting) (collectively “HiRail”) to acquire 100% of the equity interests of HiRail. The acquisition of HiRail expands our presence in our strategic markets and deepens our relationships with key customers.

Purchase Price

The Company paid $51.6 million to HiRail equity interest holders and to repay debt obligations as consideration for the HiRail acquisition.

Opening Balance Sheet

The Acquisition of HiRail has been accounted for using the acquisition method of accounting. Under the acquisition method of accounting, we are required to assign the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of January 14, 2022. The excess of the purchase price over those fair values is recorded as goodwill and is attributable to expanded access to markets for our product and service offering, synergies, and broader product offerings to existing customers of HiRail. The total purchase price has been preliminarily assigned to the underlying assets acquired and liabilities assumed based upon their preliminary fair values as of January 14, 2022, and the estimated fair values have been recorded based on independent valuations, discounted cash flow analysis, quoted market prices, contributory asset charges, and estimates made by management, which estimates fall under “Level 3” of the fair value hierarchy (as defined in Note 11: Fair Value Measurements).

The following table summarizes as of January 14, 2022, fair values of the assets acquired and liabilities assumed. The final assessment of the fair value of the HiRail assets acquired and liabilities assumed, including estimates of fair values for inventory, property and equipment, rental equipment, certain intangible assets, deferred income taxes and the final assignment of goodwill to reporting units, was not complete as of March 31, 2022. The preliminary fair values are subject to change pending a final determination of the fair values of assets acquired and liabilities assumed as more information is received about their respective values. As of March 31, 2022, the Company is in the process of determining the value of intangible assets acquired including customer relationships, trade names, and other intangible assets.

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(in $000s)
Current assets	$	2,891
Property, equipment and other assets	819
Rental equipment	34,224
Total identifiable assets acquired	37,934
Total identifiable liabilities assumed	(6,011)
Total net assets	31,923
Goodwill and intangible assets	19,712
Net assets acquired (purchase price)	51,635
Less: cash acquired	(1,122)
Net cash paid	$	50,513

HiRail has generated $3.8 million of revenue and $1.3 million of pre-tax loss since January 14, 2022, which are included in the Condensed Consolidated Statements of Net Income (Loss) for the three months ended March 31, 2022. Costs and expenses related to the acquisition were expensed as incurred and were not material. Additionally, pro forma information as if the acquisition of HiRail had occurred on January 1, 2021 is not being presented as the information is not considered material to our consolidated financial statements.

Note 4: Revenue

Revenue Disaggregation

Geographic Areas

The Company had total revenue in the following geographic areas:

	Three Months Ended March 31,
(in $000s)	2022		2021
United States	$	356,897	$	77,466
Canada	9,579		833
Total revenue	$	366,476	$	78,299

Major Product Lines and Services

Equipment leasing and equipment sales are the core businesses of the Company, with leasing complemented by the sale of rental units from the rental fleet. The Company’s revenue by major product and service line for the three month periods ended March 31, 2022 and 2021 are presented in the tables below.

	Three Months Ended March 31,						Three Months Ended March 31,
	2022						2021
(in $000s)	Topic 842		Topic 606		Total		Topic 840		Topic 606		Total
Rental:
Rental	$	105,135	$	—	$	105,135	$	46,186	$	—	$	46,186
Shipping and handling	—		4,010		4,010		—		2,103		2,103
Total rental revenue	105,135		4,010		109,145		46,186		2,103		48,289
Sales and services:
Equipment sales	12,237		214,949		227,186		—		17,987		17,987
Parts and services	2,220		27,925		30,145		—		12,023		12,023
Total sales and services	14,457		242,874		257,331		—		30,010		30,010
Total revenue	$	119,592	$	246,884	$	366,476	$	46,186	$	32,113	$	78,299

Rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers. Equipment sales recognized pursuant to sales-type leases are recorded within equipment sales revenue. Charges to customers for damaged rental equipment are recorded within parts and services revenue.

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Receivables, Contract Assets and Liabilities

The Company manages credit risk associated with its accounts receivable at the customer level. Because the same customers generate the revenues that are accounted for under both Topic 606 and Topic 842, the discussions below on credit risk and the Company's allowance for credit losses address the Company's total revenues.

The Company’s allowance for credit losses reflects its estimate of the amount of receivables that it will be unable to collect. The estimated losses are based upon a review of outstanding receivables, the related aging, including specific accounts if deemed necessary, and on the Company’s historical collection experience. The estimated losses are calculated using the loss rate method based upon a review of outstanding receivables, related aging, and historical collection experience. The Company's estimates reflect changing circumstances, including changes in the economy or in the particular circumstances of individual customers, and, as a result, the Company may be required to increase or decrease its allowance. During the three months ended March 31, 2022, the Company recognized bad debt expense of $1.4 million, as reductions of rental revenue in accordance with the collectability provisions of Topic 842. During the three months ended March 31, 2022, the Company recognized $1.5 million within selling, general, and administrative expense in its Condensed Consolidated Statements of Net Income (Loss), which included changes in its allowances for credit losses.

When customers are billed for rentals in advance of the rental period, the Company defers recognition of revenue. As of March 31, 2022 and 2021, the Company had approximately $1.7 million and $1.0 million, respectively, of deferred rental revenue. Additionally, the Company collects deposits from customers for orders placed for equipment and rentals. The Company had approximately $24.0 million in deposits as of March 31, 2022.

The Company does not have material contract assets, and it did not recognize any material impairments of any contract assets.

The primary costs to obtain contracts for new and rental unit sales with the Company's customers are commissions. The Company pays its sales force commissions related to the sale and rental of new and used units. For new unit and rental unit sales, the period benefited by each commission is less than one year. As a result, the Company has applied the practical expedient for incremental costs of obtaining a sales contract and expenses commissions as incurred.

Note 5: Inventory

Inventory consisted of the following:

(in $000s)	March 31, 2022		December 31, 2021
Whole goods	$	367,539	$	326,641
Aftermarket parts and services inventory	96,183		83,901
Inventory	$	463,722	$	410,542

Note 6: Rental Equipment

Rental equipment, net consisted of the following:

(in $000s)	March 31, 2022		December 31, 2021
Rental equipment	$	1,254,912	$	1,247,375
Less: accumulated depreciation	(420,267)		(413,050)
Rental equipment, net	$	834,645	$	834,325

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Note 7: Long-Term Debt

Debt obligations and associated interest rates consisted of the following:

(in $000s)	March 31, 2022		December 31, 2021		March 31, 2022	December 31, 2021
ABL Facility	$	410,100	$	394,945	2.1%	1.8%
2029 Secured Notes	920,000		920,000		5.5%	5.5%
Notes payable	30,864		32,619		3.0%-5.0%	3.0%-5.0%
Total debt outstanding	1,360,964		1,347,564
Deferred finance fees	(31,618)		(32,945)
Net debt	1,329,346		1,314,619
Less: current maturities	(4,950)		(6,354)
Long-term debt	$	1,324,396	$	1,308,265

As of March 31, 2022, borrowing availability under the ABL Facility was $330.9 million, and outstanding standby letters of credit were $4.8 million.

Note 8: Earnings (Loss) Per Share

Diluted earnings (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 earnings (loss) per share for the applicable periods because earnings are at a net loss and therefore, the potentially dilutive effect would be anti-dilutive. Our potentially dilutive shares aggregated 24.9 million and 28.0 million, respectively, for the three months ended March 31, 2022 and 2021.

The following tables set forth the computation of basic and dilutive loss per share:

	Three Months Ended March 31, 2022					Three Months Ended March 31, 2021
(in $000s, except share and per share data)	Net Income (Loss)		Weighted Average Shares	Per Share Amount		Net Income (Loss)		Weighted Average Shares	Per Share Amount
Basic earnings (loss) per share	$	(3,273)	247,057,564	$	(0.01)	$	(27,907)	48,619,613	$	(0.57)
Dilutive common share equivalents	—		—	—		—		—	—
Diluted earnings (loss) per share	$	(3,273)	247,057,564	$	(0.01)	$	(27,907)	48,619,613	$	(0.57)

Note 9: Equity

Preferred Stock

As of March 31, 2022 and December 31, 2021, we were authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share, respectively, with such designation, rights and preferences as may be determined from time to time by our board of directors. As of March 31, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.

Common Stock

As of March 31, 2022 and December 31, 2021, we were authorized to issue 500,000,000 shares of common stock with a par value of $0.0001 per share, respectively.

During the period commencing on the date of the Acquisition and ending on the date that is eighteen months following the date of the Acquisition (the “Lockup Period” ), Platinum shall not transfer any shares of common stock beneficially owned or otherwise held by it other than transfers as allowed by the Amended and Restated Stockholder’s Agreement of Custom Truck One Source, Inc.

Contingently Issuable Shares

NESCO Holdings, LP is a Delaware limited partnership holding shares of our common stock. NESCO Holdings, LP is owned and controlled by Energy Capital Partners, and has the right to receive: (1) up to an additional 1,800,000 shares of common stock through July 31, 2024, in increments of 900,000 shares, if (x) the trading price of the common stock exceeds $13.00 per share or $16.00 per

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share for any 20 trading days during a 30 consecutive trading day period or (y) a sale transaction of the Company occurs in which the consideration paid per share to holders of common stock of the Company exceeds $13.00 per share or $16.00 per share, and (2) an additional 1,651,798 shares of common stock if during the seven-year period ending July 31, 2026, the trading price of common stock exceeds $19.00 per share for any 20 trading days during a 30 consecutive trading day period or if a sale transaction of the Company occurs in which the consideration paid per share to holders of common stock exceeds $19.00 per share.

Note 10: Share-Based Compensation

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, performance share units and deferred compensation.

Share-based compensation expense recognized in selling, general and administrative expenses in the Condensed Consolidated Statements of Net Income (Loss) was $3.4 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there was approximately $20.8 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 2.3 years. There were no share-based payment awards granted in the three months ended March 31, 2022.

Note 11: Fair Value Measurements

The Financial Accounting Standards Board (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.

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
March 31, 2022
ABL Facility	$	410,100	$	—	$	410,100	$	—
2029 Secured Notes	920,000		—		906,200		—
Other notes payable	30,864		—		30,864		—
Warrant liabilities	17,693		—		—		17,693
December 31, 2021
ABL Facility	$	394,945	$	—	$	394,945	$	—
2029 Secured Notes	920,000		—		949,900		—
Other notes payable	32,619		—		32,619		—
Derivative and warrant liabilities	24,164		—		2,388		21,776

The carrying amounts of the ABL Facility and other notes payable approximated fair value as of March 31, 2022 and December 31, 2021 based upon terms and conditions available to the Company at those dates in comparison to the terms and conditions of its outstanding debt. The estimated fair value of the 2029 Secured Notes and Senior Secured Notes due 2024 is calculated using Level 2 inputs, based on bid prices obtained from brokers. The Level 3 fair value presented above consists of the fair value of the Non-Public Warrants (as defined in Note 12: Financial Instruments). The Company estimated the fair value using the Black-Scholes option-pricing model based on the market value of the underlying Common Stock, the remaining contractual term of the warrant, risk-free interest rates and expected dividends, and expected volatility of the price of the underlying Common Stock.

Note 12: 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.

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Warrants

Nesco Holding’s predecessor, Capitol Investment Corp. IV, an entity formed on May 1, 2017, as a special purpose acquisition company (“Capitol” or the “SPAC”), issued warrants for the purchase of approximately 7.5 million shares of the Company’s Common Stock pursuant to a private placement agreement (the “Non-Public Warrants”). In connection with the SPAC’s initial public offering, warrants for the purchase of approximately 13.4 million shares of the Company’s Common Stock were issued to public investors (the “Public Warrants”). The Public Warrants together with the Non-Public Warrants are hereafter referred to collectively as the “Warrants.”

The Warrants provide for the purchase of approximately 20.9 million shares of the Company’s Common Stock. Each Warrant entitles the holder to purchase one share of Common Stock at a price of $11.50 per share, subject to certain adjustments. The Warrants are currently exercisable and terminate on the earlier to occur of (i) July 31, 2024, and (ii) the redemption date. The Company may redeem the Public Warrants at a price of $0.01 per Public Warrant upon providing 30-days’ notice, only in the event that the last sale price of the Common Stock is at least $18.00 per share for any 20 trading days within a 30-trading day period ending on the third day prior to the date on which notice of redemption is given. If the Company elects to redeem the Public Warrants as described above, the Public Warrant may be exercised on a “cashless basis.” The redemption rights do not apply to the Non-Public Warrants if, at the time of the redemption, such Non-Public Warrants continue to be held by the initial holders as of July 31, 2019, or their affiliates or permitted transferees; however, once such Non-Public Warrants are transferred (other than to an affiliate or permitted transferee), the Company may redeem those Non-Public Warrants that have been transferred in a manner similar to any Public Warrants.

The Public Warrants are accounted for as freestanding equity-classified instruments because the Company has the ability to settle with holders of the Public Warrants either by net-share or physical settlement. Because the Non-Public Warrants do not meet the “indexed to the entity’s stock” condition, they have been accounted for as a derivative liability and remeasured at their estimated fair value each period. For the three months ended March 31, 2022, the Company recognized income of $4.1 million in Other (income) expense in its Condensed Consolidated Statements of Net Income (Loss) related to the fair value remeasurement.

Derivatives Not Designated as Hedges

On July 17, 2019, we entered into an interest rate collar (the “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 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 Collar expires in July 2024 and has not been designated as a cash flow hedge. The Collar is carried at fair value and reported in Derivative and warrant liabilities on the Company's Consolidated Balance Sheets ($2.4 million as of December 31, 2021) as a Level 2 measurement (see Note 11: Fair Value Measurements). The change in fair value of the Collar is recognized in Other expense (income), net in our Condensed Consolidated Statements of Net Income (Loss) and totaled $(1.7) million and $(1.8) million for the three months ended March 31, 2022 and 2021, respectively. During the first quarter of 2022 the Company settled the Collar for no gain or loss.

Note 13: Income Taxes

We are subject to taxation in all jurisdictions in which we operate within the United States and Canada. Substantially all of our income before income taxes for all periods presented is U.S. sourced.

We record a valuation allowance against deferred tax assets when we determine that it is more likely than not that all or a portion of a deferred tax asset will not be realized. The valuation allowance primarily relates to federal and state net operating loss carryforwards, as well as disallowed interest expense deduction carryforwards. While the Acquisition resulted in a significant increase in deferred tax liabilities, these tax liabilities, which give rise to future taxable income against which tax carryforwards may be applied, are subject to limitations. Federal and state income tax limitation rules are expected to limit the application of our carryforwards and, accordingly, we record a valuation allowance to reduce our deferred tax assets to amounts expect to be realized. The Company's effective tax rate for the three months ended March 31, 2022 and 2021 differs from the U.S. federal statutory tax rate due primarily to the recording of valuation allowances. During three months ended March 31, 2022, the tax rate also differed from the U.S. federal statutory tax rate as a result of state tax expense recorded during the period. The increase in the effective tax rate in three months ended March 31, 2022 as compared to three months ended March 31, 2021 is primarily due to the near break-even pre-tax loss in the current period.

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Note 14: 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

In the normal course of business, there are various claims in process, matters in litigation, and other contingencies. At this time, no claims of these types, certain of which are covered by insurance policies, have had a material effect on the Company. Certain jurisdictions in which the Company operates do not allow insurance recoveries related to punitive damages. For matters pertaining to the pre-Acquisition activities of Custom Truck LP, Sellers have agreed to indemnify Nesco and Buyer for losses arising out of the breach of Sellers’ pre-closing covenants in the Purchase Agreement and certain indemnified tax matters, with recourse limited to a $10 million and $8.5 million escrow account, respectively.

From time to time, the Company is audited by state and local taxing authorities. These audits typically focus on the Company’s withholding of state-specific sales tax and rental-related taxes.

Custom Truck LP’s withholdings of federal excise taxes for each of the four quarterly periods during 2015 are currently under audit by the Internal Revenue Service (the “IRS”). The IRS issued an assessment on October 28, 2020 in an aggregate amount of $2.4 million for the 2015 periods, alleging that certain types of sold equipment are not eligible for the Mobile Machinery Exemption set forth in the Internal Revenue Code (the “Code”. An appeal was filed on January 28, 2021. Based on management’s understanding of the facts and circumstances, including the relevant provisions of the Code, and historical precedent, including previous successful appeals of similar assessments in prior years, management does not believe the likelihood of a loss resulting from the IRS assessment to be probable at this time.

While it is not possible to predict the outcome of the foregoing matters with certainty, it is the opinion of management, that the final outcome of these matters will not have a material effect on the Company’s consolidated financial condition, results of operations and 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 cancellable within a specified notification period to the supplier.

Note 15: Related Parties

The Company has transactions with related parties as summarized below.

Rentals and Sales — Energy Capital Partners (“ECP”), a stockholder in the Company, and their affiliates have ownership interests in a broad range of companies. The Company has entered into commercial transactions with subsidiaries of PLH Group, Inc., a company partially owned by an affiliate of ECP.

The Company rents and sells equipment and provides services to R&M Equipment Rental, a business partially owned by members of the Company’s management. The Company also rents equipment and purchases inventory, from R&M Equipment Rental. During the three months ended March 31, 2022, the Company purchased no rental equipment from R&M Equipment Rental.

Facilities Leases and Other — The Company leases certain facilities, as well as purchases aircraft charter services, from entities owned by members of the Company’s management and their immediate families. Payments to the related parties for these transactions are immaterial. Rent and air travel expenses are recorded in selling, general, and administrative expenses.

Management Fees — The Company entered into the Corporate Advisory Services Agreement with Platinum effective as of the Closing Date, under which management fees are payable to Platinum quarterly.

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A summary of the transactions with the foregoing related parties included in the Condensed Consolidated Statements of Net Income (Loss) is as follows:

	Three Months Ended March 31,
(in $000s)	2022		2021
Total revenues from transactions with related parties	$	7,851	$	2,124
Expenses incurred from transactions with related parties included in cost of revenue	$	1,297	$	—
Expenses incurred from transactions with related parties included in operating expenses	$	1,631	$	—

Amounts receivable from/payable to related parties included in the Consolidated Balance Sheets are as follows:

(in $000s)	March 31, 2022		December 31, 2021
Accounts receivable from related parties	$	7,813	$	5,145
Accounts payable to related parties	$	1,475	$	26

Note 16: Segments

Our operations are primarily organized and managed by operating segment. Operating segment performance and resource allocations are primarily based on gross profit. The accounting policies of the reportable segments are consistent with those described in Note 2: Summary of Significant Accounting Policies to the financial statements. Intersegment sales and any related profits are eliminated in consolidation. We manage the business in three reporting segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”). The segment operations are described in Note 1: Business and Organization to these financial statements. Segment information presented below has been adjusted for all prior periods, consistent with the current reportable segment presentation.

The Company’s segment results are presented in the tables below:

	Three Months Ended March 31,
	2022
(in $000s)	ERS		TES		APS		Total
Revenue:
Rental	$	105,561	$	—	$	3,584	$	109,145
Equipment sales	59,353		167,833		—		227,186
Parts and services	—		—		30,145		30,145
Total revenue	164,914		167,833		33,729		366,476
Cost of revenue:
Rentals/parts and services	24,791		—		24,950		49,741
Equipment sales	43,230		144,048		—		187,278
Depreciation of rental equipment	43,966		—		998		44,964
Total cost of revenue	111,987		144,048		25,948		281,983
Gross profit	$	52,927	$	23,785	$	7,781	$	84,493

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	Three Months Ended March 31,
	2021
(in $000s)	ERS		TES		APS		Total
Revenue:
Rental	$	44,730	$	—	$	3,559	$	48,289
Equipment sales	10,485		7,502		—		17,987
Parts and services	—		—		12,023		12,023
Total revenue	55,215		7,502		15,582		78,299
Cost of revenue:
Rentals/parts and services	15,537		—		11,034		26,571
Equipment sales	6,740		6,925		—		13,665
Depreciation of rental equipment	16,885		—		959		17,844
Total cost of revenue	39,162		6,925		11,993		58,080
Gross profit	$	16,053	$	577	$	3,589	$	20,219

Total assets by operating segment are not disclosed herein because asset by operating segment data is not reviewed by the chief operating decision-maker (“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 March 31,
(in $000s)	2022		2021
Gross Profit	$	84,493	$	20,219
Selling, general and administrative expenses	53,655		12,050
Amortization	13,335		754
Non-rental depreciation	3,047		21
Transaction expenses	4,648		10,448
Interest expense, net	19,156		14,906
Financing and other expense (income)	(9,080)		5,857
Income (Loss) Before Income Taxes	$	(268)	$	(23,817)

The following table presents total assets by country:

(in $000s)	March 31, 2022		December 31, 2021
Assets:
United States	$	2,655,329	$	2,653,058
Canada	90,750		30,708
	$	2,746,079	$	2,683,766

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

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. These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “estimate,” “target,” “project,” “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 and are subject to and involve risks, uncertainties and assumptions. You should not place undue reliance on these forward-looking statements or projections. Below is a summary of risk factors applicable to us that may materially affect such forward-looking statements and projections:

•difficulty in integrating the Nesco (as defined below) and Custom Truck LP (as defined below) businesses and fully realizing the anticipated benefits of the Acquisition (as defined below), as well as significant transaction and transition costs that we will continue to incur following the Acquisition;

•material disruptions to our operation and manufacturing locations as a result of public health concerns, including COVID-19, equipment failures, natural disasters, work stoppages, power outages or other reasons;

•the cyclical nature of demand for our products and services and our vulnerability to industry, regional and national downturns, which impact, among others, our ability to manage our rental equipment;

•our inability to obtain raw materials, component parts and/or finished goods in a timely and cost-effective manner, and our inability to manage our rental equipment in an effective manner;

•any further increase in the cost of new equipment that we purchase for use in our rental fleet or for our sales inventory;

•disruptions in our supply chain as a result of the ongoing COVID-19 pandemic;

•aging or obsolescence of our existing equipment, and the fluctuations of market value thereof;

•our inability to recruit and retain the experienced personnel, including skilled technicians, we need to compete in our industries;

•disruptions in our information technology systems or a compromise of our system security, limiting our ability to effectively monitor and control our operations, adjust to changing market conditions, and implement strategic initiatives;

•unfavorable conditions in the capital and credit markets and our inability to obtain additional capital as required;

•our dependence on a limited number of manufacturers and suppliers and on third-party contractors to provide us with various services to assist us with conducting our business;

•potential impairment charges;

•our exposure to various risks related to legal proceedings or claims, and our failure to comply with relevant laws and regulations, including those related to occupational health and safety, the environment, government contracts, and data privacy and data security;

•the interest of our majority stockholder, which may not be consistent with the other stockholders;

•our significant indebtedness, which may adversely affect our financial position, limit our available cash and our access to additional capital, prevent us from growing our business and increase our risk of default;

•our inability to attract and retain highly skilled personnel and our inability to retain our senior management;

•our inability to generate cash, which could lead to a default;

•significant operating and financial restrictions imposed by the Indenture and the ABL Credit Agreement;

•increases in unionization rate in our workforce;

•changes in interest rates, which could increase our debt service obligations on the variable rate indebtedness and decrease our net income and cash flows; and

•the phase-out of LIBOR and uncertainty as to its replacement.

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. See “Risk Factors” in Part I, Item 1A of the Annual Report for the year ended December 31, 2021, and in Part II, Item 1A of this Quarterly Report, for additional risks.

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On April 1, 2021 (the “Closing Date”), Nesco Holdings II, Inc., a subsidiary of Custom Truck One Source, Inc. (formerly Nesco Holdings, Inc.), completed the acquisition of Custom Truck One Source, L.P. (“Custom Truck LP”) in a series of transactions described below (the “Acquisition”). On April 1, 2021, Nesco Holdings, Inc. (“Nesco Holdings”) changed its name to “Custom Truck One Source, Inc.” and changed The New York Stock Exchange ticker for its shares of common stock (“Common Stock”) from “NSCO” to “CTOS,” and the ticker of its redeemable warrants from “NSCO.WS” to “CTOS.WS.”

Throughout this section, unless otherwise noted, terms such as “we,” “our,” “us,” or “the Company” refer to Nesco Holdings prior to the Acquisition and to the combined company after the Acquisition. Unless the context otherwise requires, the terms “Nesco” or “Nesco Holdings” mean Nesco Holdings and its consolidated subsidiaries prior to the Acquisition, and the term “Custom Truck LP” means Custom Truck LP and its consolidated subsidiaries prior to the Acquisition.

Acquisition of Custom Truck LP

On December 3, 2020, Nesco Holdings and Nesco Holdings II, Inc., a subsidiary of Nesco Holdings (the “Buyer” or the “Issuer”), entered into a Purchase and Sale Agreement (as amended, the “Purchase Agreement”) with certain affiliates of The Blackstone Group (“Blackstone”) and other direct and indirect equity holders (collectively, “Sellers”) of Custom Truck LP, Blackstone Capital Partners VI-NQ L.P., and PE One Source Holdings, LLC, an affiliate of Platinum Equity, LLC (“Platinum”), pursuant to which Buyer agreed to acquire 100% of the partnership interests of Custom Truck LP. In connection with the Acquisition, Nesco Holdings and certain Sellers entered into Rollover and Contribution Agreements (the “Rollover Agreements”), pursuant to which such Sellers agreed to contribute a portion of their equity interests in Custom Truck LP (the “Rollovers”) with an aggregate value of $100.5 million in exchange for shares of Common Stock, valued at $5.00 per share.

Also on December 3, 2020, Nesco Holdings entered into a Common Stock Purchase Agreement (the “Investment Agreement”) with Platinum, relating to, among other things, the issuance and sale to Platinum (the “Subscription”) of shares of Common Stock, for an aggregate purchase price in the range of $700 million to $763 million, with the specific amount calculated in accordance with the Investment Agreement based upon the total equity funding required to fund the consideration paid pursuant to the terms of the Purchase Agreement. The shares of Common Stock issued and sold to Platinum had a purchase price of $5.00 per share. In accordance with the Investment Agreement, on December 21, 2020, Nesco Holdings entered into Subscription Agreements (the “Subscription Agreements”) with certain investors (the “PIPE Investors”) to finance, in part, the Acquisition. Pursuant to the Subscription Agreements, concurrently with the closing of the transactions contemplated by the Investment Agreement, the PIPE Investors agreed to purchase an aggregate of 28,000,000 shares of Common Stock at $5.00 per share for an aggregate purchase price of $140 million (the “Supplemental Equity Financing”).

On the Closing Date, in connection with (i) the Rollovers, the Company issued, in the aggregate, 20,100,000 shares of Common Stock to the parties to the Rollover Agreements, (ii) the Subscription, the Company issued 148,600,000 shares of Common Stock to Platinum, and (iii) the Supplemental Equity Financing, the Company issued, in the aggregate, 28,000,000 shares of Common Stock to the PIPE Investors. Following the completion of these transactions, as of April 1, 2021, the Company had 245,919,383 shares of Common Stock issued and outstanding. The trading price of the Common Stock was $9.35 per share on the Closing Date. The purchase price for the Acquisition was $1.5 billion.

On the Closing Date, the Issuer issued $920 million in aggregate principal amount of 5.50% senior secured second lien notes due 2029 (the “2029 Secured Notes”) and, together with its direct parent, and certain of its direct and indirect subsidiaries, entered into a senior secured asset-based revolving credit agreement (the “ABL Credit Agreement”) with Bank of America, N.A., as administrative agent and collateral agent, and certain other lenders party thereto, consisting of a $750.0 million first lien senior secured asset-based revolving credit facility with a maturity of five years (the “ABL Facility,” together with the offering of the 2029 Secured Notes, the Acquisition, the Rollover, the Subscription and the Supplemental Equity Financing, the “Acquisition and Related Financing Transactions”). For more detail regarding the 2029 Secured Notes and the ABL Facility, see “Liquidity and Capital Resources” below.

Pro Forma Financial Information

The unaudited pro forma combined financial information presented in the section entitled “Supplemental Pro Forma Information,” give effect to the Acquisition, as if the Acquisition had occurred on January 1, 2020, and is presented to facilitate comparisons with our results following the Acquisition. This information has been prepared in accordance with Securities and Exchange Commission Article 11 of Regulation S-X. Such unaudited pro forma combined financial information is presented on a pro forma basis to give effect to the following as if they occurred on January 1, 2020: (i) the acquisition of Custom Truck LP and related impacts of purchase accounting, (ii) borrowings under the new debt structure and (iii) repayment of previously existing debt of Nesco Holdings and Custom Truck LP.

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Financial and Performance Measures

Financial Measures

Revenue — As a full-service equipment provider, we generate revenue through renting, selling, assembling, upfitting, and servicing new and used heavy-duty trucks and cranes, as well as the sale of related parts. We also sell and rent specialized tools on an individual basis and in kits. Rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers. For periods after January 1, 2021, the Company records changes in estimated collectability directly against rental revenue. Equipment sales revenue reflects the value of vocational trucks and other equipment sold to customers. Parts and service revenue is derived from maintenance and repair services, light upfit services, and parts, tools and accessories sold directly to customers.

Cost of rental revenue — Cost of rental revenue reflects repairs and maintenance costs of rental equipment, parts costs, labor and other overheads related to maintaining the rental fleet, and freight associated with the shipping of rental equipment.

Depreciation of rental equipment — Depreciation of rental equipment is comprised of depreciation expense on the rental fleet. We allocate the cost of rental equipment generally over the rentable life of the equipment. The depreciation allocation is based upon estimated lives ranging from five to seven years. The cost of equipment is depreciated to an estimated residual value using the straight-line method.

Cost of equipment sales — Cost of equipment sales reflects production and inventory costs associated with new units sold, parts costs, labor and other overheads related to production, and freight associated with the shipping and receiving of equipment and parts. Cost of equipment sales also includes the net book value of rental units sold.

Selling, general and administrative expenses — Selling, general and administrative expenses include sales compensation, fleet licensing fees and corporate expenses, including salaries, stock-based compensation expense, insurance, advertising costs, professional services, fees earned on customer arranged financing, gains or losses resulting from insurance settlements, and information technology costs.

Amortization and non-rental depreciation — Amortization expense relates to intangible assets such as customer lists, trade names, etc. Non-rental depreciation expense reflects the depreciation of property and equipment that is not part of the rental fleet.

Transaction expenses — Transaction expenses and other expense include expenses directly related to the acquisition of businesses. These expenses generally are comprised of travel and out-of-pocket expenses and legal, accounting and valuation or appraisal fees incurred in connection with pre- and post-closure activities. We also include costs and expenses associated with post-acquisition integration activities related to the acquired businesses.

Financing and other expense (income) — Financing and other expense (income) reflects the financing expense (income) associated with sales-type lease activity, foreign currency gains and losses related to our Canadian operations, as well as other miscellaneous gains or losses from non-operating activities. Also included in financing and other expense (income) are the unrealized remeasurement gains and losses related to our interest rate collar and redeemable warrants.

Interest expense — Interest expense consists of contractual interest expense on outstanding debt obligations, floorplan financing facilities, amortization of deferred financing costs and other related financing expenses.

Income Tax Expense (Benefit) — We have net operating loss carryforward and disallowed interest deduction carryforward assets, which are generally available to be used to offset taxable income generated in future years. Due to limitations on the use of these carryforwards under U.S. federal and state income tax regulations, we record valuation allowances to reduce the carryforward assets to amounts that we estimate will be realized. Accordingly, income tax expense or benefit generally is comprised of changes to these valuation allowance estimates and does not reflect taxes on current period income (or tax benefit on current period losses). For these reasons, our effective tax rate differs from the federal statutory tax rate.

Performance Measures

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

Ending OEC — Ending original equipment cost (“OEC”) is the original equipment cost of units at the end of the measurement period. OEC represents the original equipment cost, exclusive of the effect of adjustments to rental equipment fleet acquired in business combinations, and is the basis for calculating certain of the measures set forth below. 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

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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.

Average OEC on rent — Average OEC on rent is calculated as the weighted-average OEC on rent during the stated period.

Fleet utilization — Fleet utilization is defined as the total numbers of days the rental equipment was rented during a specified period of time divided by the total number of days available during the same period and weighted based on OEC. Utilization is a measure of fleet efficiency expressed as a percentage of time the fleet is on rent and is considered to be an important indicator of the revenue generating capacity of the fleet.

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

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

Operating Segments

We operate in three reportable operating segments: Equipment Rental Solutions, Truck and Equipment Sales and Aftermarket Parts and Services.

Equipment Rental Solutions (“ERS”) Segment — We own a broad range of new and used specialty equipment, including truck-mounted aerial lifts, cranes, service trucks, dump trucks, trailers, digger derricks and other machinery and equipment. As of March 31, 2022, this equipment (the “rental fleet”) is comprised of more than 9,000 units. The majority of our rental fleet can be used across a variety of end-markets, which coincides with the needs of many of our customers who operate in multiple end-markets. As is customary for equipment rental companies, we sell used equipment out of our rental fleet to end user customers. These sales are often made in response to specific customer requests. These sales offer customers an opportunity to buy well-maintained equipment with long remaining useful lives and enable us to effectively manage the age and mix of our rental fleet to match current market demand. We also employ rental purchase options (“RPOs”) on a select basis, which provide a buyout option with an established purchase price that decreases over time as rental revenue is collected. Customers are given credit against such purchase price for a portion of the amounts paid over the life of the rental, allowing customers the flexibility of a rental with the option to purchase at any time at a known price. Activities in our ERS segment consist of the rental and sale from the rental fleet, of the foregoing products.

Truck and Equipment Sales (“TES”) Segment — We offer a broad variety of new equipment for sale to be used across our end-markets, which can be modified to meet our customers’ specific needs. We believe that our integrated production capabilities and extensive knowledge gained over a long history of selling equipment have established us as a trusted partner for customers seeking tailored solutions with short lead times. In support of these activities, we primarily employ a direct-to-customer sales model, leveraging our dedicated salesforce of industry and product managers, who are focused on driving national and local sales. We also opportunistically engage in the sale of used equipment purchased from third parties or received via trade-ins from new equipment sales customers. In all of these cases, we will sell used equipment directly to customers, rather than relying on auctions. Activities in our TES segment consist of the production and sale of new and used specialty equipment and vocational trucks, which includes equipment from leading original equipment manufacturers (“OEMs”) across our end-markets, as well as our Load KingTM brand.

Aftermarket Parts and Services (“APS”) Segment — The APS segment includes the sale of specialized aftermarket parts, including captive parts related to our Load KingTM brand, used in the maintenance and repair of the equipment we sell and rent. Specialized tools, including stringing blocks, insulated hot stick, and rigging equipment, are sold or rented to customers on an individual basis or in packaged specialty kits. We also provide truck and equipment maintenance and repair services, which are executed throughout our nationwide branch network and fleet of mobile technicians supported by our 24/7 call center based in Kansas City, Missouri.

Non-GAAP Financial Measures

In this MD&A and in the Supplemental Pro Forma Information, we report certain financial measures that are not required by, or presented in accordance with, GAAP. We utilize these financial measures to manage our business on a day-to-day basis, and some of these measures are commonly used in our industry to evaluate performance. We believe these non-GAAP measures provide investors with expanded insight to assess performance, in addition to the standard GAAP-based financial measures. Reconciliation of the most directly comparable GAAP measure to each non-GAAP measure that we refer to is included in this Quarterly Report on Form 10-Q. The following provides a description of the non-GAAP financial measures.

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Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial performance measure that the Company uses to monitor its results of operations, to measure performance against debt covenants and performance relative to competitors. The Company believes Adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of operating performance when compared to peers, without regard to financing methods or capital structures. The Company excludes the items identified in the reconciliations of net income (loss) to Adjusted EBITDA because these amounts are either non-recurring or can vary substantially within the industry depending upon accounting methods and book values of assets, including the method by which the assets were acquired, and capital structures. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) determined in accordance with GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historical costs of depreciable assets, none of which are reflected in Adjusted EBITDA. The Company's presentation of Adjusted EBITDA should not be construed as an indication that results will be unaffected by the items excluded from Adjusted EBITDA. The Company’s computation of Adjusted EBITDA may not be identical to other similarly titled measures of other companies.

The Company defines Adjusted EBITDA as net income or loss before interest expense, income taxes, depreciation and amortization, share-based compensation, and other items that the Company does not view as indicative of ongoing performance. The Company’s Adjusted EBITDA includes an adjustment to exclude the effects of purchase accounting adjustments when calculating the cost of inventory and used equipment sold. When inventory or equipment is purchased in connection with a business combination, the assets are revalued to their current fair values for accounting purposes. The consideration transferred (i.e., the purchase price) in a business combination is allocated to the fair values of the assets as of the acquisition date, with amortization or depreciation recorded thereafter following applicable accounting policies; however, this may not be indicative of the actual cost to acquire inventory or new equipment that is added to product inventory or the rental fleets apart from a business acquisition. Additionally, the pricing of rental contracts and equipment sales prices for equipment is based on OEC, and the Company measures a rate of return from rentals and sales using OEC. The Company also includes an adjustment to remove the impact of accounting for certain of our rental contracts with customers containing a rental purchase option that are accounted for under GAAP as a sales-type lease. We include this adjustment because we believe continuing to reflect the transactions as an operating lease better reflects the economics of the transactions given our large portfolio of rental contracts. These, and other, adjustments to GAAP net income or loss that are applied to derive Adjusted EBITDA are specified by the Company’s senior secured credit agreements.

Although management evaluates and presents the Adjusted EBITDA non-GAAP measure for the reasons described herein, please be aware that this non-GAAP measure has limitations and should not be considered in isolation or as a substitute for revenue, operating income/loss, net income/loss, earnings/loss per share or any other comparable operating measure prescribed by GAAP. In addition, we may calculate and/or present this non-GAAP financial measure differently than measures with the same or similar names that other companies report, and, as a result, the non-GAAP measure we report may not be comparable to those reported by others.

Pro Forma Adjusted EBITDA

We present Pro Forma Adjusted EBITDA as if the Acquisition had occurred on January 1, 2020. Refer to the reconciliation of pro forma combined net income (loss) to Pro Forma Adjusted EBITDA for the three-month period ended March 31, 2021 in the section entitled “Supplemental Pro Forma Information.”

Gross Profit Excluding Depreciation of Rental Equipment

Gross profit excluding depreciation of rental equipment is a financial performance measure that we use to monitor our results from operations. We believe the exclusion of depreciation expense of the rental fleet provides a meaningful measure of financial performance because it provides useful information relating to profitability that reflects ongoing and direct operating expenses, such as freight costs and fleet maintenance costs, related to our rental fleet. Although management evaluates and presents this non-GAAP measure for the reasons described herein, please be aware that this non-GAAP measure has limitations and should not be considered in isolation or as a substitute for revenue, gross profit or any other comparable operating measure prescribed by GAAP. In addition, we may calculate and/or present this non-GAAP financial measure differently than measures with the same or similar names that other companies report, and as a result, the non-GAAP measure we report may not be comparable to those reported by others.

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Results of Operations

Three months ended March 31, 2022 compared to three months ended December 31, 2021

The operating results and financial metrics presented below for the three months ended March 31, 2022 and the three months ended December 31, 2021 include the results of Custom Truck LP for all periods presented.

Consolidated Results of Operations

	Three Months Ended
(in $000s)	March 31, 2022		December 31, 2021		$ Change		% Change
Rental revenue	$	109,145	$	114,131	$	(4,986)	(4.4)	%
Equipment sales	227,186		212,509		14,677		6.9	%
Parts sales and services	30,145		29,799		346		1.2	%
Total revenue	366,476		356,439		10,037		2.8	%
Cost of revenue, excluding rental equipment depreciation	237,019		232,653		4,366		1.9	%
Depreciation of rental equipment	44,964		45,934		(970)		(2.1)	%
Gross profit	84,493		77.852		6,641		8.5	%
Operating expenses	74,685		68,011		6,674		9.8	%
Operating income (loss)	9,808		9,841		(33)		(0.3)	%
Other expense	10,076		19,597		(9,521)		(48.6)	%
Income (loss) before income taxes	(268)		(9,756)		9,488		(97.3)	%
Income tax expense (benefit)	3,005		(6,043)		9,048		(149.7)	%
Net income (loss)	$	(3,273)	$	(3,713)	$	440	(11.9)	%

Total Revenue - The increase in total revenue for the three months ended March 31, 2022 compared to the three months ended December 31, 2021 was driven primarily by continued strong equipment sales due to high demand related to infrastructure investments in T&D and Telecom.

Cost of Revenue, Excluding Depreciation - The increase in cost of revenue, excluding rental equipment depreciation for the three months ended March 31, 2022 was driven primarily by the increase in equipment sales revenue versus the three months ended December 31, 2021. The increase in gross profit when compared to the three months ended December 31, 2021 was largely driven by rising equipment sales prices for the period.

Depreciation of Rental Equipment - Depreciation of our rental fleet remained consistent in the three months ended March 31, 2022.

Operating Expenses - Operating expenses increased in the three months ended March 31, 2022 as a result of variable pay programs and other expenses, offset by lower transaction and post-acquisition integration costs related to the Acquisition.

Other Expense - Other expense for the three months ended March 31, 2022 decreased primarily due to financing income related to growth in customer rental contracts accounted for as sales-type leases.

Income Tax Expense (Benefit) - The Company's effective tax rate for the three months ended March 31, 2022 differs from the U.S. federal statutory tax rate due primarily to the recording of valuation allowances against deferred tax assets.

Net Income (Loss) - The decrease in our net income (loss) for the three months ended March 31, 2022 compared to the three months ended December 31, 2021 was driven primarily by an increase in operating expenses and other expense offset by an increase in gross profit.

Key Performance Measures

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 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 the following measurements: average OEC on rent, fleet utilization, and OEC on rent yield. The table below presents these key measures.

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	Three Months Ended
(in $000s)	March 31, 2022			December 31, 2021			Change			(%)
Ending OEC(a)	$	1,364,660		$	1,363,451		$	1,209		0.1	%
Average OEC on rent(b)	$	1,119,100		$	1,151,959		$	(32,859)		(2.9)	%
Fleet utilization(c)	82.5		%	83.7		%	(1.2)		%	(1.4)	%
OEC on rent yield(d)	39.1		%	39.1		%	—		%	—	%
Sales order backlog(e)	$	586,368		$	411,636		$	174,732		42.4	%

(a)    Ending original equipment cost (“OEC”) on rent is the original equipment cost of units rented to customers at the end of the measurement period.

(b)    Average OEC 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.

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

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

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

Ending OEC - The decrease in Ending OEC was driven by higher rental fleet sales in the current quarter.

Average OEC on Rent - The decrease in Average OEC on rent was driven by higher rental fleet sales.

Fleet Utilization - Fleet utilization declined modestly due to typical seasonal slowdowns in project work.

OEC on Rent Yield - ORY was flat reflective of the impact of continued pricing increases.

Sales Order Backlog - Sales order backlog consists of customer orders placed for customized and stock equipment. The increase in sales order backlog was driven by continued strong customer demand.

Adjusted EBITDA

The following table provides a reconciliation of net income (loss) to Adjusted EBITDA for the three months ended March 31, 2022 and December 31, 2021. As previously noted, Adjusted EBITDA is a non-GAAP financial measure and should not be considered in isolation or as a substitute for revenue, operating income/loss, net income (loss), earnings (loss) per share or any other comparable operating measure prescribed by GAAP.

	Three Months Ended
(in $000s)	March 31, 2022		December 31, 2021	$ Change		% Change
Net income (loss)	(3,273)		(3,713)	$	440	(11.9)	%
Interest expense	17,445		17,778	(333)		(1.9)	%
Income tax expense (benefit)	3,005		(6,043)	9,048		(149.7)	%
Depreciation and amortization	62,500		63,106	(606)		(1.0)	%
EBITDA	79,677		71,128	8,549		12.0	%
Adjustments:
Non-cash purchase accounting impact (1)	9,026		6,468	2,558		39.5	%
Transaction and integration costs (2)	4,648		8,900	(4,252)		(47.8)	%
Sales-type lease adjustment (3)	529		3,757	(3,228)		(85.9)	%
Share-based payments (4)	3,364		4,597	(1,233)		(26.8)	%
Change in fair value of derivative and warrants (5)	(5,767)		739	(6,506)		(880.4)	%
Adjusted EBITDA	$	91,477	95,589	$	(4,112)	(4.3)	%

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

(2) Represents transaction costs related to acquisitions of businesses, which are recognized within operating expenses in our Condensed Consolidated Statements of Net Income (Loss). These expenses are comprised of professional consultancy, legal, tax and accounting fees. Also included are expenses associated with the integration of acquired businesses.

(3) Represents the impact of sales-type lease accounting for certain leases containing rental purchase options ("RPOs"), as the application of sales-type lease accounting is not deemed to be representative of the ongoing cash flows of the underlying rental contracts. The adjustments are made pursuant to our credit agreement.

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

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

Operating Results by Segment

Equipment Rental Solutions (ERS) Segment

	Three Months Ended
(in $000s)	March 31, 2022		December 31, 2021		$ Change		% Change
Rental revenue	$	105,561	$	109,622	$	(4,061)	(3.7)	%
Equipment sales	59,353		35,294		24,059		68.2	%
Total revenue	164,914		144,916		19,998		13.8	%
Cost of rental revenue	24,791		26,961		(2,170)		(8.0)	%
Cost of equipment sales	43,230		29,605		13,625		46.0	%
Depreciation of rental equipment	43,966		43,752		214		0.5	%
Total cost of revenue	111,987		100,318		11,669		11.6	%
Gross profit	$	52,927	$	44,598	$	8,329	18.7	%

Total Revenue - On a sequential quarter basis, the increase in total revenue for the ERS segment was driven by an increase in equipment sales revenue, offset by a seasonal decline revenues for rental equipment. The increase in equipment sales revenue for the three months ended March 31, 2022 was driven by continued demand related to infrastructure investments in T&D and Telecom.

Cost of Revenue - The increase in cost of revenue for the three months ended March 31, 2022 was largely due to the increase in equipment sales.

Depreciation - Depreciation of our rental fleet was materially unchanged period over period.

Gross Profit - The increase in gross profit on a sequential quarter basis is due to the increase in equipment sales for the period, and improved margins on those sales. The improvement in margins on sales of used rental equipment was a function of the age and condition of the unit sold, and a lower mix of units subject to a rental purchase option.

Truck and Equipment Sales (TES) Segment

	Three Months Ended
(in $000s)	March 31, 2022		December 31, 2021		$ Change		% Change
Equipment sales	$	167,833	$	177,215	$	(9,382)	(5.3)	%
Cost of equipment sales	144,048		153,844		(9,796)		(6.4)	%
Gross profit	$	23,785	$	23,371	$	414	1.8	%

Equipment Sales - Equipment sales declined on a sequential quarter basis as a result of supply chain challenges related to the segment's inventory suppliers. Despite the reduction in equipment sales for the three months ended March 31, 2022, we continue to see strong customer demand for our products, as evidenced by the growth in our sales order backlog versus the end of the fourth quarter of 2021.

Cost of Equipment Sales - Cost of equipment sales decreased in line with the decrease in equipment sales revenue for the three months ended March 31, 2022.

Gross Profit - The increase in gross profit on a sequential quarter basis was not material.

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Aftermarket Parts and Services (APS) Segment

	Three Months Ended
(in $000s)	March 31, 2022		December 31, 2021		$ Change		% Change
Rental revenue	$	3,584	$	4,509	$	(925)	(20.5)	%
Parts and services revenue	30,145		29,799		346		1.2	%
Total revenue	33,729		34,308		(579)		(1.7)	%
Cost of revenue	24,950		22,243		2,707		12.2	%
Depreciation of rental equipment	998		2,182		(1,184)		(54.3)	%
Total cost of revenue	25,948		24,425		1,523		6.2	%
Gross profit	$	7,781	$	9,883	$	(2,102)	(21.3)	%

Total Revenue - Revenue was materially unchanged for the three months ended March 31, 2022 on a sequential quarter basis.

Cost of Revenue - On a sequential quarter basis, cost of revenue increased for the three months ended March 31, 2022 due primarily to higher distribution and fulfillment costs.

Gross Profit - The decline in gross profit was primarily due to a change in mix of product and service line revenues.

Results of Operations

Three Months Ended March 31, 2022 compared to three months ended March 31, 2021

The consolidated operating results for the three months ended March 31, 2021 represent those of Nesco Holdings before the acquisition of Custom Truck LP and, therefore, are not comparable.

Consolidated Results of Operations

	Three Months Ended March 31,
(in $000s)	2022		2021
Rental revenue	$	109,145	$	48,289
Equipment sales	227,186		17,987
Parts sales and services	30,145		12,023
Total revenue	366,476		78,299
Cost of revenue, excluding rental equipment depreciation	237,019		40,236
Depreciation of rental equipment	44,964		17,844
Gross profit	84,493		20,219
Operating expenses	74,685		23,273
Operating income (loss)	9,808		(3,054)
Other expense	10,076		20,763
Income (loss) before income taxes	(268)		(23,817)
Income tax expense (benefit)	3,005		4,090
Net income (loss)	$	(3,273)	$	(27,907)

Total Revenue - The increase in revenue for the three months ended March 31, 2022, both in total and for each of our individual revenue streams, was driven by the addition of Custom Truck LP’s revenues to our operating results. The Acquisition significantly increased the size of our rental fleet and added a new equipment production and sales line of business (which we report under our TES segment) and a parts sales and heavy equipment service business.

Cost of Revenue, Excluding Depreciation - Consistent with the increase in revenue versus the prior year period, the increase in cost of revenue was driven by the addition of Custom Truck LP’s cost of revenue, to our operating results.

Operating Expenses - The primary drivers of the increase in operating expenses for the three months ended March 31, 2022 are the addition of Custom Truck, LP’s operating expenses to our operating results.

Other Expense - The decrease in other expense for the three months ended March 31, 2022 was largely driven by charges related to mark-to-market charges related to our private warrants, which are accounted for a liability derivative instrument, offset by a reduction to net interest expense.

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Income Tax Expense (Benefit) - The Company's effective tax rate differs from the U.S. federal statutory tax rate due primarily to the recording of valuation allowances against deferred tax assets.

Net Income (Loss) - The change in net income (loss) for the three months ended March 31, 2022 is due to the addition of Custom Truck LP to our operating results.

Key Performance Measures

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 cash flow through our earnings. 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 the following measurements: ending OEC, average OEC on rent, fleet utilization, OEC on rent yield, and sales backlog. The table below presents these key measures.

	Three Months Ended March 31,
(in $000s)	2022			2021			Change			% Change
Ending OEC(a)	$	1,364,660		$	1,326,000		$	38,660		2.9	%
Average OEC on rent(b)	$	1,119,100		$	1,047,310		$	71,790		6.9	%
Fleet utilization(c)	82.5		%	78.2		%	4.3		%	5.5	%
OEC on rent yield(d)	39.1		%	37.8		%	1.3		%	3.4	%
Sales order backlog(e)	$	586,368		$	193,973		$	392,395		202.3	%

(a)    Ending original equipment cost (“OEC”) on rent is the original equipment cost of units rented to customers at the end of the measurement period.

(b)    Average OEC 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.

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

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

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

Ending OEC - The decrease in Ending OEC was driven by higher rental fleet sales in the current quarter.

Average OEC on Rent - The increase in Average OEC on rent by higher demand in the current year quarter relative to the prior year period.

Fleet Utilization - Fleet utilization increased reflective of the impact of continued pricing increases.

OEC on Rent Yield - ORY increased reflective of the impact of continued pricing increases.

Sales Order Backlog - Sales order backlog consists of customer orders placed for customized and stock equipment. The increase in sales order backlog was driven by continued strong customer demand.

Adjusted EBITDA

The following table provides a reconciliation of net income (loss) to Adjusted EBITDA for the three months ended March 31, 2022 and 2021. As previously noted, Adjusted EBITDA is a non-GAAP financial measure and should not be considered in isolation or as a substitute for revenue, operating income/loss, net income/loss, earnings/loss per share or any other comparable operating measure prescribed by GAAP.

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	Three Months Ended March 31,
(in $000s)	2022		2021
Net income (loss)	$	(3,273)	(27,907)
Interest expense	17,445		14,906
Income tax expense (benefit)	3,005		4,090
Depreciation and amortization	62,500		19,101
EBITDA	79,677		10,190
Adjustments:
Non-cash purchase accounting impact (1)	9,026		53
Transaction and integration costs (2)	4,648		10,744
Sales-type lease adjustment (3)	529		—
Share-based payments (4)	3,364		698
Change in fair value of derivative and warrants (5)	(5,767)		5,846
Adjusted EBITDA	$	91,477	$	27,531

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

(2) Represents transaction costs related to acquisitions of businesses, including the Acquisition, which are recognized within operating expenses in our Condensed Consolidated Statements of Net Income (Loss). These expenses are comprised of professional consultancy, legal, tax and accounting fees. Also included are expenses associated with the integration of acquired businesses.

(3) Represents the impact of sales-type lease accounting for certain leases containing RPOs, as the application of sales-type lease accounting is not deemed to be representative of the ongoing cash flows of the underlying rental contracts. The adjustments are made pursuant to our ABL Credit Agreement.

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

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

Operating Results by Segment

Equipment Rental Solutions (ERS) Segment

	Three Months Ended March 31,
(in $000s)	2022		2021
Rental revenue	$	105,561	$	44,730
Equipment sales	59,353		10,485
Total revenue	164,914		55,215
Cost of rental revenue	24,791		15,537
Cost of equipment sales	43,230		6,740
Depreciation of rental equipment	43,966		16,885
Total cost of revenue	111,987		39,162
Gross profit	$	52,927	$	16,053

Total Revenue - For the three months ended March 31, 2022, the increase in total revenue for the ERS segment was driven by the Acquisition.

Cost of Revenue - The increase in cost of revenue for the three months ended March 31, 2022 was largely the result of the Acquisition.

Depreciation - Depreciation of our rental fleet increased in the three months ended March 31, 2022 due to the Acquisition.

Gross Profit - The increase in gross profit for the three months ended March 31, 2022 is due to the Acquisition.

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Truck and Equipment Sales (TES) Segment

	Three Months Ended March 31,
(in $000s)	2022		2021
Equipment sales	$	167,833	$	7,502
Cost of equipment sales	144,048		6,925
Gross profit	$	23,785	$	577

Equipment Sales - Equipment sales increased for the three months ended March 31, 2022 due to the Acquisition.

Cost of Equipment Sales - Cost of equipment sales increased in line with the increase in equipment sales revenue for the three months ended March 31, 2022.

Gross Profit - The increase in gross profit for the three months ended March 31, 2022 is primarily a function of the increase in equipment sales revenue.

Aftermarket Parts and Services (APS) Segment

	Three Months Ended March 31,
(in $000s)	2022		2021
Rental revenue	$	3,584	$	3,559
Parts and services revenue	30,145		12,023
Total revenue	33,729		15,582
Cost of revenue	24,950		11,034
Depreciation of rental equipment	998		959
Total cost of revenue	25,948		11,993
Gross profit	$	7,781	$	3,589

Total Revenue - The increase in revenue for the three months ended March 31, 2022 was driven by the acquisition of Custom Truck L.P.

Cost of Revenue - Compared to the prior year, cost of revenue increased due to the Acquisition.

Gross Profit - Total segment gross profit was impacted by increased revenue in the period.

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Supplemental Pro Forma Information

As result of the Acquisition and Related Financing Transactions, we believe presenting supplemental pro forma financial information is beneficial to the readers of our financial statements. The following table sets forth key metrics used by management to run our business on a pro forma and combined basis as if the Acquisition and Related Financing Transactions had occurred on January 1, 2020. Refer to the information below for a full reconciliation of the Condensed Consolidated Statements of Net Income (Loss).

Summary Pro Forma Financial Information and Operational Data

	Three Months Ended March 31,
(in $000s)	2022 Actual			2021 Pro Forma
Revenue	$	366,476		$	394,770
Gross profit	$	84,493		$	70,425
Net income (loss)	$	(3,273)		$	(15,280)
Adjusted EBITDA	$	91,477		$	72,866
Fleet and Operational Metrics:
Ending OEC	$	1,364,660		$	1,326,000
Average OEC on rent	$	1,119,100		$	1,047,310
Fleet utilization	82.5		%	78.2		%
OEC on rent yield	39.1		%	37.8		%
Sales order backlog	$	586,368		$	193,973

Pro Forma Financial Statements

The following pro forma information has been prepared in accordance with Article 11 of Regulation S-X, "Pro Forma Financial Information," as amended by the Securities and Exchange Commission's Final Rule Release No. 33-10786, "Amendments to Financial Disclosures About Acquired and Disposed Businesses," as adopted on May 21, 2020 ("Article 11"). The amended Article 11 became effective on January 1, 2021. The pro forma combined Condensed Consolidated Statements of Net Income (Loss) for the years ended December 31, 2021 and 2020 combine the Condensed Consolidated Statements of Net Income (Loss) of Nesco Holdings and Custom Truck LP, giving effect to the following items as if they had occurred on January 1, 2020:

i.the sale of the Company’s Common Stock, proceeds from which were used for the Acquisition;

ii.the extinguishment of Nesco’s asset-based revolving credit facility (the "2019 Credit Facility") and its 10% Senior Secured Second Lien Notes due 2024 (the "2024 Secured Notes") and the contemporaneous issuance of the 2029 Secured Notes and borrowings under the ABL Facility, proceeds from which were used for the Acquisition; and

iii.the estimated effects of the Acquisition of Custom Truck LP, inclusive of the estimated effects of debt repaid.

The adjustments presented in the following pro forma financial information have been identified and presented to provide relevant information necessary for a comprehensive understanding of the combined company following the transactions and events described above. The pro forma financial information set forth below is based upon available information and assumptions that we believe are reasonable and is for illustrative purposes only. The financial results may have been different if the transactions described above had been completed sooner. You should not rely on the pro forma financial information as being indicative of the historical results that would have been achieved if these transactions and events had been completed as of January 1, 2020. The pro forma combined financial information below should be read in conjunction with the consolidated financial statements and related notes of the Company included elsewhere in this Annual Report on Form 10-K. All pro forma adjustments and their underlying assumptions are described more fully below.

During the preparation of these pro forma combined financial statements, we assessed whether there were any material differences between the accounting policies of the Company and Custom Truck LP. The assessment we performed did not identify any material differences and, as such, these pro forma combined financial statements do not adjust for or assume any differences in accounting policies between the two entities.

The following pro forma combined financial information and associated notes are based on the historical financial statements of Nesco Holdings and Custom Truck LP prior to the Acquisition. The pro forma combined Condensed Consolidated Statements of Net Income

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(Loss) for periods indicated below are based on, derived from, and should be read in conjunction with, the Company’s historical financial statements.

Pro Forma Combined Condensed Consolidated Statements of Net Income (Loss) — Three Months Ended March 31, 2021

(in $000s)	Nesco Holdings		Custom Truck LP		Pro Forma Adjustmentsa			Pro Forma Combined
Rental revenue	$	48,289	$	51,973	$	—		$	100,262
Equipments sales	17,987		245,955		—			263,942
Parts sales and services	12,023		18,543		—			30,566
Total revenue	78,299		316,471		—			394,770
Cost of revenue	40,236		240,678		(987)		b	279,927
Depreciation of rental equipment	17,844		22,757		3,817		c	44,418
Total cost of revenue	58,080		263,435		2,830			324,345
Gross profit	20,219		53,036		(2,830)			70,425
Selling, general and administrative	12,050		34,428		—			46,478
Amortization	754		1,990		3,590		d	6,334
Non-rental depreciation	21		1,151		(213)		d	959
Transaction expenses and other	10,448		5,254		(15,702)		e	—
Total operating expenses	23,273		42,823		(12,325)			53,771
Operating income (loss)	(3,054)		10,213		9,495			16,654
Interest expense, net	14,906		9,992		(3,919)		f	20,979
Finance and other expense (income)	5,857		(2,346)		—			3,511
Total other expense	20,763		7,646		(3,919)			24,490
Income (loss) before taxes	(23,817)		2,567		13,414			(7,836)
Taxes	4,090		—		3,354		g	7,444
Net income (loss)	$	(27,907)	$	2,567	$	10,060		$	(15,280)

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

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

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

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

e.Represents the elimination of transaction expenses recognized in the Company’s consolidated financial statements for the three months ended March 31, 2021. The expenses were directly related to the Acquisition and are reflected as adjustments, as if the Acquisition had occurred on January 1, 2020.

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

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

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Reconciliation of Actual (2022) and Pro Forma Net Income (Loss) (2021) to Pro Forma Adjusted EBITDA

The following table provides a reconciliation of actual and pro forma net income (loss) to actual and pro forma Adjusted EBITDA:

	Three Months Ended March 31,
(in $000s)	2022 Actual		2021 Pro Forma
Net income (loss)	$	(3,273)	$	(15,280)
Interest expense	17,445		18,500
Income tax expense	3,005		7,444
Depreciation and amortization	62,500		53,599
EBITDA	79,677		64,263
Adjustments:
Non-cash purchase accounting impact	9,026		54
Transaction and process improvement costs	4,648		293
Impairment of long-lived assets	—		—
Sales-type lease adjustment	529		1,155
Share-based payments	3,364		1,255
Change in fair value of derivative and warrants	(5,767)		5,846
Adjusted EBITDA	$	91,477	$	72,866

Liquidity and Capital Resources

Our principal sources of liquidity include cash generated by operating activities and borrowings under revolving credit facilities as described below. We believe that our liquidity sources and operating cash flows are sufficient to address our operating, debt service and capital requirements over the next 12 months; however, we are continuing to monitor the impact of COVID-19 and associated on-going supply chain issues on our business and the financial markets. As of March 31, 2022, we had $23.8 million in cash and cash equivalents compared to $35.9 million as of December 31, 2021. As of March 31, 2022, we had $410.1 million of outstanding borrowings under our ABL Facility compared to $394.9 million of outstanding borrowing under the ABL Facility as of December 31, 2021.

ABL Facility

As of March 31, 2022, borrowing availability under the ABL Facility was $330.9 million, and outstanding standby letters of credit were $4.8 million. Borrowings under the ABL Facility will bear interest at a floating rate, which, at Buyer’s election, will be (a) in the case of U.S. dollar denominated loans, either (i) the London Interbank Offered Rate (“LIBOR”) plus an applicable margin or (ii) the base rate plus an applicable margin or (b) in the case of Canadian dollar denominated loans, the CDOR rate plus an applicable margin. The applicable margin varies based on Average Availability (as defined in the ABL Credit Agreement) from (x) with respect to base rate loans, 0.50% to 1.00% and (y) with respect to LIBOR loans and CDOR rate loans, 1.50% to 2.00%. The ability to draw under the ABL Facility or issue letters of credit thereunder is conditioned upon, among other things, delivery of prior written notice of a borrowing or issuance, as applicable, the ability to reaffirm the representations and warranties contained in the ABL Credit Agreement and the absence of any default or event of default under the ABL Facility.

2029 Secured Notes

On the Closing Date, the Issuer issued $920.0 million in aggregate principal amount of 5.50% senior secured second lien notes due 2029. The 2029 Secured Notes were issued pursuant to an indenture, dated as of April 1, 2021, between the Issuer, Wilmington Trust, National Association, as trustee and the guarantors party thereto (the “Indenture”). The Issuer will pay interest on the 2029 Secured Notes semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2021. Unless earlier redeemed, the 2029 Secured Notes will mature on April 15, 2029.

Restrictive Covenants

The Indenture contains covenants that limit the Issuer’s (and certain of its subsidiaries’) ability to, among other things: (i) incur additional debt or issue certain preferred stock; (ii) pay dividends, redeem stock or make other distributions; (iii) make other restricted payments or investments; (iv) create liens on assets; (v) transfer or sell assets; (vi) create restrictions on payment of dividends or other amounts by the Issuer to the Issuer’s restricted subsidiaries; (vii) engage in mergers or consolidations; (viii) engage in certain transactions with affiliates; or (ix) designate the Issuer’s subsidiaries as unrestricted subsidiaries.

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Events of Default

The Indenture provides for customary events of default, including non-payment, failure to comply with covenants or other agreements in the Indenture and certain events of bankruptcy or insolvency. If an event of default occurs and continues with respect to the 2029 Secured Notes, the trustee or the holders of at least 30% in aggregate principal amount of the outstanding 2029 Secured Notes of such series may declare the entire principal amount of all the 2029 Secured Notes to be due and payable immediately (except that if such event of default is caused by certain events of bankruptcy or insolvency, the entire principal of the 2029 Secured Notes will become due and payable immediately without further action or notice).

Floor Plan Financing

Daimler Truck Financial

The Company is party to the Wholesale Financing Agreement with Daimler Truck Financial (the “Daimler Facility”) which bears interest at a rate of the Federal Funds Rate (“Prime”) plus 0.80% after an initial interest free period of up to 150 days. The total capacity under the Daimler Facility is $175.0 million. As of March 31, 2022, borrowings on the Daimler Facility were $39.0 million. The Daimler agreement is evergreen and is subject to termination by either party through written notice.

PACCAR

The Company has an Inventory Financing Agreement with PACCAR Financial Corp that provides the Company with a line of credit of $75.0 million to finance inventory purchases of new Peterbilt and/or Kenworth trucks, tractors, and chassis. Amounts borrowed against this line of credit incur interest at a rate of LIBOR plus 2.4%. As of March 31, 2022, borrowings on the PACCAR line of credit were $20.7 million. The PACCAR agreement extends automatically each April and is subject to termination by either party through written notice.

PNC Equipment Finance, LLC

The Company has an Inventory Loan, Guaranty and Security Agreement (the “Loan Agreement”) with PNC Equipment Finance, LLC. The Loan Agreement provides the Company with a $295.0 million revolving credit facility, which matures on August 25, 2022 and bears interest at a rate of LIBOR plus 3.05%. As of March 31, 2022, borrowings on the Loan Agreement were $220.3 million.

Notes Payable

Our notes payable require the Company to pay monthly and quarterly interest payments and have maturities beginning in 2022 through 2026. Notes payable includes (i) debt assumed from the Acquisition related to borrowings for facilities renovations and to support general business activities, (ii) notes payable related to past businesses acquired, and (iii) term loans. Subsequent to the Acquisition, the Company consolidated certain notes payable assumed from the Acquisition into a $23.9 million loan agreement with Security Bank of Kansas City (“SBKC”) that bears interest at a rate of 3.125% per annum, and a $3.5 million loan agreement with SBKC that bears interest at a rate of 3.5% per annum.

Historical Cash Flows

The following table summarizes our sources and uses of cash:

	Three Months Ended March 31,
(in $000s)	2022		2021
Net cash flow used in operating activities	$	(29,771)	$	(12,086)
Net cash flow (used in) provided by investing activities	(48,458)		3,972
Net cash flow provided by financing activities	66,138		7,893
Net change in cash and cash equivalents	$	(12,091)	$	(221)

As of March 31, 2022, we had cash and cash equivalents of $23.8 million, a decrease of $12.1 million from December 31, 2021. Generally, we manage our cash flow by using any excess cash, after considering our working capital and capital expenditure needs, including paying down the outstanding balance under our ABL Facility.

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Cash Flows from Operating Activities

Net cash used in operating activities was $29.8 million for the three months ended March 31, 2022, as compared to $12.1 million in the same period of 2021. The increase in cash used was driven by increases in cash used in accounts and financing receivables ($35.0 million), inventory ($46.3 million), floor plan payables - trade, net ($13.1 million) and customer deposits and deferred revenue ($9.9 million) offset by increases in cash provided by accounts payable ($28.9 million), depreciation and amortization ($42.6 million) and net losses ($23.1 million) in the current period.

Cash Flows from Investing Activities

Net cash used in investing activities was $48.5 million for the three months ended March 31, 2022, as compared to cash provided by investing activities of $4.0 million in 2021. The increase in cash used was driven by the acquisition of HiRail ($50.5 million) and an increase in cash used in purchases of rental equipment ($34.5 million) offset by cash provided by proceeds from sales and disposals of rental equipment ($34.6 million).

Cash Flows from Financing Activities

Net cash provided by financing activities was $66.1 million for the three months ended March 31, 2022, as compared to $7.9 million in 2021. The increase in cash provided was driven by the acquisition of inventory through floor plan financing - non trade, net of repayments, ($55.0 million) and an increase in cash provided by borrowings under revolving credit facilities, net of repayments ($6.1 million).

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 our asset-based revolving credit facility. 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. As of March 31, 2022, we had $410.1 million aggregate principal amount of variable rate debt, consisting of the balance outstanding under the ABL Facility. Holding other variables constant, each one-eighth percentage point increase or decrease in the applicable interest rates would correspondingly change our interest expense on the ABL Facility by approximately $0.5 million on an annual basis. This amount does not reflect the impact of the interest rate collar currently in place.

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, and our primary exposure is from our variable-rate debt. During the three months ended March 31, 2022, we settled an interest rate collar agreement in place as a hedge against fluctuations in the required interest payments due on variable rate debt. 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.

During the three months ended March 31, 2022, we generated $9.6 million of U.S. dollar denominated revenues in Canadian dollars. Each 100 basis point increase or decrease in the average Canadian dollar to U.S. dollar exchange rate for the year would have correspondingly changed our revenues by approximately $0.1 million. We do not currently hedge our exchange rate exposure.

37

Item 4.    Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q we carried out an evaluation with the participation of our Chief Executive Officer and Chief Financial Officer. Based on that assessment, the Chief Executive Officer and Chief Financial Officer concluded as of March 31, 2022, the Company’s disclosure controls and procedures were not effective because of the material weaknesses in our internal control over financial reporting described below.

Inadequate General Information Technology Controls and Business Process Controls

On April 1, 2021, we completed the acquisition of Custom Truck LP, which resulted in a significant change in the Company’s internal control over financial reporting. We are in the process of integrating policies, processes, people, technology and operations for the combined company. As part of this integration, we have identified deficiencies in the design and operating effectiveness of internal controls associated with the control activities component of the COSO framework. These include:

1.During the third quarter ended September 30, 2021, we identified a material weakness in the design and operation of information technology general controls (“ITGCs”) related to an enterprise resource planning (“ERP”) system that supports the processes related to the preparation of our consolidated financial statements. Specifically, we did not maintain adequate control over user access to the ERP system to ensure appropriate segregation of duties and to restrict access to financial applications and data to appropriate Company personnel.

2.During the fourth quarter ended December 31, 2021, we identified control deficiencies related to overall ITGCs for both user access and program change-management for systems supporting all of the Company’s internal control processes and controls, controls over the completeness and accuracy of information used in business process controls and management review controls. Our business process controls (automated and manual) and management review controls were also deemed ineffective because they are adversely impacted by ineffective ITGCs. These control deficiencies could result in misstatements potentially impacting all financial statement accounts and disclosures that may not be prevented or detected.

Accordingly, these deficiencies constitute material weaknesses. The material weaknesses did not result in any identified misstatements to our consolidated financial statements, and there were no changes to previously released financial results.

(b) Remediation of the Material Weaknesses in Internal Control Over Financial Reporting

The Company is in the process of implementing changes associated with the design, implementation, and monitoring information technology general controls in the areas of user access and program change-management for systems supporting all of the Company’s internal control processes to ensure that internal controls are designed and operating effectively. A significant portion of our remediation plan to address the control deficiencies encompass the completion of our new ERP system implementation planned for the second and third quarters of 2022. The new ERP system will allow us to address segregation of duties by establishing user roles specific to the nature of each job function. We are also establishing controls to ensure appropriate authorization of new user access requests, including performance of routine reviews of user access, and controls over program-change management. Additionally, we are in the process of enhancing relevant process level controls that are relevant to the preparation of consolidated financial statements. The material weaknesses cannot be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

(c) Changes to Internal Control Over Financial Reporting

Other than the ongoing remediation plans described above, there were no changes to our internal control over financial reporting that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. On January 14, 2022, we completed the acquisition of Hi-Rail Leasing, Inc. (“Hi-Rail”). In conducting our evaluation of effectiveness of our internal control over financial reporting, we have elected to exclude Hi-Rail from our evaluation, as permitted under existing SEC rules.

38

PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

We may, at any given time, be named as a defendant in certain lawsuits, investigations and claims arising in the ordinary course of business. While the outcome of these potential lawsuits, investigations and claims cannot be predicted with certainty, we do not expect these matters to have a material adverse impact on our business, results of operations, cash flows or financial condition. In the opinion of management, there are no pending litigations, disputes or claims against the Company that, if decided adversely, would have a material adverse effect on its consolidated financial condition, cash flows or results of operations.

Item 1A.    Risk Factors

No material changes occurred to the indicated risk factors as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

47

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.

48

Item 6.    Exhibits

Exhibit No.	Description
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 - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed or furnished herewith.

49

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.

		CUSTOM TRUCK ONE SOURCE, INC. (Registrant)
Date:	May 10, 2022	/s/ Fred Ross
		Fred Ross, Chief Executive Officer
Date:	May 10, 2022	/s/ Bradley Meader
		Bradley Meader, Chief Financial Officer

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

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

I, Fred Ross, certify that:

1 I have reviewed this Quarterly Report on Form 10-Q of Custom Truck One Source, Inc. for the quarterly period ended March 31, 2022;

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 the registrant as of, and for, the periods presented in this report;

4 The registrant’s other certifying officer(s) 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 the registrant 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 the registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that occurred during the registrant’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 The registrants’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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 the registrant’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 registrant’s internal control over financial reporting.

Date:	May 10, 2022	/s/ Fred Ross
		Fred Ross
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

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

I, Bradley Meader, certify that:

1 I have reviewed this Quarterly Report on Form 10-Q of Custom Truck One Source, Inc. for the quarterly period ended March 31, 2022;

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 the registrant as of, and for, the periods presented in this report;

4 The registrant’s other certifying officer(s) 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 the registrant 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 the registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that occurred during the registrant’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 The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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 the registrant’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 registrant’s internal control over financial reporting.

Date:	May 10, 2022	/s/ Bradley Meader
		Bradley Meader
		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 on Form 10-Q of Custom Truck One Source, Inc. (the “Company”) for the quarterly period ended March 31, 2022, 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 operations of the Company.

May 10, 2022	/s/ Fred Ross
	Fred Ross
	Chief Executive Officer
May 10, 2022	/s/ Bradley Meader
	Bradley Meader
	Chief Financial Officer

XML

Cover Page - shares	3 Months Ended
	Mar. 31, 2022	Apr. 28, 2022
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2022
Document Transition Report	false
Entity File Number	001-38186
Entity Registrant Name	CUSTOM TRUCK ONE SOURCE, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	84-2531628
Entity Address, Address Line One	7701 Independence Ave
Entity Address, City or Town	Kansas City
Entity Address, State or Province	MO
Entity Address, Postal Zip Code	64125
City Area Code	816
Local Phone Number	241-4888
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		247,589,922
Entity Central Index Key	0001709682
Document Fiscal Year Focus	2022
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q1
Amendment Flag	false
Common Stock
Document Information [Line Items]
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	CTOS
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	CTOS.WS
Security Exchange Name	NYSE

XML

Condensed Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Current Assets
Cash and cash equivalents	$ 23,811	$ 35,902
Accounts receivable, net	174,057	168,394
Financing receivables, net	36,487	28,649
Inventory	463,722	410,542
Prepaid expenses and other	14,847	13,217
Total current assets	712,924	656,704
Property and equipment, net	107,723	108,612
Rental equipment, net	834,645	834,325
Goodwill	713,832	695,865
Intangible assets, net	314,505	327,840
Operating lease assets	35,453	36,014
Other assets	26,997	24,406
Total Assets	2,746,079	2,683,766
Current Liabilities
Accounts payable	108,484	91,123
Accrued expenses	61,963	60,337
Deferred revenue and customer deposits	25,684	35,791
Floor plan payables - trade	59,682	72,714
Floor plan payables - non-trade	220,300	165,239
Operating lease liabilities - current	5,283	4,987
Current maturities of long-term debt	4,950	6,354
Current portion of finance lease obligations	4,559	4,038
Total current liabilities	490,905	440,583
Long-term debt, net	1,324,396	1,308,265
Finance leases	2,313	5,109
Operating lease liabilities - noncurrent	30,718	31,514
Deferred income taxes	21,545	15,621
Derivative, warrants and other liabilities	17,693	24,164
Total long-term liabilities	1,396,665	1,384,673
Commitments and contingencies
Stockholder's Equity
Common stock — $0.0001 par value, 500,000,000 shares authorized, 247,461,042 and 247,358,412 shares issued and outstanding, at March 31, 2022 and December 31, 2021, respectively	25	25
Treasury stock, at cost — 339,591 and 318,086 shares at March 31, 2022 and December 31, 2021, respectively	(3,307)	(3,020)
Additional paid-in capital	1,512,554	1,508,995
Accumulated deficit	(650,763)	(647,490)
Total stockholders' equity (deficit)	858,509	858,510
Total Liabilities and Stockholders' Equity	$ 2,746,079	$ 2,683,766
Treasury stock (in shares)	339,591	318,086

XML

Condensed Consolidated Balance Sheets (unaudited) (Parentheticals) - $ / shares	Mar. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, authorized (in shares)	500,000,000	500,000,000
Common stock, issued (in shares)	247,461,042	247,358,412
Common stock, outstanding (in shares)	247,461,042	247,358,412
Treasury stock (in shares)	339,591	318,086

XML

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Revenue
Total revenue	$ 366,476	$ 78,299
Cost of Revenue
Depreciation of rental equipment	44,964	17,844
Total cost of revenue	281,983	58,080
Gross Profit	84,493	20,219
Operating Expenses
Selling, general and administrative expenses	53,655	12,050
Amortization	13,335	754
Non-rental depreciation	3,047	21
Transaction expenses	4,648	10,448
Total operating expenses	74,685	23,273
Operating Income (Loss)	9,808	(3,054)
Other Expense
Interest expense, net	19,156	14,906
Financing and other expense (income)	(9,080)	5,857
Total other expense	10,076	20,763
Income (Loss) Before Income Taxes	(268)	(23,817)
Income Tax Expense (Benefit)	3,005	4,090
Net Income (Loss)	$ (3,273)	$ (27,907)
Basic Earnings (Loss) Per Share (USD per share)	$ (0.01)	$ (0.57)
Diluted Earnings (Loss) Per Share (USD per share)	$ (0.01)	$ (0.57)
Weighted-Average Common Shares Outstanding, Basic (in shares)	247,057,564	48,619,613
Weighted-Average-Common Shares Outstanding, Diluted (in shares)	247,057,564	48,619,613
Revenue
Revenue
Total revenue	$ 109,145	$ 48,289
Cost of Revenue
Cost of rental revenue	25,793	16,928
Equipment sales
Revenue
Total revenue	227,186	17,987
Cost of Revenue
Cost of rental revenue	187,278	13,665
Parts sales and services
Revenue
Total revenue	30,145	12,023
Cost of Revenue
Cost of rental revenue	$ 23,948	$ 9,643

XML

Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Operating Activities
Net income (loss)	$ (3,273)	$ (27,907)
Adjustments to reconcile net income (loss) to net cash flow from operating activities:
Depreciation and amortization	62,500	19,905
Amortization of debt issuance costs	1,326	0
Provision for losses on accounts receivable	2,811	1,383
Share-based compensation	3,364	698
Gain on sales and disposals of rental equipment	(5,420)	(4,139)
Change in fair value of derivative and warrants	(5,767)	5,846
Deferred tax expense (benefit)	2,849	3,826
Changes in assets and liabilities:
Accounts and financing receivables	(33,520)	1,520
Inventories	(51,384)	(5,081)
Prepaids, operating leases and other	(4,637)	(5,545)
Accounts payable	29,869	(956)
Accrued expenses and other liabilities	(5,343)	(1,437)
Floor plan payables - trade, net	(13,031)	0
Customer deposits and deferred revenue	(10,115)	(199)
Net cash flow from operating activities	(29,771)	(12,086)
Investing Activities
Acquisition of business, net of cash acquired	(50,513)	0
Purchases of rental equipment	(45,945)	(11,368)
Proceeds from sales and disposals of rental equipment	49,961	15,416
Other investing activities, net	(1,961)	(76)
Net cash flow from investing activities	(48,458)	3,972
Financing Activities
Proceeds from debt	75	0
Share-based payments	(6)	0
Borrowings under revolving credit facilities	50,000	25,461
Repayments under revolving credit facilities	(34,844)	(16,431)
Repayments of notes payable	(1,872)	(182)
Finance lease payments	(2,275)	(955)
Acquisition of inventory through floor plan payables - non-trade	140,126	0
Repayment of floor plan payables - non-trade	(85,066)	0
Net cash flow from financing activities	66,138	7,893
Net Change in Cash and Cash Equivalents	(12,091)	(221)
Cash and Cash Equivalents at Beginning of Period	35,902	3,412
Cash and Cash Equivalents at End of Period	23,811	3,191
Supplemental Cash Flow Information
Interest paid	4,865	26,287
Income taxes paid	0	122
Non-Cash Investing and Financing Activities
Rental equipment and property and equipment purchases in accounts payable	0	6,285
Rental equipment sales in accounts receivable	$ 23,551	$ 1,505

XML

Condensed Consolidated Statement of Stockholders' Equity (Deficit) (unaudited) - USD ($) $ in Thousands	Total	Reclassification Adjustment	Common Stock	Treasury Stock	Additional Paid-in Capital	Additional Paid-in Capital Reclassification Adjustment	Accumulated Deficit
Balance (in shares) at Dec. 31, 2020			49,156,753	0
Balance at Dec. 31, 2020	$ (31,067)	$ (10,290)	$ 5	$ 0	$ 434,917	$ (10,290)	$ (465,989)
Increase (Decrease) in Stockholders' Deficit [Roll Forward]
Net income (loss)	(27,907)						(27,907)
Share-based payments (in shares)			62,630
Share-based payments	597				597
Balance (in shares) at Mar. 31, 2021			49,219,383	0
Balance at Mar. 31, 2021	$ (68,667)		$ 5	$ 0	425,224		(493,896)
Balance (in shares) at Dec. 31, 2021	247,358,412		247,358,412	(318,086)
Balance at Dec. 31, 2021	$ 858,510		$ 25	$ (3,020)	1,508,995		(647,490)
Increase (Decrease) in Stockholders' Deficit [Roll Forward]
Net income (loss)	(3,273)						(3,273)
Share-based payments (in shares)			102,630	(21,505)
Share-based payments	$ 3,272			$ (287)	3,559
Balance (in shares) at Mar. 31, 2022	247,461,042		247,461,042	(339,591)
Balance at Mar. 31, 2022	$ 858,509		$ 25	$ (3,307)	$ 1,512,554		$ (650,763)

XML

Business and Organization

3 Months Ended

Mar. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business and Organization

Note 1: Business and Organization

Organization

Custom Truck One Source, Inc., formerly Nesco Holdings, Inc., a Delaware corporation, and its wholly owned subsidiaries are engaged in the business of providing a range of products and services to customers through rentals and sales of specialty equipment, rentals and sales of aftermarket parts and services related to the specialty equipment, and repair, maintenance and customization services related to that equipment. Immediately following the acquisition by Nesco Holdings II, Inc. of Custom Truck One Source, L.P. (“Custom Truck LP”) as discussed in Note 3: Business Combinations, on April 1, 2021 (the “Acquisition”), Nesco Holdings, Inc. (“Nesco Holdings”) changed its name to “Custom Truck One Source, Inc.” and changed The New York Stock Exchange ticker for its shares of common stock (“Common Stock”) from “NSCO” to “CTOS,” and the ticker of its redeemable warrants from “NSCO.WS” to “CTOS.WS.” Terms such as, “we,” “our,” “us,” or “the Company” refer to Nesco Holdings prior to the Acquisition, and to the combined company after the Acquisition. Unless the context otherwise requires, the term “Nesco” or “Nesco Holdings” as used in these financial statements means Nesco Holdings and its consolidated subsidiaries prior to the Acquisition, and the term “Custom Truck LP” means Custom Truck LP and its consolidated subsidiaries prior to and on the date of the Acquisition.

We are a specialty equipment provider to the electric utility transmission and distribution, telecommunications, rail and other infrastructure-related industries in North America. Our core business relates to our new equipment inventory and rental fleet of specialty equipment that is utilized by service providers in infrastructure development and improvement work. We offer our specialized equipment to a diverse customer base, including utilities and 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 for lighting and signage. We rent, produce, sell and service a broad range of new and used equipment, including bucket trucks, digger derricks, dump trucks, cranes, service trucks, and heavy-haul trailers. Following the Acquisition, we changed our reportable segments to be consistent with how we currently manage the business, representing three reporting segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”).

Equipment Rental Solutions (“ERS”) Segment

We own a broad range of new and used specialty equipment, including truck-mounted aerial lifts, cranes, service trucks, dump trucks, trailers, digger derricks and other machinery and equipment. The majority of our rental fleet can be used across a variety of end-markets, which coincides with the needs of many of our customers who operate in multiple end-markets. As is customary for equipment rental companies, we sell used equipment out of our rental fleet to end user customers. These sales are often made in response to specific customer requests. These sales offer customers an opportunity to buy well-maintained equipment with long remaining useful lives and enable us to effectively manage the age and mix of our rental fleet to match current market demand. We also employ rental purchase options on a select basis, which provide a buyout option with an established purchase price that decreases over time as rental revenue is collected. Customers are given credit against such purchase price for a portion of the amounts paid over the life of the rental, allowing customers the flexibility of a rental with the option to purchase at any time at a known price. Activities in our ERS segment consist of the rental and sale from the rental fleet, of the foregoing products.

Truck and Equipment Sales (“TES”) Segment

We offer a broad variety of new equipment for sale to be used across our end-markets, which can be modified to meet our customers’ specific needs. We believe that our integrated production capabilities and extensive knowledge gained over a long history of selling equipment have established us as a trusted partner for customers seeking tailored solutions with short lead times. In support of these activities, we primarily employ a direct-to-customer sales model, leveraging our dedicated sales force of industry and product managers, who are focused on driving national and local sales. We also opportunistically engage in the sale of used equipment purchased from third parties or received via trade-ins from new equipment sales customers. In all of these cases, we will sell used equipment directly to customers, rather than relying on auctions. Activities in our TES segment consist of the production and sale of new and used specialty equipment and vocational trucks, which includes equipment from leading original equipment manufacturers (“OEMs”) across our end-markets, as well as our Load KingTM brand.

Aftermarket Parts and Services (“APS”) Segment

The APS segment includes the sale of specialized aftermarket parts, including captive parts related to our Load KingTM brand, used in the maintenance and repair of the equipment we sell and rent. Specialized tools, including stringing blocks, insulated hot stick, and rigging equipment, are sold or rented to customers on an individual basis or in packaged specialty kits. We also provide truck and equipment maintenance and repair services, which are executed throughout our nationwide branch network and fleet of mobile technicians supported by our 24/7 call center based in Kansas City, Missouri.

COVID-19 and Supply Chain

Uncertainty remains regarding emerging variant strains of the Coronavirus Disease 2019 ("COVID-19") pandemic, and regarding the length of time it will take for the COVID-19 pandemic to subside, including the time it will take for vaccines to be broadly distributed and accepted in the United States and the rest of the world, and the effectiveness of such vaccines in slowing or stopping the spread of COVID-19 and mitigating the economic effects of the pandemic. The Company serves critical infrastructure sectors that have been identified by the United States Cybersecurity and Infrastructure Security Agency (“CISA”) as vital to the U.S., and the Company has continued to meet the needs of customers during the pandemic. The unprecedented nature of the COVID-19 pandemic continues to make it difficult to predict our future business and financial performance. The ensuing economic impacts from restrictions put in place around the globe to address the COVID-19 pandemic, including shutdowns and workplace changes, have led to issues, broadly, in the global flow of goods and services (the “supply chain”). The Company continues to monitor the impact of the COVID-19 pandemic and related restrictions on our supply chain, including, but not limited to, the commercial vehicle manufacturers that provide the chassis used in our production and manufacturing processes. Supply chain disruptions, such as the ongoing semiconductor shortage, could potentially limit the ability of these manufacturers to meet demand in future periods.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Polices

Note 2: Summary of Significant Accounting Policies

Basis of Presentation

Our accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and the accounting policies described below. Our consolidated financial statements include the accounts of all wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in accordance with GAAP requires that these Unaudited Condensed Consolidated Financial Statements and most of the disclosures in these Notes be presented on a historical basis, as of or for the current interim period ended or comparable prior period. The consolidated financial position and results of operations and cash flows (including segment information) presented herein include those of Custom Truck One Source, Inc. as of March 31, 2022 and since the date of the Acquisition. Financial information presented for periods prior to the Acquisition represent those of Nesco Holdings and its subsidiaries.

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, and the Condensed Consolidated Balance Sheet at December 31, 2021, has been derived from the audited consolidated financial statements of Custom Truck One Source, Inc. at that date. Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting 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 Custom Truck One Source, Inc. audited consolidated financial statements included in the Custom Truck One Source, Inc. Annual Report on Form 10-K for the year ended December 31, 2021.

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 the allocation of purchase price related to 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.

Trade Receivables and Allowance for Credit Losses

We are exposed to credit losses from trade receivables generated through our leasing, sales and service businesses. We assess each customer’s ability to pay for the products and services by conducting a credit review. The credit review considers expected billing exposure and timing for payment and the customer’s established credit rating. We perform a credit review of new customers at inception of the customer relationship and, for existing customers, when the customer transacts new leases or product orders after a period of dormancy. We also consider contract terms and conditions, country risk and business strategy in the evaluation.

We monitor ongoing credit exposure through an active review of customer balances against contract terms and due dates. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. The allowances for credit losses reflect the estimate of the amount of receivables that management assesses will be unable to be collected based on historical write-off experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. This estimate could require change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may be required to increase or decrease the allowances. We review the adequacy of the allowance on a quarterly basis. The allowance for doubtful accounts was $12.8 million and $10.8 million as of March 31, 2022 and December 31, 2021, respectively, and is included in accounts receivable, net on our Condensed Consolidated Balance Sheets.

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Business Combinations

3 Months Ended

Mar. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Business Combinations

Note 3: Business Combinations

Acquisition of Custom Truck One Source, L.P.

On December 3, 2020, Nesco Holdings and Nesco Holdings II, Inc., a subsidiary of Nesco Holdings (the “Buyer” or the “Issuer”), entered into a Purchase and Sale Agreement (as amended, the “Purchase Agreement”) with certain affiliates of The Blackstone Group (“Blackstone”) and other direct and indirect equity holders (collectively, “Sellers”) of Custom Truck One Source, L.P., Blackstone Capital Partners VI-NQ L.P., and PE One Source Holdings, LLC, an affiliate of Platinum Equity, LLC (“Platinum”), pursuant to which Buyer agreed to acquire 100% of the partnership interests of Custom Truck LP. In connection with the Acquisition, Nesco Holdings and certain Sellers entered into Rollover and Contribution Agreements (the “Rollover Agreements”), pursuant to which such Sellers agreed to contribute a portion of their equity interests in Custom Truck LP (the “Rollovers”) with an aggregate value of $100.5 million in exchange for shares of Common Stock, valued at $5.00 per share. We believe the Acquisition creates a leading, one-stop shop for specialty equipment, serving highly attractive and growing infrastructure end markets, including transmission and distribution, telecom, rail and other national infrastructure initiatives.

Also on December 3, 2020, Nesco Holdings entered into a Common Stock Purchase Agreement (the “Investment Agreement”) with Platinum, relating to, among other things, the issuance and sale to Platinum (the “Subscription”) of shares of Common Stock, for an aggregate purchase price in the range of $700 million to $763 million, with the specific amount calculated in accordance with the Investment Agreement based upon the total equity funding required to fund the consideration paid pursuant to the terms of the Purchase Agreement. The shares of Common Stock issued and sold to Platinum had a purchase price of $5.00 per share. In accordance with the Investment Agreement, on December 21, 2020, Nesco Holdings entered into Subscription Agreements (the “Subscription Agreements”) with certain investors (the “PIPE Investors”) to finance, in part, the Acquisition. Pursuant to the Subscription Agreements, concurrently with the closing of the transactions contemplated by the Investment Agreement, the PIPE Investors agreed to purchase an aggregate of 28,000,000 shares of Common Stock at $5.00 per share for an aggregate purchase price of $140 million (the “Supplemental Equity Financing”).

On April 1, 2021 (the “Closing Date”), in connection with (i) the Rollovers, the Company issued, in the aggregate, 20,100,000 shares of Common Stock to the parties to the Rollover Agreements, (ii) the Subscription, the Company issued 148,600,000 shares of Common Stock to Platinum, and (iii) the Supplemental Equity Financing, the Company issued, in the aggregate, 28,000,000 shares of Common Stock to the PIPE Investors.

Purchase Price

The Company issued 20,100,000 shares of Common Stock to Custom Truck LP equity interest holders, as well as paid cash and repaid debt obligations as consideration for the Acquisition. The trading price of the Common Stock was $9.35 per share on the Closing Date. The purchase price has been determined to be as follows:

(in $000s, except share and per share data)
Common stock issued	20,100,000
Common stock per share price as of April 1, 2021	$	9.35
Fair value of common stock issued	$	187,935
Cash consideration paid to equity interest holders	790,324
Repayment of debt obligations	552,600
Total purchase price	$	1,530,859

During the year ended December 31, 2021, the Company transferred an additional $3.4 million of cash consideration to the Sellers related to certain customary closing adjustments set forth in the Purchase Agreement.

Opening Balance Sheet

The acquisition of Custom Truck One Source, L.P. has been accounted for using the acquisition method of accounting, and the Company is considered the accounting acquirer. Under the acquisition method of accounting, we are required to assign the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the Closing Date. The excess of the purchase price over those fair values is recorded as goodwill. The total purchase price has been assigned to the underlying assets acquired and liabilities assumed based upon their fair values as of the Closing Date, and the estimated fair values have been recorded based on independent valuations, discounted cash flow analysis, quoted market prices, contributory asset charges, and estimates made by management, which estimates fall under “Level 3” of the fair value hierarchy (as defined in Note 11: Fair Value Measurements).

The following table summarizes the April 1, 2021 fair values of the assets acquired and liabilities assumed. Since the Closing Date, the Company identified and recorded certain measurement period adjustments to the preliminary purchase price allocation, which are reflected in the table below. These adjustments were not significant and related primarily to rental equipment and current liabilities. The measurement period adjustments, coupled with the additional cash consideration discussed above, increased goodwill by approximately $15.6 million during the year ended December 31, 2021. The final assessment of the fair value of the Custom Truck LP assets acquired and liabilities assumed was complete as of March 31, 2022.

(in $000s)
Accounts and financing receivables (a)	$	115,325
Inventory	431,648
Other current assets	13,201
Property and equipment (b)	104,721
Rental equipment	556,569
Intangible assets (c)	301,018
Operating lease assets	23,793
Other assets	18,223
Total identifiable assets acquired	1,564,498
Current liabilities	(410,276)
Long-term debt	(28,607)
Operating lease liabilities-noncurrent	(21,308)
Deferred tax and other liabilities	(31,261)
Total identifiable liabilities assumed	(491,452)
Total net assets	1,073,046
Goodwill (d)	457,813
Net assets acquired (purchase price)	$	1,530,859

a.The estimated fair value of accounts and financing receivables is $115.3 million, with the gross contractual amount being $122.4 million. The Company estimates approximately $7.0 million to be uncollectible.

b.Acquired property and equipment is primarily comprised of land, buildings and improvements with an estimated fair value of $67.9 million, and machinery, equipment and vehicles, with an estimated fair value of $31.1 million, as well as other property with an estimated fair value of $5.7 million.

c.The acquired identified intangible assets are comprised of trade names, with an estimated fair value of $151.0 million, and customer relationships, with an estimated fair value of $150.0 million. The weighted average useful lives of the trade names and the customer relationships are estimated to be 15 years and 12 years, respectively.

d.The goodwill recognized is attributable primarily to synergies and economies of scale provided by the acquired rental and new equipment sales businesses, as well as the assembled workforce of Custom Truck LP. Approximately $265.4 million of the goodwill is expected to be deductible for income tax purposes.

Goodwill attributable to the Acquisition is assigned to our Segments as follows:

(in $000s)
ERS	$	261,607
TES	167,307
APS	28,899

Financing Transactions

On the Closing Date, the Issuer issued $920 million in aggregate principal amount of 5.50% senior secured second lien notes due 2029 (the “2029 Secured Notes”). The 2029 Secured Notes were issued pursuant to an indenture, dated as of April 1, 2021, by and among the Issuer, Wilmington Trust, National Association, as trustee, and the guarantors party thereto (the “Indenture”). The Issuer will pay interest on the Notes semi-annually in arrears on April 15 and October 15 of each year, which commenced on October 15, 2021. Unless earlier redeemed, the 2029 Secured Notes will mature on April 15, 2029. The notes were offered pursuant to a private placement exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons outside of the United States in reliance on Regulation S under the Securities Act. The proceeds from the issuance and sale of the 2029 Secured Notes were used to consummate the Acquisition and to repay the Senior Secured Notes due 2024 previously issued by Nesco Holdings, repay certain indebtedness of Custom Truck LP and pay certain fees and expenses related to the Acquisition and financing transactions.

Also on the Closing Date, the Buyer, its direct parent, and certain of its direct and indirect subsidiaries entered into a senior secured asset-based revolving credit agreement (the “ABL Credit Agreement”) with Bank of America, N.A., as administrative agent and collateral agent, and certain other lenders party thereto, consisting of a $750.0 million first lien senior secured asset-based revolving credit facility with a maturity of five years (the “ABL Facility”), which includes borrowing capacity for revolving loans (with a swingline sub-facility) and the issuance of letters of credit. Proceeds from the ABL Facility were used to finance the repayment of certain indebtedness of (i) Custom Truck LP under that certain Credit Agreement, dated as of April 18, 2017 (the “Custom Truck LP Credit Facility”), by and among Custom Truck LP, the other entities party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent, and (ii) Buyer under that certain Credit Agreement, dated as of July 31, 2019 (the “2019 Credit Facility”), by and among Capitol Investment Merger Sub 2, LLC, the other entities party thereto and JPMorgan Chase Bank, N.A., as administrative agent, as well as to pay fees and expenses related to the Acquisition and the financing transactions.

Pro Forma Information

The below pro forma information is presented for the three months ended March 31, 2021 and uses the estimated fair value of assets and liabilities on the Closing Date, and makes the following assumptions: (1) removes acquisition-related costs and charges that were recognized in the Company's consolidated financial statements in the three months ended March 31, 2021 and applies these costs and charges as if the Acquisition and related financing transactions had occurred on January 1, 2020; (2) adjusts for the impacts of purchase accounting in the three months ended March 31, 2021; (3) adjusts interest expense, including amortization of debt issuance costs, to reflect borrowings on the ABL Facility and issuance of the 2029 Secured Notes, as if the funds had been borrowed and the notes had been issued on January 1, 2020 and used to repay Nesco’s 2019 Credit Facility, Nesco’s Senior Secured Notes due 2024 and the Custom Truck LP Credit Facility and term loan; and (4) adjusts for the income tax effect using a tax rate of 25%. The pro forma information is not necessarily indicative of the Company’s results of operations had the Acquisition been completed on January 1, 2020, nor is it necessarily indicative of the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies, synergies, or revenue opportunities that could result from the Acquisition.

	Three Months Ended March 31,
(in $000s)	2021
Revenue	$	394,770
Net income (loss)	$	(15,280)

The following presents a summary of the pro forma adjustments that are directly attributable to the business combination:

		Three Months Ended March 31,
(in $000s)		2021
Increase (decrease) net income/loss:
Impact of fair value mark-ups on rental fleet depreciation	a	$	(3,817)
Intangible asset amortization and other depreciation expense	b	(2,390)
Transaction expenses	c	15,702
Interest expense and amortization of debt issuance costs	d	3,919
Income tax expense	e	(3,354)

a.Represents the adjustment for depreciation of rental fleet relating to the increase in the value of the rental fleet to its fair value.

b.Represents the differential in amortization and depreciation of non-rental equipment related to the respective fair values of the assets.

c.Represents adjustments for transaction expenses that are applied to the three months ended March 31, 2021.

d.Reflects the differential in interest expense, inclusive of amortization of capitalized debt issuance costs, related to our debt structure after the Acquisition as though the following had occurred on January 1, 2020: (i) borrowings under the ABL Facility; (ii) repayment of the 2019 Credit Facility; (iii) repayment of the Senior Secured Notes due 2024; (iv) repayment of the Custom Truck LP Credit Facility; and (v) the issuance of the 2029 Secured Notes.

e.Reflects the adjustment to recognize the tax impacts of the pro forma adjustments for which a tax expense is recognized using a statutory tax rate of 25%. This rate may vary from the actual effective rate of the historical and combined businesses.

Transaction Costs

The Company expensed approximately $10.4 million in transaction costs related to the Acquisition within Transaction expenses and other expense in the three months ended March 31, 2021.

Acquisition of HiRail

On January 14, 2022, a subsidiary of the Company, CTOS Canada, Ltd., closed a Share Purchase Agreement with certain affiliates of Ontario Limited (d/b/a HiRail Leasing), Ontario Inc. (d/b/a Heavy Equipment Repairs), and Ontario Limited (d/b/a Northshore Rail Contracting) (collectively “HiRail”) to acquire 100% of the equity interests of HiRail. The acquisition of HiRail expands our presence in our strategic markets and deepens our relationships with key customers.

Purchase Price

The Company paid $51.6 million to HiRail equity interest holders and to repay debt obligations as consideration for the HiRail acquisition.

Opening Balance Sheet

The Acquisition of HiRail has been accounted for using the acquisition method of accounting. Under the acquisition method of accounting, we are required to assign the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of January 14, 2022. The excess of the purchase price over those fair values is recorded as goodwill and is attributable to expanded access to markets for our product and service offering, synergies, and broader product offerings to existing customers of HiRail. The total purchase price has been preliminarily assigned to the underlying assets acquired and liabilities assumed based upon their preliminary fair values as of January 14, 2022, and the estimated fair values have been recorded based on independent valuations, discounted cash flow analysis, quoted market prices, contributory asset charges, and estimates made by management, which estimates fall under “Level 3” of the fair value hierarchy (as defined in Note 11: Fair Value Measurements).

The following table summarizes as of January 14, 2022, fair values of the assets acquired and liabilities assumed. The final assessment of the fair value of the HiRail assets acquired and liabilities assumed, including estimates of fair values for inventory, property and equipment, rental equipment, certain intangible assets, deferred income taxes and the final assignment of goodwill to reporting units, was not complete as of March 31, 2022. The preliminary fair values are subject to change pending a final determination of the fair values of assets acquired and liabilities assumed as more information is received about their respective values. As of March 31, 2022, the Company is in the process of determining the value of intangible assets acquired including customer relationships, trade names, and other intangible assets.

(in $000s)
Current assets	$	2,891
Property, equipment and other assets	819
Rental equipment	34,224
Total identifiable assets acquired	37,934
Total identifiable liabilities assumed	(6,011)
Total net assets	31,923
Goodwill and intangible assets	19,712
Net assets acquired (purchase price)	51,635
Less: cash acquired	(1,122)
Net cash paid	$	50,513

HiRail has generated $3.8 million of revenue and $1.3 million of pre-tax loss since January 14, 2022, which are included in the Condensed Consolidated Statements of Net Income (Loss) for the three months ended March 31, 2022. Costs and expenses related to the acquisition were expensed as incurred and were not material. Additionally, pro forma information as if the acquisition of HiRail had occurred on January 1, 2021 is not being presented as the information is not considered material to our consolidated financial statements.

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Revenue

3 Months Ended

Mar. 31, 2022

Revenue from Contract with Customer [Abstract]

Revenue

Note 4: Revenue

Revenue Disaggregation

Geographic Areas

The Company had total revenue in the following geographic areas:

	Three Months Ended March 31,
(in $000s)	2022		2021
United States	$	356,897	$	77,466
Canada	9,579		833
Total revenue	$	366,476	$	78,299

Major Product Lines and Services

Equipment leasing and equipment sales are the core businesses of the Company, with leasing complemented by the sale of rental units from the rental fleet. The Company’s revenue by major product and service line for the three month periods ended March 31, 2022 and 2021 are presented in the tables below.

	Three Months Ended March 31,						Three Months Ended March 31,
	2022						2021
(in $000s)	Topic 842		Topic 606		Total		Topic 840		Topic 606		Total
Rental:
Rental	$	105,135	$	—	$	105,135	$	46,186	$	—	$	46,186
Shipping and handling	—		4,010		4,010		—		2,103		2,103
Total rental revenue	105,135		4,010		109,145		46,186		2,103		48,289
Sales and services:
Equipment sales	12,237		214,949		227,186		—		17,987		17,987
Parts and services	2,220		27,925		30,145		—		12,023		12,023
Total sales and services	14,457		242,874		257,331		—		30,010		30,010
Total revenue	$	119,592	$	246,884	$	366,476	$	46,186	$	32,113	$	78,299

Rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers. Equipment sales recognized pursuant to sales-type leases are recorded within equipment sales revenue. Charges to customers for damaged rental equipment are recorded within parts and services revenue.

Receivables, Contract Assets and Liabilities

The Company manages credit risk associated with its accounts receivable at the customer level. Because the same customers generate the revenues that are accounted for under both Topic 606 and Topic 842, the discussions below on credit risk and the Company's allowance for credit losses address the Company's total revenues.

The Company’s allowance for credit losses reflects its estimate of the amount of receivables that it will be unable to collect. The estimated losses are based upon a review of outstanding receivables, the related aging, including specific accounts if deemed necessary, and on the Company’s historical collection experience. The estimated losses are calculated using the loss rate method based upon a review of outstanding receivables, related aging, and historical collection experience. The Company's estimates reflect changing circumstances, including changes in the economy or in the particular circumstances of individual customers, and, as a result, the Company may be required to increase or decrease its allowance. During the three months ended March 31, 2022, the Company recognized bad debt expense of $1.4 million, as reductions of rental revenue in accordance with the collectability provisions of Topic 842. During the three months ended March 31, 2022, the Company recognized $1.5 million within selling, general, and administrative expense in its Condensed Consolidated Statements of Net Income (Loss), which included changes in its allowances for credit losses.

When customers are billed for rentals in advance of the rental period, the Company defers recognition of revenue. As of March 31, 2022 and 2021, the Company had approximately $1.7 million and $1.0 million, respectively, of deferred rental revenue. Additionally, the Company collects deposits from customers for orders placed for equipment and rentals. The Company had approximately $24.0 million in deposits as of March 31, 2022.

The Company does not have material contract assets, and it did not recognize any material impairments of any contract assets.

The primary costs to obtain contracts for new and rental unit sales with the Company's customers are commissions. The Company pays its sales force commissions related to the sale and rental of new and used units. For new unit and rental unit sales, the period benefited by each commission is less than one year. As a result, the Company has applied the practical expedient for incremental costs of obtaining a sales contract and expenses commissions as incurred.

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Inventory

3 Months Ended

Mar. 31, 2022

Inventory Disclosure [Abstract]

Inventory

Note 5: Inventory

Inventory consisted of the following:

(in $000s)	March 31, 2022		December 31, 2021
Whole goods	$	367,539	$	326,641
Aftermarket parts and services inventory	96,183		83,901
Inventory	$	463,722	$	410,542

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Rental Equipment

3 Months Ended

Mar. 31, 2022

Property, Plant and Equipment [Abstract]

Rental Equipment

Note 6: Rental Equipment

Rental equipment, net consisted of the following:

(in $000s)	March 31, 2022		December 31, 2021
Rental equipment	$	1,254,912	$	1,247,375
Less: accumulated depreciation	(420,267)		(413,050)
Rental equipment, net	$	834,645	$	834,325

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Long-Term Debt

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Long-Term Debt

Note 7: Long-Term Debt

Debt obligations and associated interest rates consisted of the following:

(in $000s)	March 31, 2022		December 31, 2021		March 31, 2022	December 31, 2021
ABL Facility	$	410,100	$	394,945	2.1%	1.8%
2029 Secured Notes	920,000		920,000		5.5%	5.5%
Notes payable	30,864		32,619		3.0%-5.0%	3.0%-5.0%
Total debt outstanding	1,360,964		1,347,564
Deferred finance fees	(31,618)		(32,945)
Net debt	1,329,346		1,314,619
Less: current maturities	(4,950)		(6,354)
Long-term debt	$	1,324,396	$	1,308,265

As of March 31, 2022, borrowing availability under the ABL Facility was $330.9 million, and outstanding standby letters of credit were $4.8 million.

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Earnings (Loss) Per Share

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Earnings (Loss) Per Share

Note 8: Earnings (Loss) Per Share

Diluted earnings (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 earnings (loss) per share for the applicable periods because earnings are at a net loss and therefore, the potentially dilutive effect would be anti-dilutive. Our potentially dilutive shares aggregated 24.9 million and 28.0 million, respectively, for the three months ended March 31, 2022 and 2021.

The following tables set forth the computation of basic and dilutive loss per share:

	Three Months Ended March 31, 2022					Three Months Ended March 31, 2021
(in $000s, except share and per share data)	Net Income (Loss)		Weighted Average Shares	Per Share Amount		Net Income (Loss)		Weighted Average Shares	Per Share Amount
Basic earnings (loss) per share	$	(3,273)	247,057,564	$	(0.01)	$	(27,907)	48,619,613	$	(0.57)
Dilutive common share equivalents	—		—	—		—		—	—
Diluted earnings (loss) per share	$	(3,273)	247,057,564	$	(0.01)	$	(27,907)	48,619,613	$	(0.57)

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Equity

3 Months Ended

Mar. 31, 2022

Equity [Abstract]

Equity

Note 9: Equity

Preferred Stock

As of March 31, 2022 and December 31, 2021, we were authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share, respectively, with such designation, rights and preferences as may be determined from time to time by our board of directors. As of March 31, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.

Common Stock

As of March 31, 2022 and December 31, 2021, we were authorized to issue 500,000,000 shares of common stock with a par value of $0.0001 per share, respectively.

During the period commencing on the date of the Acquisition and ending on the date that is eighteen months following the date of the Acquisition (the “Lockup Period” ), Platinum shall not transfer any shares of common stock beneficially owned or otherwise held by it other than transfers as allowed by the Amended and Restated Stockholder’s Agreement of Custom Truck One Source, Inc.

Contingently Issuable Shares

NESCO Holdings, LP is a Delaware limited partnership holding shares of our common stock. NESCO Holdings, LP is owned and controlled by Energy Capital Partners, and has the right to receive: (1) up to an additional 1,800,000 shares of common stock through July 31, 2024, in increments of 900,000 shares, if (x) the trading price of the common stock exceeds $13.00 per share or $16.00 per

share for any 20 trading days during a 30 consecutive trading day period or (y) a sale transaction of the Company occurs in which the consideration paid per share to holders of common stock of the Company exceeds $13.00 per share or $16.00 per share, and (2) an additional 1,651,798 shares of common stock if during the seven-year period ending July 31, 2026, the trading price of common stock exceeds $19.00 per share for any 20 trading days during a 30 consecutive trading day period or if a sale transaction of the Company occurs in which the consideration paid per share to holders of common stock exceeds $19.00 per share.

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Share-Based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

Note 10: Share-Based Compensation

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, performance share units and deferred compensation.

Share-based compensation expense recognized in selling, general and administrative expenses in the Condensed Consolidated Statements of Net Income (Loss) was $3.4 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there was approximately $20.8 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 2.3 years. There were no share-based payment awards granted in the three months ended March 31, 2022.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 11: Fair Value Measurements

The Financial Accounting Standards Board (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.

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
March 31, 2022
ABL Facility	$	410,100	$	—	$	410,100	$	—
2029 Secured Notes	920,000		—		906,200		—
Other notes payable	30,864		—		30,864		—
Warrant liabilities	17,693		—		—		17,693
December 31, 2021
ABL Facility	$	394,945	$	—	$	394,945	$	—
2029 Secured Notes	920,000		—		949,900		—
Other notes payable	32,619		—		32,619		—
Derivative and warrant liabilities	24,164		—		2,388		21,776

The carrying amounts of the ABL Facility and other notes payable approximated fair value as of March 31, 2022 and December 31, 2021 based upon terms and conditions available to the Company at those dates in comparison to the terms and conditions of its outstanding debt. The estimated fair value of the 2029 Secured Notes and Senior Secured Notes due 2024 is calculated using Level 2 inputs, based on bid prices obtained from brokers. The Level 3 fair value presented above consists of the fair value of the Non-Public Warrants (as defined in Note 12: Financial Instruments). The Company estimated the fair value using the Black-Scholes option-pricing model based on the market value of the underlying Common Stock, the remaining contractual term of the warrant, risk-free interest rates and expected dividends, and expected volatility of the price of the underlying Common Stock.

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Financial Instruments

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Note 12: 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.

Warrants

Nesco Holding’s predecessor, Capitol Investment Corp. IV, an entity formed on May 1, 2017, as a special purpose acquisition company (“Capitol” or the “SPAC”), issued warrants for the purchase of approximately 7.5 million shares of the Company’s Common Stock pursuant to a private placement agreement (the “Non-Public Warrants”). In connection with the SPAC’s initial public offering, warrants for the purchase of approximately 13.4 million shares of the Company’s Common Stock were issued to public investors (the “Public Warrants”). The Public Warrants together with the Non-Public Warrants are hereafter referred to collectively as the “Warrants.”

The Warrants provide for the purchase of approximately 20.9 million shares of the Company’s Common Stock. Each Warrant entitles the holder to purchase one share of Common Stock at a price of $11.50 per share, subject to certain adjustments. The Warrants are currently exercisable and terminate on the earlier to occur of (i) July 31, 2024, and (ii) the redemption date. The Company may redeem the Public Warrants at a price of $0.01 per Public Warrant upon providing 30-days’ notice, only in the event that the last sale price of the Common Stock is at least $18.00 per share for any 20 trading days within a 30-trading day period ending on the third day prior to the date on which notice of redemption is given. If the Company elects to redeem the Public Warrants as described above, the Public Warrant may be exercised on a “cashless basis.” The redemption rights do not apply to the Non-Public Warrants if, at the time of the redemption, such Non-Public Warrants continue to be held by the initial holders as of July 31, 2019, or their affiliates or permitted transferees; however, once such Non-Public Warrants are transferred (other than to an affiliate or permitted transferee), the Company may redeem those Non-Public Warrants that have been transferred in a manner similar to any Public Warrants.

The Public Warrants are accounted for as freestanding equity-classified instruments because the Company has the ability to settle with holders of the Public Warrants either by net-share or physical settlement. Because the Non-Public Warrants do not meet the “indexed to the entity’s stock” condition, they have been accounted for as a derivative liability and remeasured at their estimated fair value each period. For the three months ended March 31, 2022, the Company recognized income of $4.1 million in Other (income) expense in its Condensed Consolidated Statements of Net Income (Loss) related to the fair value remeasurement.

Derivatives Not Designated as Hedges

On July 17, 2019, we entered into an interest rate collar (the “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 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 Collar expires in July 2024 and has not been designated as a cash flow hedge. The Collar is carried at fair value and reported in Derivative and warrant liabilities on the Company's Consolidated Balance Sheets ($2.4 million as of December 31, 2021) as a Level 2 measurement (see Note 11: Fair Value Measurements). The change in fair value of the Collar is recognized in Other expense (income), net in our Condensed Consolidated Statements of Net Income (Loss) and totaled $(1.7) million and $(1.8) million for the three months ended March 31, 2022 and 2021, respectively. During the first quarter of 2022 the Company settled the Collar for no gain or loss.

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Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 13: Income Taxes

We are subject to taxation in all jurisdictions in which we operate within the United States and Canada. Substantially all of our income before income taxes for all periods presented is U.S. sourced.

We record a valuation allowance against deferred tax assets when we determine that it is more likely than not that all or a portion of a deferred tax asset will not be realized. The valuation allowance primarily relates to federal and state net operating loss carryforwards, as well as disallowed interest expense deduction carryforwards. While the Acquisition resulted in a significant increase in deferred tax liabilities, these tax liabilities, which give rise to future taxable income against which tax carryforwards may be applied, are subject to limitations. Federal and state income tax limitation rules are expected to limit the application of our carryforwards and, accordingly, we record a valuation allowance to reduce our deferred tax assets to amounts expect to be realized. The Company's effective tax rate for the three months ended March 31, 2022 and 2021 differs from the U.S. federal statutory tax rate due primarily to the recording of valuation allowances. During three months ended March 31, 2022, the tax rate also differed from the U.S. federal statutory tax rate as a result of state tax expense recorded during the period. The increase in the effective tax rate in three months ended March 31, 2022 as compared to three months ended March 31, 2021 is primarily due to the near break-even pre-tax loss in the current period.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 14: 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

In the normal course of business, there are various claims in process, matters in litigation, and other contingencies. At this time, no claims of these types, certain of which are covered by insurance policies, have had a material effect on the Company. Certain jurisdictions in which the Company operates do not allow insurance recoveries related to punitive damages. For matters pertaining to the pre-Acquisition activities of Custom Truck LP, Sellers have agreed to indemnify Nesco and Buyer for losses arising out of the breach of Sellers’ pre-closing covenants in the Purchase Agreement and certain indemnified tax matters, with recourse limited to a $10 million and $8.5 million escrow account, respectively.

From time to time, the Company is audited by state and local taxing authorities. These audits typically focus on the Company’s withholding of state-specific sales tax and rental-related taxes.

Custom Truck LP’s withholdings of federal excise taxes for each of the four quarterly periods during 2015 are currently under audit by the Internal Revenue Service (the “IRS”). The IRS issued an assessment on October 28, 2020 in an aggregate amount of $2.4 million for the 2015 periods, alleging that certain types of sold equipment are not eligible for the Mobile Machinery Exemption set forth in the Internal Revenue Code (the “Code”. An appeal was filed on January 28, 2021. Based on management’s understanding of the facts and circumstances, including the relevant provisions of the Code, and historical precedent, including previous successful appeals of similar assessments in prior years, management does not believe the likelihood of a loss resulting from the IRS assessment to be probable at this time.

While it is not possible to predict the outcome of the foregoing matters with certainty, it is the opinion of management, that the final outcome of these matters will not have a material effect on the Company’s consolidated financial condition, results of operations and 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 cancellable within a specified notification period to the supplier.

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Related Parties

3 Months Ended

Mar. 31, 2022

Related Party Transactions [Abstract]

Related Parties

Note 15: Related Parties

The Company has transactions with related parties as summarized below.

Rentals and Sales — Energy Capital Partners (“ECP”), a stockholder in the Company, and their affiliates have ownership interests in a broad range of companies. The Company has entered into commercial transactions with subsidiaries of PLH Group, Inc., a company partially owned by an affiliate of ECP.

The Company rents and sells equipment and provides services to R&M Equipment Rental, a business partially owned by members of the Company’s management. The Company also rents equipment and purchases inventory, from R&M Equipment Rental. During the three months ended March 31, 2022, the Company purchased no rental equipment from R&M Equipment Rental.

Facilities Leases and Other — The Company leases certain facilities, as well as purchases aircraft charter services, from entities owned by members of the Company’s management and their immediate families. Payments to the related parties for these transactions are immaterial. Rent and air travel expenses are recorded in selling, general, and administrative expenses.

Management Fees — The Company entered into the Corporate Advisory Services Agreement with Platinum effective as of the Closing Date, under which management fees are payable to Platinum quarterly.

A summary of the transactions with the foregoing related parties included in the Condensed Consolidated Statements of Net Income (Loss) is as follows:

	Three Months Ended March 31,
(in $000s)	2022		2021
Total revenues from transactions with related parties	$	7,851	$	2,124
Expenses incurred from transactions with related parties included in cost of revenue	$	1,297	$	—
Expenses incurred from transactions with related parties included in operating expenses	$	1,631	$	—

Amounts receivable from/payable to related parties included in the Consolidated Balance Sheets are as follows:

(in $000s)	March 31, 2022		December 31, 2021
Accounts receivable from related parties	$	7,813	$	5,145
Accounts payable to related parties	$	1,475	$	26

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Segments

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Segments

Note 16: Segments

Our operations are primarily organized and managed by operating segment. Operating segment performance and resource allocations are primarily based on gross profit. The accounting policies of the reportable segments are consistent with those described in Note 2: Summary of Significant Accounting Policies to the financial statements. Intersegment sales and any related profits are eliminated in consolidation. We manage the business in three reporting segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”). The segment operations are described in Note 1: Business and Organization to these financial statements. Segment information presented below has been adjusted for all prior periods, consistent with the current reportable segment presentation.

The Company’s segment results are presented in the tables below:

	Three Months Ended March 31,
	2022
(in $000s)	ERS		TES		APS		Total
Revenue:
Rental	$	105,561	$	—	$	3,584	$	109,145
Equipment sales	59,353		167,833		—		227,186
Parts and services	—		—		30,145		30,145
Total revenue	164,914		167,833		33,729		366,476
Cost of revenue:
Rentals/parts and services	24,791		—		24,950		49,741
Equipment sales	43,230		144,048		—		187,278
Depreciation of rental equipment	43,966		—		998		44,964
Total cost of revenue	111,987		144,048		25,948		281,983
Gross profit	$	52,927	$	23,785	$	7,781	$	84,493

	Three Months Ended March 31,
	2021
(in $000s)	ERS		TES		APS		Total
Revenue:
Rental	$	44,730	$	—	$	3,559	$	48,289
Equipment sales	10,485		7,502		—		17,987
Parts and services	—		—		12,023		12,023
Total revenue	55,215		7,502		15,582		78,299
Cost of revenue:
Rentals/parts and services	15,537		—		11,034		26,571
Equipment sales	6,740		6,925		—		13,665
Depreciation of rental equipment	16,885		—		959		17,844
Total cost of revenue	39,162		6,925		11,993		58,080
Gross profit	$	16,053	$	577	$	3,589	$	20,219

Total assets by operating segment are not disclosed herein because asset by operating segment data is not reviewed by the chief operating decision-maker (“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 March 31,
(in $000s)	2022		2021
Gross Profit	$	84,493	$	20,219
Selling, general and administrative expenses	53,655		12,050
Amortization	13,335		754
Non-rental depreciation	3,047		21
Transaction expenses	4,648		10,448
Interest expense, net	19,156		14,906
Financing and other expense (income)	(9,080)		5,857
Income (Loss) Before Income Taxes	$	(268)	$	(23,817)

The following table presents total assets by country:

(in $000s)	March 31, 2022		December 31, 2021
Assets:
United States	$	2,655,329	$	2,653,058
Canada	90,750		30,708
	$	2,746,079	$	2,683,766

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

Our accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and the accounting policies described below. Our consolidated financial statements include the accounts of all wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in accordance with GAAP requires that these Unaudited Condensed Consolidated Financial Statements and most of the disclosures in these Notes be presented on a historical basis, as of or for the current interim period ended or comparable prior period. The consolidated financial position and results of operations and cash flows (including segment information) presented herein include those of Custom Truck One Source, Inc. as of March 31, 2022 and since the date of the Acquisition. Financial information presented for periods prior to the Acquisition represent those of Nesco Holdings and its subsidiaries.

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, and the Condensed Consolidated Balance Sheet at December 31, 2021, has been derived from the audited consolidated financial statements of Custom Truck One Source, Inc. at that date. Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting 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 Custom Truck One Source, Inc. audited consolidated financial statements included in the Custom Truck One Source, Inc. Annual Report on Form 10-K for the year ended December 31, 2021.

Use of Estimates

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 the allocation of purchase price related to 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.

Trade Receivables and Allowance for Credit Losses

Trade Receivables and Allowance for Credit Losses

We are exposed to credit losses from trade receivables generated through our leasing, sales and service businesses. We assess each customer’s ability to pay for the products and services by conducting a credit review. The credit review considers expected billing exposure and timing for payment and the customer’s established credit rating. We perform a credit review of new customers at inception of the customer relationship and, for existing customers, when the customer transacts new leases or product orders after a period of dormancy. We also consider contract terms and conditions, country risk and business strategy in the evaluation.

We monitor ongoing credit exposure through an active review of customer balances against contract terms and due dates. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. The allowances for credit losses reflect the estimate of the amount of receivables that management assesses will be unable to be collected based on historical write-off experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. This estimate could require change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may be required to increase or decrease the allowances. We review the adequacy of the allowance on a quarterly basis.

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Business Combinations (Tables)

3 Months Ended

Mar. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Summary of Purchase Price

The purchase price has been determined to be as follows:

(in $000s, except share and per share data)
Common stock issued	20,100,000
Common stock per share price as of April 1, 2021	$	9.35
Fair value of common stock issued	$	187,935
Cash consideration paid to equity interest holders	790,324
Repayment of debt obligations	552,600
Total purchase price	$	1,530,859

Summary of Assets Acquired and Liabilities Assumed

The following table summarizes the April 1, 2021 fair values of the assets acquired and liabilities assumed. Since the Closing Date, the Company identified and recorded certain measurement period adjustments to the preliminary purchase price allocation, which are reflected in the table below. These adjustments were not significant and related primarily to rental equipment and current liabilities. The measurement period adjustments, coupled with the additional cash consideration discussed above, increased goodwill by approximately $15.6 million during the year ended December 31, 2021. The final assessment of the fair value of the Custom Truck LP assets acquired and liabilities assumed was complete as of March 31, 2022.

(in $000s)
Accounts and financing receivables (a)	$	115,325
Inventory	431,648
Other current assets	13,201
Property and equipment (b)	104,721
Rental equipment	556,569
Intangible assets (c)	301,018
Operating lease assets	23,793
Other assets	18,223
Total identifiable assets acquired	1,564,498
Current liabilities	(410,276)
Long-term debt	(28,607)
Operating lease liabilities-noncurrent	(21,308)
Deferred tax and other liabilities	(31,261)
Total identifiable liabilities assumed	(491,452)
Total net assets	1,073,046
Goodwill (d)	457,813
Net assets acquired (purchase price)	$	1,530,859

a.The estimated fair value of accounts and financing receivables is $115.3 million, with the gross contractual amount being $122.4 million. The Company estimates approximately $7.0 million to be uncollectible.

b.Acquired property and equipment is primarily comprised of land, buildings and improvements with an estimated fair value of $67.9 million, and machinery, equipment and vehicles, with an estimated fair value of $31.1 million, as well as other property with an estimated fair value of $5.7 million.

c.The acquired identified intangible assets are comprised of trade names, with an estimated fair value of $151.0 million, and customer relationships, with an estimated fair value of $150.0 million. The weighted average useful lives of the trade names and the customer relationships are estimated to be 15 years and 12 years, respectively.

d.The goodwill recognized is attributable primarily to synergies and economies of scale provided by the acquired rental and new equipment sales businesses, as well as the assembled workforce of Custom Truck LP. Approximately $265.4 million of the goodwill is expected to be deductible for income tax purposes.

(in $000s)
Current assets	$	2,891
Property, equipment and other assets	819
Rental equipment	34,224
Total identifiable assets acquired	37,934
Total identifiable liabilities assumed	(6,011)
Total net assets	31,923
Goodwill and intangible assets	19,712
Net assets acquired (purchase price)	51,635
Less: cash acquired	(1,122)
Net cash paid	$	50,513

Schedule of Goodwill

Goodwill attributable to the Acquisition is assigned to our Segments as follows:

(in $000s)
ERS	$	261,607
TES	167,307
APS	28,899

Summary of Pro Forma Information

The pro forma information does not reflect any cost savings from operating efficiencies, synergies, or revenue opportunities that could result from the Acquisition.

	Three Months Ended March 31,
(in $000s)	2021
Revenue	$	394,770
Net income (loss)	$	(15,280)

Summary of Pro Forma Adjustments

The following presents a summary of the pro forma adjustments that are directly attributable to the business combination:

		Three Months Ended March 31,
(in $000s)		2021
Increase (decrease) net income/loss:
Impact of fair value mark-ups on rental fleet depreciation	a	$	(3,817)
Intangible asset amortization and other depreciation expense	b	(2,390)
Transaction expenses	c	15,702
Interest expense and amortization of debt issuance costs	d	3,919
Income tax expense	e	(3,354)

a.Represents the adjustment for depreciation of rental fleet relating to the increase in the value of the rental fleet to its fair value.

b.Represents the differential in amortization and depreciation of non-rental equipment related to the respective fair values of the assets.

c.Represents adjustments for transaction expenses that are applied to the three months ended March 31, 2021.

d.Reflects the differential in interest expense, inclusive of amortization of capitalized debt issuance costs, related to our debt structure after the Acquisition as though the following had occurred on January 1, 2020: (i) borrowings under the ABL Facility; (ii) repayment of the 2019 Credit Facility; (iii) repayment of the Senior Secured Notes due 2024; (iv) repayment of the Custom Truck LP Credit Facility; and (v) the issuance of the 2029 Secured Notes.

e.Reflects the adjustment to recognize the tax impacts of the pro forma adjustments for which a tax expense is recognized using a statutory tax rate of 25%. This rate may vary from the actual effective rate of the historical and combined businesses.

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Revenue (Tables)

3 Months Ended

Mar. 31, 2022

Revenue from Contract with Customer [Abstract]

Summary of Revenue by Country

The Company had total revenue in the following geographic areas:

	Three Months Ended March 31,
(in $000s)	2022		2021
United States	$	356,897	$	77,466
Canada	9,579		833
Total revenue	$	366,476	$	78,299

Schedule of Revenue Types Based On Accounting Standard

The Company’s revenue by major product and service line for the three month periods ended March 31, 2022 and 2021 are presented in the tables below.

	Three Months Ended March 31,						Three Months Ended March 31,
	2022						2021
(in $000s)	Topic 842		Topic 606		Total		Topic 840		Topic 606		Total
Rental:
Rental	$	105,135	$	—	$	105,135	$	46,186	$	—	$	46,186
Shipping and handling	—		4,010		4,010		—		2,103		2,103
Total rental revenue	105,135		4,010		109,145		46,186		2,103		48,289
Sales and services:
Equipment sales	12,237		214,949		227,186		—		17,987		17,987
Parts and services	2,220		27,925		30,145		—		12,023		12,023
Total sales and services	14,457		242,874		257,331		—		30,010		30,010
Total revenue	$	119,592	$	246,884	$	366,476	$	46,186	$	32,113	$	78,299

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Inventory (Tables)

3 Months Ended

Mar. 31, 2022

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory consisted of the following:

(in $000s)	March 31, 2022		December 31, 2021
Whole goods	$	367,539	$	326,641
Aftermarket parts and services inventory	96,183		83,901
Inventory	$	463,722	$	410,542

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Rental Equipment (Tables)

3 Months Ended

Mar. 31, 2022

Property, Plant and Equipment [Abstract]

Schedule of Rental Equipment

Rental equipment, net consisted of the following:

(in $000s)	March 31, 2022		December 31, 2021
Rental equipment	$	1,254,912	$	1,247,375
Less: accumulated depreciation	(420,267)		(413,050)
Rental equipment, net	$	834,645	$	834,325

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Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Schedule of Debt Obligations

Debt obligations and associated interest rates consisted of the following:

(in $000s)	March 31, 2022		December 31, 2021		March 31, 2022	December 31, 2021
ABL Facility	$	410,100	$	394,945	2.1%	1.8%
2029 Secured Notes	920,000		920,000		5.5%	5.5%
Notes payable	30,864		32,619		3.0%-5.0%	3.0%-5.0%
Total debt outstanding	1,360,964		1,347,564
Deferred finance fees	(31,618)		(32,945)
Net debt	1,329,346		1,314,619
Less: current maturities	(4,950)		(6,354)
Long-term debt	$	1,324,396	$	1,308,265

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Earnings (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Computation of Basic and Dilutive Loss Per Share

The following tables set forth the computation of basic and dilutive loss per share:

	Three Months Ended March 31, 2022					Three Months Ended March 31, 2021
(in $000s, except share and per share data)	Net Income (Loss)		Weighted Average Shares	Per Share Amount		Net Income (Loss)		Weighted Average Shares	Per Share Amount
Basic earnings (loss) per share	$	(3,273)	247,057,564	$	(0.01)	$	(27,907)	48,619,613	$	(0.57)
Dilutive common share equivalents	—		—	—		—		—	—
Diluted earnings (loss) per share	$	(3,273)	247,057,564	$	(0.01)	$	(27,907)	48,619,613	$	(0.57)

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2022

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
March 31, 2022
ABL Facility	$	410,100	$	—	$	410,100	$	—
2029 Secured Notes	920,000		—		906,200		—
Other notes payable	30,864		—		30,864		—
Warrant liabilities	17,693		—		—		17,693
December 31, 2021
ABL Facility	$	394,945	$	—	$	394,945	$	—
2029 Secured Notes	920,000		—		949,900		—
Other notes payable	32,619		—		32,619		—
Derivative and warrant liabilities	24,164		—		2,388		21,776

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Related Parties (Tables)

3 Months Ended

Mar. 31, 2022

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

A summary of the transactions with the foregoing related parties included in the Condensed Consolidated Statements of Net Income (Loss) is as follows:

	Three Months Ended March 31,
(in $000s)	2022		2021
Total revenues from transactions with related parties	$	7,851	$	2,124
Expenses incurred from transactions with related parties included in cost of revenue	$	1,297	$	—
Expenses incurred from transactions with related parties included in operating expenses	$	1,631	$	—

Amounts receivable from/payable to related parties included in the Consolidated Balance Sheets are as follows:

(in $000s)	March 31, 2022		December 31, 2021
Accounts receivable from related parties	$	7,813	$	5,145
Accounts payable to related parties	$	1,475	$	26

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Segments (Tables)

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Summary of Financial Information by Segment

The Company’s segment results are presented in the tables below:

	Three Months Ended March 31,
	2022
(in $000s)	ERS		TES		APS		Total
Revenue:
Rental	$	105,561	$	—	$	3,584	$	109,145
Equipment sales	59,353		167,833		—		227,186
Parts and services	—		—		30,145		30,145
Total revenue	164,914		167,833		33,729		366,476
Cost of revenue:
Rentals/parts and services	24,791		—		24,950		49,741
Equipment sales	43,230		144,048		—		187,278
Depreciation of rental equipment	43,966		—		998		44,964
Total cost of revenue	111,987		144,048		25,948		281,983
Gross profit	$	52,927	$	23,785	$	7,781	$	84,493

	Three Months Ended March 31,
	2021
(in $000s)	ERS		TES		APS		Total
Revenue:
Rental	$	44,730	$	—	$	3,559	$	48,289
Equipment sales	10,485		7,502		—		17,987
Parts and services	—		—		12,023		12,023
Total revenue	55,215		7,502		15,582		78,299
Cost of revenue:
Rentals/parts and services	15,537		—		11,034		26,571
Equipment sales	6,740		6,925		—		13,665
Depreciation of rental equipment	16,885		—		959		17,844
Total cost of revenue	39,162		6,925		11,993		58,080
Gross profit	$	16,053	$	577	$	3,589	$	20,219

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 March 31,
(in $000s)	2022		2021
Gross Profit	$	84,493	$	20,219
Selling, general and administrative expenses	53,655		12,050
Amortization	13,335		754
Non-rental depreciation	3,047		21
Transaction expenses	4,648		10,448
Interest expense, net	19,156		14,906
Financing and other expense (income)	(9,080)		5,857
Income (Loss) Before Income Taxes	$	(268)	$	(23,817)

Summary of Total Assets by Country

The following table presents total assets by country:

(in $000s)	March 31, 2022		December 31, 2021
Assets:
United States	$	2,655,329	$	2,653,058
Canada	90,750		30,708
	$	2,746,079	$	2,683,766

XML

Business and Organization (Details) - 3 months ended Mar. 31, 2022	segment	day
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable segments	3	3

XML

Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Accounting Policies [Abstract]
Allowance for accounts receivable	$ 12.8	$ 10.8

XML

Business Combinations - Acquisition of Custom Truck One Source L.P (Details) - USD ($)			9 Months Ended
	Apr. 01, 2021	Dec. 03, 2020	Dec. 31, 2021
Business Acquisition [Line Items]
Common stock trading price (in dollars per share)		$ 5.00
Private Placement
Business Acquisition [Line Items]
Consideration received on sale of stock		$ 140,000,000
Price per share (in dollars per share)		$ 5.00
Shares purchased (in shares)	28,000,000	28,000,000
Rollover Agreement
Business Acquisition [Line Items]
Shares purchased (in shares)	20,100,000
Subscription
Business Acquisition [Line Items]
Shares purchased (in shares)	148,600,000
Custom Truck
Business Acquisition [Line Items]
Percentage of voting rights acquired		100.00%
Value of shares issued in acquisition		$ 100,500,000
Common stock issued (in shares)	20,100,000
Cash considerations paid	$ 790,324,000		$ 3,400,000
PE One Source
Business Acquisition [Line Items]
Price per share (in dollars per share)		$ 5.00
PE One Source | Minimum
Business Acquisition [Line Items]
Consideration received on sale of stock		$ 700,000,000
PE One Source | Maximum
Business Acquisition [Line Items]
Consideration received on sale of stock		$ 763,000,000

XML

Business Combinations - Purchase Price (Details) - Custom Truck - USD ($) $ / shares in Units, $ in Thousands		9 Months Ended
	Apr. 01, 2021	Dec. 31, 2021
Business Acquisition [Line Items]
Common stock issued (in shares)	20,100,000
Common stock share price (in dollars per share)	$ 9.35
Fair value of common stock issued	$ 187,935
Cash consideration paid to equity interest holders	790,324	$ 3,400
Repayment of debt obligations	552,600
Total purchase price	$ 1,530,859

XML

Business Combinations - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Apr. 01, 2021	Mar. 31, 2022	Dec. 31, 2021
Business Acquisition [Line Items]
Goodwill		$ 713,832	$ 695,865
Trade names
Business Acquisition [Line Items]
Finite-lived intangible assets weighted average useful life	15 years
Customer relationships
Business Acquisition [Line Items]
Finite-lived intangible assets weighted average useful life	12 years
Custom Truck
Business Acquisition [Line Items]
Accounts and financing receivables	$ 115,325
Inventory	431,648
Other current assets	13,201
Property and equipment	104,721
Rental equipment	556,569
Intangible assets	301,018
Operating lease assets	23,793
Other assets	18,223
Total identifiable assets acquired	1,564,498
Current liabilities	(410,276)
Long-term debt	(28,607)
Operating lease liabilities-noncurrent	(21,308)
Deferred tax and other liabilities	(31,261)
Total identifiable liabilities assumed	(491,452)
Total net assets	1,073,046
Goodwill	457,813
Net assets acquired (purchase price)	1,530,859
Gross contractual receivables	122,400
Estimated uncollectible receivables	7,000
Expected deductible amount of goodwill	265,400
Custom Truck | Land, Buildings and Improvements
Business Acquisition [Line Items]
Property and equipment	67,900
Custom Truck | Machinery and equipment
Business Acquisition [Line Items]
Property and equipment	31,100
Custom Truck | Other property
Business Acquisition [Line Items]
Property and equipment	5,700
Custom Truck | Trade names
Business Acquisition [Line Items]
Intangible assets	151,000
Custom Truck | Customer relationships
Business Acquisition [Line Items]
Intangible assets	$ 150,000

XML

Business Combinations - Summary of Goodwill (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Apr. 01, 2021
Business Acquisition [Line Items]
Goodwill	$ 713,832	$ 695,865
Custom Truck
Business Acquisition [Line Items]
Goodwill			$ 457,813
Custom Truck | ERS
Business Acquisition [Line Items]
Goodwill			261,607
Custom Truck | TES
Business Acquisition [Line Items]
Goodwill			167,307
Custom Truck | APS
Business Acquisition [Line Items]
Goodwill			$ 28,899

XML

Business Combinations - Additional Information (Details) - USD ($)		3 Months Ended		12 Months Ended
	Apr. 01, 2021	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Custom Truck
Business Acquisition [Line Items]
Goodwill purchase adjustment				$ 15,600,000
Federal tax rate		25.00%
Transaction costs			$ 10,400,000
2029 Secured Notes | Secured Debt
Business Acquisition [Line Items]
Debt instrument, face amount	$ 920,000,000
Debt interest rate	5.50%
ABL Facility | Revolving Credit Facility
Business Acquisition [Line Items]
Maximum borrowing capacity	$ 750,000,000
Debt instrument, term	5 years

XML

Business Combinations - Pro Forma Information (Details) - Custom Truck $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Business Acquisition [Line Items]
Revenue	$ 394,770
Net income (loss)	$ (15,280)

XML

Business Combinations - Pro Forma Adjustments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Increase (decrease) net income/loss:
Net income (loss)	$ (3,273)	$ (27,907)
Custom Truck
Increase (decrease) net income/loss:
Federal tax rate	25.00%
Impact of fair value mark-ups on rental fleet depreciation
Increase (decrease) net income/loss:
Net income (loss)		(3,817)
Intangible asset amortization and other depreciation expense
Increase (decrease) net income/loss:
Net income (loss)		(2,390)
Transaction expenses
Increase (decrease) net income/loss:
Net income (loss)		15,702
Interest expense and amortization of debt issuance costs
Increase (decrease) net income/loss:
Net income (loss)		3,919
Income tax expense
Increase (decrease) net income/loss:
Net income (loss)		$ (3,354)

XML

Business Combinations - Acquisition of Hi-Rail (Details) - Hi-Rail - USD ($) $ in Millions		3 Months Ended
	Jan. 14, 2022	Mar. 31, 2022
Business Acquisition [Line Items]
Percentage of voting rights acquired	100.00%
Cash consideration paid to equity interest holders	$ 51.6
Revenues		$ 3.8
Pretax income (loss)		$ (1.3)

XML

Business Combinations - Summary of Hi-Rail Assets (Details) - USD ($) $ in Thousands		3 Months Ended
	Jan. 14, 2022	Mar. 31, 2022	Mar. 31, 2021
Business Acquisition [Line Items]
Net cash paid		$ 50,513	$ 0
Hi-Rail
Business Acquisition [Line Items]
Current assets	$ 2,891
Property and equipment	819
Rental equipment	34,224
Total identifiable assets acquired	37,934
Total identifiable liabilities assumed	(6,011)
Total net assets	31,923
Goodwill and intangible assets	19,712
Net assets acquired (purchase price)	51,635
Less: cash acquired	(1,122)
Net cash paid	$ 50,513

XML

Revenue - Geographic Areas (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Disaggregation of Revenue [Line Items]
Total revenue	$ 366,476	$ 78,299
United States
Disaggregation of Revenue [Line Items]
Total revenue	356,897	77,466
Canada
Disaggregation of Revenue [Line Items]
Total revenue	$ 9,579	$ 833

XML

Revenue - Major Product Lines and Services (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Disaggregation of Revenue [Line Items]
Topic 842/840	$ 119,592	$ 46,186
Topic 606	246,884	32,113
Total	366,476	78,299
Rental Revenue
Disaggregation of Revenue [Line Items]
Topic 842/840	105,135	46,186
Topic 606	4,010	2,103
Total	109,145	48,289
Rental Revenue, Excluding Shipping And Handling
Disaggregation of Revenue [Line Items]
Topic 842/840	105,135	46,186
Topic 606	0	0
Total	105,135	46,186
Rental Revenue, Shipping And Handling
Disaggregation of Revenue [Line Items]
Topic 842/840	0	0
Topic 606	4,010	2,103
Total	4,010	2,103
Sales and services
Disaggregation of Revenue [Line Items]
Topic 842/840	14,457	0
Topic 606	242,874	30,010
Total	257,331	30,010
Equipment sales
Disaggregation of Revenue [Line Items]
Topic 842/840	12,237	0
Topic 606	214,949	17,987
Total	227,186	17,987
Parts and services
Disaggregation of Revenue [Line Items]
Topic 842/840	2,220	0
Topic 606	27,925	12,023
Total	$ 30,145	$ 12,023

XML

Revenue - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Disaggregation of Revenue [Line Items]
Bad debt expense reduction	$ 1,400
Provision for losses on accounts receivable	2,811	$ 1,383
Deferred rent revenue	1,700	$ 1,000
Customer deposits	24,000
Selling, general and administrative expenses
Disaggregation of Revenue [Line Items]
Provision for losses on accounts receivable	$ 1,500

XML

Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Inventory [Line Items]
Inventory	$ 463,722	$ 410,542
Whole goods
Inventory [Line Items]
Inventory	367,539	326,641
Aftermarket parts and services inventory
Inventory [Line Items]
Inventory	$ 96,183	$ 83,901

XML

Rental Equipment - Summary of Rental Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Property, Plant and Equipment [Abstract]
Rental equipment	$ 1,254,912	$ 1,247,375
Less: accumulated depreciation	(420,267)	(413,050)
Rental equipment, net	$ 834,645	$ 834,325

XML

Long-Term Debt - Schedule of Debt Obligations (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Total debt outstanding	$ 1,360,964	$ 1,347,564
Deferred finance fees	(31,618)	(32,945)
Net debt	1,329,346	1,314,619
Less: current maturities	(4,950)	(6,354)
Long-term debt	1,324,396	1,308,265
Notes payable
Debt Instrument [Line Items]
Total debt outstanding	$ 30,864	$ 32,619
Notes payable | Minimum
Debt Instrument [Line Items]
Debt interest rate	3.00%	3.00%
Notes payable | Maximum
Debt Instrument [Line Items]
Debt interest rate	5.00%	5.00%
ABL Facility | Revolving Credit Facility | Line of Credit
Debt Instrument [Line Items]
Total debt outstanding	$ 410,100	$ 394,945
Debt interest rate	2.10%	1.80%
2029 Secured Notes | Senior Notes
Debt Instrument [Line Items]
Total debt outstanding	$ 920,000	$ 920,000
Debt interest rate	5.50%	5.50%

XML

Long-Term Debt - Narrative (Details) - ABL Facility $ in Millions	Mar. 31, 2022 USD ($)
Revolving Credit Facility
Debt Instrument [Line Items]
Remaining borrowing capacity	$ 330.9
Letter of Credit
Debt Instrument [Line Items]
Outstanding borrowings	$ 4.8

XML

Earnings (Loss) Per Share - Computation of Basic and Dilutive Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Earnings Per Share [Abstract]
Potentially dilutive shares excluded in aggregate (in shares)	24,900,000	28,000,000
Net Income (Loss)
Basic earnings (loss) per share	$ (3,273)	$ (27,907)
Dilutive common share equivalents	0	0
Diluted earnings (loss) per share	$ (3,273)	$ (27,907)
Weighted Average Shares
Weighted-average shares, basic (in shares)	247,057,564	48,619,613
Dilutive common share equivalents (in shares)	0	0
Weighted-average shares, diluted (in shares)	247,057,564	48,619,613
Per Share Amount
Basic earnings (loss) per share (USD per share)	$ (0.01)	$ (0.57)
Diluted earnings (loss) per share (USD per share)	$ (0.01)	$ (0.57)

XML

Equity - Narrative (Details)		3 Months Ended
	Jul. 31, 2019 day $ / shares shares	Mar. 31, 2022 $ / shares shares	Dec. 31, 2021 $ / shares shares
Business Acquisition [Line Items]
Preferred stock authorized (in shares) | shares		10,000,000	10,000,000
Preferred stock par value (in dollars per share)		$ 0.0001	$ 0.0001
Preferred stock outstanding (in shares) | shares		0	0
Preferred stock issued (in shares) | shares		0	0
Common stock, authorized (in shares) | shares		500,000,000	500,000,000
Common stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
Lockup period		18 months
Nesco Owner | Additional shares if common stock exceeds $13 per share or $16 per share | Common Stock | Capitol
Business Acquisition [Line Items]
Contingent consideration, additional shares (up to) (in shares) | shares	1,800,000
Contingent consideration, incremental shares transferred (in shares) | shares	900,000
Consecutive trading days threshold | day	30
Nesco Owner | Additional shares if common stock exceeds $13 per share | Capitol
Business Acquisition [Line Items]
Contingent consideration stock price trigger (in dollars per share)	$ 13.00
Nesco Owner | Additional shares if common stock exceeds $13 per share | Common Stock | Capitol
Business Acquisition [Line Items]
Contingent consideration stock price trigger (in dollars per share)	13.00
Nesco Owner | Additional shares if common stock exceeds $16 per share | Capitol
Business Acquisition [Line Items]
Contingent consideration stock price trigger (in dollars per share)	16.00
Nesco Owner | Additional shares if common stock exceeds $16 per share | Common Stock | Capitol
Business Acquisition [Line Items]
Contingent consideration stock price trigger (in dollars per share)	$ 16.00
Trading days threshold | day	20
Nesco Owner | Additional shares if common stock exceeds $19 per share | Capitol
Business Acquisition [Line Items]
Contingent consideration, additional shares (up to) (in shares) | shares	1,651,798
Contingent consideration stock price trigger (in dollars per share)	$ 19.00
Trading days threshold | day	20
Consecutive trading days threshold | day	30
Contingent consideration term (in years)	7 years
Share price consideration (in dollars per share)	$ 19.00

XML

Share-Based Compensation - Narrative (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Share-based Payment Arrangement [Abstract]
Compensation expense	$ 3.4	$ 0.7
Unrecognized compensation cost	$ 20.8
Weighted average period for recognition	2 years 3 months 18 days

XML

Fair Value Measurements (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative and warrant liabilities		$ 2,400
Carrying Value | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative and warrant liabilities	$ 17,693	24,164
Carrying Value | Other notes payable | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	30,864	32,619
Carrying Value | 2029 Secured Notes | Senior Notes | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	920,000	920,000
Carrying Value | Revolving Credit Facility | ABL Facility | Line of Credit | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	410,100	394,945
Fair Value | Fair Value, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative and warrant liabilities	0	0
Fair Value | Fair Value, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative and warrant liabilities	0	2,388
Fair Value | Fair Value, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative and warrant liabilities	17,693	21,776
Fair Value | Other notes payable | Fair Value, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	0	0
Fair Value | Other notes payable | Fair Value, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	30,864	32,619
Fair Value | Other notes payable | Fair Value, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	0	0
Fair Value | 2029 Secured Notes | Senior Notes | Fair Value, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	0	0
Fair Value | 2029 Secured Notes | Senior Notes | Fair Value, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	906,200	949,900
Fair Value | 2029 Secured Notes | Senior Notes | Fair Value, Recurring | 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 | ABL Facility | Line of Credit | Fair Value, Recurring | 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 | ABL Facility | Line of Credit | Fair Value, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	410,100	394,945
Fair Value | Revolving Credit Facility | ABL Facility | Line of Credit | Fair Value, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt	$ 0	$ 0

XML

Financial Instruments - Warrants (Details) $ / shares in Units, shares in Millions, $ in Millions		3 Months Ended
	May 01, 2017 day $ / shares shares	Mar. 31, 2022 USD ($)
Class of Warrant or Right [Line Items]
Fair value adjustment | $		$ (4.1)
Common Stock
Class of Warrant or Right [Line Items]
Number of securities called by issued warrants (in shares) | shares	20.9
Share price of warrants (in dollars per share) | $ / shares	$ 11.50
Common Stock | Private Placement
Class of Warrant or Right [Line Items]
Number of securities called by issued warrants (in shares) | shares	7.5
Common Stock | Public Investors
Class of Warrant or Right [Line Items]
Number of securities called by issued warrants (in shares) | shares	13.4
Share price of warrants (in dollars per share) | $ / shares	$ 0.01
Notice period	30 days
Share price required for redemption (in usd per share) | $ / shares	$ 18.00
Trading days threshold for redemption | day	20
Trading day period for redemption | day	30

XML

Financial Instruments - Derivatives Not Designated as Hedges (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Jul. 17, 2019
Level 2
Derivative [Line Items]
Derivative Liability			$ 2.4
Interest Rate Collar
Derivative [Line Items]
Derivative instruments not designated as hedges, gain (loss)	$ (1.7)	$ (1.8)
Interest Rate Collar | Not Designated as Hedging Instrument
Derivative [Line Items]
Interest rate collar amount				$ 170.0

XML

Commitments and Contingencies (Details) - USD ($) $ in Millions	Oct. 28, 2020	Mar. 31, 2022
Custom Truck
Loss Contingencies [Line Items]
Escrow amount		$ 8.5
Maximum | Custom Truck
Loss Contingencies [Line Items]
Estimate of possible loss		$ 10.0
Tax Year 2015
Loss Contingencies [Line Items]
Tax assessment amount	$ 2.4

XML

Related Parties - Narrative (Details)	3 Months Ended
	Mar. 31, 2022 USD ($)
Affiliated Entity | R&M Equipment Rental | Rentals and Sales of Equipment
Related Party Transaction [Line Items]
Purchases with related party	$ 0

XML

Related Parties - Condensed Consolidated Statements of Operations (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Related Party Transactions [Abstract]
Total revenues from transactions with related parties	$ 7,851	$ 2,124
Expenses incurred from transactions with related parties included in cost of revenue	1,297	0
Expenses incurred from transactions with related parties included in operating expenses	$ 1,631	$ 0

XML

Related Parties - Condensed Consolidated Balance Sheets (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Related Party Transactions [Abstract]
Accounts receivable from related parties	$ 7,813	$ 5,145
Accounts payable	$ 1,475	$ 26

XML

Segments - Additional Information (Details) - 3 months ended Mar. 31, 2022	segment	day
Segment Reporting [Abstract]
Number of reportable segments	3	3

XML

Segments - Financial Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Segment Reporting Information [Line Items]
Rental revenue	$ 366,476	$ 78,299
Depreciation of rental equipment	44,964	17,844
Cost of revenue	281,983	58,080
Gross Profit	84,493	20,219
Equipment Rental Solutions
Segment Reporting Information [Line Items]
Rental revenue	164,914	55,215
Depreciation of rental equipment	43,966	16,885
Cost of revenue	111,987	39,162
Gross Profit	52,927	16,053
Truck Equipment Sales
Segment Reporting Information [Line Items]
Rental revenue	167,833	7,502
Depreciation of rental equipment	0	0
Cost of revenue	144,048	6,925
Gross Profit	23,785	577
Aftermarket Parts and Services
Segment Reporting Information [Line Items]
Rental revenue	33,729	15,582
Depreciation of rental equipment	998	959
Cost of revenue	25,948	11,993
Gross Profit	7,781	3,589
Rental Revenue
Segment Reporting Information [Line Items]
Rental revenue	109,145	48,289
Cost of rental revenue	25,793	16,928
Rental Revenue | Equipment Rental Solutions
Segment Reporting Information [Line Items]
Rental revenue	105,561	44,730
Rental Revenue | Truck Equipment Sales
Segment Reporting Information [Line Items]
Rental revenue	0	0
Rental Revenue | Aftermarket Parts and Services
Segment Reporting Information [Line Items]
Rental revenue	3,584	3,559
Equipment sales
Segment Reporting Information [Line Items]
Rental revenue	227,186	17,987
Cost of rental revenue	187,278	13,665
Equipment sales | Equipment Rental Solutions
Segment Reporting Information [Line Items]
Rental revenue	59,353	10,485
Cost of rental revenue	43,230	6,740
Equipment sales | Truck Equipment Sales
Segment Reporting Information [Line Items]
Rental revenue	167,833	7,502
Cost of rental revenue	144,048	6,925
Equipment sales | Aftermarket Parts and Services
Segment Reporting Information [Line Items]
Rental revenue	0	0
Cost of rental revenue	0	0
Parts and services
Segment Reporting Information [Line Items]
Rental revenue	30,145	12,023
Cost of rental revenue	23,948	9,643
Parts and services | Equipment Rental Solutions
Segment Reporting Information [Line Items]
Rental revenue	0	0
Parts and services | Truck Equipment Sales
Segment Reporting Information [Line Items]
Rental revenue	0	0
Parts and services | Aftermarket Parts and Services
Segment Reporting Information [Line Items]
Rental revenue	30,145	12,023
Rentals/parts and services
Segment Reporting Information [Line Items]
Cost of rental revenue	49,741	26,571
Rentals/parts and services | Equipment Rental Solutions
Segment Reporting Information [Line Items]
Cost of rental revenue	24,791	15,537
Rentals/parts and services | Truck Equipment Sales
Segment Reporting Information [Line Items]
Cost of rental revenue	0	0
Rentals/parts and services | Aftermarket Parts and Services
Segment Reporting Information [Line Items]
Cost of rental revenue	$ 24,950	$ 11,034

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Segments - Reconciliation of Segment Gross Profit (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Segment Reporting [Abstract]
Gross Profit	$ 84,493	$ 20,219
Selling, general and administrative expenses	53,655	12,050
Amortization	13,335	754
Non-rental depreciation	3,047	21
Transaction expenses	4,648	10,448
Interest expense, net	19,156	14,906
Financing and other expense (income)	(9,080)	5,857
Income (Loss) Before Income Taxes	$ (268)	$ (23,817)

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Segments - Assets by Country (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Segment Reporting Information [Line Items]
Assets	$ 2,746,079	$ 2,683,766
United States
Segment Reporting Information [Line Items]
Assets	2,655,329	2,653,058
Canada
Segment Reporting Information [Line Items]
Assets	$ 90,750	$ 30,708