Custom Truck One Source, Inc.
For the period ended Mar 31, 2025. Filed Apr 30, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed Apr 30, 2025
CTOS$9.33+0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-30.
0001709682-24-000073
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-04-30.
0001709682-25-000023
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 121 previous paragraphs and 104 current paragraphs.
63 unchanged; 31 reworded; 9 added; 24 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 17 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
•our strategic initiatives including acquisitions and divestitures may not be successful and may divert our management’s attention away from operations and could create general customer uncertainty;
Current report
•volatility of our common stock market price;
Current report
Transaction expenses and other — Transaction expenses and other include costs related to acquisitions of businesses; costs associated with closed operations; costs associated with restructuring and business optimization activities (inclusive of systems establishment costs); employee retention and/or severance costs; costs related to start-up/preopenings and openings of locations; reconfiguration or consolidation of facilities and equipment conversion costs.
Current report
Condensed Consolidated Results of Operations
Current report
Total Revenue - The increase in total revenue for the ERS segment for the three months ended March 31, 2025, compared to the same period in 2024, was due to an increase in rental revenue and rental equipment sales. Rental revenue increased as a result of higher fleet utilization of 4.4% driven by higher average OEC on rent. Used equipment sales increased as a result of the improved market demand for used equipment over new equipment due to the ongoing high-interest rate environment.
Current report
Equipment Sales - Equipment sales decreased for the three months ended March 31, 2025, compared to the same period in 2024. The decline in new equipment sales is driven by pricing pressures due to the ongoing high-interest rate environment and the mix of equipment sold.
Current report
Gross Profit - The decrease in gross profit for the three months ended March 31, 2025, compared to the same period in 2024, was due to to the pricing pressures on new truck sales as well as the mix of equipment sold.
Current report
(2) Represents transaction and other costs related to acquisitions of businesses; costs associated with closed operations; costs associated with restructuring and business optimization activities (inclusive of systems establishment costs); employee retention and/or severance costs; costs related to start-up/preopenings and openings of locations; reconfiguration or consolidation of facilities or equipment conversion costs. These adjustments are presented as adjustments to net income (loss) pursuant to our ABL Credit Agreement and Indenture.
Current report
(4) During Q4 2024, the Company closed on a sale leaseback transaction with an unrelated third party. The Company sold eight properties with a combined net book value of $29.0 million for gross proceeds of $53.8 million, which was reduced by transaction costs and other fees of $1.3 million, for net cash proceeds of approximately $52.5 million. Additionally, $3.2 million from the proceeds were used to repay a note payable. The Company recognized a gain of $23.5 million on this transaction.
Removed paragraphs (24)
Previous report
•our inability to recruit and retain the experienced personnel, including skilled technicians, we need to compete in our industries;
Previous report
•potential impairment charges;
Previous report
•difficulty in integrating acquired businesses and fully realizing the anticipated benefits and cost savings of the acquired businesses, as well as additional transaction and transition costs that we will continue to incur following acquisitions;
Previous report
•material weakness in our internal control over financial reporting which, if not remediated, could result in material misstatements in our financial statements;
Previous report
Transaction expenses and other — Transaction expenses and other include expenses directly related to the acquisition of businesses. These expenses generally are comprised of travel and out-of-pocket expenses and legal, accounting and valuation or appraisal fees incurred in connection with pre- and post-closure activities. We also include costs and expenses associated with post-acquisition integration activities related to the acquired businesses.
Previous report
Three and nine months ended September 30, 2024, compared to the same periods in 2023
Previous report
Consolidated Results of Operations
Previous report
The decrease in total revenue for the nine months ended September 30, 2024, compared to the same period in 2023 was the result of lower rental revenue as described above, as well as lower volume of used equipment sales. The Company continues to be impacted by factors affecting its customers, including their supply chain constraints, environmental, regulatory and customer financing factors that have impacted the timing of transmission job starts. These delays contributed to both lower rental revenue and rental asset sales during the year.
Previous report
Total Revenue - The decrease in total revenue for the ERS segment for the three and nine months ended September 30, 2024, compared to the same periods in 2023, was driven by a decrease in equipment sales due to fewer rental asset sales of used equipment, as well as a decrease in rental revenue as a result of a reduction in fleet utilization of 5.7% and 8.6% for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. Fleet utilization decreased due to a decline in demand in the utility market as a result of supply chain constraints, environmental, regulatory, and customer financing factors affecting the timing of transmission and distribution job starts. For the three and nine months ended September 30, 2024, average OEC on rent decreased 6.3% and 10.7%, respectively, compared to the same periods in 2023, primarily as a result of the lower utilization in the quarter.
Previous report
Equipment Sales - Equipment sales increased for the three and nine months ended September 30, 2024, compared to the same periods in 2023. The growth in sales was primarily a result of exiting 2023 with healthy inventory levels (due to the improved supply chain), as well as continued robust demand for our products in the forestry and utility end-markets.
Previous report
Gross Profit - The increase in gross profit for the three and nine months ended September 30, 2024, compared to the same periods in 2023, was due to higher volume of equipment sales.
Previous report
(2) Represents transaction and process improvement costs related to acquisitions of businesses, including post-acquisition integration costs, which are recognized within operating expenses in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). These expenses are comprised of professional consultancy, legal, tax and accounting fees. Also included are expenses associated with the integration of acquired businesses. These expenses are presented as adjustments to net income (loss) pursuant to our ABL Credit Agreement and Indenture.
Previous report
Critical Accounting Estimates
Previous report
Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. GAAP requires that we make estimates and judgments that affect the reported amount of assets, liabilities, revenue, expenses and the related disclosure of contingent assets and liabilities. We base these estimates on historical experience and on various other assumptions that we consider reasonable under the circumstances and reevaluate our estimates and judgments as appropriate. The actual results experienced by us may differ materially and adversely from our estimates. For a complete discussion of our significant critical accounting estimates, see the “Critical Accounting Estimates” section in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023. Except as discussed below, there were no significant changes to our critical accounting estimates during the nine months ended September 30, 2024.
Previous report
Goodwill and the Evaluation of Goodwill Impairment
Previous report
Goodwill represents the excess of cost over the fair value of identifiable net assets of businesses acquired and goodwill is assigned to each of our reporting units, which are ERS, TES and APS. The following presents the amount of goodwill by reporting unit as of June 30, September 30, 2024 and December 31, 2023:
Previous report
We perform our assessment of goodwill impairment utilizing either a qualitative or quantitative impairment test, and we perform our test at least annually. Our annual assessment date is October 1 and we perform impairment tests in interim periods (e.g., other than October 1) when factors are identified that could indicate goodwill of any of our reporting units may be impaired. Examples of such factors may include a significant adverse change in business climate, weakness in an industry in which our reporting units operate or recent significant cash or operating losses with expectations that those losses will continue. The qualitative and quantitative impairment tests are described further below.
Previous report
Qualitative Impairment Test – The qualitative impairment test assesses company-specific, industry, market and general economic factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we conclude that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, or we elect not to use the qualitative impairment test, a quantitative impairment test is performed.
Previous report
Quantitative Impairment Test – The quantitative impairment test involves a comparison of the estimated fair value of a reporting unit to its carrying amount with the fair value of a reporting being unit being estimated by using a discounted cash flow model (the “income approach”) that calculates fair value as the present value of expected cash flows of the reporting unit. Additionally, a market analysis is performed that encompasses an analysis of comparable publicly-traded companies (the “market approach”).
Previous report
Determining the fair value of a reporting unit requires judgment and the use of significant estimates that include assumptions about the reporting unit’s future revenue (considering expectations about rental and sales volumes and prices as well as capital spending related to the end-markets we serve), profitability and cash flows, long-term growth rates, amount and timing of estimated capital expenditures, inflation rates, risk adjusted cost of capital, operational plans, and current and future economic conditions, among other assumptions. The fair value of each reporting unit is determined using a weighted combination of the income and market approaches. We believe that the estimates and assumptions used in our impairment assessments are reasonable and based on available market information. We use a discounted cash flow methodology for the income approach. Under the income approach, the discounted cash flow model determines fair value based on the present value of projected cash flows over a specified period and a residual value related to future cash flows beyond the projection period. Both values are discounted using a rate that reflects the best estimate of the risk adjusted cost of capital at each reporting unit.
Previous report
During the quarterly period ended June 30, 2024, we identified factors indicating goodwill may be impaired related to two of our reporting units, ERS and APS. The following is a discussion of the estimates and assumptions from our June 30, 2024 interim impairment test for the ERS and APS reporting units:
Previous report
•The risk adjusted cost of capital varies by reporting unit and was in the range of 10.0% to 10.5% and represents our estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise.
Previous report
•Our projections were based on our assessment of macroeconomic variables, industry trends and market opportunities, as well as our strategic objectives and future growth plans. Revenue growth rates assumed ranged from approximately 5% to 7% for 2025 and from approximately 3% to 8% for 2026 and beyond.
Previous report
As a result of completing our June 30, 2024, interim quantitative impairment test, we determined that the fair value of the ERS and APS reporting units exceeded their carrying values by 23% and 17%, respectively. While there is no “bright line” to determine whether or not a reporting unit’s fair value is substantially in excess of its carrying amount (“cushion”), significant adverse changes in business climate, weakness in an industry in which our reporting units operate (for example, electric utility T&D, telecom, rail and general infrastructure) or significant cash or operating losses and changes in expectations of profitability could reduce the amounts of cushion applicable to our reporting units and result in impairment of one or more of our reporting units’ goodwill. During the quarter ended September 30, 2024, we continued to evaluate whether factors indicate goodwill of any of our reporting units may be impaired and we did not identify any triggering factors that could indicate goodwill impairment. As a result, we concluded another interim test was not necessary.
Reworded paragraphs (31)
Previous wording
Any statements made in this report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, and should be evaluated as such. These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “estimate,” “target,” “project,” “should,” “could,” “would,” “may,” “will,” “forecast,” and other similar expressions. We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this report, you should understand that these statements are not guarantees of performance or results and are subject to and involve risks, uncertainties and assumptions. You should not place undue reliance on these forward-looking statements or projections. Below is a summary of risk factors applicable to us that may materially affect such forward-looking statements and projections:
Current wording
Any statements made in this report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, and should be evaluated as such. These statements often include words such as “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “suggests,” “plans,” “targets,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose,” “could,” “would,” and other similar expressions. We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this report, you should understand that these statements are not guarantees of performance or results and are subject to and involve risks, uncertainties and assumptions. You should not place undue reliance on these forward-looking statements or projections. Below is a summary of risk factors applicable to us that may materially affect such forward-looking statements and projections:
Previous wording
•increases in labor costs, our inability to obtain raw materials, component parts and/or finished goods in a timely and cost-effective manner, and our inability to manage our rental equipment in an effective manner;
Current wording
•increases in labor costs, changes in U.S. trade policy including tariffs, our inability to obtain raw materials, component parts and/or finished goods in a timely and cost-effective manner, and our inability to manage our rental equipment in an effective manner;
Previous wording
•our inability to attract and retain highly skilled personnel and our inability to retain or plan for succession of our senior management;
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•our inability to attract and retain key personnel, including our management and skilled technicians;
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•any further increase in the cost of new equipment that we purchase for use in our rental fleet or for sale as inventory;
Current wording
•any further increase in the cost of new equipment that we purchase for use in our rental fleet or for sale as inventory; and aging or obsolescence of our existing equipment, and the fluctuations of market value thereof;
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•uncertainty relating to macroeconomic conditions, unfavorable conditions in the capital and credit markets and our inability to obtain additional capital as required;
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•uncertainty relating to macroeconomic conditions, unfavorable conditions in the capital and credit markets and our customers’ inability to obtain additional capital as required;
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•increased attention to, and evolving expectations for, sustainability and environmental, social and governance initiatives.
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•we are subject to a series of risks related to climate change; and increased attention to, and evolving expectations for, sustainability and environmental, social and governance initiatives.
Previous wording
Revenue — As a full-service equipment provider, we generate revenue through renting, selling, assembling, upfitting, and servicing new and used heavy-duty trucks and cranes, as well as the sale of related parts. We also sell and rent specialized tools on an individual basis and in kits. Rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers. The Company records changes in estimated collectability directly against rental revenue. Equipment sales revenue reflects the value of vocational trucks and other equipment sold to customers. Parts and service revenue is derived from maintenance and repair services, light upfit services, and parts, tools and accessories sold directly to customers. Rental revenue excludes active rental contracts which qualify to be accounted for as sales-type leases.
Current wording
Revenue — As a full-service equipment provider, we generate revenue through renting, selling, assembling, upfitting, and servicing new and used heavy-duty trucks and cranes, as well as the sale of related parts. We also sell and rent specialized tools on an individual basis and in kits. Rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers. The Company records changes in estimated collectability directly against rental revenue. Equipment sales revenue reflects the value of vocational trucks and other equipment sold to customers as well as upfit services. Parts and service revenue is derived from maintenance and repair services, and parts, tools and accessories sold directly to customers. Rental revenue excludes active rental contracts which qualify to be accounted for as sales-type leases.
Previous wording
Equipment Rental Solutions (“ERS”) Segment — We own a broad range of new and used specialty equipment, including truck-mounted aerial lifts, cranes, service trucks, dump trucks, trailers, digger derricks and other machinery and equipment. As of September 30, 2024, this equipment (the “rental fleet”) is comprised of approximately 10,200 units. The majority of our rental fleet can be used across a variety of end-markets, which coincides with the needs of many of our customers who operate in multiple end-markets. As is customary for equipment rental companies, we sell used equipment out of our rental fleet to end user customers. These sales are often made in response to specific customer requests. These sales offer customers an opportunity to buy well-maintained equipment with long remaining useful lives and enable us to effectively manage the age and mix of our rental fleet to match current market demand. We also employ rental purchase options (“RPOs”) on a select basis, which provide a buyout option with an established purchase price that decreases over time as rental revenue is collected. Customers are given credit against such purchase price for a portion of the amounts paid over the life of the rental, allowing customers the flexibility of a rental with the option to purchase at any time at a known price. Activities in our ERS segment consist of the rental and sale from the rental fleet of the foregoing products.
Current wording
Equipment Rental Solutions (“ERS”) Segment — We own a broad range of new and used specialty equipment, including truck-mounted aerial lifts, cranes, service trucks, dump trucks, trailers, digger derricks and other machinery and equipment. As of March 31, 2025, this equipment (the “rental fleet”) is comprised of approximately 10,300 units. The majority of our rental fleet can be used across a variety of end-markets, which coincides with the needs of many of our customers who operate in multiple end-markets. As is customary for equipment rental companies, we sell used equipment out of our rental fleet to end user customers. These sales are often made in response to specific customer requests. These sales offer customers an opportunity to buy well-maintained equipment with long remaining useful lives and enable us to effectively manage the age and mix of our rental fleet to match current market demand. We also employ rental purchase options (“RPOs”) on a select basis, which provide a buyout option with an established purchase price that decreases over time as rental revenue is collected. Customers are given credit against such purchase price for a portion of the amounts paid over the life of the rental, allowing customers the flexibility of a rental with the option to purchase at any time at a known price. Activities in our ERS segment consist of the rental and sale from the rental fleet of the foregoing products.
Previous wording
Total Revenue - The increase in total revenue for the three months ended September 30, 2024, compared to the same period in 2023 is a result of higher volumes of new equipment sales due to the robust demand for our products in the forestry and utility end-markets, partially offset by decreased rental revenue due to lower utilization and a decline in average OEC on rent.
Current wording
Total Revenue - The increase in total revenue for the three months ended March 31, 2025, compared to the same period in 2024 is a result of higher rental revenue driven by higher average OEC on rent.
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Depreciation of Rental Equipment - Depreciation of our rental equipment increased in the three and nine months ended September 30, 2024, compared to the same periods in 2023, as a result of higher rental equipment levels.
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Depreciation of Rental Equipment - Depreciation of our rental equipment increased in the three months ended March 31, 2025, compared to the same period in 2024, as a result of higher rental equipment levels.
Previous wording
Operating Expenses - Operating expenses remained flat for the three months ended September 30, 2024, compared to the same period in 2023. Operating expenses increased in the nine months ended September 30, 2024, compared to the same period in 2023, primarily as a result of an increase in general and administrative expenses due to increased headcount and wages, increased insurance due to higher inventory levels and rental assets, and additional expense associated with various information technology projects.
Current wording
Operating Expenses - Operating expenses increased in the three months ended March 31, 2025, compared to the same period in 2024, primarily as a result of an increase in general and administrative expenses due to increased compensation.
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Total Other Expense - Other expense increased for the three and nine months ended September 30, 2024, compared to the same periods in 2023, primarily due to the increase in interest expense from variable rate debt and floor plan financing liabilities.
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Total Other Expense - Other expense increased for the three months ended March 31, 2025, compared to the same period in 2024, primarily due to the increase in interest expense from variable rate debt and floor plan financing liabilities.
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Income Tax Expense (Benefit) - Income tax expense (benefit) for the three and nine months ended September 30, 2024 was $(0.6) million and $0.5 million, respectively, resulting in an effective tax rate of 3.4% and (0.9)%. Income tax expense for the three and nine months ended September 30, 2023 was $0.4 million and $2.7 million, respectively, at an effective tax rate of 4.5% and 7.2%. The changes in the effective tax rates were primarily due to state and local income tax updates enacted during the current periods.
Current wording
Income Tax Expense (Benefit) - Income tax benefit for the three months ended March 31, 2025 was $7.7 million, resulting in an effective tax rate of 30.2%. Income tax benefit for the three months ended March 31, 2024 was $1.9 million, at an effective tax rate of 12.0%. The changes in the effective tax rates were primarily due to the impact of permanent adjustments partially offset by the valuation allowance.
Previous wording
Net Income (loss) - The change in net income to a net loss for the three and nine months ended September 30, 2024, compared to the same periods in 2023, was primarily the result of decreased gross profit and higher interest expense on variable-rate debt and variable-rate floor plan liabilities.
Current wording
Net Income (loss) - Net loss increased for the three months ended March 31, 2025, compared to the same period in 2024, due to decreased gross profit and higher interest expense on variable-rate debt and variable-rate floor plan liabilities.
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Cost of Revenue - The decrease in total cost of revenue for the three and nine months ended September 30, 2024, compared to the same periods in 2023, was largely due to the decrease in rental equipment sales volume.
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Cost of Revenue - The increase in total cost of revenue for the three months ended March 31, 2025, compared to the same period in 2024, was largely due to the increase in rental equipment sales volume.
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Depreciation - Depreciation of our rental equipment increased for the three and nine months ended September 30, 2024, compared to the same periods in 2023, as a result of higher rental equipment levels.
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Depreciation - Depreciation of our rental equipment increased for the three months ended March 31, 2025, compared to the same period in 2024, as a result of higher rental equipment levels.
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Gross Profit - The decrease in gross profit for the three and nine months ended September 30, 2024, compared to the same periods in 2023, was due to the decrease in rental revenues and equipment sales for the period.
Current wording
Gross Profit - The increase in gross profit for the three months ended March 31, 2025, compared to the same period in 2024, was due to the increase in rental revenues and equipment sales for the period.
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Cost of Equipment Sales - Cost of equipment sales increased for the three and nine months ended September 30, 2024, compared to the same periods in 2023, due to the increase in equipment sales volume.
Current wording
Cost of Equipment Sales - Cost of equipment sales increased for the three months ended March 31, 2025, compared to the same period in 2024, due to the increase in equipment sales volume.
Previous wording
Total Revenue - Total revenue remained flat for the three months ended September 30, 2024, compared to the same period in 2023. Total revenue decreased for the nine months ended September 30, 2024, compared to the same period in 2023, due to the decrease in rentals of tools and accessories tied to the decline in rental revenue in the ERS segment.
Current wording
Total Revenue - Total revenue was flat for the three months ended March 31, 2025, compared to the same period in 2024.
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Cost of Revenue - Cost of revenue increased for the three and nine months ended September 30, 2024, compared to the same periods in 2023, as a result of higher costs of materials.
Current wording
Cost of Revenue - Cost of revenue increased for the three months ended March 31, 2025, compared to the same period in 2024, as a result of higher costs of materials.
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Gross Profit - The decrease in gross profit for the three and nine months ended September 30, 2024, compared to the same periods in 2023, was primarily driven by the decrease in tools and accessories rentals with an increase in costs of materials driving gross profit down.
Current wording
Gross Profit - The decrease in gross profit for the three months ended March 31, 2025, compared to the same period in 2024, was primarily driven by the decrease in parts and services revenue with an increase in costs of materials driving gross profit down.
Previous wording
Our principal sources of liquidity include cash generated by operating activities and borrowings under revolving credit facilities as described below. We believe that our liquidity sources and operating cash flows are sufficient to address our operating, debt service and capital requirements, including investments in our rental fleet, over the next 12 months. As of September 30, 2024, we had $8.4 million in cash and cash equivalents compared to $10.3 million as of December 31, 2023. As of September 30, 2024 and December 31, 2023, we had $627.9 million and $552.4 million of outstanding borrowings under our ABL Facility, respectively. During August 2024, the ABL Facility was amended to, among other things, provide an additional $200.0 million of borrowing capacity and extend the maturity date to August 9, 2029. Availability under the senior secured credit facility was $319.0 million as of September 30, 2024, and based on our borrowing base, we have an additional $190.9 million of suppressed availability that we can potentially utilize by upsizing our existing facility. For further information on the ABL Facility amendment, see Note 8: Long-Term Debt in the Notes to the Unaudited Condensed Consolidated Financial Statements.
Current wording
Our principal sources of liquidity include cash generated by operating activities and borrowings under revolving credit facilities as described below. We believe that our liquidity sources and operating cash flows are sufficient to address our operating, debt service and capital requirements, including investments in our rental fleet, over the next 12 months and beyond. As of March 31, 2025, we had $5.4 million in cash and cash equivalents compared to $3.8 million as of December 31, 2024. As of March 31, 2025 and December 31, 2024, we had $655.5 million and $582.9 million of outstanding borrowings under our ABL Facility, respectively. Availability under the ABL Facility was $289.9 million as of March 31, 2025, and based on our borrowing base, we have an additional $161.4 million of suppressed availability that we can potentially utilize by upsizing our existing facility. For further information on the ABL Facility, see Note 7: Long-Term Debt in the Notes to the Unaudited Condensed Consolidated Financial Statements.
Previous wording
The ABL Facility contains customary negative covenants for transactions of this type, including covenants that, among other things, limit the Company and its restricted subsidiaries’ ability to: incur additional indebtedness; pay dividends, redeem stock, or make other distributions; repurchase, prepay or redeem subordinated indebtedness; make investments; create restrictions on the ability of Company’s restricted subsidiaries to pay dividends; create liens; transfer or sell assets; consolidate, merge, sell, or otherwise dispose of all or substantially all of the Company’s assets; enter into certain transactions with the Company’s affiliates; and designate subsidiaries as unrestricted subsidiaries, in each case subject to certain exceptions, as well as a restrictive covenant applicable to each Specified Floor Plan Company (as defined in the ABL Credit Agreement) limiting its ability to own certain assets and engage in certain lines of business. The covenants governing the payment of dividends and making other distributions are based upon a combination of fixed amounts, percentages of Adjusted EBITDA or upon multiple pro forma measures depending on the purpose of any such dividend payments or distributions the Company and its restricted subsidiaries are permitted to make. Unlimited dividends under the ABL Facility may be permitted so long as, on a pro forma basis, “distribution conditions” (as defined in the ABL Credit Agreement governing the ABL Facility) are satisfied. As of September 30, 2024, the Company’s distribution conditions were satisfied and, as a result, the Company determined there were no restrictions on distributions by the ABL Credit Agreement.
Current wording
The ABL Facility contains customary negative covenants for transactions of this type, including covenants that, among other things, limit Nesco Holdings II, Inc., our wholly owned subsidiary (the “Borrower” with respect to the ABL Facility, or the “Issuer” with respect to the Indenture, defined below) and its restricted subsidiaries’ ability to: incur additional indebtedness; pay dividends, redeem stock, or make other distributions; repurchase, prepay or redeem subordinated indebtedness; make investments; create restrictions on the ability of the Borrower’s restricted subsidiaries to pay dividends; create liens; transfer or sell assets; consolidate, merge, sell, or otherwise dispose of all or substantially all of the Borrower’s assets; enter into certain transactions with the Borrower’s affiliates; and designate subsidiaries as unrestricted subsidiaries, in each case subject to certain exceptions, as well as a restrictive covenant applicable to each Specified Floor Plan Company (as defined in the ABL Credit Agreement) limiting its ability to own certain assets and engage in certain lines of business. The covenants governing the payment of dividends and making other distributions are based upon a combination of fixed amounts, percentages of Adjusted EBITDA or upon multiple pro forma measures depending on the purpose of any such dividend payments or distributions the Borrower and its restricted subsidiaries are permitted to make. Unlimited dividends under the ABL Facility may be permitted so long as, on a pro forma basis, “distribution conditions” (as defined in the ABL Credit Agreement governing the ABL Facility) are satisfied. As of March 31, 2025, the Company’s distribution conditions were satisfied and, as a result, the Company determined there were no restrictions on distributions by the Borrower and its restricted subsidiaries by the ABL Credit Agreement.
Previous wording
The 5.50% senior secured second lien notes due 2029 (the “2029 Secured Notes”) were issued pursuant to an indenture (the “Indenture”) which contains covenants that limit the Company’s (and certain of its subsidiaries’) ability to, among other things: (i) incur additional debt or issue certain preferred stock; (ii) pay dividends, redeem stock, or make other distributions; (iii) make other restricted payments or investments; (iv) create liens on assets; (v) transfer or sell assets; (vi) create restrictions on payment of dividends or other amounts by the Company to its restricted subsidiaries; (vii) engage in mergers or consolidations; (viii) engage in certain transactions with affiliates; or (ix) designate the Company’s subsidiaries as unrestricted subsidiaries. The covenants governing the payment of dividends and making other distributions are based upon a combination of fixed amounts, percentages of Adjusted EBITDA or upon multiple pro forma measures depending on the purpose of any such dividend payments or distributions the Company and its restricted subsidiaries are permitted to make. Unlimited dividends, under the Indenture, may be made so long as after giving effect to making the dividends, the Consolidated Total Debt Ratio would be no greater than 5.00 to 1.00 on a pro forma basis. As of September 30, 2024, the Company’s Consolidated Total Debt Ratio was not greater than 5.00 to 1.00 and, as a result, the Company determined there were no restrictions on distributions by the Indenture. For further information on the ABL Facility and Indenture, see Note 9: Long-Term Debt in the Notes to the Consolidated Financial Statements under Part II, Item 8 in the Company’s annual report on Form 10-K for the year ended December 31, 2023, filed on March 7, 2024.
Current wording
The 5.50% senior secured second lien notes due 2029 (the “2029 Secured Notes”) were issued pursuant to the indenture governing our 2029 Secured Notes (the “Indenture”) which contains covenants that limit the Issuer’s (and certain of its subsidiaries’) ability to, among other things: (i) incur additional debt or issue certain preferred stock; (ii) pay dividends, redeem stock, or make other distributions; (iii) make other restricted payments or investments; (iv) create liens on assets; (v) transfer or sell assets; (vi) create restrictions on payment of dividends or other amounts by the Issuer’s restricted subsidiaries; (vii) engage in mergers or consolidations; (viii) engage in certain transactions with affiliates; or (ix) designate the Issuer’s subsidiaries as unrestricted subsidiaries. The covenants governing the payment of dividends and making other distributions are based upon a combination of fixed amounts, percentages of Adjusted EBITDA or upon multiple pro forma measures depending on the purpose of any such dividend payments or distributions the Issuer and its restricted subsidiaries are permitted to make. Unlimited dividends, under the Indenture, may be made so long as after giving effect to making the dividends, the Consolidated Total Debt Ratio would be no greater than 5.00 to 1.00 on a pro forma basis. As of March 31, 2025, the Company’s Consolidated Total Debt Ratio was not greater than 5.00 to 1.00 and, as a result, the Company determined there were no restrictions on distributions by the Issuer and its restricted subsidiaries by the Indenture. For further information on the ABL Facility and Indenture, see Note 8: Long-Term Debt in the Notes to the Consolidated Financial Statements under Part II, Item 8 in the Company’s annual report on Form 10-K for the year ended December 31, 2024, filed on March 4, 2025.
Previous wording
(4) Represents non-cash share-based compensation expense associated with the issuance of stock options and restricted stock units.
Current wording
(5) Represents non-cash share-based compensation expense associated with the issuance of restricted stock units.
Previous wording
(5) Represents the charge to earnings for the change in fair value of the liability for warrants.
Current wording
(6) Represents the charge to earnings for the change in fair value of the liability for warrants. On July 31, 2024, all of the Company’s stock purchase warrants expired and were unexercised.
Previous wording
(1) The following tables present the calculation of LTM Adjusted EBITDA for the periods ended September 30, 2024 and June 30, 2024:
Current wording
(1) The following tables present the calculation of LTM Adjusted EBITDA for the period ended March 31, 2025 and December 31, 2024:
Previous wording
As of September 30, 2024, we had cash and cash equivalents of $8.4 million, a decrease of $1.9 million from December 31, 2023. Generally, we manage our cash flow by using any excess cash, after considering our working capital and capital expenditure needs, including paying down the outstanding balance under our ABL Facility, and availability under our credit facilities.
Current wording
As of March 31, 2025, we had cash and cash equivalents of $5.4 million, an increase of $1.6 million from December 31, 2024. Generally, we manage our cash flow by using any excess cash, after considering our working capital and capital expenditure needs, including paying down the outstanding balance under our ABL Facility, and availability under our credit facilities.
Previous wording
Net cash from operating activities was $39.9 million for the nine months ended September 30, 2024, as compared to net cash used in operating activities of $2.7 million in the same period of 2023. The cash provided by operating activities in the current period is the result of the increase in floorplan trade financing for inventory purchases.
Current wording
Net cash from operating activities was $55.6 million for the three months ended March 31, 2025, as compared to net cash used in operating activities of $14.4 million in the same period of 2024. The change year over year is driven by lower levels of inventory production in 2025 compared to 2024.
Previous wording
Net cash used in investing activities was $164.9 million for the nine months ended September 30, 2024, as compared to $145.6 million in the same period of 2023. The increase in cash used in investing activities was primarily due to lower proceeds from sales and disposals of rental equipment of $21.8 million.
Current wording
Net cash used in investing activities was $71.3 million for the three months ended March 31, 2025, as compared to $33.4 million in the same period of 2024. The increase in cash used in investing activities was primarily due to an increase in purchases of rental equipment of $36.4 million.
Previous wording
Net cash provided by financing activities was $122.8 million for the nine months ended September 30, 2024, as compared to $142.6 million in the same period of 2023. The decrease in cash provided by financing activities was primarily due to an increase in repurchases of common stock of $9.0 million and a decrease in proceeds, net of repayments, from floor plan financing and long-term debt arrangements of $5.8 million.
Current wording
Net cash provided by financing activities was $17.2 million for the three months ended March 31, 2025, as compared to $45.5 million in the same period of 2024. The decrease in cash provided by financing activities was primarily due to an increase in repurchases of common stock of $25.8 million.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Three months ended March 31, 2025, compared to the same period in 2024
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
•aging or obsolescence of our existing equipment, and the fluctuations of market value thereof;
Previous report — wording carried elsewhere
•we are subject to a series of risks related to climate change; and
Previous report — wording carried elsewhere
The decrease in cost of revenue, excluding rental equipment depreciation for the nine months ended September 30, 2024, compared to the same period in 2023, was driven primarily by the decrease in equipment sales volume during the nine months ended September 30, 2024.