PR Newswire | Nov 9, 2021 04:06PM EST

for Third Quarter 2021

11/09 15:05 CST

Custom Truck One Source, Inc. Reports Pro Forma Combined 18.1% Revenue Increase for Third Quarter 2021 KANSAS CITY, Mo., Nov. 9, 2021

KANSAS CITY, Mo., Nov. 9, 2021 /PRNewswire/ -- Custom Truck One Source, Inc. (NYSE: CTOS, "CTOS," "we," "our," or the "Company"), a leading provider of specialty equipment to the electric utility, telecom, rail and other infrastructure-related end markets, today reported financial results for its third quarterly period ended September 30, 2021.

On April 1, 2021, the Company, formerly known as Nesco Holdings, Inc. ("Nesco Holdings"), through its subsidiary, closed on the acquisition (the "Acquisition") of Custom Truck One Source, L.P. ("Custom Truck LP"). The Acquisition creates a leading, one-stop shop for specialty equipment serving highly attractive and growing infrastructure end markets, including electric utility transmission and distribution ("T&D"), telecom, rail and other national infrastructure initiatives. Our reported results include Custom Truck LP only for the period subsequent to the Acquisition. We also provide key operational metrics on a combined basis and pro forma combined results of operations for the three and nine-month periods ended September 30, 2021 and 2020 in accordance with Article 11 of Regulation S-X, assuming the Acquisition had occurred on January 1, 2020. We believe such combined information is useful to compare how the combined company has performed over time.

Following the Acquisition, we expanded our reporting segments from two segments to three segments. The Equipment Rental Solutions ("ERS") segment encompasses our core rental business, inclusive of sales of rental equipment to our customers. The Truck and Equipment Sales ("TES") segment encompasses our specialized truck and equipment production and sales activities. Finally, the Aftermarket Parts and Services ("APS") segment encompasses sales and rentals of parts, tools and other supplies to our customers, as well as our aftermarket repair service operations.

CTOS Third Quarter Highlights

* Total revenue of $357.3 million, reflective of continued strong demand from our end markets * Increased OEC on rent by $18.9 million to $1.10 billion compared to $1.08 billion for second quarter 2021 * Equipment sales order backlog grew 52.0% to $338.5 million compared to $222.7 million for second quarter 2021 * Gross profit improvement of $18.6 million (or 39.8%) to $65.3 million compared to $46.7 million for second quarter 2021 * Net loss of $20.5 million, including $7.7 million related to the Acquisition and integration related expenses and purchase accounting inventory mark-up amortization of $7.4 million, compared to a net loss of $129.4 million in second quarter 2021 * Adjusted EBITDA of $84.4 million compared to $70.2 million in second quarter 2021 * Cash flow from operating activities of $112.8 million, or $49.5 million including net repayments on non-trade floorplan financing, for the nine months ended September 30, 2021

CTOS Third Quarter Pro Forma Highlights

Pro forma third quarter highlights are presented for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 in accordance with Article 11 of Regulation S-X, as if the Acquisition had been completed on January 1, 2020.

* Total pro forma revenue increased 18.1% to $357.3 million * Total pro forma rental revenues increased 10.9% to $109.1 million * Total pro forma equipment sales revenue increased 25.3% to $217.2 million * Pro forma gross profit increased 31.9% to $72.7 million * Pro forma gross profit, excluding rental equipment depreciation, increased 21.4% to $122.8 million * Pro forma net loss of $15.0 million, compared to pro forma net income of $19.3 million * Pro forma Adjusted EBITDA increased 19.6% to $84.4 million

"We delivered another quarter of strong revenue growth over last year and produced record quarterly gross profit, as well as reduced net loss, and improved Adjusted EBITDA, despite having to navigate challenging supply chain issues," said Fred Ross, Chief Executive Officer of CTOS. "Fundamentals in our end markets remain very strong, driving accelerated demand for products and services in all three of our business segments and pushing our new sales backlog to record levels. We continue to take advantage of the benefits afforded by our scale and unique one-stop-shop business model to help us best navigate the challenges in the current environment. We remain committed to delivering exceptional customer service and creating value for our shareholders."

Summary Actual Financial Results

Three Months Ended Nine Months Ended September 30, September 30, Three Months Ended 2021 2020 2021 2020 June 30, 2021(in $000s) Actual Actual Actual Actual Actual

Rental revenue $109,108 $46,125$255,936 $144,103 $98,539

Equipment sales 217,163 11,558 482,825 38,628 247,675

Parts and services revenue31,034 11,577 71,954 36,753 28,897

Total revenue $357,305 $69,260$810,715 $219,484 $375,111

Gross profit $65,252 $15,631$132,161 $53,376 $46,690

Net income (loss) $(20,525)$15,173$(177,788)$(13,946)$(129,356)

Adjusted EBITDA^1 $84,423 $28,020$182,195 $86,249 $70,241

1 - Adjusted EBITDA is a non-GAAP financial measure. Further information andreconciliations for our non-GAAP measures to the most directly comparablefinancial measure under generally accepted accounting principles in the U.S.("GAAP") is included at the end of this press release.

Summary Pro Forma Financial Results1

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

Three Months Ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020 (in $000s) Pro Forma Pro Forma Pro Forma Pro Forma

Rental revenue $109,108 $98,409 $307,909 $301,125

Equipment sales 217,163 173,378 728,780 554,985

Parts and services revenue31,034 30,870 90,497 94,892

Total revenue $357,305 $302,657$1,127,186$951,002

Gross profit $72,678 $55,103 $199,132 $160,187

Net income (loss) $(14,956)$19,296 $(87,884) $(104,097)

Adjusted EBITDA^2 $84,423 $70,599 $227,529 $205,908

1 - The above pro forma information is presented for the three-month periodsended September 30, 2021 and 2020 and nine-month periods ended September 30,2021 and 2020 in accordance with Article 11 of Regulation S-X. The informationpresented gives effect to the following as if they occurred on January 1, 2020:(i) the Acquisition, (ii) borrowings under the senior secured notes and theasset-based credit facility used to repay certain debt in connection with theAcquisition, (iii) extinguishment of Custom Truck LP's prior credit facilityand term loan borrowings assumed in the Acquisition and immediately repaid onApril 1, 2021, and (iv) extinguishment of Nesco Holdings' prior credit facilityand its senior secured notes repaid in connection with the Acquisition. The proforma information is not necessarily indicative of the Company's results ofoperations had the Acquisition been completed on January 1, 2020, nor is itnecessarily indicative of the Company's future results. The pro formainformation does not reflect any cost savings from operating efficiencies,synergies, or revenue opportunities that could result from the Acquisition.

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

Summary Financial Results by Segment

Segment performance presented below for the three and nine months ended September 30, 2021 includes Custom Truck LP from April 1, 2021 to September 30, 2021. Segment performance for the three and nine months ended September 30, 2020 represents that of Nesco Holdings before the acquisition of Custom Truck LP and, therefore, is not comparable.

Equipment Rental Solutions (ERS)



Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended (in $000s) 2021 2020 2021 2020 June 30, 2021

Rental revenue $105,124 $42,615 $244,935 $132,693 $ 95,081

Equipment sales 27,101 5,510 70,141 19,585 32,555

Total revenue 132,225 48,125 315,076 152,278 127,636

Cost of rental revenue 24,622 12,742 67,683 38,916 27,524

Cost of equipment sales 19,546 5,190 60,815 16,454 34,529

Depreciation of rental equipment49,125 18,530 108,202 56,065 42,192

Total cost of revenue 93,293 36,462 236,700 111,435 104,245

Gross profit $38,932 $11,663 $78,376 $40,843 $ 23,391





Truck and Equipment Sales (TES)



Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended (in $000s) 2021 2020 2021 2020 June 30, 2021

Equipment sales $190,062 $6,048 $412,684 $19,043 $ 215,120

Cost of equipment sales 172,445 5,410 374,180 16,841 194,810

Gross profit $17,617 $638 $38,504 $2,202 $ 20,310





Aftermarket Parts and Services (APS)



Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended (in $000s) 2021 2020 2021 2020 June 30, 2021

Rental revenue $3,984 $3,510 $11,001 $11,410 $ 3,458

Parts and services revenue 31,034 11,577 71,954 36,753 28,897

Total revenue 35,018 15,087 82,955 48,163 32,355

Cost of revenue 25,287 10,820 64,700 34,622 28,379

Depreciation of rental equipment1,028 937 2,974 3,210 987

Total cost of revenue 26,315 11,757 67,674 37,832 29,366

Gross profit $8,703 $3,330 $15,281 $10,331 $ 2,989

Summary Combined Operating Metrics

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

Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended (in $000s) 2021 2020 2021 2020 June 30, 2021

Average OEC on rent^(a) $1,103,562 $982,499 $1,078,947 $1,007,173 $1,084,709

Fleet utilization^(b) 81.4 % 73.4 %80.4 % 74.3 % 80.9 %

OEC on rent yield^(c) 38.0 % 37.8 %37.5 % 37.8 % 37.6 %

Sales order backlog^(d) (as of period end)$338,457 $118,260 $338,457 $118,260 $222,661

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

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

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

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

Management Commentary

Total revenue for CTOS in the third quarter was $357.3 million, a decrease of 4.7% from the second quarter of 2021. Despite the modest sequential quarter decrease in revenues, revenues in 2021 continue to be characterized by strong year-over-year customer demand for new and used equipment following a period of softer demand in 2020 as a result of the global health pandemic. Consolidated rental revenue improved to $109.1 million (a 10.7% increase on a sequential quarter basis), compared to $98.5 million in the second quarter of 2021, continuing a trend of high demand related to infrastructure investments in our T&D and Telecom end markets. Pro forma rental revenue increased $10.7 million to $109.1 million in the third quarter of 2021, compared to pro forma rental revenue of $98.4 million in the third quarter of 2020. Sales of new and used equipment were $217.2 million in the third quarter of 2021, compared to $247.7 million in the second quarter of 2021. The decline in new sales was driven in part by our decision to allocate more inventory for rental fleet growth over sales activity, as well as seasonality, in that third quarter new equipment demand is typically lower relative to second quarter. Pro forma new and used equipment sales increased $43.8 million to $217.2 million in the third quarter of 2021, compared pro forma new and used equipment sales of $173.4 million in the third quarter of 2020. Sales order backlog grew to $338.5 million as of the end of the third quarter of 2021 compared to $222.7 million as of the end of the second quarter of 2021, representing an increase of 52.0%. Equipment sales gross profit improved to $25.2 million (or 37.3%), compared to $18.3 million in the second quarter of 2021.

In our ERS segment, demand for equipment remained solid as rental revenue in the third quarter of 2021 was $105.1 million compared to $95.1 million in the second quarter of 2021, a 10.6% increase. Fleet utilization improved to 81.4% from 80.9% in the second quarter of 2021. Activity in the T&D sector, driven by continued demand from renewable generation projects and aging-infrastructure improvement work, was somewhat tempered as elevated temperatures across North America caused a shift in the normal seasonal uptick in grid work. As expected, customer buy-outs of rental equipment moderated in the third quarter of 2021. Gross profit (excluding depreciation) in the segment was $88.1 million, compared to $65.6 million in the second quarter of 2021, representing a 34% increase on a sequential quarter basis.

Revenue in our TES segment declined 12%, to $190.1 million in the third quarter of 2021, from $215.1 million in the second quarter of 2021, as a result of supply chain challenges relating to the segment's inventory suppliers, as well as seasonality. Despite the impact on third quarter sales volume, TES continued to see strength in product demand as sales order backlog grew by 52.0% compared to the end of the second quarter of 2021. On a pro forma basis, sales of new equipment were $181.6 million in the third quarter of 2021, compared to $134.5 million in the third quarter of 2020, a 35.0% increase.

APS segment revenue increased by $2.7 million (or 8%) in the third quarter of 2021, to $35.0 million, as compared to $32.4 million inthe second quarter of 2021, driven by a seasonal uptick in demand for products as well as an impact from storm recovery projects.

Net loss was $20.5 million in the third quarter of 2021 compared to $129.4 million for the second quarter of 2021. Significant transaction-related expenses in the second quarter of 2021 directly related to the Acquisition, as well as improvements in gross profit levels, contributed to the meaningful sequential quarterly reduction to net loss.

Adjusted EBITDA for the third quarter of 2021 was $84.4 million, compared to $70.2 million for the second quarter of 2021. The increase in Adjusted EBITDA was largely driven by the improvement in rental demand and production efficiencies in both our TES and APS segments.

CTOS had cash and cash equivalents of $21.1 million as of September 30, 2021, and debt outstanding net of cash and cash equivalents ("net debt"), including finance leases, was $1.4 billion as of September 30, 2021. Availability under the senior secured credit facility was $337.0 million as of September 30, 2021. This compares to cash and cash equivalents of $27.2 million as of June 30, 2021, and net debt outstanding, including finance leases, of $1.3 billion as of June 30, 2021. For the nine months ended September 30, 2021, we added $141.1 million to our rental fleet ($75.3 million in the three months ended September 30, 2021).

2021 Outlook

Based on the Company's year-to-date results, current sales order backlog and management's outlook for the rental fleet for remainder of the year, the Company is reaffirming its full-year 2021 guidance reported on August 12, 2021.

CONFERENCE CALL INFORMATION

The Company has scheduled a conference call at 5:00 P.M. Eastern Time on November 9, 2021, to discuss its third quarter 2021 financial results. A webcast will be publicly available at: investors.customtruck.com. To listen by phone, please dial 1-800-897-4057 or 1-416-981-9006. A replay of the call will be available until midnight, Tuesday, November 16, 2021, by dialing 1-844-512-2921 or 1-412-317-6671 and entering passcode 21998618.

ABOUT CTOS

CTOS is one of the largest providers of specialty equipment, parts, tools, accessories and services to the electric utility transmission and distribution, telecommunications and rail markets in North America. CTOS offers its specialized equipment to a diverse customer base for the maintenance, repair, upgrade and installation of critical infrastructure assets, including electric lines, telecommunications networks and rail systems. The Company's coast-to-coast rental fleet of more than 9,000 units includes aerial devices, boom trucks, cranes, digger derricks, pressure drills, stringing gear, hi-rail equipment, repair parts, tools and accessories. For more information, please visit investors.customtruck.com.

FORWARD-LOOKING STATEMENTS

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

INVESTOR CONTACT

Brian Perman, Vice President, Investor Relations(844) 403-6138investors@customtruck.com

CUSTOM TRUCK ONE SOURCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



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



Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended (in $000s except per share data) 2021 2020 2021 2020 June 30, 2021

Revenue

Rental revenue $ 109,108 $ 46,125 $255,936 $144,103 $98,539

Equipment sales 217,163 11,558 482,825 38,628 247,675

Parts sales and services 31,034 11,577 71,954 36,753 28,897

Total revenue 357,305 69,260 810,715 219,484 375,111

Cost of Revenue

Cost of rental revenue 25,932 13,307 71,873 42,699 29,013

Depreciation of rental equipment 50,153 19,467 111,176 59,275 43,179

Cost of equipment sales 191,991 10,600 434,995 33,295 229,339

Cost of parts sales and services 23,977 10,255 60,510 30,839 26,890

Total cost of revenue 292,053 53,629 678,554 166,108 328,421

Gross Profit 65,252 15,631 132,161 53,376 46,690

Operating Expenses

Selling, general and administrative expenses48,625 9,319 111,939 33,512 51,264

Amortization 13,334 771 27,420 2,234 13,332

Non-rental depreciation 873 21 1,845 74 951

Transaction expenses and other 7,742 561 42,765 3,282 24,575

Total operating expenses 70,574 10,672 183,969 39,102 90,122

Operating Income (Loss) (5,322) 4,959 (51,808) 14,274 (43,432)

Other Expense

Loss on extinguishment of debt - - 61,695 - 61,695

Interest expense, net 19,045 15,853 53,674 47,816 19,723

Financing and other expense (income) (3,656) (559) 143 6,245 (2,058)

Total other expense 15,389 15,294 115,512 54,061 79,360

Loss Before Income Taxes (20,711) (10,335) (167,320) (39,787) (122,792)

Income Tax Expense (Benefit) (186) (25,508) 10,468 (25,841) 6,564

Net Income (Loss) $ (20,525) $ 15,173 $(177,788) $(13,946) $(129,356)



Net Income (Loss) Per Share

Basic $ (0.08) $ 0.31 $(0.99) $(0.28) $(0.53)

Diluted $ (0.08) $ 0.31 $(0.99) $(0.28) $(0.53)

CUSTOM TRUCK ONE SOURCE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)



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



(in $000s) September 30, 2021December 31, 2020

Assets

Current Assets

Cash and cash equivalents $ 21,086 $ 3,412

Accounts receivable, net 165,161 60,933

Financing receivables, net 25,963 -

Inventory 381,159 31,367

Prepaid expenses and other 11,777 7,530

Total current assets 605,146 103,242

Property and equipment, net 111,178 6,269

Rental equipment, net 879,025 335,812

Goodwill 684,796 238,052

Intangible assets, net 341,160 67,579

Deferred income taxes - 16,952

Operating lease assets 37,117 -

Other assets 22,799 498

Total Assets $ 2,681,221 $ 768,404

Liabilities and Stockholders' Equity (Deficit)

Current Liabilities

Accounts payable $ 82,538 $ 31,829

Accrued expenses 68,797 31,991

Deferred revenue and customer deposits 21,605 975

Floor plan payables - trade 78,505 -

Floor plan payables - non-trade 150,694 -

Operating lease liabilities - current 5,006 -

Current maturities of long-term debt 4,997 1,280

Current portion of finance lease obligations 4,471 5,276

Total current liabilities 416,613 71,351

Long-term debt, net 1,323,671 715,858

Finance leases 5,391 5,250

Operating lease liabilities - noncurrent 32,425 -

Deferred income taxes 19,752 -

Derivative and warrants liabilities 25,874 7,012

Total long-term liabilities 1,407,113 728,120

Commitments and contingencies

Stockholders' Equity (Deficit)

Common stock 25 5

Treasury stock (3,007) -

Additional paid-in capital 1,504,254 434,917

Accumulated deficit (643,777) (465,989)

Total stockholders' equity (deficit) 857,495 (31,067)

Total Liabilities and Stockholders' Equity (Deficit)$ 2,681,221 $ 768,404

CUSTOM TRUCK ONE SOURCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



The condensed consolidated statement of cash flows presented below for the nine months ended September 30, 2021 include the cash flows of Custom Truck LP from April 1, 2021 to September 30, 2021. The condensed consolidated statement of cash flows for the nine months ended September 30, 2020 represents the cash flows of Nesco Holdings before the acquisition of Custom Truck LP and, therefore, is not comparable.



Nine Months Ended September 30,

(in $000s) 2021 2020

Operating activities

Net loss $(177,788) $(13,946)

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

Depreciation and amortization 145,967 63,819

Amortization of debt issuance costs 3,416 2,188

Loss on extinguishment of debt 61,695 -

Provision for losses on accounts receivable 8,391 1,813

Share-based compensation 12,716 1,669

Gain on sales and disposals of rental equipment (8,636) (4,945)

Change in fair value of derivative and warrants 5,453 6,149

Deferred tax expense (benefit) 10,003 (24,417)

Changes in assets and liabilities:

Accounts and financing receivables (33,217) 9,258

Inventories 79,040 (3,797)

Prepaids, operating leases and other (2,115) (953)

Accounts payable (2,450) (8,920)

Accrued expenses and other liabilities 16,955 (11,782)

Floor plan payables - trade, net (12,485) -

Customer deposits and deferred revenue 5,810 (1,270)

Net cash flow from operating activities 112,755 14,866



Investing activities

Acquisition of business, net of cash acquired (1,337,686) -

Purchases of rental equipment (141,142) (59,197)

Proceeds from sales and disposals of rental equipment 62,617 29,855

Other investing activities, net (3,404) (527)

Net cash flow from investing activities (1,419,615) (29,869)



Financing activities

Proceeds from debt 947,420 -

Proceeds from issuance of common stock 883,000 -

Payment of common stock issuance costs (6,386) -

Payment of premiums on debt extinguishment (53,469) -

Share-based payments (652) -

Borrowings under revolving credit facilities 461,084 74,042

Repayments under revolving credit facilities (307,056) (55,019)

Repayments of notes payable (497,047) (964)

Finance lease payments (4,382) (7,718)

Acquisition of inventory through floor plan payables - non-trade 184,950 -

Repayment of floor plan payables - non-trade (248,234) -

Payment of debt issuance costs (34,694) -

Net cash flow from financing activities 1,324,534 10,341

Net Change in Cash 17,674 (4,662)

Cash at Beginning of Period 3,412 6,302

Cash at End of Period $21,086 $1,640





Nine Months Ended September 30,

(in $000s) 2021 2020

Supplemental Cash Flow Information

Cash paid for interest $44,786 $56,815

Cash paid for income taxes 217 156

Non-Cash Investing and Financing Activities:

Non-cash consideration - acquisition of business 187,935 -

Rental equipment and property and equipment purchases in accounts payable - 4,217

Rental equipment sales in accounts receivable 1,429 902

CUSTOM TRUCK ONE SOURCE, INC.NON-GAAP FINANCIAL AND PERFORMANCE MEASURES

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

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

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

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

CUSTOM TRUCK ONE SOURCE, INC.

SCHEDULE 1 - ADJUSTED EBITDA RECONCILIATION

(unaudited)



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



Three Months Ended Nine Months Ended September 30, September 30, Three Months Ended (in $000s) 2021 2020 2021 2020 June 30, 2021 Actual Actual Actual Actual

Net income (loss) $(20,525)$15,173$(177,788) $(13,946) $(129,356)

Interest expense 17,324 15,853 49,832 47,816 17,602

Income tax expense (benefit) (186) (25,508)10,468 (25,841) 6,564

Depreciation and amortization 66,804 20,693 145,967 63,819 60,062

EBITDA 63,417 26,211 28,479 71,848 (45,128)

Adjustments:

Non-cash purchase accounting impact (1) 6,046 390 27,486 1,485 21,387

Transaction and integration costs (2) 7,748 1,380 43,093 5,098 24,601

Loss on extinguishment of debt (3) - - 61,695 - 61,695

Sales-type lease adjustment (4) 3,783 - 3,273 - (510)

Share-based payments (5) 4,856 657 12,716 1,669 7,162

Change in fair value of derivative and warrants (6)(1,427) (618) 5,453 6,149 1,034

Adjusted EBITDA $84,423 $28,020$182,195 $86,249 $70,241

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

Represents the non-cash impact of purchase accounting, net of accumulated depreciation, on the cost of equipment and inventory sold. The equipment(1) 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.

Represents transaction costs related to acquisitions of businesses,(2) including post-acquisition integration costs. These expenses are comprised of professional consultancy, legal, tax and accounting fees. Also included are expenses associated with the integration of acquired businesses.

Loss on extinguishment of debt represents a special charge, which is not(3) expected to recur. Such charges are adjustments pursuant to our credit agreement.

Represents the adjustment for the impact of sales-type lease accounting for certain leases containing rental purchase options (or "RPOs"), as the(4) application of sales-type lease accounting is not deemed to be representative of the ongoing cash flows of the underlying rental contracts. This adjustment is made pursuant to our credit agreement.

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

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

CUSTOM TRUCK ONE SOURCE, INC.

SCHEDULE 2 - SUPPLEMENTAL PRO FORMA INFORMATION

(unaudited)



Pro Forma Combined Statements of Operations - Three Months Ended September 30, 2021



(in $000s) Custom Truck Pro Forma Pro Forma One Source, Inc.Adjustments^a Combined

Rental revenue $109,108 $- $109,108

Equipment sales 217,163 - 217,163

Parts sales and services 31,034 - 31,034

Total revenue 357,305 - 357,305

Cost of revenue 241,900 (7,426) b 234,474

Depreciation of rental equipment 50,153 - 50,153

Total cost of revenue 292,053 (7,426) 284,627

Gross profit 65,252 7,426 72,678

Selling, general and administrative48,625 - 48,625

Amortization 13,334 - 13,334

Non-rental depreciation 873 - 873

Transaction expenses and other 7,742 - 7,742

Total operating expenses 70,574 - 70,574

Operating income (loss) (5,322) 7,426 2,104

Interest expense, net 19,045 - 19,045

Finance and other expense (income) (3,656) - (3,656)

Total other expense 15,389 - 15,389

Income (loss) before taxes (20,711) 7,426 (13,285)

Taxes (186) 1,857 c 1,671

Net income (loss) $(20,525) $5,569 $(14,956)

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

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

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

Pro Forma Combined Statements of Operations - Three Months Ended September 30, 2020



(in $000s) Nesco HoldingsCustom Truck LPPro Forma Pro Forma Adjustments^a Combined

Rental revenue $46,125 $ 52,284 $ - $98,409

Equipment sales 11,558 161,820 - 173,378

Parts sales and services 11,577 19,293 - 30,870

Total revenue 69,260 233,397 - 302,657

Cost of revenue 34,162 168,076 (725) b201,513

Depreciation of rental equipment 19,467 23,998 2,576 c46,041

Total cost of revenue 53,629 192,074 1,851 247,554

Gross profit 15,631 41,323 (1,851) 55,103

Selling, general and administrative9,319 28,139 - 37,458

Amortization 771 1,993 3,587 d6,351

Non-rental depreciation 21 1,176 (238) d959

Transaction expenses and other 561 - - 561

Total operating expenses 10,672 31,308 3,349 45,329

Operating income (loss) 4,959 10,015 (5,200) 9,774

Interest expense, net 15,853 12,226 (7,172) e20,907

Finance and other expense (income) (559) (4,855) - (5,414)

Total other expense 15,294 7,371 (7,172) 15,493

Income (loss) before taxes (10,335) 2,644 1,972 (5,719)

Taxes (25,508) - 493 f(25,015)

Net income (loss) $15,173 $ 2,644 $ 1,479 $19,296

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

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

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

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

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,e. 2020: (i) borrowings under the ABL Facility; (ii) repayment of Nesco Holdings' 2019 Credit Facility; (iii) repayment of Nesco Holdings' 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.

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

Pro Forma Combined Statements of Operations - Nine Months Ended September 30, 2021



Custom Truck LP (in $000s) Custom Truck (Three Months Pro Forma Pro Forma One Source, Inc.Ended March 31,Adjustments^a Combined 2021)

Rental revenue $ 255,936 $ 51,973 $ - $307,909

Equipment sales 482,825 245,955 - 728,780

Parts sales and services 71,954 18,543 - 90,497

Total revenue 810,715 316,471 - 1,127,186

Cost of revenue 567,378 240,678 (17,752) b790,304

Depreciation of rental equipment 111,176 22,757 3,817 c137,750

Total cost of revenue 678,554 263,435 (13,935) 928,054

Gross profit 132,161 53,036 13,935 199,132

Selling, general and administrative111,939 34,428 - 146,367

Amortization 27,420 1,990 3,590 d33,000

Non-rental depreciation 1,845 1,151 (213) d2,783

Transaction expenses and other 42,765 5,254 (40,277) e7,742

Total operating expenses 183,969 42,823 (36,900) 189,892

Operating income (loss) (51,808) 10,213 50,835 9,240

Loss on extinguishment of debt 61,695 - (61,695) f-

Interest expense, net 53,674 9,992 (3,919) g59,747

Finance and other expense (income) 143 (2,346) - (2,203)

Total other expense 115,512 7,646 (65,614) 57,544

Income (loss) before taxes (167,320) 2,567 116,449 (48,304)

Taxes 10,468 - 29,112 h39,580

Net income (loss) $ (177,788) $ 2,567 $ 87,337 $(87,884)

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

Represents the elimination from cost of revenue of the run-off of the estimated step-up in fair value of inventory acquired that was recognized in the Company's consolidated financial statements for the nine months ended September 30, 2021. The impact of the step-up is reflected as an adjustmentb. to the comparable prior period ended September 30, 2020, as if the Acquisition had occurred on January 1, 2020. Includes the reduction to depreciation expense for the difference between historical depreciation and estimated depreciation of the preliminary fair value of the property and equipment.

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

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

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

Represents the elimination of the loss on extinguishment of debt recognizedf. in the Company's consolidated financial statements for the nine months ended September 30, 2021 as though the repayment of Nesco Holdings' 2019 Credit Facility and its 2024 Secured Notes had occurred on January 1, 2020.

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,g. 2020: (i) borrowings under the ABL Facility; (ii) repayment of Nesco Holdings' 2019 Credit Facility; (iii) repayment of Nesco Holdings' 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.

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

Pro Forma Combined Statements of Operations - Nine Months Ended September 30, 2020



(in $000s) Nesco HoldingsCustom Truck LPPro Forma Pro Forma Adjustments^a Combined

Rental revenue $ 144,103 $ 157,022 $ - $301,125

Equipment sales 38,628 516,357 - 554,985

Parts sales and services 36,753 58,139 - 94,892

Total revenue 219,484 731,518 - 951,002

Cost of revenue 106,833 530,260 14,725 b651,818

Depreciation of rental equipment 59,275 73,566 6,156 c138,997

Total cost of revenue 166,108 603,826 20,881 790,815

Gross profit 53,376 127,692 (20,881) 160,187

Selling, general and administrative33,512 87,309 - 120,821

Amortization 2,234 6,391 10,347 d18,972

Non-rental depreciation 74 3,551 (738) d2,887

Transaction expenses and other 3,282 - 40,277 e43,559

Total operating expenses 39,102 97,251 49,886 186,239

Operating income (loss) 14,274 30,441 (70,767) (26,052)

Loss on extinguishment of debt - - 61,695 f61,695

Interest expense, net 47,816 45,163 (21,521) g71,458

Finance and other expense (income) 6,245 (7,777) - (1,532)

Total other expense 54,061 37,386 40,174 131,621

Income (loss) before taxes (39,787) (6,945) (110,941) (157,673)

Taxes (25,841) - (27,735) h(53,576)

Net income (loss) $ (13,946) $ (6,945) $ (83,206) $(104,097)

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

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

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

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

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

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

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,g. 2020: (i) borrowings under the ABL Facility; (ii) repayment of Nesco Holdings' 2019 Credit Facility; (iii) repayment of Nesco Holdings' 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.

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

Reconciliation of Pro Forma Combined Net Income (Loss) to Pro Forma Adjusted EBITDA



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



Three Months Ended Nine Months Ended September 30, September 30,

(in $000s) 2021 2020 2021 2020

Net income (loss) $(14,956) $19,296 $(87,884) $(104,097)

Interest expense 17,324 18,777 53,426 56,638

Income tax expense (benefit) 1,671 (25,015) 39,580 (53,576)

Depreciation and amortization 66,804 55,191 180,514 167,311

EBITDA 70,843 68,249 185,636 66,276

Adjustments:

Non-cash purchase accounting impact (1,380) 551 10,672 18,976

Transaction and process improvement costs 7,748 (381) 8,067 47,837

Loss on extinguishment of debt - - - 61,695

Sales-type lease adjustment 3,783 1,599 4,428 1,855

Share-based payments 4,856 1,199 13,273 3,120

Change in fair value of derivative and warrants (1,427) (618) 5,453 6,149

Adjusted EBITDA $84,423 $70,599 $227,529 $205,908

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SOURCE Custom Truck One Source, Inc.