0001709682-23-000058.txt : 20231107 0001709682-23-000058.hdr.sgml : 20231107 20231107162259 ACCESSION NUMBER: 0001709682-23-000058 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 76 CONFORMED PERIOD OF REPORT: 20230930 FILED AS OF DATE: 20231107 DATE AS OF CHANGE: 20231107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Custom Truck One Source, Inc. CENTRAL INDEX KEY: 0001709682 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38186 FILM NUMBER: 231384280 BUSINESS ADDRESS: STREET 1: 7701 INDEPENDENCE AVENUE CITY: KANSAS CITY STATE: MO ZIP: 64125 BUSINESS PHONE: (816) 241-4888 MAIL ADDRESS: STREET 1: 7701 INDEPENDENCE AVENUE CITY: KANSAS CITY STATE: MO ZIP: 64125 FORMER COMPANY: FORMER CONFORMED NAME: NESCO HOLDINGS, INC. DATE OF NAME CHANGE: 20190730 FORMER COMPANY: FORMER CONFORMED NAME: Capitol Investment Corp. IV DATE OF NAME CHANGE: 20170619 10-Q 1 ctos-20230930.htm FORM 10-Q ctos-20230930
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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 September 30, 2023
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)
_______________________________
Delaware84-2531628
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par value per shareCTOSNew York Stock Exchange
Redeemable warrants, exercisable for Common Stock, $0.0001 par value per shareCTOS.WSNew 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 filero Accelerated filer
Non-accelerated filero 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 November 3, 2023 was 242,880,347.



Custom Truck One Source, Inc. and Subsidiaries
TABLE OF CONTENTS
PART IFINANCIAL INFORMATIONPage Number
Item 1.Financial Statements
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2023 and 2022
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2023 and 2022
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART IIOTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
SIGNATURES




PART I - FINANCIAL INFORMATION
Item 1.    Financial Statements
3


Custom Truck One Source, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(in $000s, except per share data)2023202220232022
Revenue
Rental revenue$118,209 $115,010 $358,666 $336,210 
Equipment sales283,079 210,903 886,486 656,595 
Parts sales and services33,065 31,867 98,194 93,557 
Total revenue434,353 357,780 1,343,346 1,086,362 
Cost of Revenue
Cost of rental revenue29,874 28,207 91,754 82,791 
Depreciation of rental equipment42,469 42,612 126,415 130,900 
Cost of equipment sales228,912 173,588 720,303 545,461 
Cost of parts sales and services25,942 25,201 77,438 71,787 
Total cost of revenue327,197 269,608 1,015,910 830,939 
Gross Profit107,156 88,172 327,436 255,423 
Operating Expenses
Selling, general and administrative expenses56,955 49,835 171,974 152,269 
Amortization6,698 6,794 19,976 27,000 
Non-rental depreciation2,602 1,938 7,973 7,302 
Transaction expenses and other2,890 6,498 10,039 17,192 
Total operating expenses69,145 65,065 209,962 203,763 
Operating Income 38,011 23,107 117,474 51,660 
Other Expense
Interest expense, net34,144 22,887 94,945 62,324 
Financing and other income(5,745)(1,747)(14,744)(25,905)
Total other expense28,399 21,140 80,201 36,419 
Income Before Income Taxes9,612 1,967 37,273 15,241 
Income Tax Expense 432 4,349 2,683 7,273 
Net Income (Loss)$9,180 $(2,382)$34,590 $7,968 
Other Comprehensive Income (Loss):
Unrealized foreign currency translation adjustments$(2,823)$(7,651)$(259)$(10,287)
Other Comprehensive Loss(2,823)(7,651)(259)(10,287)
Comprehensive Income (Loss)$6,357 $(10,033)$34,331 $(2,319)
Net Income (Loss) Per Share:
Basic$0.04 $(0.01)$0.14 $0.03 
Diluted$0.04 $(0.01)$0.14 $0.03 
Weighted-Average Common Shares Outstanding:
Basic (in thousands)245,810 247,704 245,987 247,448 
Diluted (in thousands)246,594 247,704 246,809 247,926 
See accompanying notes to unaudited condensed consolidated financial statements.
4


Custom Truck One Source, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(in $000s, except share data)September 30, 2023December 31, 2022
Assets
Current Assets
Cash and cash equivalents$8,793 $14,360 
Accounts receivable, net 156,305 193,106 
Financing receivables, net41,914 38,271 
Inventory888,755 596,724 
Prepaid expenses and other21,036 25,784 
Total current assets1,116,803 868,245 
Property and equipment, net136,567 121,956 
Rental equipment, net924,315 883,674 
Goodwill703,812 703,827 
Intangible assets, net284,146 304,132 
Operating lease assets36,920 29,434 
Other assets25,107 26,944 
Total Assets$3,227,670 $2,938,212 
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable$130,466 $87,255 
Accrued expenses72,550 68,784 
Deferred revenue and customer deposits22,641 34,671 
Floor plan payables - trade194,929 136,634 
Floor plan payables - non-trade396,891 293,536 
Operating lease liabilities - current6,198 5,262 
Current maturities of long-term debt1,286 6,940 
Current portion of finance lease obligations 1,796 
Total current liabilities824,961 634,878 
Long-term debt, net1,426,062 1,354,766 
Finance leases 3,206 
Operating lease liabilities - noncurrent31,559 24,818 
Deferred income taxes31,091 29,086 
Derivative, warrants and other liabilities606 3,015 
Total long-term liabilities1,489,318 1,414,891 
Stockholders' Equity
Common stock — $0.0001 par value, 500,000,000 shares authorized, 249,538,314 and 248,311,104 shares issued and outstanding, at September 30, 2023 and December 31, 2022, respectively
25 25 
Treasury stock, at cost — 5,630,643 and 2,241,069 shares at September 30, 2023 and December 31, 2022, respectively
(37,256)(15,537)
Additional paid-in capital1,533,823 1,521,487 
Accumulated other comprehensive loss(9,206)(8,947)
Accumulated deficit(573,995)(608,585)
Total stockholders' equity913,391 888,443 
Total Liabilities and Stockholders' Equity$3,227,670 $2,938,212 
See accompanying notes to unaudited condensed consolidated financial statements.
5


Custom Truck One Source, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended September 30,
(in $000s)20232022
Operating Activities
Net income $34,590 $7,968 
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation and amortization162,084 171,121 
Amortization of debt issuance costs4,221 3,485 
Provision for losses on accounts receivable4,522 5,905 
Share-based compensation10,312 9,526 
Gain on sales and disposals of rental equipment(48,392)(35,064)
Change in fair value of derivative and warrants(2,409)(18,013)
Deferred tax expense 1,959 6,792 
Changes in assets and liabilities:
Accounts and financing receivables21,978 (17,637)
Inventories(290,302)(155,111)
Prepaids, operating leases and other6,143 2,475 
Accounts payable42,707 9,900 
Accrued expenses and other liabilities3,620 9,397 
Floor plan payables - trade, net58,295 8,726 
Customer deposits and deferred revenue(12,034)(5,126)
Net cash flow from operating activities(2,706)4,344 
Investing Activities
Acquisition of business, net of cash acquired (49,832)
Purchases of rental equipment(289,984)(224,002)
Proceeds from sales and disposals of rental equipment177,623 135,436 
Purchase of non-rental property and cloud computing arrangements(33,251)(15,529)
Net cash flow from investing activities(145,612)(153,927)
Financing Activities
Proceeds from debt13,537  
Share-based payments387 (1,250)
Borrowings under revolving credit facilities111,057 87,000 
Repayments under revolving credit facilities(56,377)(34,945)
Repayments of notes payable(6,674)(6,126)
Finance lease payments(2,682)(3,308)
Repurchase of common stock(19,936)(1,752)
Acquisition of inventory through floor plan payables - non-trade571,062 451,202 
Repayment of floor plan payables - non-trade(467,707)(348,961)
Payment of debt issuance costs(110) 
Net cash flow from financing activities142,557 141,860 
Effect of exchange rate changes on cash and cash equivalents194 (2,005)
Net Change in Cash and Cash Equivalents(5,567)(9,728)
Cash and Cash Equivalents at Beginning of Period14,360 35,902 
Cash and Cash Equivalents at End of Period$8,793 $26,174 


Custom Truck One Source, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited) — Continued
Nine Months Ended September 30,
(in $000s)20232022
Supplemental Cash Flow Information
Interest paid$51,142 $44,414 
Income taxes paid1,897  
Non-Cash Investing and Financing Activities
Rental equipment and property and equipment purchases in accounts payable596  
Rental equipment sales in accounts receivable1,573 747 
See accompanying notes to unaudited condensed consolidated financial statements.
6


Custom Truck One Source, Inc.
Condensed Consolidated Statements of Stockholders' Equity (unaudited)
Common StockTreasury StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
Shares
(in $000s, except share data)CommonTreasury
Balance, December 31, 2022248,311,104 (2,241,069)$25 $(15,537)$1,521,487 $(8,947)$(608,585)$888,443 
Net income — — — — — — 13,800 13,800 
Other comprehensive income— — — — — 342 — 342 
Common stock repurchase— (174,744)— (1,122)— — — (1,122)
Share-based payments130,484 (11,582)— (77)3,451 — — 3,374 
Balance, March 31, 2023248,441,588 (2,427,395)$25 $(16,736)$1,524,938 $(8,605)$(594,785)$904,837 
Net income — — — — — — 11,610 11,610 
Other comprehensive income— — — — — 2,222 — 2,222 
Common stock repurchases— (505,142)— (3,205)— — — (3,205)
Share-based payments919,763 (221,233)— (1,497)5,505 — — 4,008 
Balance, June 30, 2023249,361,351 (3,153,770)$25 $(21,438)$1,530,443 $(6,383)$(583,175)$919,472 
Net income— — — — — — 9,180 9,180 
Other comprehensive loss— — — — — (2,823)— (2,823)
Common stock repurchases— (2,466,609)— (15,754)— — — (15,754)
Share-based payments176,963 (10,264)— (64)3,380 — — 3,316 
Balance, September 30, 2023249,538,314 (5,630,643)$25 $(37,256)$1,533,823 $(9,206)$(573,995)$913,391 
Common StockTreasury StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
Shares
(in $000s, except share data)CommonTreasury
Balance, December 31, 2021247,358,412 (318,086)$25 $(3,020)$1,508,995 $ $(647,490)$858,510 
Net income (loss)— — — — — — (3,273)(3,273)
Share-based payments102,630 (21,505)— (287)3,559 — — 3,272 
Balance, March 31, 2022247,461,042 (339,591)$25 $(3,307)$1,512,554 $ $(650,763)$858,509 
Net income — — — — — — 13,623 13,623 
Other comprehensive loss— — — — — (2,636)— (2,636)
Share-based payments607,561 (150,420)— (1,156)1,785 — — 629 
Balance, June 30, 2022248,068,603 (490,011)$25 $(4,463)$1,514,339 $(2,636)$(637,140)$870,125 
Net income (loss)— — — — — — (2,382)(2,382)
Other comprehensive loss— — — — — (7,651)— (7,651)
Common stock repurchases— (388,521)— (2,437)— — — (2,437)
Share-based payments1,250 (305)— (3)4,378 — — 4,375 
Balance, September 30, 2022248,069,853 (878,837)$25 $(6,903)$1,518,717 $(10,287)$(639,522)$862,030 
See accompanying notes to unaudited condensed consolidated financial statements.

7


 Custom Truck One Source, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1: Business and Organization
Organization
Custom Truck One Source, Inc., a Delaware corporation, and its wholly owned subsidiaries (“we,” “our,” “us,” or “the Company”) 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.
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. We manage the business in three reporting segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”).
Supply Chain
The Company purchases raw materials, component parts and finished goods to be used in the manufacturing, sale and rental of its products. Uncertainty remains regarding supply chain disruptions, inflationary pressures, public health crises, and geopolitical risks that have led to issues, broadly, in the supply chain. Changes in the Company’s relationships with suppliers, shortages in availability of materials, production delays, regulatory restrictions, public health crises, or other supply chain disruptions, whether due to suppliers or customers, could have a material adverse effect on the Company’s ability to timely manufacture and market products. Increases in the costs of shipping and transportation, purchased raw materials, component parts or finished goods could result in manufacturing interruptions, delays, inefficiencies or the Company’s inability to market products. The unprecedented nature of the supply chain disruptions continues to make it difficult to predict the Company’s future business and financial performance. The Company continues to monitor the impact on its supply chain, including, but not limited to, the commercial vehicle manufacturers that provide the chassis used in the Company’s production and manufacturing processes and the ongoing semiconductor shortage, which could potentially limit the ability of these manufacturers to meet demand in future periods.
Basis of Presentation
Our accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). Our condensed 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 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, 2022, 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 periods. 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, 2022.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
8


Accounting Pronouncements Recently Adopted
Contract Assets and Contract Liabilities from Contracts with Customers. In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). This ASU improves the comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination and requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The amended guidance specifies for all acquired revenue contracts regardless of their timing of payment (1) the circumstances in which the acquirer should recognize contract assets and contract liabilities that are acquired in a business combination and (2) how to measure those contract assets and contract liabilities, thereby providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The ASU was effective as of January 1, 2023. The Company applies the guidance in ASU 2021-08 prospectively to any future business combinations occurring on or after the effective date.
Financing Receivables. In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments—Credit Losses (Topic 326) (“ASU 2022-02”), which requires an entity to disclose current period gross write-offs by year of origination for financing receivables and net investment in leases. Gross write-off information must be included in the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit-quality indicator and class of financing receivable by year of origination. The adoption on January 1, 2023 of the ASU had no impact to the Company’s disclosures.
Note 2: Acquisition
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. HiRail, including the assignment of purchase accounting goodwill (see below), is included in the Company’s ERS segment.
Purchase Price
The Company paid $51.0 million, net of working capital adjustments, 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, the Company was 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 was recorded as goodwill and was attributable to expanded access to markets for the Company’s product and service offering, synergies, and broader product offerings to existing customers of HiRail. The total purchase price has been assigned to the underlying assets acquired and liabilities assumed based upon their 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.
9


The following table summarizes the 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 was complete as of December 31, 2022.
(in $000s)January 14, 2022ChangesDecember 31, 2022
Current assets$2,891 $956 $3,847 
Property, equipment and other assets819  819 
Rental equipment34,224  34,224 
Total identifiable assets acquired37,934 956 38,890 
Total identifiable liabilities assumed(6,011)(1,596)(7,607)
Total net assets31,923 (640)31,283 
Goodwill8,685 (41)8,644 
Intangible assets11,027  11,027 
Net assets acquired (purchase price)51,635 (681)50,954 
Less: cash acquired(1,122) (1,122)
Net cash paid$50,513 $(681)$49,832 
HiRail generated $3.8 million and $11.7 million, respectively, of revenue for the three and nine months ended September 30, 2022, and $1.6 million and $2.3 million, respectively, of pre-tax income from January 14, 2022 through September 30, 2022, for the three and nine months ended September 30, 2022, which were included in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). 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 the Company’s financial statements.
Note 3: Revenue
Revenue Disaggregation
Geographic Areas
The Company had total revenue in the following geographic areas:
Three Months Ended September 30,Nine Months Ended September 30,
(in $000s)2023202220232022
United States$424,513 $347,093 $1,305,292 $1,056,324 
Canada9,840 10,687 38,054 30,038 
Total revenue$434,353 $357,780 $1,343,346 $1,086,362 
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 and nine months ended September 30, 2023 and 2022 are presented in the table below.
10


Three Months Ended September 30,Three Months Ended September 30,
20232022
(in $000s)Topic 842Topic 606TotalTopic 842Topic 606Total
Rental:
Rental$112,373 $ $112,373 $110,054 $ $110,054 
Shipping and handling 5,836 5,836  4,956 4,956 
Total rental revenue112,373 5,836 118,209 110,054 4,956 115,010 
Sales and services:
Equipment sales12,760 270,319 283,079 4,456 206,447 210,903 
Parts and services4,216 28,849 33,065 970 30,897 31,867 
Total sales and services16,976 299,168 316,144 5,426 237,344 242,770 
Total revenue$129,349 $305,004 $434,353 $115,480 $242,300 $357,780 
Nine Months Ended September 30,Nine Months Ended September 30,
20232022
(in $000s)Topic 842Topic 606TotalTopic 842Topic 606Total
Rental:
Rental$339,896 $ $339,896 $322,634 $ $322,634 
Shipping and handling 18,770 18,770  13,576 13,576 
Total rental revenue339,896 18,770 358,666 322,634 13,576 336,210 
Sales and services:   
Equipment sales56,535 829,951 886,486 20,572 636,023 656,595 
Parts and services15,969 82,225 98,194 8,949 84,608 93,557 
Total sales and services72,504 912,176 984,680 29,521 720,631 750,152 
Total revenue$412,400 $930,946 $1,343,346 $352,155 $734,207 $1,086,362 
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
As of September 30, 2023 and December 31, 2022, the Company had net receivables related to contracts with customers of $61.2 million and $98.0 million, respectively. As of September 30, 2023 and December 31, 2022, the Company had net receivables related to rental contracts and other of $95.1 million and $95.1 million, respectively.
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.
Accounts receivable, net consisted of the following:
(in $000s)September 30, 2023December 31, 2022
Accounts receivable$170,514 $212,347 
Less: allowance for doubtful accounts(14,209)(19,241)
Accounts receivable, net$156,305 $193,106 
When customers are billed for rentals in advance of the rental period, the Company defers recognition of revenue. As of both September 30, 2023 and December 31, 2022, the Company had approximately $3.0 million of deferred rental revenue. Additionally,
11


the Company collects deposits from customers for orders placed for equipment and rentals. The Company had approximately $19.6 million and $29.6 million in deposits as of September 30, 2023 and December 31, 2022, respectively. Of the $29.6 million deposit liability balance as of December 31, 2022, $28.9 million was recorded as revenue during the nine months ended September 30, 2023 due to performance obligations being satisfied. The Company’s remaining performance obligations on its equipment deposit liabilities have original expected durations of one year or less.
The Company does not have material contract assets, and as such, did not recognize any material impairments of any contract assets.
Note 4: Sales-Type Leases
Revenue from sales-type leases was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in $000s)2023202220232022
Equipment sales$12,760 $7,099 $56,535 $27,007 
Cost of equipment sales11,714 5,938 54,354 23,073 
Gross profit $1,046 $1,161 $2,181 $3,934 
As these transactions remained under rental contracts, $7.1 million and $5.1 million for the three months ended September 30, 2023 and 2022, respectively, and $22.2 million and $15.6 million for the nine months ended September 30, 2023 and 2022, respectively, were billed under the contracts as rentals. Interest income from financing receivables was $4.5 million and $2.7 million for the three months ended September 30, 2023 and 2022, respectively, and $12.3 million and $7.8 million, for the nine months ended September 30, 2023 and 2022, respectively.
Note 5: Inventory
Whole goods inventory is comprised of chassis, attachments (i.e., boom cranes, serial lifts, digger derricks, dump bodies, etc.) and the in-process costs incurred in the final assembly of those units. As part of the business model, the Company sells unassembled individual whole goods and whole goods with varying levels of customization direct to consumers or dealers. Whole goods inventory also includes new equipment purchased specifically for resale to customers. Inventory consisted of the following:
(in $000s)September 30, 2023December 31, 2022
Whole goods$750,047 $468,557 
Aftermarket parts and services inventory138,708 128,167 
Inventory$888,755 $596,724 
Note 6: Floor Plan Financing
Floor plan payables represent financing arrangements to facilitate the Company’s purchase of new and used trucks, cranes, and construction equipment inventory. All floor plan payables are collateralized by the inventory financed. These payables become due and payable upon the sale, transfer, or reclassification of each unit of inventory. Certain floor plan arrangements require the Company to satisfy various financial ratios consistent with those under the ABL Facility. As of September 30, 2023, the Company was in compliance with these covenants.
The amounts owed under floor plan payables are summarized as follows:
(in $000s)September 30, 2023December 31, 2022
Trade:
Daimler Truck Financial$131,637 $105,447 
PACCAR Financial Services63,292 31,187 
Trade floor plan payables$194,929 $136,634 
Non-trade:
PNC Equipment Finance, LLC$396,891 $293,536 
Non-trade floor plan payables$396,891 $293,536 
Interest on outstanding floor plan payable balances is due and payable monthly. Floor plan interest expense was $10.1 million and $25.0 million for the three and nine months ended September 30, 2023, respectively, and $3.6 million, and $7.5 million for the three and nine months ended September 30, 2022, respectively.
12


Trade Floor Plan Financing:
Daimler Truck Financial
The Wholesale Financing Agreement with Daimler Truck Financial (the “Daimler Facility”) bears interest at a rate of U.S. Prime plus 0.80% after an initial interest free period of up to 150 days. The total borrowing capacity under the Daimler Facility is $175.0 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 U.S. Prime Rate minus 0.71%. The PACCAR agreement extends automatically each April and is subject to termination by either party through written notice.
References to the Prime Rate in the foregoing agreements represent the rate as published in The Wall Street Journal.
Non-Trade Floor Plan Financing:
PNC Equipment Finance, LLC
The Company has an Inventory Loan, Guaranty and Security Agreement (the “Loan Agreement”) with PNC Equipment Finance, LLC. On August 25, 2023, the Company renewed the Loan Agreement by an additional two years. The Loan Agreement as of September 30, 2023, provides the Company with a $400.0 million revolving credit facility, which matures on August 25, 2025 and bears interest at a three-month term secured overnight financing rate (“SOFR”) plus 3.00%.
Note 7: Rental Equipment
Rental equipment, net consisted of the following:
(in $000s)September 30, 2023December 31, 2022
Rental equipment$1,399,840 $1,360,205 
Less: accumulated depreciation(475,525)(476,531)
Rental equipment, net$924,315 $883,674 
Note 8: Long-Term Debt
Debt obligations and associated interest rates consisted of the following:
(in $000s)September 30, 2023December 31, 2022September 30, 2023December 31, 2022
ABL Facility$492,400 $437,731 7.2%6.1%
2029 Secured Notes920,000 920,000 5.5%5.5%
2023 Credit Facility13,800  5.8%
Notes payable24,986 31,661 
3.1%-5.0%
3.1%-5.0%
Total debt outstanding1,451,186 1,389,392 
Deferred financing fees(23,838)(27,686)
Total debt net of deferred financing fees1,427,348 1,361,706 
Less: current maturities(1,286)(6,940)
Long-term debt$1,426,062 $1,354,766 
As of September 30, 2023, borrowing availability under the ABL Facility was $254.5 million, and outstanding standby letters of credit were $3.1 million.
ABL Facility
Borrowings under the ABL Facility bear interest at a floating rate, which, at Buyer’s election, could be (a) in the case of U.S. dollar denominated loans, either (i) SOFR 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 (a) with respect to base rate loans, 0.50% to 1.00% and (b) with respect to SOFR loans and CDOR rate loans, 1.50% to 2.00%.
13


2023 Credit Facility
On January 13, 2023, the Company entered into a new credit agreement allowing for borrowings of up to $18.0 million (the “2023 Credit Facility”). Proceeds from the credit agreement were used to finance a portion of the Company’s acquisition of real property from a related party in December 2022. A portion of the loan proceeds has been used to finance improvements to the property. In connection with entering into the agreement, the Company received net proceeds of $13.7 million with the ability to draw an additional $4.2 million upon completion of certain construction milestones. Borrowings bear interest at a fixed rate of 5.75% per annum and are required to be repaid monthly in an amount of approximately $0.1 million with a balloon payment due on the maturity date of January 13, 2028. Borrowings are secured by the real property and improvements.
Note 9: Earnings Per Share
Basic earnings per share is computed by dividing net earnings by the weighted-average number of shares of Common Stock outstanding. Diluted earnings per share includes the effects of potentially dilutive shares of Common Stock, if dilutive. Our potentially dilutive shares aggregated 29.1 million and 29.0 million for the three and nine months ended September 30, 2023, respectively, and 26.4 million and 25.4 million for the three and nine months ended September 30, 2022, respectively, and included warrants, contingently issuable shares, and share-based compensation, and were not included in the computation of diluted earnings per share because they would be anti-dilutive.
The following tables set forth the computation of basic and dilutive earnings per share:
Three Months Ended September 30, 2023Three Months Ended September 30, 2022
(in $000s, except per share data)Net IncomeWeighted Average SharesPer Share AmountNet LossWeighted Average SharesPer Share Amount
Basic earnings $9,180 245,810$0.04 $(2,382)247,704$(0.01)
Dilutive common share equivalents 784—  — 
Diluted earnings $9,180 246,594$0.04 $(2,382)247,704$(0.01)
Nine Months Ended September 30, 2023Nine Months Ended September 30, 2022
(in $000s, except per share data)Net Income Weighted Average SharesPer Share AmountNet Income Weighted Average SharesPer Share Amount
Basic earnings $34,590 245,987 $0.14 $7,968 247,448 $0.03 
Dilutive common share equivalents 822 —  478— 
Diluted earnings $34,590 246,809 $0.14 $7,968 247,926 $0.03 

Note 10: Equity
Preferred Stock
As of September 30, 2023 and December 31, 2022, we were authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share, with such designation, rights and preferences as may be determined from time to time by our board of directors. As of September 30, 2023 and December 31, 2022, there were no shares of preferred stock issued or outstanding.
14


Common Stock
On August 2, 2022, the Company’s Board of Directors authorized a stock repurchase program, allowing for the repurchase of up to $30 million of the Company’s ordinary common shares. Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions, or otherwise, all in accordance with the rules of the Securities and Exchange Commission and other applicable legal requirements. The specific timing, price and size of purchases will depend on prevailing stock prices, general economic and market conditions, and other considerations. The repurchase program does not obligate the Company to acquire any particular amount of its common stock, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. As the Company exhausted this program during the quarter, on September 14, 2023, the Board of Directors approved a stock repurchase program that authorizes additional repurchases of up to $25 million of shares of the Company’s ordinary common shares.
During the three and nine months ended September 30, 2023, the Company repurchased approximately 2.5 million and 3.1 million shares of its common stock, respectively, which are held in treasury, for a total cost of $15.8 million and $20.1 million including commission fees. At September 30, 2023, $24.4 million was available under the stock repurchase program.
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 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 if 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 11: Fair Value Measurements
The 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 ValueFair Value
(in $000s)Level 1Level 2Level 3
September 30, 2023
ABL Facility$492,400 $ $492,400 $ 
2029 Secured Notes 920,000  809,600  
2023 Credit Facility13,800  13,800  
Other notes payable24,986  24,986  
Warrant liabilities603   603 
December 31, 2022
ABL Facility$437,731 $ $437,731 $ 
2029 Secured Notes920,000  814,200  
Other notes payable31,661  31,661  
Warrant liabilities3,012   3,012 
The carrying amounts of the ABL Facility, the 2023 Credit Facility and other notes payable approximated fair value as of September 30, 2023 and December 31, 2022 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 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. 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. The changes in the fair value of the warrant liabilities are recorded in
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Financing and other income in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and cash flow from operating activities in the Condensed Consolidated Statements of Cash Flows.
Note 12: Income Taxes
For interim periods, we estimate our annual effective tax rate, exclusive of discrete items, which is derived primarily by our estimate of our valuation allowance as of the end of our fiscal year. The Company’s effective tax rate for the nine months ended September 30, 2023 and 2022 differs from the U.S. federal statutory tax rate due to the recording of valuation allowances. We recorded an income tax expense of $2.7 million for the nine months ended September 30, 2023 resulting in an effective tax rate of 7% compared to an income tax expense of $7.3 million for the comparable prior year period, at an effective tax rate of 48%. The reduction in the effective tax rate for the nine months ended September 30, 2023 compared to same period in 2022, was primarily due to discrete items recorded in the third quarter of 2022, including derivative mark-to-market adjustments and certain tax attribute changes related to personal property.
On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (“IRA”), which, among other things, implements a 15% minimum tax for certain large corporations, a 1% excise tax on net stock repurchases, and several tax incentives to promote clean energy. The IRA is effective for tax years beginning after December 31, 2022. The IRA does not have a material effect on our consolidated financial statements. We will continue to monitor the additional guidance from the Internal Revenue Service (the “IRS”).
Note 13: 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 One Source, L.P. (“Custom Truck LP”), the sellers of Custom Truck LP have agreed to indemnify the Company for losses arising out of the breach of pre-closing covenants in the purchase agreement and certain indemnified tax matters discussed below, with recourse limited to $10.0 million and $8.5 million escrow accounts, respectively.
From time to time, the Company may be 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 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 14: Related Parties
The Company has transactions with related parties as summarized below.
Rentals and Sales — 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.
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Prior to August 1, 2022, Energy Capital Partners (“ECP”), a stockholder of the Company, and its affiliates had ownership interests in PLH Group, Inc., which was a customer of the Company.
Facilities Leases and Other — The Company leased certain facilities, as well as purchased aircraft charter services, from entities owned by members of the Company’s management and their immediate families. Lease and charter services payments related to these transactions are immaterial. Rent and air travel expenses are recorded in selling, general, and administrative expenses. In December 2022, the Company terminated the lease agreements and purchased the facilities and land from these related parties for a purchase price of approximately $15.4 million.
Management Fees — The Company entered into the Corporate Advisory Services Agreement with Platinum effective in April 2021, under which management fees are payable to Platinum quarterly. The management fees are recorded in transaction expenses and other in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss).
A summary of the transactions with the foregoing related parties included in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in $000s)2023202220232022
Total revenues from transactions with related parties$4,728 $8,385 $23,231 $27,128 
Expenses incurred from transactions with related parties included in cost of revenue$239 $297 $1,091 $2,109 
Expenses incurred from transactions with related parties included in operating expenses$1,391 $1,398 $4,154 $4,635 
Amounts receivable from/payable to related parties included in the Condensed Consolidated Balance Sheets are as follows:
(in $000s)September 30, 2023December 31, 2022
Accounts receivable from related parties$695 $5,053 
Accounts payable to related parties$140 $36 
Note 15: Segments
Our operations are primarily organized and managed by operating segment. Operating segment performance and resource allocations are primarily based on gross profit. 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 Company’s segment results are presented in the tables below:
Three Months Ended September 30,
2023
(in $000s)ERSTESAPSTotal
Revenue:
Rental$114,929 $ $3,280 $118,209 
Equipment sales52,175 230,904  283,079 
Parts and services  33,065 33,065 
Total revenue167,104 230,904 36,345 434,353 
Cost of revenue:
Rentals/parts and services29,613  26,203 55,816 
Equipment sales37,828 191,084  228,912 
Depreciation of rental equipment41,652  817 42,469 
Total cost of revenue109,093 191,084 27,020 327,197 
Gross profit$58,011 $39,820 $9,325 $107,156 

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Three Months Ended September 30,
2022
(in $000s)ERSTESAPSTotal
Revenue:
Rental$112,009 $ $3,001 $115,010 
Equipment sales37,121 173,782  210,903 
Parts and services  31,867 31,867 
Total revenue149,130 173,782 34,868 357,780 
Cost of revenue:
Rentals/parts and services27,221  26,187 53,408 
Equipment sales27,015 146,573  173,588 
Depreciation of rental equipment41,776  836 42,612 
Total cost of revenue96,012 146,573 27,023 269,608 
Gross profit$53,118 $27,209 $7,845 $88,172 
Nine Months Ended September 30,
2023
(in $000s)ERSTESAPSTotal
Revenue:
Rental$346,545 $ $12,121 $358,666 
Equipment sales195,005 691,481  886,486 
Parts and services  98,194 98,194 
Total revenue541,550 691,481 110,315 1,343,346 
Cost of revenue:
Rentals/parts and services90,014  79,178 169,192 
Equipment sales148,711 571,592  720,303 
Depreciation of rental equipment123,969  2,446 126,415 
Total cost of revenue362,694 571,592 81,624 1,015,910 
Gross profit$178,856 $119,889 $28,691 $327,436 
Nine Months Ended September 30,
2022
(in $000s)ERSTESAPSTotal
Revenue:
Rental$325,679 $ $10,531 $336,210 
Equipment sales133,674 522,921  656,595 
Parts and services  93,557 93,557 
Total revenue459,353 522,921 104,088 1,086,362 
Cost of revenue: