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目录
美国
证券交易委员会
华盛顿特区20549  
_______________________________
表格 10-Q
_______________________________
☒根据1934年证券交易所法第13或第15(d)款的规定，递交季度报告。
截至季度结束日期的财务报告2024年9月30日
☐根据1934年证券交易协定第13或15（d）节的过渡报告
过渡期从              为             
委托文件编号：001-39866001-38186
_______________________________  
CUSTOm TRUCk ONE SOURCE, INC.
(根据其章程规定的注册人准确名称)
_______________________________
特拉华州84-2531628
（国家或其他管辖区的
公司成立或组织）		（IRS雇主
唯一识别号码）
7701 Independence Ave
堪萨斯城, 莫州 64125
（总部地址，包括邮政编码）
(816) 241-4888
(注册人电话号码，包括区号)
_______________________________
在法案第12(b)条的规定下注册的证券：
每一类的名称交易标志在其上注册的交易所的名称
每股普通股的面值为$0.0001CTOS请使用moomoo账号登录查看New York Stock Exchange
请勾选以下内容。申报人是否（1）在过去12个月内（或申报人需要报告这些报告的时间较短的期间内）已提交证券交易法规定的第13或15（d）条要求提交的所有报告；以及（2）过去90天内已被要求提交此类报告。    是   ☒ 无 o
请勾选以下内容。申报人是否已在过去12个月内（或申报人需要提交此类文件的时间较短的期间内）逐个以电子方式提交了根据规则405提交的互动数据文件。这章的交易中规定。    是   ☒ 没有 o
请勾选标记以说明注册人是大型快速申报人、加速申报人、非加速申报人、较小的报告公司还是新兴成长型公司。请查看《交易所法》第120亿.2条中“大型快速申报人”、“加速申报人”、“较小的报告公司”和“新兴成长型公司”的定义。
大型加速文件申报人o 加速文件提交人☒
非加速文件提交人o 较小的报告公司☐
   新兴成长公司☐
如果公司无法符合证券交易法第13(a)条规定，使用延长过渡期来遵守任何新的或修订的财务会计准则，请在复选框中指示。 ☐
请用复选标志表示注册公司是否属于壳公司（按《交易所法》120亿.2条规定定义）。 是 ☐ 没有☒
截至2024年10月28日，流通的普通股份数量为 233,432,467.


Custom Truck One Source, Inc.及其子公司
目录
第一部分财务信息页码
项目1。基本报表
2024年9月30日和2023年结算财务报表的未经审计的综合收支表
2024年9月30日和2023年12月31日的未经审计的简明综合资产负债表
2024年9月30日和2023年未经审计的简明合并现金流量表
2024年9月30日止和2023年基本报表股东权益未经审计的压缩合并报表
简明联合财务报表附注(未经审计)
事项二管理层对财务状况和经营结果的讨论和分析
第3项。有关市场风险的定量和定性披露
事项4。控制和程序
第II部分 其他信息
项目1。法律诉讼
项目1A。风险因素
事项二未注册的股票股权销售和筹款用途
第3项。对优先证券的违约
事项4。矿山安全披露
项目5。其他信息
项目6。展示资料
签名



第一部分 - 财务信息
项目1。财务报表
3

Custom Truck One Source, Inc.
综合收支及综合收益（亏损）简明综合收益（未经审计）
截至9月30日的三个月截至9月30日的九个月
(单位：千美元，除每股数据外)2024202320242023
营业收入
租赁收入$108,324 $118,209 $317,492 $358,666 
设备销售305,476 283,079 863,711 886,486 
零部件销售和服务33,420 33,065 100,337 98,194 
总收入447,220 434,353 1,281,540 1,343,346 
营收成本
租金成本29,439 29,874 88,559 91,754 
租赁设备折旧45,956 42,469 134,285 126,415 
设备销售成本251,987 228,912 704,105 720,303 
零部件销售和服务成本28,009 25,942 82,786 77,438 
营业成本总额355,391 327,197 1,009,735 1,015,910 
毛利润91,829 107,156 271,805 327,436 
研究和开发
销售，总务及管理费用54,630 56,955 168,322 171,974 
摊销6,696 6,698 19,966 19,976 
非租赁折旧3,472 2,602 9,752 7,973 
交易费用及其他3,994 2,890 14,684 10,039 
营业费用总计68,792 69,145 212,724 209,962 
营业收入 23,037 38,011 59,081 117,474 
其他费用
利息费用，净额43,875 34,144 124,191 94,945 
融资和其他费用（收入）(2,818)(5,745)(9,399)(14,744)
其他费用总计41,057 28,399 114,792 80,201 
税前收益（亏损）(18,020)9,612 (55,711)37,273 
所得税费用（收益）(604)432 518 2,683 
净利润（损失）$(17,416)$9,180 $(56,229)$34,590 
其他全面收益（亏损）：
未实现的外币翻译调整$1,310 $(2,823)$(2,159)$(259)
其他综合收益（损失）1,310 (2,823)(2,159)(259)
综合收益（损失）$(16,106)$6,357 $(58,388)$34,331 
每股净利润（损失）：
基本$(0.07)$0.04 $(0.24)$0.14 
稀释的$(0.07)$0.04 $(0.24)$0.14 
加权平均流通普通股
基本234,438 245,810 238,162 245,987 
稀释的234,438 246,594 238,162 246,809 
请参见附注的未经审计的简明合并财务报表。
4

Custom Truck One Source，Inc。
压缩的综合资产负债表（未经审计）
(以千美元为单位，除每股数据外)2024年9月30日2023年12月31日
资产
流动资产
现金及现金等价物$8,438 $10,309 
应收账款净额176,037 215,089 
融资应收款，净额11,992 30,845 
库存1,200,925 985,794 
预付费用和其他13,573 23,862 
总流动资产1,410,965 1,265,899 
资产和设备，净值161,023 142,115 
租赁设备，净值975,129 916,704 
商誉705,282 704,011 
无形资产, 净额259,497 277,212 
营业租赁资产50,126 38,426 
其他17,918 23,430 
总资产$3,579,940 $3,367,797 
负债和股东权益
流动负债
应付账款$88,744 $117,653 
应计费用58,405 73,847 
已收入账但尚未履行服务的营收和客户存款20,059 28,758 
平面图款项 - 交易428,756 253,197 
平面图应付款项 - 非交易493,786 409,113 
经营租赁负债 - 流动负债7,225 6,564 
长期债务的流动部分1,458 8,257 
流动负债合计1,098,433 897,389 
长期负债净额1,567,103 1,487,136 
租赁负债-非流动负债44,258 32,714 
延迟所得税32,637 33,355 
长期负债总额1,643,998 1,553,205 
股东权益
普通股票 - $0.0001每股面值，500,000,000 251,411,684和页面。249,903,120股已发行；且233,432,467和页面。241,011,332 截至2024年9月30日和2023年12月31日分别为流通股份
25 25 
开多股票，以成本计量 — 17,979,217和页面。8,891,788 分别为2024年9月30日和2023年12月31日的股份
(87,580)(56,524)
额外实收资本1,547,303 1,537,553 
累计其他综合损失(8,137)(5,978)
累积赤字(614,102)(557,873)
股东权益合计837,509 917,203 
负债和股东权益总计$3,579,940 $3,367,797 
See accompanying notes to unaudited condensed consolidated financial statements.
5

Custom Truck One Source, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended September 30,
(in $000s)20242023
Operating Activities
Net income (loss)$(56,229)$34,590 
Adjustments to reconcile net income (loss) to net cash flow from operating activities:
Depreciation and amortization173,271 162,084 
Amortization of debt issuance costs4,627 4,221 
Provision for losses on accounts receivable9,541 4,522 
Share-based compensation8,748 10,312 
Gain on sales and disposals of rental equipment(34,702)(48,392)
Change in fair value of derivative and warrants(527)(2,409)
Deferred tax expense (benefit)(718)1,959 
Changes in assets and liabilities:
Accounts and financing receivables12,980 21,978 
Inventories(213,468)(290,302)
Prepaids, operating leases and other11,390 6,143 
Accounts payable(27,219)42,707 
Accrued expenses and other liabilities(14,628)3,620 
Floor plan payables - trade, net175,559 58,295 
Customer deposits and deferred revenue(8,691)(12,034)
Net cash flow from operating activities39,934 (2,706)
Investing Activities
Acquisition of business, net of cash acquired(6,015)— 
Purchases of rental equipment(278,507)(289,984)
Proceeds from sales and disposals of rental equipment155,788 177,623 
Purchase of non-rental property and cloud computing arrangements(36,149)(33,251)
Net cash flow for investing activities(164,883)(145,612)
Financing Activities
Proceeds from debt4,200 13,537 
Share-based payments(1,451)387 
Borrowings under revolving credit facilities168,069 111,057 
Repayments under revolving credit facilities(92,569)(56,377)
Repayments of notes payable(7,946)(6,674)
Finance lease payments— (2,682)
Repurchase of common stock(28,984)(19,936)
Acquisition of inventory through floor plan payables - non-trade490,195 571,062 
Repayment of floor plan payables - non-trade(405,522)(467,707)
Payment of debt issuance costs(3,213)(110)
Net cash flow from financing activities122,779 142,557 
Effect of exchange rate changes on cash and cash equivalents299 194 
Net Change in Cash and Cash Equivalents(1,871)(5,567)
Cash and Cash Equivalents at Beginning of Period10,309 14,360 
Cash and Cash Equivalents at End of Period$8,438 $8,793 


Custom Truck One Source, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited) — Continued
Nine Months Ended September 30,
(in $000s)20242023
Supplemental Cash Flow Information
Interest paid$105,202 $51,142 
Income taxes paid4,140 1,897 
Non-Cash Investing and Financing Activities
Rental equipment and property and equipment purchases in accounts payable439 596 
Rental equipment sales in accounts receivable111 1,573 
See accompanying notes to unaudited condensed consolidated financial statements.
6

Custom Truck One Source, Inc.
Condensed Consolidated Statements of Stockholders' Equity (unaudited)
Common StockTreasury StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
Shares
(in $000s, except share data)CommonTreasury
Balance, December 31, 2023249,903,120 (8,891,788)$25 $(56,524)$1,537,553 $(5,978)$(557,873)$917,203 
Net income (loss)— — — — — — (14,335)(14,335)
Other comprehensive income (loss)— — — — — (2,530)— (2,530)
Common stock repurchases— (1,040,585)— (6,381)— — — (6,381)
Share-based payments171,990 (9,885)— (53)2,774 — — 2,721 
Balance, March 31, 2024250,075,110 (9,942,258)25 (62,958)1,540,327 (8,508)(572,208)896,678 
Net income (loss)— — — — — — (24,478)(24,478)
Other comprehensive income (loss)— — — — — (939)— (939)
Common stock repurchases— (3,589,436)— (16,736)— — — (16,736)
Share-based payments1,336,574 (408,262)— (2,400)4,557 — — 2,157 
Balance, June 30, 2024251,411,684 (13,939,956)25 (82,094)1,544,884 (9,447)(596,686)856,682 
Net income (loss)— — — — — — (17,416)(17,416)
Other comprehensive income (loss)— — — — — 1,310 — 1,310 
Common stock repurchases— (1,260,827)— (5,486)— — — (5,486)
Earnout share forfeitures— (2,778,434)— — — — — — 
Share-based payments— — — — 2,419 — — 2,419 
Balance, September 30, 2024251,411,684 (17,979,217)$25 $(87,580)$1,547,303 $(8,137)$(614,102)$837,509 
Common StockTreasury StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
Shares
(in $000s, except share data)CommonTreasury
Balance, December 31, 2022248,311,104 (2,241,069)$25 $(15,537)$1,521,487 $(8,947)$(608,585)$888,443 
Net income (loss)— — — — — — 13,800 13,800 
Other comprehensive income (loss)— — — — — 342 — 342 
Common stock repurchases— (174,744)— (1,122)— — — (1,122)
Share-based payments130,484 (11,582)— (77)3,451 — — 3,374 
Balance, March 31, 2023248,441,588 (2,427,395)25 (16,736)1,524,938 (8,605)(594,785)904,837 
Net income (loss)— — — — — — 11,610 11,610 
Other comprehensive income (loss)— — — — — 2,222 — 2,222 
Common stock repurchases— (505,142)— (3,205)— — — (3,205)
Share-based payments919,763 (221,233)— (1,497)5,505 — — 4,008 
Balance, June 30, 2023249,361,351 (3,153,770)25 (21,438)1,530,443 (6,383)(583,175)919,472 
Net income (loss)— — — — — — 9,180 9,180 
Other comprehensive income (loss)— — — — — (2,823)— (2,823)
Common stock repurchases— (2,466,609)— (15,754)— — — (15,754)
Share-based payments176,963 (10,264)— (64)3,380 — — 3,316 
Balance, September 30, 2023249,538,314 (5,630,643)$25 $(37,256)$1,533,823 $(9,206)$(573,995)$913,391 
See accompanying notes to unaudited condensed consolidated financial statements.

7

 Custom Truck One Source, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1: Business and Organization
Organization
Custom Truck One Source, Inc., a Delaware corporation, and its wholly owned subsidiaries (“we,” “our,” “us,” or “the Company”) are engaged in the business of providing a range of products and services to customers through rentals and sales of specialty equipment, rentals and sales of aftermarket parts and services related to the specialty equipment, and repair, maintenance and customization services related to that equipment.
We are a specialty equipment provider to the electric utility transmission and distribution, telecommunications, rail, forestry, waste management and other infrastructure-related industries in North America. Our core business relates to our new equipment inventory and rental fleet of specialty equipment that is utilized by service providers in infrastructure development and improvement work. We offer our specialized equipment to a diverse customer base, including utilities and contractors, for the maintenance, repair, upgrade, and installation of critical infrastructure assets, including distribution and transmission electric lines, telecommunications networks and rail systems, as well as for lighting and signage. We rent, produce, sell and service a broad range of new and used equipment, including bucket trucks, digger derricks, dump trucks, cranes, service trucks, and heavy-haul trailers. We manage the business in three reporting segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”).
Basis of Presentation
Our accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). Our condensed consolidated financial statements include the accounts of all wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in accordance with GAAP requires that these Unaudited Condensed Consolidated Financial Statements and most of the disclosures in these Notes be presented on a historical basis, as of or for the current interim period ended or comparable prior period.
The accompanying interim statements of the Company have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, and the Condensed Consolidated Balance Sheet at December 31, 2023 has been derived from the audited consolidated financial statements of Custom Truck One Source, Inc. at that date. Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments and disclosures necessary for a fair statement of these interim statements, have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year or for any other periods. These interim statements should be read in conjunction with the Custom Truck One Source, Inc. audited consolidated financial statements included in the Custom Truck One Source, Inc. Annual Report on Form 10-K for the year ended December 31, 2023.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Recently Issued Accounting Standards
Income Taxes
In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2023-09, Income Taxes—Improvements to Income Tax Disclosures (Topic 740) (“ASU 2023-09”), which expands income tax disclosure requirements to include additional information related to the rate reconciliation of our effective tax rates to statutory rates as well as additional disaggregation of taxes paid. The amendments in the ASU also remove disclosures related to certain unrecognized tax benefits and deferred taxes. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The amendments may be applied prospectively or retrospectively, and early adoption is permitted. We are currently assessing the impact of the requirements on our condensed consolidated financial statements and disclosures.
8

Segment Reporting
In November 2023, the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (Topic 280) (“ASU 2023-07”), which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with retrospective application required and early adoption permitted. We are currently assessing the impact of the requirements on our condensed consolidated financial statements and disclosures.
Note 2: Revenue
Revenue Disaggregation
Geographic Areas
The Company had total revenue in the following geographic areas:
Three Months Ended September 30,Nine Months Ended September 30,
(in $000s)2024202320242023
United States$435,919 $424,513 $1,247,682 $1,305,292 
Canada11,301 9,840 33,858 38,054 
Total Revenue$447,220 $434,353 $1,281,540 $1,343,346 
Major Product Lines and Services
Equipment leasing and equipment sales are the core businesses of the Company, with leasing complemented by the sale of rental units from the rental fleet. The Company’s revenue by major product and service line for the three and nine months ended September 30, 2024 and 2023 are presented in the table below.
9

Three Months Ended September 30,Three Months Ended September 30,
20242023
(in $000s)Topic 842Topic 606TotalTopic 842Topic 606Total
Rental:
Rental$103,703 $— $103,703 $112,373 $— $112,373 
Shipping and handling— 4,621 4,621 — 5,836 5,836 
Total rental revenue103,703 4,621 108,324 112,373 5,836 118,209 
Sales and services:
Equipment sales3,701 301,775 305,476 12,760 270,319 283,079 
Parts and services2,300 31,120 33,420 4,216 28,849 33,065 
Total sales and services6,001 332,895 338,896 16,976 299,168 316,144 
Total revenue$109,704 $337,516 $447,220 $129,349 $305,004 $434,353 
Nine Months Ended September 30,Nine Months Ended September 30,
20242023
(in $000s)Topic 842Topic 606TotalTopic 842Topic 606Total
Rental:
Rental$303,418 $— $303,418 $339,896 $— $339,896 
Shipping and handling— 14,074 14,074 — 18,770 18,770 
Total rental revenue303,418 14,074 317,492 339,896 18,770 358,666 
Sales and services:   
Equipment sales8,273 855,438 863,711 56,535 829,951 886,486 
Parts and services8,170 92,167 100,337 15,969 82,225 98,194 
Total sales and services16,443 947,605 964,048 72,504 912,176 984,680 
Total revenue$319,861 $961,679 $1,281,540 $412,400 $930,946 $1,343,346 
Rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers. Equipment sales recognized pursuant to sales-type leases are recorded within equipment sales revenue. Charges to customers for damaged rental equipment are recorded within parts and services revenue.
Receivables, Contract Assets and Liabilities
As of September 30, 2024 and December 31, 2023, the Company had net receivables related to contracts with customers of $81.5 million and $112.1 million, respectively. As of September 30, 2024 and December 31, 2023, the Company had net receivables related to rental contracts and other of $94.3 million and $103.0 million, respectively.
The Company manages credit risk associated with its accounts receivable at the customer level. Because the same customers generate the revenues that are accounted for under both Topic 606 and Topic 842, the discussions below address how credit risk and the Company's allowance for credit losses impact the Company's total revenues.
The Company’s allowance for credit losses reflects its estimate of the amount of receivables that it will be unable to collect. The estimated losses are based upon a review of outstanding receivables, the related aging, including specific accounts if deemed necessary, and on the Company’s historical collection experience. The estimated losses are calculated using the loss rate method based upon a review of outstanding receivables, related aging, and historical collection experience. The Company's estimates reflect changing circumstances, including changes in the economy or in the particular circumstances of individual customers, and, as a result, the Company may be required to increase or decrease its allowance.
Accounts receivable, net consisted of the following:
(in $000s)September 30, 2024December 31, 2023
Accounts receivable$194,022 $232,592 
Less: allowance for doubtful accounts(17,985)(17,503)
Accounts receivable, net$176,037 $215,089 
For the nine months ended September 30, 2024 and 2023, the Company wrote-off $8.4 million and $9.6 million, respectively, of receivables, net of recoveries.
10

When customers are billed for rentals in advance of the rental period, the Company defers recognition of revenue. As of both September 30, 2024 and December 31, 2023, the Company had approximately $2.8 million of deferred rental revenue. Additionally, the Company collects deposits from customers for orders placed for equipment and rentals. The Company had approximately $17.3 million and $25.9 million in deposits as of September 30, 2024 and December 31, 2023, respectively. All of the $25.9 million deposit liability balance as of December 31, 2023, was recorded as revenue during the nine months ended September 30, 2024 due to performance obligations being satisfied. The Company’s remaining performance obligations on its equipment deposit liabilities have original expected durations of one year or less.
The Company does not have material contract assets, and as such, did not recognize any material impairments of any contract assets.
Note 3: Sales-Type Leases
Revenue from rental agreements qualifying as sales-type leases was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in $000s)2024202320242023
Equipment sales$3,701 $12,760 $8,273 $56,535 
Cost of equipment sales4,111 11,714 8,162 54,354 
Gross margin$(410)$1,046 $111 $2,181 
As these transactions remained under rental contracts, $3.7 million and $7.1 million for the three months ended September 30, 2024 and 2023, respectively, and $14.6 million and $22.2 million for the nine months ended September 30, 2024 and 2023, respectively, were billed under the contracts as rentals. Interest income from financing receivables was $2.8 million and $4.5 million for the three months ended September 30, 2024 and 2023, respectively, and $8.8 million and $12.3 million for the nine months ended September 30, 2024 and 2023, respectively.
Note 4: Inventory
Whole goods inventory is comprised of chassis, attachments (i.e., boom cranes, aerial lifts, digger derricks, dump bodies, etc.) and the in-process costs incurred in the final assembly of those units. As part of the business model, the Company sells unassembled individual whole goods and whole goods with varying levels of customization direct to consumers or dealers. Whole goods inventory also includes new equipment purchased specifically for resale to customers. Inventory consisted of the following:
(in $000s)September 30, 2024December 31, 2023
Whole goods$1,068,328 $846,170 
Aftermarket parts and services inventory132,597 139,624 
Inventory$1,200,925 $985,794 
Note 5: Floor Plan Financing
Floor plan payables represent financing arrangements to facilitate the Company’s purchase of new and used trucks, cranes, and construction equipment inventory. All floor plan payables are collateralized by the inventory financed. These payables become due and payable upon the sale, transfer, or reclassification of each unit of inventory. Certain floor plan arrangements require the Company to satisfy various financial ratios consistent with those under the ABL Facility (as defined below). As of September 30, 2024, the Company was in compliance with these covenants.
The amounts owed under floor plan payables are summarized as follows:
(in $000s)September 30, 2024December 31, 2023
Trade:
Daimler Truck Financial$237,938 $181,480 
PACCAR Financial Services148,859 71,717 
Ford Motor Credit Company, LLC41,959 — 
Trade floor plan payables$428,756 $253,197 
Non-trade:
PNC Equipment Finance, LLC$493,786 $409,113 
Non-trade floor plan payables$493,786 $409,113 
11

Interest on outstanding floor plan payable balances is due and payable monthly. Floor plan interest expense was $16.7 million and $45.0 million for the three and nine months ended September 30, 2024, respectively, and $10.1 million and $25.0 million for the same periods in 2023.
Trade Floor Plan Financing:
Daimler Truck Financial
The Company is party to the Wholesale Financing Agreement with Daimler Truck Financial (the “Daimler Facility”), which bears interest at a rate of U.S. Prime Rate plus 0.80% after an initial interest free period of up to 150 days. The total borrowing capacity under the Daimler Facility is $225.0 million, however, from time to time, Daimler extends credit to the Company in excess of this amount. The Daimler agreement is evergreen and is subject to termination by either party through written notice.
PACCAR
The Company has an Inventory Financing Agreement with PACCAR Financial Corp that provides the Company with a line of credit of $150.0 million to finance inventory purchases of new Peterbilt and/or Kenworth trucks, tractors, and chassis. Amounts borrowed against this line of credit incur interest at a rate of U.S. Prime Rate minus 0.71%. The PACCAR agreement extends automatically each April and is subject to termination by either party through written notice. In October 2024, the revolving credit facility limit was increased to $175.0 million.
Ford Motor Credit Company, LLC
On April 2, 2024, the Company entered into the Master Loan and Security Agreement with Ford Motor Credit Company, LLC (the “FMCC Facility”), which allows the Company to enter into individual loan supplements which bear interest based on the bank prime loan rate as reported by the Federal Reserve Board for the Friday preceding the last Monday of a given month. The total borrowing capacity under the FMCC Facility as of September 30, 2024 was $42.0 million. The FMCC agreement is evergreen and is subject to termination by either party through written notice.
References to the U.S. Prime Rate in the foregoing agreements represent the rate as published in The Wall Street Journal.
Non-Trade Floor Plan Financing:
PNC Equipment Finance, LLC
The Company has an Inventory Loan, Guaranty and Security Agreement (the “Loan Agreement”) with PNC Equipment Finance, LLC. The Loan Agreement, as of September 30, 2024, provides the Company with a $500.0 million revolving credit facility, which matures on August 25, 2025 and bears interest at a three-month term secured overnight financing rate (“SOFR”) plus 3.00%.
Note 6: Rental Equipment
Rental equipment, net consisted of the following:
(in $000s)September 30, 2024December 31, 2023
Rental equipment$1,491,918 $1,405,532 
Less: accumulated depreciation(516,789)(488,828)
Rental equipment, net$975,129 $916,704 
Note 7: Goodwill
We recognize goodwill when the purchase price of an acquired business exceeds the fair value of net assets acquired. Goodwill is not amortized for financial reporting purposes. Goodwill is impaired when its carrying value exceeds its implied fair value. We perform our goodwill impairment analysis annually on October 1 or more frequently if an event or circumstance (such as a significant adverse change in the business climate, operating performance metrics, or legal factors) indicates that an impairment may have occurred. If the fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not considered impaired. If the carrying value of the reporting unit exceeds its fair value, then there is an indication impairment may exist.
During the quarter ended June 30, 2024, we identified factors indicating goodwill may be impaired related to two of our reporting units, ERS and APS. These factors were decreased utilization levels driven by continuing transmission project declines and delays. To derive the fair value of each reporting unit, we utilized the income approach, specifically the discounted cash flow method, as well as the market approach, which included analysis of comparable publicly-traded companies, to determine the fair value of the reporting
12

units. The income method approach calculates fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting these after-tax cash flows to a present value using a risk-adjusted discount rate. The market approach analyzed how the market values of comparable publicly-traded companies’ operating metrics, such as sales and earnings, compare to each of the respective metrics of the reporting units. These methodologies are consistent with how we estimate the fair value of reporting units during the annual goodwill impairment test. Inputs used to calculate fair value of our reporting units are considered “Level 3” inputs of the fair value hierarchy and include the following:
•Our projections were based on management's assessment of macroeconomic variables, industry trends and market opportunities, as well as our strategic objectives and future growth plans. Revenue growth rates assumed from approximately 5% to 7% for 2025 and from approximately 3% to 8% for 2026 and beyond.
•The discount rate used to measure the present value of the projected future cash flows is set using a weighted-average cost of capital method that considers market and industry data, as well as our specific risk factors that are likely to be considered by a market participant. The weighted-average cost of capital is our estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise. The discount rates applied to the reporting units ranged from 10.0% to 10.5%.
As a result of our fair value calculations, we determined that the fair value of the reporting units exceeded their carrying values. Accordingly, goodwill related to the reporting units was not considered impaired. 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 concluded another interim test was not necessary as we did not identify any triggering factors that could indicate goodwill impairment.
Note 8: Long-Term Debt
Debt obligations and associated interest rates consisted of the following:
(in $000s) September 30, 2024December 31, 2023September 30, 2024December 31, 2023
ABL Facility$627,900 $552,400 7.0%7.7%
2029 Secured Notes920,000 920,000 5.5%5.5%
2023 Credit Facility17,733 13,800 5.8%5.8%
Other notes payable23,920 31,599 
3.1%-3.5%
3.1%-7.9%
Total debt outstanding1,589,553 1,517,799 
Deferred financing fees(20,992)(22,406)
Total debt net of deferred financing fees1,568,561 1,495,393 
Less: current maturities(1,458)(8,257)
Long-term debt$1,567,103 $1,487,136 
As of September 30, 2024, borrowing availability under the ABL Facility was $319.0 million, and outstanding standby letters of credit were $3.1 million.
ABL Facility
On August 9, 2024, the Company and certain of its direct and indirect subsidiaries entered into an amendment to its asset-based revolving credit agreement (the “ABL Amendment,” and the credit agreement as amended, supplemented or modified, including by the ABL Amendment, the “ABL Credit Agreement”), to increase the borrowing capacity under its first lien senior secured asset-based revolving credit facility (the “ABL Facility”) from $750.0 million to $950.0 million, and extend the maturity date of the agreement from April 1, 2026 to August 9, 2029, or, if earlier, the date that is 91 days prior to the maturity date of the Company’s existing senior notes or any debt that refinances such existing notes. Additionally, the ABL Amendment changes the rate provisions for Canadian dollar denominated loans from the Canadian dollar offered rate to the term Canadian Overnight Repo Rate Average (the “CORRA” rate), and adds a leverage based step-down to the pricing grid otherwise based on Average Availability (as defined in the ABL Credit Agreement).
Borrowings under the ABL Facility bear interest at a floating rate, which, at the Company’s election, could be (a) in the case of U.S. dollar denominated loans, either (i) SOFR plus an applicable margin or (ii) the base rate plus an applicable margin; or (b) in the case of Canadian dollar denominated loans, the CORRA rate plus an applicable margin. The applicable margin varies based on Average Availability (as defined in the ABL Credit Agreement) from (a) with respect to base rate loans, 0.50% to 1.00% and (b) with respect to SOFR loans and CORRA rate loans, 1.50% to 2.00%.

13

2023 Credit Facility
On January 13, 2023, the Company entered into a new credit agreement allowing for borrowings of up to $18.0 million (the “2023 Credit Facility”). Proceeds from the credit agreement were used to finance a portion of the Company’s acquisition of real property from a related party in December 2022. A portion of the loan proceeds has been used to finance improvements to the property. In connection with entering into the agreement, the Company received net proceeds of $13.7 million. During the first quarter of 2024, the Company drew down an additional $4.2 million, as certain required construction milestones were met. Borrowings bear interest at a fixed rate of 5.75% per annum and are required to be repaid monthly in an amount of approximately $0.1 million with a balloon payment due on the maturity date of January 13, 2028. Borrowings are secured by the real property and improvements.
Note 9: Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net earnings (loss) by the weighted-average number of shares of common stock outstanding. Diluted earnings (loss) per share includes the effects of potentially dilutive shares of common stock, if dilutive. Potentially dilutive effects include the exercise of warrants, contingently issuable shares, or share-based compensation. Our potentially dilutive shares aggregated 9.8 million and 24.8 million for the three and nine months ended September 30, 2024, respectively, and 29.1 million and 29.0 million for the same periods in 2023, and were not included in the computation of diluted earnings (loss) per share because the impact would have been anti-dilutive.
The following tables set forth the computation of basic and dilutive earnings per share:
Three Months Ended September 30, 2024Three Months Ended September 30, 2023
(in $000s, except per share data)Net Income (loss)Weighted Average SharesPer Share AmountNet IncomeWeighted Average SharesPer Share Amount
Basic earnings (loss) per share$(17,416)234,438$(0.07)$9,180 245,810$0.04 
Dilutive common share equivalents— —— — 784— 
Diluted earnings (loss) per share$(17,416)234,438$(0.07)$9,180 246,594$0.04 
Nine Months Ended September 30, 2024Nine Months Ended September 30, 2023
(in $000s, except per share data)Net Income (loss)Weighted Average SharesPer Share AmountNet Income Weighted Average SharesPer Share Amount
Basic earnings (loss) per share$(56,229)238,162 $(0.24)$34,590 245,987 $0.14 
Dilutive common share equivalents— — — — 822— 
Diluted earnings (loss) per share$(56,229)238,162 $(0.24)$34,590 246,809 $0.14 
Note 10: Equity
Preferred Stock
As of both September 30, 2024 and December 31, 2023, we were authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share, with such designation, rights and preferences as may be determined from time to time by our board of directors. As of both September 30, 2024 and December 31, 2023, there were no shares of preferred stock issued or outstanding.
Common Stock
As of both September 30, 2024 and December 31, 2023, we were authorized to issue 500,000,000 shares of common stock with a par value of $0.0001 per share.
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On August 2, 2022, the Company’s Board of Directors authorized a stock repurchase program, allowing for the repurchase of up to $30 million of the Company’s shares of common stock, which authorization was further increased by $25 million of shares on September 14, 2023, and increased again by $25 million of shares on March 11, 2024, upon exhaustion of prior authorization. Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions, or otherwise, all in accordance with the rules of the Securities and Exchange Commission and other applicable legal requirements. The specific timing, price and size of purchases will depend on prevailing stock prices, general economic and market conditions, and other considerations. The repurchase program does not obligate the Company to acquire any particular amount of its common stock, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion.
During the three and nine months ended September 30, 2024, the Company repurchased approximately 1.3 million and 5.9 million shares of its common stock, respectively, which are held in treasury, for a total cost of $5.5 million and $28.6 million, including commission fees. During the three and nine months ended September 30, 2023, the Company repurchased approximately 2.5 million and 3.1 million shares of common stock, respectively, for a total cost of $15.8 million and $20.1 million. At September 30, 2024, $1.9 million was available under the stock repurchase program.
Contingently Issuable and Earnout Shares
Contingently Issuable Shares
NESCO Holdings, LP is a Delaware limited partnership holding shares of our common stock. NESCO Holdings, LP is owned and controlled by Energy Capital Partners, and, as of September 30, 2024, had the right to receive 1,651,798 shares of common stock if during the seven-year period ending July 31, 2026, the trading price of common stock exceeds $19.00 per share for any 20 trading days during a 30 consecutive trading day period or if a sale transaction of the Company occurs in which the consideration paid per share to holders of common stock exceeds $19.00 per share.
Earnout Shares
Pursuant to the Stockholders’ Agreement dated July 31, 2019 (as amended and restated from time to time, the “Stockholders’ Agreement”), certain stockholders agreed to restrictions on approximately 3,100,000 of their shares of the Company’s Common Stock (the “Earnout Shares”). The Earnout Shares shall be automatically forfeited by the holders thereof to the Company for no consideration with respect to (i) 2.8 million shares unless the trading price of the Common Stock equals or exceeds certain price targets by July 31 2024 (the “Minimum and Second Target Earnout Shares”) and (ii) 0.3 million shares unless the trading price of the Common Stock equals or exceeds $19.00 per share for any period of 20 trading days out of 30 consecutive trading days to and including July 31, 2026 (the “Maximum Target Earnout Shares”). On July 31, 2024, the price targets for the Minimum and Second Target Earnout Shares were not met, and such shares were forfeited by the respective holders pursuant to the Stockholders’ Agreement.
Note 11: Fair Value Measurements
The FASB accounting standards provide a comprehensive framework for measuring fair value and sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs.
The following table sets forth the carrying values (exclusive of deferred financing fees) and fair values of our financial liabilities:
Carrying ValueFair Value
(in $000s)Level 1Level 2Level 3
September 30, 2024
ABL Facility$627,900 $— $627,900 $— 
2029 Secured Notes920,000 — 841,800 — 
2023 Credit Facility17,733 — 17,733 — 
Other notes payable23,920 — 23,920 — 
December 31, 2023
ABL Facility$552,400 $— $552,400 $— 
2029 Secured Notes920,000 — 846,400 — 
2023 Credit Facility13,800 — 13,800 — 
Other notes payable31,599 — 31,599 — 
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The carrying amounts of the ABL Facility, 2023 Credit Facility and other notes payable approximated fair value as of September 30, 2024 and December 31, 2023 based upon terms and conditions available to the Company at those dates in comparison to the terms and conditions of its outstanding debt. The estimated fair value of the 2029 Secured Notes is calculated using Level 2 inputs, based on bid prices obtained from brokers.
Note 12: Income Taxes
For interim periods, we estimate our annual effective tax rate, exclusive of discrete items, which is derived primarily by our estimate of our valuation allowance as of the end of our fiscal year. The Company’s effective tax rate for the nine months ended September 30, 2024 and 2023 differs from the U.S. federal statutory tax rate due to the recording of valuation allowances. We recorded an income tax expense of $0.5 million for the nine months ended September 30, 2024 resulting in an effective tax rate of (0.9)% compared to an income tax expense of $2.7 million for the comparable prior year period, at an effective tax rate of 7.2%. The decrease in the effective tax rate for the nine months ended September 30, 2024 compared to same period in 2023, was primarily due to state and local income tax updates enacted during the current period.
The Organization for Economic Cooperation and Development (“OECD”) has issued “Pillar Two” model rules introducing a new global minimum tax of 15% effective on January 1, 2024. While the US has not adopted the Pillar Two rules, effective June 20, 2024, Canada has enacted legislation formally adopting Pillar Two. As currently designed, Pillar Two will ultimately apply to our worldwide operations. Considering we do not have material operations in jurisdictions with tax rates lower than the Pillar Two minimum, these rules are not expected to materially increase our global tax liability. We will continue to monitor US and global legislative activities related to Pillar Two.
Note 13: Commitments and Contingencies
We record a liability when we believe that it is both probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. We review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information.
Legal Matters
In the normal course of business, there are various claims in process, matters in litigation, and other contingencies. At this time, no claims of these types, certain of which are covered by insurance policies, have had a material effect on the Company. Certain jurisdictions in which the Company operates do not allow insurance recoveries related to punitive damages. For matters pertaining to the pre-acquisition activities of Custom Truck One Source, L.P. (“Custom Truck LP”), the sellers of Custom Truck LP have agreed to indemnify the Company for losses arising out of the breach of pre-closing covenants in the purchase agreement and certain indemnified tax matters discussed below, with recourse limited to $10.0 million and $5.0 million escrow accounts, respectively.
From time to time, the Company is audited by state and local taxing authorities. These audits typically focus on the Company’s withholding of state-specific sales tax and rental-related taxes.
Custom Truck LP’s withholdings of federal excise taxes for each of the four quarterly periods during 2015 are currently under audit by the IRS. The IRS issued an assessment on October 28, 2020 in an aggregate amount of $2.4 million for the 2015 periods, alleging that certain types of sold equipment are not eligible for the Mobile Machinery Exemption set forth in the Internal Revenue Code (the “Code”). An appeal was filed on January 28, 2021. Based on management’s understanding of the facts and circumstances, including the relevant provisions of the Code, and historical precedent, including previous successful appeals of similar assessments in prior years, management does not believe the likelihood of a loss resulting from the IRS assessment to be probable at this time.
While it is not possible to predict the outcome of the foregoing matters with certainty, it is the opinion of management that the final outcome of these matters will not have a material effect on the Company’s consolidated financial condition, results of operations and cash flows.
Purchase Commitments
We enter into purchase agreements with manufacturers and suppliers of equipment for our rental fleet and inventory. All of these agreements are cancellable within a specified notification period to the supplier.
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Note 14: Related Parties
The Company has transactions with related parties as summarized below.
Rentals and Sales — The Company rents and sells equipment and provides services to R&M Equipment Rental, a business partially owned by members of the Company’s management. The Company also rents equipment and purchases inventory from R&M Equipment Rental.
Other — The Company has purchased aircraft charter services from entities owned by members of the Company’s management and their immediate families. Charter services payments related to these transactions are immaterial. Air travel expenses are recorded in selling, general, and administrative expenses.
Management Fees — The Company is obligated under a Corporate Advisory Services Agreement with Platinum, under which management fees are payable to Platinum quarterly. The management fees are recorded in transaction expenses and other in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss).
A summary of the transactions with the foregoing related parties included in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in $000s)2024202320242023
Total revenues from transactions with related parties$6,341 $4,728 $17,945 $23,231 
Expenses incurred from transactions with related parties included in cost of revenue$287 $239 $1,039 $1,091 
Expenses incurred from transactions with related parties included in operating expenses$693 $1,391 $2,093 $4,154 
Amounts receivable from/payable to related parties included in the Condensed Consolidated Balance Sheets are as follows:
(in $000s)September 30, 2024December 31, 2023
Accounts receivable from related parties$1,499 $695 
Accounts payable to related parties$115 $140 
Note 15: Segments
Our operations are primarily organized and managed by operating segment. Operating segment performance and resource allocations are primarily based on gross profit. Intersegment sales and any related profits are eliminated in consolidation. We manage the business in three reporting segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”).
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The Company’s segment results are presented in the tables below:
Three Months Ended September 30,
2024
(in $000s)ERSTESAPSTotal
Revenue:
Rental$105,317 $— $3,007 $108,324 
Equipment sales45,574 259,902 — 305,476 
Parts and services— — 33,420 33,420 
Total revenue150,891 259,902 36,427 447,220 
Cost of revenue:
Rentals/parts and services29,415 — 28,033 57,448 
Equipment sales33,975 218,012 — 251,987 
Depreciation of rental equipment44,964 — 992 45,956 
Total cost of revenue108,354 218,012 29,025 355,391 
Gross profit$42,537 $41,890 $7,402 $91,829 
Three Months Ended September 30,
2023
(in $000s)ERSTESAPSTotal
Revenue:
Rental$114,929 $— $3,280 118,209 
Equipment sales52,175 230,904 — 283,079 
Parts and services— — 33,065 33,065 
Total revenue167,104 230,904 36,345 434,353 
Cost of revenue:
Rentals/parts and services29,613 — 26,203 55,816 
Equipment sales37,828 191,084 — 228,912 
Depreciation of rental equipment41,652 — 817 42,469 
Total cost of revenue109,093 191,084 27,020 327,197 
Gross profit$58,011 $39,820 $9,325 $107,156 

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Nine Months Ended September 30,
2024
(in $000s)ERSTESAPSTotal
Revenue:
Rental$309,304 $— $8,188 $317,492 
Equipment sales116,026 747,685 — 863,711 
Parts and services— — 100,337 100,337 
Total revenue425,330 747,685 108,525 1,281,540 
Cost of revenue:
Rentals/parts and services88,496 — 82,849 171,345 
Equipment sales83,865 620,240 — 704,105 
Depreciation of rental equipment131,242 — 3,043 134,285 
Total cost of revenue303,603 620,240 85,892 1,009,735 
Gross profit$121,727 $127,445 $22,633 $271,805 
Nine Months Ended September 30,
2023
(in $000s)ERSTESAPSTotal
Revenue:
Rental$346,545 $— $12,121 $358,666 
Equipment sales195,005 691,481 — 886,486 
Parts and services— — 98,194 98,194 
Total revenue541,550 691,481 110,315 1,343,346 
Cost of revenue:
Rentals/parts and services90,014 — 79,178 169,192 
Equipment sales148,711 571,592 — 720,303 
Depreciation of rental equipment123,969 — 2,446 126,415 
Total cost of revenue362,694 571,592 81,624 1,015,910 
Gross profit$178,856 $119,889 $28,691 $327,436 
Total assets by operating segment are not disclosed herein because asset by operating segment data is not reviewed by the chief operating decision-maker (“CODM”) to assess performance and allocate resources.
Gross profit is the primary operating result whereby our segments are evaluated for performance and resource allocation. The following table presents a reconciliation of consolidated gross profit to consolidated income (loss) before income taxes:
Three Months Ended September 30,Nine Months Ended September 30,
(in $000s)2024202320242023
Gross profit$91,829 $107,156 $271,805 $327,436 
Selling, general and administrative expenses54,630 56,955 168,322 171,974 
Amortization6,696 6,698 19,966 19,976 
Non-rental depreciation3,472 2,602 9,752 7,973 
Transaction expenses and other3,994 2,890 14,684 10,039 
Interest expense, net43,875 34,144 124,191 94,945 
Financing and other expense (income)(2,818)(5,745)(9,399)(14,744)
Income (loss) before income taxes$(18,020)$9,612 $(55,711)$37,273 
The following table presents total assets by country:
(in $000s) September 30, 2024December 31, 2023
Assets:
United States$3,457,031 $3,243,619 
Canada122,909 124,178 
       Total Assets$3,579,940 $3,367,797 
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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Any statements made in this report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, and should be evaluated as such. These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “estimate,” “target,” “project,” “should,” “could,” “would,” “may,” “will,” “forecast,” and other similar expressions. We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this report, you should understand that these statements are not guarantees of performance or results and are subject to and involve risks, uncertainties and assumptions. You should not place undue reliance on these forward-looking statements or projections. Below is a summary of risk factors applicable to us that may materially affect such forward-looking statements and projections:
•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;
•competition in the equipment dealership and rental industries;
•our sales order backlog may not be indicative of the level of our future revenues;
•increases in unionization rate in our workforce;
•our inability to recruit and retain the experienced personnel, including skilled technicians, we need to compete in our industries;
•our inability to attract and retain highly skilled personnel and our inability to retain or plan for succession of our senior management;
•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;
•potential impairment charges;
•any further increase in the cost of new equipment that we purchase for use in our rental fleet or for sale as inventory;
•aging or obsolescence of our existing equipment, and the fluctuations of market value thereof;
•disruptions in our supply chain;
•our business may be impacted by government spending;
•we may experience losses in excess of our recorded reserves for receivables;
•uncertainty relating to macroeconomic conditions, unfavorable conditions in the capital and credit markets and our inability to obtain additional capital as required;
•increases in price of fuel or freight;
•regulatory technological advancement, or other changes in our core end-markets may affect our customers’ spending;
•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;
•the interest of our majority stockholder, which may not be consistent with the other stockholders;
•our significant indebtedness, which may adversely affect our financial position, limit our available cash and our access to additional capital, prevent us from growing our business and increase our risk of default;
•our inability to generate cash, which could lead to a default;
•significant operating and financial restrictions imposed by our debt agreements;
•changes in interest rates, which could increase our debt service obligations on the variable rate indebtedness and decrease our net income and cash flows;
•disruptions or security compromises affecting our information technology systems or those of our critical services providers could adversely affect our operating results by subjecting us to liability, and limiting our ability to effectively monitor and control our operations, adjust to changing market conditions, or implement strategic initiatives;
•we are subject to complex laws and regulations, including environmental and safety regulations that can adversely affect cost, manner or feasibility of doing business;
•material weakness in our internal control over financial reporting which, if not remediated, could result in material misstatements in our financial statements;
•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.
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These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. See “Risk Factors” in Part I, Item 1A of the Annual Report for the year ended December 31, 2023 and in Part II, Item 1A of this report, for additional risks.
Custom Truck One Source, Inc., a Delaware corporation, and its wholly owned subsidiaries (“we,” “our,” “us,” or “the Company”) are engaged in the business of providing a range of products and services to customers through rentals and sales of specialty equipment, rentals and sales of aftermarket parts and services related to the specialty equipment, and repair, maintenance and customization services related to that equipment.
We are a specialty equipment provider to the electric utility transmission and distribution, telecommunications, rail, forestry, waste management and other infrastructure-related industries in North America. Our core business relates to our new equipment inventory and rental fleet of specialty equipment that is utilized by service providers in infrastructure development and improvement work. We offer our specialized equipment to a diverse customer base, including utilities and contractors, for the maintenance, repair, upgrade, and installation of critical infrastructure assets, including distribution and transmission electric lines, telecommunications networks and rail systems, as well as for lighting and signage. We rent, produce, sell and service a broad range of new and used equipment, including bucket trucks, digger derricks, dump trucks, cranes, service trucks, and heavy-haul trailers. We manage the business in three reporting segments: Equipment Rental Solutions (“ERS”), Truck and Equipment Sales (“TES”) and Aftermarket Parts and Services (“APS”).
Financial and Performance Measures
Financial Measures
Revenue — As a full-service equipment provider, we generate revenue through renting, selling, assembling, upfitting, and servicing new and used heavy-duty trucks and cranes, as well as the sale of related parts. We also sell and rent specialized tools on an individual basis and in kits. Rental revenue is primarily comprised of revenues from rental agreements and freight charges billed to customers. 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.
Cost of rental revenue — Cost of rental revenue reflects repairs and maintenance costs of rental equipment, parts costs, labor and other overheads related to maintaining the rental fleet, and freight associated with the shipping of rental equipment.
Depreciation of rental equipment — Depreciation of rental equipment is comprised of depreciation expense on the rental fleet. We allocate the cost of rental equipment generally over the rentable life of the equipment. The depreciation allocation is based upon estimated lives ranging from five to seven years. The cost of equipment is depreciated to an estimated residual value using the straight-line method.
Cost of equipment sales — Cost of equipment sales reflects production and inventory costs associated with new units sold, parts costs, labor and other overheads related to production, and freight associated with the shipping and receiving of equipment and parts. Cost of equipment sales also includes the net book value of rental units sold, including active rental contracts which qualify to be accounted for as sales-type leases.
Selling, general and administrative expenses — Selling, general and administrative expenses include sales compensation, fleet licensing fees and corporate expenses, including salaries, stock-based compensation expense, insurance, advertising costs, professional services, fees earned on customer arranged financing, gains or losses resulting from insurance settlements, and information technology costs.
Amortization and non-rental depreciation — Amortization expense relates to intangible assets such as customer lists, trade names, etc. Non-rental depreciation expense reflects the depreciation of property and equipment that is not part of the rental fleet.
Transaction expenses 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.
Financing and other expense (income) — Financing and other expense (income) reflects the financing expense (income) associated with lease agreements qualifying to be accounted for as a sales-type lease, foreign currency gains and losses related to our Canadian


operations, as well as other miscellaneous gains or losses from non-operating activities. Also included in financing and other expense (income) are the unrealized remeasurement gains and losses related to derivative financial instruments.
Interest expense — Interest expense consists of contractual interest expense on outstanding debt obligations, floorplan financing facilities, amortization of deferred financing costs and other related financing expenses.
Income Tax Expense (Benefit) — We have net operating loss carryforward and disallowed interest deduction carryforward assets, which are generally available to be used to offset taxable income generated in future years. Due to limitations on the use of these carryforwards under U.S. federal and state income tax regulations, we record valuation allowances to reduce the carryforward assets to amounts that we estimate will be realized. Accordingly, income tax expense or benefit generally is comprised of changes to these valuation allowance estimates and does not reflect taxes on current period income (or tax benefit on current period losses). For these reasons, our effective tax rate differs from the federal statutory tax rate.
Operating Metrics
We consider the following key operational metrics, which are consistent with those defined by the American Rental Association, when evaluating our performance and making day-to-day operating decisions:
Ending OEC — Ending original equipment cost (“OEC”) is the original equipment cost of units at the end of the measurement period. OEC represents the original equipment cost, and excludes the effect of adjustments to rental equipment fleet acquired in business combinations. OEC is the basis for calculating certain of the measures set forth below. Additionally, the pricing of our rental contracts and equipment sales prices for our equipment is based upon OEC, and we measure a rate of return from our rentals and sales using OEC. OEC is a widely used industry metric to compare fleet dollar value independent of depreciation.
Average OEC on rent — Average OEC on rent is calculated as the weighted-average OEC on rent during the stated period.
Fleet utilization — Fleet utilization is defined as the total number of days the rental equipment was rented during a specified period of time divided by the total number of days available during the same period and weighted based on OEC. Utilization is a measure of fleet efficiency expressed as a percentage of time the fleet is on rent and is considered to be an important indicator of the revenue generating capacity of the fleet.
OEC on rent yield — OEC on rent yield (“ORY”) is a measure of return realized by our rental fleet during a period. ORY is calculated as rental revenue (excluding freight recovery and ancillary fees) during the stated period divided by the average OEC on rent for the same period. For periods less than 12 months, ORY is adjusted to an annualized basis.
Sales order backlog — Sales order backlog consists of purchase orders received for customized and stock equipment. Sales order backlog should not be considered an accurate measure of future net sales.
Operating Segments
We operate in three reportable operating segments: Equipment Rental Solutions, Truck and Equipment Sales and Aftermarket Parts and Services.
Equipment Rental Solutions (“ERS”) Segment — We own a broad range of new and used specialty equipment, including truck-mounted aerial lifts, cranes, service trucks, dump trucks, trailers, digger derricks and other machinery and equipment. As of 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.
Truck and Equipment Sales (“TES”) Segment — We offer a broad variety of new equipment for sale to be used across our end-markets, which can be modified to meet our customers’ specific needs. We believe that our integrated production capabilities and extensive knowledge gained over a long history of selling equipment have established us as a trusted partner for customers seeking tailored solutions with short lead times. In support of these activities, we primarily employ a direct-to-customer sales model, leveraging our dedicated sales force of industry and product managers, who are focused on driving national and local sales. We also
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opportunistically engage in the sale of used equipment purchased from third parties or received via trade-ins from new equipment sales customers. In the majority of these cases, we will sell used equipment directly to customers, rather than relying on auctions. Activities in our TES segment consist of the production and sale of new and used specialty equipment and vocational trucks, which includes equipment from leading original equipment manufacturers (“OEMs”) across our end-markets, as well as our Load KingTM brand.
Aftermarket Parts and Services (“APS”) Segment — The APS segment includes the sale of specialized aftermarket parts, including captive parts related to our Load KingTM brand, used in the maintenance and repair of the equipment we sell and rent. Specialized tools, including stringing blocks, insulated hot stick, and rigging equipment, are sold or rented to our customers on an individual basis or in packaged specialty kits. We also provide truck and equipment maintenance and repair services, which are executed throughout our nationwide branch network and fleet of mobile technicians supported by our 24/7 call center based in Kansas City, Missouri.
Results of Operations
Three and nine months ended September 30, 2024, compared to the same periods in 2023
Consolidated Results of Operations
Three Months Ended
(in $000s)September 30, 2024% of revenueSeptember 30, 2023% of revenue$ Change% changeJune 30, 2024% of revenue
Rental revenue$108,324 24.2%$118,209 27.2%$(9,885)(8.4)%$102,997 24.3%
Equipment sales305,476 68.3%283,079 65.2%22,397 7.9%285,633 67.5%
Parts sales and services33,420 7.5%33,065 7.6%355 1.1%34,383 8.1%
Total revenue447,220 100.0%434,353 100.0%12,867 3.0%423,013 100.0%
Cost of revenue, excluding rental equipment depreciation309,435 69.2%284,72865.6%24,707 8.7%289,161 68.4%
Depreciation of rental equipment45,956 10.3%42,469 9.8%3,487 8.2%44,585 10.5%
Gross profit91,829 20.5%107,156 24.7%(15,327)(14.3)%89,267 21.1%
Operating expenses68,792 69,145 (353)(0.5)%71,593 
Operating income 23,037 38,011 (14,974)(39.4)%17,674 
Total other expense41,057 28,399 12,658 44.6%39,082 
Income (loss) before income taxes(18,020)9,612 (27,632)(287.5)%(21,408)
Income tax expense (benefit)(604)432 (1,036)(239.8)%3,070 
Net income (loss)$(17,416)$9,180 $(26,596)(289.7)%$(24,478)
Nine Months Ended September 30,
(in $000s)2024% of revenue2023% of revenue$ Change% of change
Rental revenue$317,492 24.8 %$358,666 26.7%$(41,174)(11.5)%
Equipment sales863,711 67.4 %886,486 66.0%(22,775)(2.6)%
Parts sales and services100,337 7.8 %98,194 7.3%2,143 2.2 %
Total revenue1,281,540 100.0 %1,343,346 100.0%(61,806)(4.6)%
Cost of revenue, excluding rental equipment depreciation875,450 68.3 %889,495 66.2%(14,045)(1.6)%
Depreciation of rental equipment134,285 10.5 %126,415 9.4%7,870 6.2 %
Gross profit271,805 21.2 %327,436 24.4%(55,631)(17.0)%
Operating expenses212,724 209,962 2,762 1.3 %
Operating income 59,081 117,474 (58,393)(49.7)%
Total other expense114,792 80,201 34,591 43.1 %
Income (loss) before income taxes(55,711)37,273 (92,984)(249.5)%
Income tax expense518 2,683 (2,165)(80.7)%
Net income (loss)$(56,229)$34,590 $(90,819)(262.6)%
23

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.
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.
Cost of Revenue, Excluding Rental Equipment Depreciation - The increase in cost of revenue, excluding rental equipment depreciation for the three months ended September 30, 2024, compared to the same period in 2023, was driven primarily by the increase in equipment sales volume during the quarter.
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.
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.
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.
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.
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.
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.
Operating Metrics
We principally evaluate operational performance based on the following metrics: ending OEC, average OEC on rent, fleet utilization, and OEC on rent yield. We also report sales order backlog related to our customers’ orders for new vocational heavy duty trucks as an indicator of the demand environment for our products. The table below presents these key measures.
Three Months Ended
(in $000s)September 30, 2024September 30, 2023 Change% ChangeJune 30, 2024% Change
Ending OEC $1,493,799 $1,465,989 $27,810 1.9 %$1,457,955 2.5 %
Average OEC on rent$1,082,679 $1,155,598 $(72,919)(6.3)%$1,044,683 3.6 %
Fleet utilization73.2 %78.9 %(5.7)%(7.2)%71.7 %2.1 %
OEC on rent yield38.4 %40.8 %(2.4)%(5.9)%40.0 %(4.0)%
Sales order backlog$395,603 $779,295 $(383,692)(49.2)%$478,244 (17.3)%
Nine Months Ended September 30,
(in $000s)20242023 Change% Change
Ending OEC $1,493,799 $1,465,989 $27,810 1.9 %
Average OEC on rent$1,064,188 $1,191,293 $(127,105)(10.7)%
Fleet utilization72.7 %81.3 %(8.6)%(10.6)%
OEC on rent yield39.2 %39.8 %(0.6)%(1.5)%
Sales order backlog$395,603 $779,295 $(383,692)(49.2)%
24

Operating Results by Segment
Equipment Rental Solutions (ERS) Segment
Three Months Ended
(in $000s)September 30, 2024September 30, 2023$ Change% ChangeJune 30, 2024% Change
Rental revenue$105,317 $114,929 $(9,612)(8.4)%$100,699 4.6 %
Equipment sales45,574 52,175 (6,601)(12.7)%37,712 20.8 %
Total revenue150,891 167,104 (16,213)(9.7)%138,411 9.0 %
Cost of rental revenue29,415 29,613 (198)(0.7)%29,281 0.5 %
Cost of equipment sales33,975 37,828 (3,853)(10.2)%25,792 31.7 %
Depreciation of rental equipment44,964 41,652 3,312 8.0 %43,581 3.2 %
Total cost of revenue108,354 109,093 (739)(0.7)%98,654 9.8 %
Gross profit$42,537 $58,011 $(15,474)(26.7)%$39,757 7.0 %
Nine Months Ended September 30,
(in $000s)20242023$ Change% Change
Rental revenue$309,304 $346,545 $(37,241)(10.7)%
Equipment sales116,026 195,005 (78,979)(40.5)%
Total revenue425,330 541,550 (116,220)(21.5)%
Cost of rental revenue88,496 90,014 (1,518)(1.7)%
Cost of equipment sales83,865 148,711 (64,846)(43.6)%
Depreciation of rental equipment131,242 123,969 7,273 5.9 %
Total cost of revenue303,603 362,694 (59,091)(16.3)%
Gross profit$121,727 $178,856 $(57,129)(31.9)%
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.
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.
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.
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.

25

Truck and Equipment Sales (TES) Segment
Three Months Ended
(in $000s)September 30, 2024September 30, 2023$ Change% ChangeJune 30, 2024% Change
Equipment sales$259,902 $230,904 $28,998 12.6 %$247,921 4.8 %
Cost of equipment sales218,012 191,084 26,928 14.1 %205,526 6.1 %
Gross profit$41,890 $39,820 $2,070 5.2 %$42,395 (1.2)%
Nine Months Ended September 30,
(in $000s)20242023$ Change% Change
Equipment sales$747,685 $691,481 $56,204 8.1 %
Cost of equipment sales620,240 571,592 48,648 8.5 %
Gross profit$127,445 $119,889 $7,556 6.3 %
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.
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.
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.

Aftermarket Parts and Services (APS) Segment
Three Months Ended
(in $000s)September 30, 2024September 30, 2023$ Change% ChangeJune 30, 2024% Change
Rental revenue$3,007 $3,280 $(273)(8.3)%$2,298 30.9 %
Parts and services revenue33,420 33,065 355 1.1 %34,383 (2.8)%
Total revenue36,427 36,345 82 0.2 %36,681 (0.7)%
Cost of revenue28,033 26,203 1,830 7.0 %28,562 (1.9)%
Depreciation of rental equipment992 817 175 21.4 %1,004 (1.2)%
Total cost of revenue29,025 27,020 2,005 7.4 %29,566 (1.8)%
Gross profit$7,402 $9,325 $(1,923)(20.6)%$7,115 4.0 %
Nine Months Ended September 30,
(in $000s)20242023$ Change% Change
Rental revenue$8,188 $12,121 $(3,933)(32.4)%
Parts and services revenue100,337 98,194 2,143 2.2 %
Total revenue108,525 110,315 (1,790)(1.6)%
Cost of revenue82,849 79,178 3,671 4.6 %
Depreciation of rental equipment3,043 2,446 597 24.4 %
Total cost of revenue85,892 81,624 4,268 5.2 %
Gross profit$22,633 $28,691 $(6,058)(21.1)%
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.
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.
26

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.
Liquidity and Capital Resources
Our principal sources of liquidity include cash generated by operating activities and borrowings under revolving credit facilities as described below. We believe that our liquidity sources and operating cash flows are sufficient to address our operating, debt service and capital requirements, 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.
Loan Covenants and Compliance
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.
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.
The Company presents Adjusted EBITDA calculated in accordance with “Consolidated EBITDA” as that term is used in the ABL Credit Agreement and the Indenture. Adjusted EBITDA is defined as net income, as adjusted for provision for income taxes, interest expense, net, depreciation of rental equipment and non-rental depreciation and amortization, and further adjusted for the impact of the fair value mark-up of acquired rental fleet (the “non-cash purchase accounting impact”), business acquisition and merger-related costs, including integration, the impact of accounting for certain of our rental contracts with customers that are accounted for under GAAP as a sales-type lease and stock compensation expense.
The Company presents Net Leverage Ratio, which is equivalent to Consolidated Total Net Leverage Ratio in our ABL Credit Agreement and Consolidated Total Debt Ratio in the Indenture, is defined as Net Debt over Adjusted EBITDA for the previous twelve-month period (“last twelve months,” or “LTM”). Net debt is defined as total debt (calculated as current and long-term debt, excluding deferred financing fees, plus current and long-term finance lease obligations) minus cash and cash equivalents.
27

Our creditors utilize Adjusted EBITDA and Net Leverage Ratio to assess our compliance with the restrictive covenants in the ABL Credit Agreement and the Indenture. Neither Adjusted EBITDA or Net Leverage Ratio is calculated in accordance with GAAP and may not conform to the calculation of Adjusted EBITDA or Net Leverage Ratio used by other companies. Neither Adjusted EBITDA or Net leverage Ratio should be considered as a substitute for a measure of our financial performance or liquidity prepared in accordance with GAAP.
The following table provides the calculation of Adjusted EBITDA pursuant to the ABL Credit Agreement and the Indenture.
Three Months Ended Nine Months Ended Three Months Ended June 30, 2024
(in $000s)September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Net income (loss)
$(17,416)$9,180 $(56,229)$34,590 $(24,478)
Interest expense27,156 24,044 79,174 69,982 27,003 
Income tax expense (benefit)
(604)432 518 2,683 3,070 
Depreciation and amortization59,295 54,552 173,253 162,083 57,797 
EBITDA68,431 88,208 196,716 269,338 63,392 
   Adjustments: 
   Non-cash purchase accounting impact (1)
4,066 5,884 12,286 13,552 5,260 
   Transaction and integration costs (2)
3,994 2,890 14,684 10,039 5,844 
   Sales-type lease adjustment (3)
1,295 1,640 5,730 7,736 1,961 
   Share-based payments (4)
2,419 2,843 8,748 10,312 3,599 
Change in fair value of warrants (5)
— (1,280)(527)(2,409)— 
Adjusted EBITDA$80,205 $100,185 $237,637 $308,568 $80,056 
(1) Represents the non-cash impact of purchase accounting, net of accumulated depreciation, on the cost of equipment and inventory sold. The equipment and inventory acquired received a purchase accounting step-up in basis, which is a non-cash adjustment to the equipment cost pursuant to our ABL Credit Agreement and Indenture.
(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.
(3) Represents the impact of sales-type lease accounting for certain leases containing RPOs, as the application of sales-type lease accounting is not deemed to be representative of the ongoing cash flows of the underlying rental contracts. The adjustments are made pursuant to our ABL Credit Agreement and Indenture. The components of this adjustment are presented in the table below.
Three Months EndedNine Months Ended Three Months Ended June 30, 2024
(in $000s)September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Equipment sales$(3,701)$(12,760)$(8,273)$(56,535)$(1,554)
Cost of equipment sales4,111 11,714 8,162 54,354 1,229 
Gross margin410 (1,046)(111)(2,181)(325)
Interest income(2,766)(4,461)(8,791)(12,295)(3,283)
Rental invoiced3,651 7,147 14,632 22,212 5,569 
Sales-type lease adjustment$1,295 $1,640 $5,730 $7,736 $1,961 
(4) Represents non-cash share-based compensation expense associated with the issuance of stock options and restricted stock units.
(5) Represents the charge to earnings for the change in fair value of the liability for warrants.
28

The following table presents the calculation of Net Debt and Net Leverage Ratio:
(in $000s) September 30, 2024June 30, 2024
Current maturities of long-term debt$1,458 $3,779 
Long-term debt, net1,567,103 1,528,433 
Deferred financing fees20,992 19,527 
Less: cash and cash equivalents(8,438)(8,059)
Net Debt$1,581,115 $1,543,680 
Divided by: LTM Adjusted EBITDA (1)
355,999 375,979 
Net Leverage Ratio4.44 4.11 
(1) The following tables present the calculation of LTM Adjusted EBITDA for the periods ended September 30, 2024 and June 30, 2024:
Current Year To Date PeriodLess: Prior Year To Date PeriodAdd: Prior Fiscal YearLTM Adjusted EBITDA
(in $000s)September 30, 2024September 30, 2023December 31, 2023September 30, 2024
Net income (loss)$(56,229)$34,590 $50,712 $(40,107)
Interest expense79,174 69,982 94,694 103,886 
Income tax expense (benefit)518 2,683 7,364 5,199 
Depreciation and amortization173,253 162,083 218,993 230,163 
EBITDA196,716 269,338 371,763 299,141 
Adjustments:
Non-cash purchase accounting impact12,286 13,552 19,742 18,476 
Transaction and integration costs14,684 10,039 14,143 18,788 
Sales-type lease adjustment5,730 7,736 10,458 8,452 
Share-based payments8,748 10,312 13,309 11,745 
Change in fair value of warrants(527)(2,409)(2,485)(603)
Adjusted EBITDA$237,637 $308,568 $426,930 $355,999 
29

Current Year To Date PeriodLess: Prior Year To Date PeriodAdd: Prior Fiscal YearLTM Adjusted EBITDA
(in $000s)June 30, 2024June 30, 2023December 31, 2023June 30, 2024
Net income (loss)$(38,813)$25,410 $50,712 $(13,511)
Interest expense52,018 45,938 94,694 100,774 
Income tax expense (benefit)1,122 2,251 7,364 6,235 
Depreciation and amortization113,958 107,531 218,993 225,420 
EBITDA128,285 181,130 371,763 318,918 
Adjustments:
Non-cash purchase accounting impact8,220 7,668 19,742 20,294 
Transaction and integration costs10,690 7,149 14,143 17,684 
Sales-type lease adjustment4,435 6,096 10,458 8,797 
Share-based payments6,329 7,469 13,309 12,169 
Change in fair value of warrants(527)(1,129)(2,485)(1,883)
Adjusted EBITDA$157,432 $208,383 $426,930 $375,979 

Historical Cash Flows
The following table summarizes our sources and uses of cash:
Nine Months Ended September 30,
(in $000s)20242023
Net cash flow from operating activities$39,934 $(2,706)
Net cash flow for investing activities(164,883)(145,612)
Net cash flow from financing activities122,779 142,557 
Effect of exchange rate changes on cash and cash equivalents299 194 
Net change in cash and cash equivalents$(1,871)$(5,567)
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.
Cash Flows from Operating Activities
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.
Cash Flows for Investing Activities
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.
Cash Flows from Financing Activities
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.

30

Critical Accounting Estimates
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.
Goodwill and the Evaluation of Goodwill Impairment
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:

(in $000s)
September 30, 2024June 30, 2024December 31, 2023
ERS$498,611 $498,549 $498,808 
TES167,307 167,307 167,307 
APS39,364 39,364 37,896 
Total$705,282 $705,220 $704,011 

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.
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.
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”).
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.
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:
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•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.
•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.
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.



Item 3.     Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk
We are subject to interest rate market risk in connection with our long-term debt. Our principal interest rate exposure relates to outstanding amounts under the ABL Credit Facility and our floor plan financing arrangements. Interest rate changes generally impact the amount of our interest payments and, therefore, our future net income and cash flows, assuming other factors are held constant. As of September 30, 2024, we had $1,550.4 million aggregate principal amount of variable rate debt, consisting of the balance outstanding under floor plan financing and the ABL Facility. Holding other variables constant, each one-eighth percentage point increase or decrease in the applicable interest rates would correspondingly change our interest expense under floor plan financing and the ABL Facility by approximately $1.9 million on an annual basis.
We, from time to time, may manage a portion of our risks from exposures to fluctuations in interest rates as part of our risk management program through the use of derivative financial instruments. The objective of controlling these risks is to limit the impact on earnings and cash flows caused by fluctuations in the interest rates of our variable-rate debt. We do not currently hedge our interest rate exposure.
Foreign currency exchange rate risk
During the nine months ended September 30, 2024, we generated $33.9 million of revenues denominated in Canadian dollars. Each 100-basis point increase or decrease in the average Canadian dollar to U.S. dollar exchange rate for the year would have correspondingly changed our revenues by approximately $0.4 million on an annual basis. We do not currently hedge our exchange rate exposure.
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Item 4.    Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation with the participation of our Chief Executive Officer and Chief Financial Officer. Based on that assessment, the Chief Executive Officer and Chief Financial Officer concluded as of September 30, 2024, the Company’s disclosure controls and procedures were not effective because of the material weakness in our internal control over financial reporting described below.
Inadequate Business Process Controls
On April 1, 2021, we completed the acquisition of Custom Truck LP, which resulted in a significant change in the Company’s internal control over financial reporting. We are in the process of completing the integration of policies, processes, people, technology and operations for the combined company. As part of this integration, we identified deficiencies in the design and operating effectiveness of internal controls associated with the control activities component of the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework.
During the fourth quarter ended December 31, 2021, we identified control deficiencies related to all of our business process controls (automated and manual), including management review controls. These control deficiencies could result in misstatements potentially impacting all financial statement accounts and disclosures that may not be prevented or detected.
Accordingly, these deficiencies constituted a pervasive material weakness. The pervasive material weakness did not result in any identified misstatements to our consolidated financial statements, and there were no changes to previously released financial results.
(b) Status of Remediation of the Pervasive Material Weakness in Internal Control Over Financial Reporting
We have devoted and continue to devote substantial resources and effort to remediating the pervasive material weakness identified in fiscal year 2021.
Additionally, management is in the process of designing, implementing and monitoring all business process controls (automated and manual), including management review controls, that are relevant to all financial statement accounts and disclosures. This pervasive material weakness cannot be considered remediated until the applicable controls are designed and operating effectively for a sufficient period of time, as supported by management’s testing results.
(c) Changes to Internal Control Over Financial Reporting
Other than the ongoing remediation efforts described above, there were no changes to our internal control over financial reporting that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION
Item 1.    Legal Proceedings
We may, at any given time, be named as a defendant in certain lawsuits, investigations and claims arising in the ordinary course of business. While the outcome of these potential lawsuits, investigations and claims cannot be predicted with certainty, we do not expect these matters to have a material adverse impact on our business, results of operations, cash flows or financial condition. In the opinion of management, there are no pending litigation, disputes or claims against the Company that, if decided adversely, would have a material adverse effect on its consolidated financial condition, cash flows or results of operations.
Item 1A.    Risk Factors
No material changes occurred to the indicated risk factors as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On August 2, 2022, our Board of Directors authorized a stock repurchase program for up to $30 million of the Company’s shares of common stock, which authorization was further increased by $25 million of shares on September 14, 2023, and increased again increased by $25 million on March 11, 2024, upon exhaustion of prior authorization. The authorization does not have an expiration date. Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases depending on market conditions and corporate needs.
The following table contains information regarding our purchases of our common stock during the three months ended September 30, 2024:
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(in $000s)
July 1, 2024 - July 31, 20241,260,827 $4.35 1,260,827 $1,892 
August 1, 2024 - August 31, 2024— $— — $1,892 
September 1, 2024 - September 30, 2024— $— — $1,892 
Total1,260,827 $4.35 1,260,827  
Item 3.    Defaults Upon Senior Securities
None.
Item 4.     Mine Safety Disclosures
Not applicable.
Item 5.    Other Information
None.

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Item 6.    Exhibits
Exhibit No. Description
10.1
31.1*
31.2*
32**
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Filed herewith.
**Furnished herewith.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  
CUSTOM TRUCK ONE SOURCE, INC.
(Registrant)
   
Date:October 30, 2024/s/ Ryan McMonagle
  Ryan McMonagle, Chief Executive Officer
   
Date:October 30, 2024/s/ Christopher J. Eperjesy
  Christopher J. Eperjesy, Chief Financial Officer