NESCO HOLDINGS, INC. (Form: 8-K, Received: 03/12/2020 08:44:22)

Exhibit 10.1

INCREMENTAL AGREEMENT AND AMENDMENT NO. 1

INCREMENTAL AGREEMENT AND AMENDMENT NO. 1 dated as of March 10, 2020 (this “Incremental Agreement”), by and among CAPITOL INTERMEDIATE HOLDINGS, LLC, a Delaware limited liability company (“Holdings”), CAPITOL INVESTMENT MERGER SUB 2, LLC, a Delaware limited liability company (the “Borrower”), JPMORGAN CHASE BANK, N.A., as Administrative Agent and Collateral Agent (in such capacities, the “Administrative Agent”) under the Credit Agreement (as defined below), each Letter of Credit Issuer, the Swingline Lender, MUFG UNION BANK, N.A., as “Increasing Lender” (the “Increasing Lender”) and the Lenders party hereto.

WHEREAS, reference is hereby made to the Credit Agreement dated as of July 31, 2019 (as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “Credit Agreement”), among Holdings, the Borrower, the Administrative Agent, Fifth Third Bank as the Additional Collateral Agent, the other agents, arrangers and bookrunners party thereto and each Lender from time to time party thereto;

WHEREAS, pursuant to Section 2.6 of the Credit Agreement, the Borrower may obtain a “Revolving Credit Commitment Increase” by, among other things, entering into an “Incremental Agreement” in accordance with the terms and conditions of the Credit Agreement;

WHEREAS, the Borrower has notified the Administrative Agent that it is requesting a “Revolving Credit Commitment Increase” in the amount of $35,000,000 (the “Revolving Credit Commitment Increase”) pursuant to Section 2.6(a) of the Credit Agreement;

WHEREAS, the Increasing Lender party to this Incremental Agreement as a lender with respect to the Revolving Credit Commitment Increase set forth on Schedule 1.1 hereto has indicated its willingness to provide such Revolving Credit Commitment Increase on the terms and subject to the conditions herein;

WHEREAS, in accordance with Section 12.1(a), the Borrower and the Required Lenders have agreed that four Appraisals per twelve (12) month period may be conducted at the Borrower’s expense; and

WHEREAS, the Required Lenders have agreed to amend Section 8.4 of the Credit Agreement and the parties hereto have indicated their willingness to amend certain other terms of the Credit Agreement as set forth herein.

NOW, THEREFORE, in consideration of the premises and agreements, provisions and covenants herein contained, the parties hereto agree as follows:

Section 1.Defined Terms; References. Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement has the meaning assigned to such term in the Credit Agreement. Each reference to “hereof”, “hereunder”, “herein” and “hereby” and each other similar reference and each reference to “this Agreement” and each other similar reference contained in the Credit Agreement shall, after this Incremental Agreement becomes effective, refer to the Credit Agreement as amended hereby. This Incremental Agreement is a “Loan Document” and an “Incremental Agreement,” each as defined under the Credit Agreement.

Section 2.Revolving Credit Commitment Increase.

(a) The Borrower and the Increasing Lender hereby agree that, subject to the satisfaction of the conditions in Section 6 hereof, on the Commitment Effective Date (as defined below), the Revolving Credit Commitment Increase of the Increasing Lender shall become effective and the Commitments shall be deemed increased by the amount of the Revolving Credit Commitment Increase of the Increasing Lender. Pursuant to Section 2.6 of the Credit Agreement, the Revolving Credit Commitment Increase shall be a Commitment for all purposes under the Credit Agreement and each of the other Loan Documents and shall have terms identical to the Commitments outstanding under the Credit Agreement immediately prior to the date hereof.

(b) The Increasing Lender acknowledges and agrees that upon the Commitment Effective Date, the Increasing Lender shall be a “Lender” under, and for all purposes of, the Credit Agreement and the other Loan Documents, and shall be subject to and bound by the terms thereof, and shall perform all the obligations of and shall have all rights of a Lender thereunder.

(c) Upon the Commitment Effective Date, Schedule 1.1 of the Credit Agreement will be amended and restated in its entirety by Schedule 1.1 hereto.

Section 3.Reallocation. The reallocation of the Lenders’ Revolving Loans contemplated by Section 2.6(f)(ii) of the Credit Agreement with respect to any Revolving Credit Commitment Increase shall occur with respect to the Revolving Credit Commitment Increase contemplated hereby on the Commitment Effective Date, and the Increasing Lender shall make such Revolving Loans on the Commitment Effective Date as may be required to effectuate such reallocation. Furthermore, on the Commitment Effective Date, all participations in Letters of Credit and Swingline Loans shall be reallocated as contemplated by Section 2.6(f)(ii) of the Credit Agreement pro rata among the Lenders after giving effect to the Revolving Credit Commitment Increase contemplated hereby. Each Lender party hereto hereby agrees to waive reimbursement of any costs incurred by such Lender in connection with such reallocation pursuant to Section 5.4 of the Credit Agreement.

Section 4.Amendments. The Borrower and the Required Lenders hereby agree that the third sentence of Section 8.4(c) of the Credit Agreement shall be amended and restated in its entirety to read as follows:

“Absent the continuance of a Specified Event of Default, during each period of twelve (12) consecutive calendar months commencing on or after the Agreement Date, the Agent and the Co-Collateral Agents may, collectively, at the Borrower’s expense, conduct (i) Appraisals of the Inventory not more than four (4) times during any such period and (ii) Appraisals of the Equipment not more than four (4) times during any such period.”

Section 5.Representations Correct. By its execution of this Incremental Agreement, the Borrower hereby certifies that:

(a) The execution, delivery and performance of this Incremental Agreement has been duly authorized by all necessary corporate or other organizational action of, and has been duly executed and delivered by, each Obligor that is a party hereto and constitutes a legal, valid and binding obligation of such Obligor, enforceable against such Obligor in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, winding up, moratorium and other similar Laws relating to or affecting creditors’ rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and implied covenants of good faith and fair dealing; and

(b) the execution, delivery and performance of this Incremental Agreement by each Obligor that is a party hereto and the other documents executed by such Persons in connection herewith (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except for such as (i) have been obtained or made and are in full force and effect, or (ii) the failure of which to obtain would not reasonably be expected to result in a Material Adverse Effect, (b) will not violate any Requirement of Law applicable to such Obligor or the Charter Documents of such Obligor, except to the extent that such violation would not reasonably be expected to result in a Material Adverse Effect, (c) will not violate or result in a default under any Material Indebtedness and (d) will not result in the imposition of any Lien on any asset of any Obligor (other than Permitted Liens).

Section 6.Effectiveness of this Incremental Agreement. This Incremental Agreement shall become effective as of the date on which the following conditions have been satisfied (the “Commitment Effective Date”, which for the avoidance of doubt occurred on March 10, 2020):

(a) The Administrative Agent (or its counsel) shall have received from (i) the Borrower, (ii) Holdings, (iii) the Increasing Lender, (iv) the Issuing Lenders, (v) the Swingline Lender, (vi) the Required Lenders and (vii) the Administrative Agent, either (x) counterparts of this Incremental Agreement signed on behalf of such parties or (y) written evidence satisfactory to the Administrative Agent (which may include facsimile or other electronic transmissions of signed signature pages) that such parties have signed counterparts of this Incremental Agreement.

(b) Immediately before and immediately after giving effect to the Incremental Revolving Credit Commitment Increase on such date, (i) no Event of Default has occurred and is continuing or would result therefrom and (ii) the representations and warranties (x) of each Obligor set forth in the Loan Documents and (y) in Section 5 of this Incremental Agreement shall be true and correct in all material respects as of such date (it being understood that, to the extent that any such representation and warranty specifically refers to an earlier date, it shall be true and correct in all material respects as of such earlier date and any such representation and warranty that is qualified as to “materiality,” Material Adverse Effect or similar language shall be true and correct in all respects (after giving effect to any such qualification therein)).

(c) The Administrative Agent shall have received a certificate of an appropriate officer of the Borrower certifying that the conditions set forth in Section 6(b) of this Incremental Agreement and the conditions to the Revolving Credit Commitment Increase set forth in Section 2.6(e) of the Credit Agreement, in each case, are satisfied as of the Commitment Effective Date.

(d) The Administrative Agent shall have received a duly executed certificate of an appropriate officer of each Obligor party to the Credit Agreement, certifying (i)that the copies of such Obligor’s Charter Documents (x) as previously certified and delivered to the Administrative Agent, remain in full force and effect as of the Commitment Effective Date without modification or amendment since such previous delivery or (y) as attached to such officer’s certificate are true, correct and complete and in full force and effect as of the Commitment Effective Date and, with respect to any applicable Charter Document, certified as of a recent date by an appropriate Governmental Authority of the jurisdiction of such Obligor’s organization or formation, (ii) that the copies of such Obligor’s resolutions approving and adopting the Loan Documents to which it is party, the transactions contemplated herein, and authorizing the execution and delivery thereof, as attached to such officer’s certificate, are true, correct and complete copies and in full force and effect as of the Commitment Effective Date, (iii) as to incumbency certificates identifying the officers of such Obligor that are authorized to execute the Incremental Agreement and who will execute the Incremental Agreement and (iv) certificates of good standing or the equivalent (if any) for each Obligor party to the Credit Agreement from such Obligor’s jurisdiction of organization or formation, in each case certified as of a recent date by the appropriate Governmental Authority .

(e) The Administrative Agent shall have received on or prior to such date, in immediately available funds, payment or reimbursement (or the Borrower shall have made arrangements reasonably satisfactory to the Administrative Agent for such payment or reimbursement) of all reasonable and documented or invoiced out-of-pocket costs and expenses then due and payable to it under Section 14.7 of the Credit Agreement in connection with this Incremental Agreement, including all reasonable and invoiced fees and expenses of Cahill Gordon & Reindel LLP, as counsel to the Administrative Agent, in each case, to the extent invoiced at least (3) Business Days prior to the Commitment Effective Date (or such later date as the Borrower may agree).

(f) If the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation and the Increasing Lender has provided its electronic delivery requirements, the Increasing Lender requesting a certification regarding beneficial ownership in relation to the Borrower as required by the Beneficial Ownership Regulation (the “Beneficial Ownership Certification”) shall have received prior to the Commitment Effective Date, the Beneficial Ownership in relation to the Borrower.

(g) The Borrower shall have paid (or shall have made arrangements reasonably satisfactory to the Increasing Lender for such payment) to the Increasing Lender an upfront fee equal to 0.25% of the aggregate principal amount of the Revolving Credit Commitment Increase.

Section 7.Acknowledgments. The Borrower and each other Obligor party to the Credit Agreement hereby expressly acknowledges the terms of this Incremental Agreement and reaffirms, as of the date hereof, (i) the covenants and agreements contained in each Loan Document to which it is a party, including, in each case, such covenants and agreements as in effect immediately after giving effect to this Incremental Agreement and the transactions contemplated hereby, (ii) its guarantee of the Obligations (including, without limitation, the Obligations that may arise pursuant to the Revolving Credit Commitment Increase) under the Security Documents and (iii) its grant of Liens on the Collateral to secure the Obligations (including, without limitation, the Obligations that may arise pursuant to the Revolving Credit Commitment Increase) pursuant to the Security Documents.

Section 8.Amendment, Modification and Waiver. This Incremental Agreement may not be amended, modified or waived except pursuant to Section 12.1 of the Credit Agreement.

Section 9.Liens Unimpaired. After giving effect to this Incremental Agreement, neither the modification of the Credit Agreement effected pursuant to this Incremental Agreement nor the execution, delivery, performance or effectiveness of this Incremental Agreement:

(a) impairs the validity, effectiveness or priority of the Liens granted pursuant to any Security Document, and such Liens continue unimpaired with the same priority (subject to Permitted Liens) to secure repayment of all Obligations, whether heretofore or hereafter incurred; or

(b) requires that any new filings be made or other action taken to perfect or to maintain the perfection of such Liens.

Section 10.Entire Agreement. This Incremental Agreement, the Credit Agreement and the other Loan Documents constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and verbal, among the parties hereto with respect to the subject matter hereof. Except as expressly set forth herein, this Incremental Agreement shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of any party under, the Credit Agreement, nor (except as expressly contemplated hereby) alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect. It is understood and agreed that each reference in each Loan Document to the Credit Agreement, whether direct or indirect, shall hereafter be deemed to be a reference to the Credit Agreement as amended hereby and that this Incremental Agreement is a Loan Document.

Section 11.GOVERNING LAW. THIS INCREMENTAL AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTIONS 14.3(b), 14.3(c) AND 14.4 OF THE CREDIT AGREEMENT ARE HEREBY INCORPORATED BY REFERENCE INTO THIS INCREMENTAL AGREEMENT AND SHALL APPLY HERETO.

Section 12.Severability. If any provision of this Incremental Agreement is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Incremental Agreement shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 13.Counterparts. This Incremental Agreement may be signed in any number of counterparts, each of which shall be deemed an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery by facsimile or other electronic means of an executed counterpart of a signature page to this Incremental Agreement shall be effective as delivery of an original executed counterpart of this Incremental Agreement.

Section 14.Headings. The headings of this Incremental Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties hereto have caused this Incremental Agreement to be duly executed and delivered by their respective authorized signatories as of the day and year first above written.

CAPITOL INTERMEDIATE HOLDINGS, LLC, as Holdings


By:	Name: Bruce Heinemann Title: Chief Financial Officer

CAPITOL INVESTMENT MERGER SUB 2, LLC, as Borrower


By:	Name: Bruce Heinemann Title: Chief Financial Officer

JPMORGAN CHASE BANK, N.A., as Administrative Agent, a Lender, a Swingline Lender and a Letter of Credit Issuer


By:	Name: Title:

MUFG UNION BANK, N.A., as an Increasing Lender and a Lender


By:	Name: Title:

FIFTH THIRD BANK, as a Letter of Credit Issuer and a Lender


By:	Name: Title:

MORGAN STANLEY SENIOR FUNDING, INC., as a Letter of Credit Issuer and a Lender


By:	Name: Title:

DEUTSCHE BANK AG NEW YORK BRANCH, as a Letter of Credit Issuer and a Lender


By:	Name: Title:

CITIBANK, N.A., as a Letter of Credit Issuer and a Lender


By:	Name: Title:

SCHEDULE 1.1
TO INCREMENTAL AGREEMENT

Schedule 1.1

As of as of March 10, 2020:

Lenders’ Commitments



Lender	Revolving Credit Commitment	Applicable Percentage
JPMorgan Chase Bank, N.A.	$100,000,000.00	25.974%
Fifth Third Bank	$100,000,000.00	25.974%
Morgan Stanley Senior Funding, Inc.	$50,000,000.00	12.987%
Deutsche Bank AG New York Branch	$50,000,000.00	12.987%
Citibank, N.A.	$50,000,000.00	12.987%
MUFG Union Bank, N.A.	$35,000,000.00	9.091%
Total	$385,000,000.00	100.000%

Letter of Credit Commitments



Letter of Credit Issuer	Letter of Credit Commitments	Applicable Percentage
JPMorgan Chase Bank, N.A.	$29,000,000.00	29%
Fifth Third Bank	$29,000,000.00	29%
Morgan Stanley Senior Funding, Inc.	$14,000,000.00	14%
Deutsche Bank AG New York Branch	$14,000,000.00	14%
Citibank, N.A.	$14,000,000.00	14%
Total	$100,000,000.00	100%

Exhibit 99.1

NESCO HOLDINGS, INC. REPORTS FOURTH QUARTER AND FULL YEAR 2019 FINANCIAL RESULTS

FORT WAYNE, IN., March 12, 2020 – Nesco Holdings, Inc. (NYSE: NSCO, “Nesco” or the “Company”), a leading provider of specialty rental equipment to the electric utility, telecom, and rail infrastructure end-markets, today reported financial results for the fourth quarter and full year ended December 31, 2019.

FULL YEAR 2019 HIGHLIGHTS


•	Total revenue of $264.0 million (+7.2% from 2018)


•	Equipment rental revenue of $182.7 million (+5.5% from 2018)


•	Equipment sales revenue of $34.1 million (-23.2% from 2018)


•	Parts, tools, and accessories revenue of $47.2 million (+64.8% from 2018)


•	Consolidated net loss of $27.1 million (includes $15.9 million of transaction and process improvement costs)


•	Adjusted EBITDA of $127.5 million (+4.8% from 2018)


•	Adjusted EBITDA including a full year of Truck Utilities of $134.5 million


•	Closed acquisition of Truck Utilities on November 4, 2019

Lee Jacobson, Chief Executive Officer of Nesco, said, “The fourth quarter capped off another year of solid growth for Nesco. Our core specialty rental equipment remains in high demand in each of our end-markets, as evidenced by more than 8% year-over-year equipment rental revenue growth in the fourth quarter, excluding the impact from Truck Utilities and another quarter of record equipment on rent, which is also up more than 8% year-over-year in the fourth quarter. Parts, tools and accessories segment revenue increased more than 70% on a year-over-year basis in the fourth quarter, excluding Truck Utilities, driven by a combination of new regional locations and increased spend within our equipment rental customer base.”

“Demand within our core electrical transmission and distribution, telecom and rail end markets remain robust,” continued Jacobson. “Our largest contractor customers reported another quarter of record, or near record, revenue backlogs in our core end markets and our average customer rental contract period exceeded 13 months for most of 2019, a record for Nesco. Looking ahead, we expect 2020 will be a period of strong growth for our business. Our recent investment in new fleet will allow us to capture many previously lost rental opportunities due to equipment availability. We will also benefit from the investment we made in expanding our parts, tools and accessories service locations from two to seven in 2019 and one additional expected in 2020; and a full year of contribution from the Truck Utilities acquisition. We plan to take a measured approach toward capital spending in 2020 in order to generate positive free cash flow, reduce leverage and focus on maintaining high fleet utilization.”

FULL YEAR 2019 RESULTS

Total Revenue

Total revenue in 2019 was $264.0 million, an increase of $17.7 million, or 7.2%, from 2018. Excluding equipment sales, revenue grew $28.0 million or 13.9%, from 2018. Truck Utilities contributed $8.5 million to revenue since the acquisition was completed in November 2019, split nearly evenly between both the Equipment Rental and Sales ("ERS") and Parts Tools and Accessories ("PTA") segments.

ERS segment revenue declined 0.4% to $216.8 million in 2019, compared to $217.6 million for the same period in 2018. Equipment rental revenue increased 5.5% to $182.7 million, primarily due to a 6.1% increase in average equipment on rent, which grew to $477.5 million in 2019, compared to $450.2 million in 2018. Fleet utilization was 80.7% in 2019, compared to 82.3% in 2018. After adjusting for new units that have not yet entered into service, Truck Utilities and the prior year’s benefit from storm recovery in Puerto Rico, utilization was down 0.4% year-over-year. Equipment sales revenue of $34.1 million was a reduction from the prior year of $10.3 million or 23.2% leading to an overall decline in ERS revenue for the year. Equipment sales can be lumpy in nature, but any timing difference that may reduce used sales provides Nesco with the opportunity to continue to rent this equipment.

PTA segment revenue grew 64.8% to $47.2 million in 2019, compared to $28.7 million in 2018. PTA revenue growth was driven by increased penetration of Nesco's equipment rental customer base and a ramping of revenues at the new PTA locations.

Net Loss

The Company reported a net loss in 2019 of $27.1 million, compared to a net loss of $15.5 million for the same period in 2018. The year-over-year increase in net loss was primarily driven by a $13.3 million increase in deal-related transaction and business acquisition expenses.

Adjusted EBITDA

Adjusted EBITDA increased $5.8 million, or 4.8%, from $121.7 million for the year ended December 31, 2018 to $127.5 million for the year ended December 31, 2019. Adjusted EBITDA including a full year of Truck Utilities was $134.5 million for the year ended December 31, 2019. The year over year increase in Adjusted EBITDA was primarily driven by an $11.6 million, or 8.6%, increase in core rental gross profit, excluding depreciation to $147.2 million ($76.6 million, including depreciation), compared to $135.5 million ($71.4 million, including depreciation) in 2018. This increase was partially offset by an increase in selling, general and administrative expenses due largely to increased expenses related to becoming a public company.

FOURTH QUARTER 2019 RESULTS

Total Revenue

Total revenue in the fourth quarter was $77.2 million, an increase of $8.6 million or 12.5% from the fourth quarter 2018. Excluding equipment sales, revenue grew $14.4 million or 27.6% from the fourth quarter 2018. Truck Utilities contributed $8.5 million to revenue since the acquisition was completed in November 2019, split nearly evenly between both segments.

ERS segment revenue declined 1.2% to $60.8 million in the fourth quarter, compared to $61.5 million for the same period in 2018. Equipment rental revenue increased 11.3% (or 8.1% excluding Truck Utilities) to $50.0 million. This growth is primarily due to a 10.0% increase in average equipment on rent, which grew to $508.7 million in the fourth quarter, compared to $462.4 million in the same quarter of 2018. Fleet utilization was 81.5% in the fourth quarter compared to 83.5% in the same period of 2018. After adjusting for new units that have not yet entered into service and Truck Utilities, utilization was approximately flat year-over-year. The Company's average rental rate per day was $138 and $140 in the fourth quarter of 2019 and 2018, respectively. The Company continues to realize gains in pricing by product line, but average reported rate remains relatively constant due to a changing fleet mix as a result of increased investment in relatively lower cost telecom and rail equipment. Equipment sales revenue of $10.8 million was a reduction from the prior year quarter of 34.9% (or 51.7% excluding Truck Utilities) leading to an overall decline in ERS revenue for the quarter.

PTA segment revenue grew 129.9% (or 70.6% excluding Truck Utilities) to $16.4 million in the fourth quarter, compared to $7.1 million for the same period in 2018. PTA revenue growth was driven by increased penetration of Nesco's equipment rental customer base and a ramping of revenues at the newer PTA locations.

Net Loss

The Company reported net income in the fourth quarter of $3.1 million, compared to a net loss of $3.4 million for the same period in 2018. The year-over-year increase in net earnings was primarily driven by an income tax benefit of $7.3 million due to tax valuation allowance reductions from the rental equipment acquired in the Truck Utilities acquisition.

Adjusted EBITDA

Adjusted EBITDA increased slightly to $35.6 million, as compared to the same period in 2018. Adjusted EBITDA reflects a $4.5 million or 12.5% increase in core rental gross profit excluding depreciation to $40.8 million ($21.5 million, including depreciation), compared to $36.3 million ($18.7 million, including depreciation) in 2018. This increase was partially offset by an increase in selling, general and administrative expenses due largely to increased expenses related to becoming a public company.

Liquidity and Capitalization

On March 10, 2020, the Company completed an increase in the size of its asset-based lending facility from $350 million to $385 million with the addition of MUFG Bank, Ltd. as a new lender under the facility. Nesco made significant investments in its fleet and acquired Truck Utilities in 2019. The increase in facility size expands liquidity, enabling continued flexibility for Nesco to grow its fleet and opportunistically pursue mergers and acquisitions.

As of December 31, 2019, the Company had total cash of $6.3 million and availability on its asset-based lending facility of $96.9 million, which does not reflect the impact of the increased size of the asset-based facility. Total debt outstanding, including capital leases, was $756.6 million at the end of the fourth quarter 2019.

Investing Activities

Average fleet count increased to 4,172 units in 2019, from 3,839 units in 2018. Total purchases of rental fleet and property and equipment in 2019 was $109.7 million, including $36.7 million of maintenance expenditures and $73.0 million of growth expenditures. Nesco accelerated the timing of some capital expenditures planned for 2020 into the fourth quarter of 2019 in order to capture potential upside from market demand in 2019 and is reducing 2020 target capital expenditures as a result. The Company received $28.5 million from sale of rental equipment and parts and insurance proceeds from damaged equipment in 2019, resulting in total net capital expenditures of $81.3 million.

FINANCIAL OUTLOOK

The Company's current expectations for the full year 2020 are as follows:


•	Total revenueof $330 to $360 million (25% to 36% growth)


•	Adjusted EBITDA⁽¹⁾ of $142 to $154 million (11% to 21% growth)


•	Net capital expenditures (after proceeds from equipment sales)⁽²⁾of $45 to $55 million


(1)	Adjusted EBITDA is a non-GAAP financial measure. Further information including both historical and forward-looking reconciliations for this non-GAAP measure to the most directly comparable financial measure under GAAP is included at the end of this press release.


(2)	Net capital expenditures is a non-GAAP financial measure. Please see the historical non-GAAP reconciliation tables included at the end of this press release.

This outlook includes anticipated results from Truck Utilities Inc. This guidance is subject to risks and uncertainties, including those described in "Forward-Looking Statements" below.

NEW INDEPENDENT BOARD MEMBER

On March 2, 2020, the Company announced that it had appointed Gerard E. Holthaus to serve as an independent director. Mr. Holthaus is the non-executive Chairman of the Board of WillScot Corp, a leading provider of modular space solutions in North America. He is the former non-executive chairman of Algeco Scotsman Global S.à.r.l., the leading global provider of modular space solutions. He previously served as executive chairman and CEO of Algeco Scotsman, where he was responsible for its North American and European operations, and as executive chairman, president and CEO of WSII prior to its acquisition by Algeco Scotsman in 2007. Mr. Holthaus is also a former director of BakerCorp International, Inc. and Neff Corporation, two equipment rental companies that completed strategic sales. Mr. Holthaus is also currently Non-Executive Chairman of FTI Consulting.

"As Nesco continues to grow so does the breadth and expertise of our board, and we are eager to welcome Gerry's voice and insight to the organization. Gerry brings a proven track record of success in the specialty equipment rental arena most recently as Chairman of WillScot. His specialty rental industry expertise is complemented by his strong financial background and makes him a perfect addition to our board," said William Plummer, Chairman of the Board.

NON-GAAP FINANCIAL MEASURES

The Company uses a variety of operational and financial metrics, including non-GAAP financial measures such as Adjusted EBITDA, free cash flow, fleet utilization, original equipment cost on rent, among other metrics, to enable it to analyze its performance and financial condition. The Company utilizes these financial measures to manage its business on a day-to-day basis and believes that they are the most relevant measures of performance. Some of these measures are commonly used in the specialty rentals industry to evaluate performance. The Company believes these non-GAAP measures provide expanded insight to assess revenue and cost performance, in addition to the standard GAAP-based financial measures. There are no specific rules or regulations for determining non-GAAP measures, and as such, they may not be comparable to measures used by other companies within the industry. The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The definitions of non-GAAP financial measures along with a reconciliation of non-GAAP financial information to GAAP are included in the supplemental financial schedules.

CONFERENCE CALL INFORMATION

The Company has scheduled a conference call at 8:30 A.M. Eastern Time on March 12, 2020, to discuss the fourth quarter and full year 2019 financial results. The conference call can be accessed by dialing 866-211-4094 (United States) or 647-689-6722 (International) using the conference ID 1032839. A replay of the call will be available on the Company’s investor relations website at investors.nescospecialty.com.

ABOUT NESCO

Nesco is one of the largest providers of specialty equipment, parts, tools, accessories and services to the electric utility transmission and distribution, telecommunications and rail markets in North America. Nesco offers its specialized equipment to a diverse customer base for the maintenance, repair, upgrade and installation of critical infrastructure assets including electric lines, telecommunications networks and rail systems. Nesco's coast-to-coast rental fleet of approximately 4,600 units includes aerial devices, boom trucks, cranes, digger derricks, pressure drills, stringing gear, hi-rail equipment, repair parts, tools, and accessories. For more information, please visit investors.nescospecialty.com.

FORWARD-LOOKING STATEMENTS

This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Nesco’s management’s control, that could cause actual results or outcomes to differ materially from those discussed in this press release. This press release is based on certain assumptions that Nesco has made in light of its experience in the industry as well as Nesco’s perceptions of historical trends, current conditions, expected future developments and other factors Nesco believes are appropriate in these circumstances. As you read and consider this press release, you should understand that these statements are not guarantees of performance or results. Many factors could affect Nesco’s actual performance and results and could cause actual results to differ materially from those expressed in this press release. All forward-looking statements attributable to Nesco or persons acting on their behalf are expressly qualified in their entirety by the foregoing cautionary statements. Important factors, among others, that may affect actual results or outcomes include: Nesco’s ability to execute on its plans to develop and market new products and the timing of these development programs; Nesco’s estimates of the size of the markets for its solutions; the rate and degree of market acceptance of Nesco’s solutions; the success of other competing technologies that may become available; Nesco’s ability to identify and integrate acquisitions, including Nesco’s ability to integrate its acquisition of Truck Utilities and realize the anticipated benefits thereof (including Nesco’s estimates of the Adjusted EBITDA impact of contributions from Truck Utilities); the performance and security of Nesco’s services; potential litigation involving Nesco; and general economic and market conditions impacting demand for Nesco’s services. For a more complete description of these and other possible risks and uncertainties, please refer to Capitol’s final prospectus and definitive proxy statement filed with the Securities and Exchange Commission on June 4, 2019 (as supplemented on June 24, 2019 and July 11, 2019, the "Proxy Statement/Prospectus") and incorporated by reference in the Current Report on Form 8-K filed with the SEC on August 1, 2019, as well as to our subsequent filings with the SEC. The forward-looking statements contained herein speak only as of the date hereof, and Nesco undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

INVESTOR CONTACT

Noel Ryan, IRC

720.778.2415

investors@nescospecialty.com

Table 1: Unaudited Condensed Consolidated Balance Sheets

Nesco Holdings, Inc.

Condensed Consolidated Balance Sheets (unaudited)



(in $000s, except share data)	December 31, 2019			December 31, 2018
Assets
Current Assets
Cash	$	6,302		$	2,140
Accounts receivable, net of allowance of $4,654 and $7,562, respectively	71,323			52,559
Inventory	33,001			11,435
Prepaid expenses and other	5,217			2,483
Total current assets	115,843			68,617
Property and equipment, net	6,561			2,763
Rental equipment, net	383,420			320,722
Goodwill and other intangibles, net	308,747			299,454
Notes receivable	713			—
Total Assets	$	815,284		$	691,556
Liabilities and Stockholders’ Deficit
Current Liabilities
Accounts payable	$	41,172		$	20,867
Accrued expenses	27,590			20,383
Deferred rent income	2,270			4,762
Current maturities of long-term debt	1,280			2,531
Current portion of capital lease obligations	5,451			4,866
Total current liabilities	77,763			53,409
Long-term debt, net	713,023			756,872
Capital leases	22,631			28,418
Deferred tax liabilities	12,288			11,191
Other liabilities	1,709			422
Total long-term liabilities	749,651			796,903
Commitments and contingencies	—			—
Stockholders’ Deficit
Common stock - $0.0001 par value, 250,000,000 shares authorized, 49,033,903 and 21,660,638 shares issued and outstanding, at December 31, 2019 and December 31, 2018, respectively	5			2
Additional paid-in capital	432,577			259,298
Accumulated deficit	(444,712		)	(417,660		)
Accumulated other comprehensive loss	—			(396		)
Total stockholders’ deficit	(12,130		)	(158,756		)
Total Liabilities and Stockholders’ Deficit	$	815,284		$	691,556

Table 2: Unaudited Condensed Consolidated Statements of Operations

Nesco Holdings, Inc.

Condensed Consolidated Statements of Operations (unaudited)



	Three Months Ended December 31,						Year Ended December 31,
(in $000s, except share and per share data)	2019			2018			2019			2018
Revenue
Rental revenue	$	54,125		$	47,785		$	197,996		$	184,563
Sales of rental equipment	8,600			10,457			23,767			26,019
Sales of new equipment	2,232			6,182			10,308			18,349
Parts sales and services	12,289			4,264			31,964			17,366
Total revenue	77,246			68,688			264,035			246,297
Cost of Revenue
Cost of rental revenue	13,313			11,512			50,829			49,023
Depreciation of rental equipment	19,270			17,576			70,568			64,093
Cost of rental equipment sales	7,649			8,636			20,302			21,689
Cost of new equipment sales	1,902			5,460			8,520			16,099
Cost of parts sales and services	10,131			3,091			25,052			12,339
Major repair disposals	694			375			2,216			1,436
Total cost of revenue	52,959			46,650			177,487			164,679
Gross Profit	24,287			22,038			86,548			81,618
Operating Expenses
Selling, general, and administrative expenses	9,960			8,307			34,667			32,718
Licensing and titling expenses	690			567			2,617			2,241
Amortization and non-rental depreciation	858			781			3,122			3,045
Transaction expenses	247			277			7,641			440
Asset impairment	—			—			657			—
Other operating expenses	613			10			1,826			10
Total operating expenses	12,368			9,942			50,530			38,454
Operating Income	11,919			12,096			36,018			43,164
Other Expense
Loss on extinguishment of debt	—			—			4,005			—
Interest expense, net	16,985			15,049			63,361			56,698
Other expense, net	(855		)	1			1,690			287
Total other expenses	16,130			15,050			69,056			56,985
Loss Before Income Taxes	(4,211		)	(2,954		)	(33,038		)	(13,821		)
Income Tax Expense (Benefit)	(7,316		)	452			(5,986		)	1,705
Net Income (Loss)	$	3,105		$	(3,406	)	$	(27,052	)	$	(15,526	)
Income (Loss) per share:
Basic and diluted	$	0.06		$	(0.16	)	$	(0.82	)	$	(0.72	)
Weighted-average common shares outstanding:
Basic and diluted	49,033,903			21,660,638			33,066,165			21,660,638

Table 3: Unaudited Condensed Consolidated Statements of Cash Flows

Nesco Holdings, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)



	Year Ended December 31,
(in $000s)	2019			2018
Operating Activities
Net loss	$	(27,052	)	$	(15,526	)
Adjustments to reconcile net loss to net cash flow from operating activities:
Depreciation	71,548			64,312
Amortization - intangibles	3,008			2,826
Amortization - financing costs	2,913			3,537
Provision for losses on accounts receivable	3,292			4,302
Share-based payments	1,014			1,130
Gain on sale of rental equipment and parts	(5,542		)	(3,644		)
Gain on insurance proceeds - damaged equipment	(538		)	—
Major repair disposal	2,216			1,436
Loss on extinguishment of debt	4,005			—
Change in fair value of derivative	1,709			—
Asset impairment and loss on asset acquisition	657			—
Deferred tax (benefit) expense	(6,861		)	1,096
Changes in assets and liabilities:
Accounts receivable	(17,073		)	(5,185		)
Inventory	(22,683		)	(8,023		)
Prepaid expenses and other	(2,578		)	351
Accounts payable	7,547			(4,307		)
Accrued expenses and other liabilities	6,560			(1,203		)
Unearned income	(3,350		)	(62		)
Net cash flow from operating activities	18,792			41,040

Investing Activities
Cash paid for business acquisition, net of cash acquired	(48,425		)	(1,524		)
Purchase of equipment - rental fleet	(106,641		)	(58,519		)
Proceeds from sale of rental equipment and parts	26,794			33,321
Insurance proceeds from damaged equipment	1,658			—
Purchase of other property and equipment	(3,065		)	(716		)
Net cash flow from in investing activities	(129,679		)	(27,438		)
Financing Activities
Proceeds from debt	475,000			—
Borrowings under revolving credit facilities	313,000			49,000
Repayments under revolving credit facilities	(272,000		)	(50,000		)
Repayments of notes payable	(527,531		)	(1,658		)
Capital lease payments	(5,201		)	(8,119		)
Proceeds from merger and recapitalization	147,269			—
Finance fees paid	(15,488		)	(1,645		)
Net cash flow from financing activities	115,049			(12,422		)


Net Change in Cash	4,162			1,180
Cash at Beginning of Period	2,140			960
Cash at End of Period	$	6,302		$	2,140



	Year Ended December 31,
(in $000s)	2019		2018
Supplemental Cash Flow Information
Cash paid for interest	$	53,595	$	53,763
Cash paid for income taxes	455		526
Non-Cash Investing and Financing Activities
Transfer of parts inventory to leased equipment	5,804		6,014
Rental equipment and property and equipment purchases in accounts payable	21,643		10,712
Rental equipment sales in accounts receivable	4,684		2,750
Rental equipment on capital lease	—		15,388
Customer note receivable	972		—
Settlement of note payable with common stock	25,000		—
Acquisition	—		3,546

Table 4: Unaudited Adjusted EBITDA Reconciliation

Nesco Holdings, Inc.

Adjusted EBITDA Reconciliation (unaudited)



	Three Months Ended December 31,						Year Ended December 31,
(in $000s)	2019			2018			2019			2018
Net income (loss)	$	3,105		$	(3,406	)	$	(27,052	)	$	(15,526	)
Interest expense	16,985			15,049			63,361			56,698
Income tax expense (benefit)	(7,316		)	452			(5,986		)	1,705
Depreciation expense	19,444			17,634			71,548			64,312
Amortization expense	836			723			3,008			2,826
EBITDA	33,054			30,452			104,879			110,015
Adjustments:
Non-cash purchase accounting impact ⁽¹⁾	940			1,324			1,802			3,631
Transaction and process improvement costs ⁽²⁾	1,190			535			15,866			2,536
Major repairs ⁽³⁾	694			375			2,216			1,436
Share-based payments ⁽⁴⁾	551			280			1,014			1,130
Other non-recurring items ⁽⁵⁾	—			2,609			—			2,909
Change in fair value of derivative ⁽⁶⁾	(843		)	—			1,709			—
Adjusted EBITDA	$	35,586		$	35,575		$	127,486		$	121,657

Adjusted EBITDA is defined as net income (loss) plus interest expense, provision for income taxes, depreciation, and amortization, and further adjusted for (1) non-cash purchase accounting impact, (2) transaction and process improvement costs, including the effect of the cessation of operations in Mexico, (3) major repairs, (4) share-based payments, (5) other non-recurring items, and (6) the change in fair value of derivative instruments. This non-GAAP measure is subject to certain limitations.


(1)	Represents the non-cash impact of purchase accounting, net of accumulated depreciation, on the cost of equipment sold. The equipment acquired received a purchase step-up in basis, which is a non-cash adjustment to the equipment cost pursuant to the credit agreement governing the Company’s asset-based lending facility (the “credit agreement”).

(2)

For the years ended December 31, 2019 and 2018, represents transaction costs related to the agreement and plan of merger with Capitol, which are comprised of professional consultancy fees, transaction costs, and the loss on extinguishment of debt. Additionally, pursuant to the credit agreement, the cost of undertakings to effect such cost savings, operating expense reductions and other synergies, as well as any expenses incurred in connection with acquisitions, are amounts to be included in the calculation of Adjusted EBITDA. For the year ended December 31, 2019, these costs include startup expenses associated with the new PTA locations (which include training, travel, and process setup costs), transaction expenses related to the acquisition of Truck Utilities, Inc. and expenses associated with the Company’s closure of its Mexican equipment rental and sales operations.


(3)	Represents the undepreciated cost of replaced chassis components from heavy maintenance, repair and overhaul activities associated with our fleet, which is an adjustment pursuant to our credit agreement.


(4)	Represents non-cash stock compensation expense associated with the issuance of stock options and restricted stock units in 2019 and the Class B Profits Interest Awards by NESCO Holdings, LP (our ultimate parent) on February 26, 2014, which is an adjustment pursuant to our credit agreement.


(5)	For the year ended December 31, 2018, represents other adjustments pursuant to the credit agreement: Rental expense incurred in 2018 for fleet equipment that had been rented under the terms of an operating lease that was terminated in 2018.


(6)	Represents the charge to earnings for our interest rate collar (which is an undesignated hedge) in the year ended December 31, 2019.

Table 5: Reconciliation of Adjusted EBITDA including a Full Year of Truck Utilities (Unaudited)




(in $000s)	Year Ended December 31, 2019
Adjusted EBITDA⁽¹⁾	$	127,486
Truck Utilities Adjusted EBITDA since acquisition ⁽²⁾	(936		)
Truck Utilities Adjusted EBITDA for the year ended September 30, 2019 ⁽³⁾	7,983
Adjusted EBITDA including a full year of Truck Utilities	$	134,533


(1)	See the unaudited Adjusted EBITDA reconciliation for the year ended December 31, 2019 in Table 4.


(2)	Represents Truck Utilities contribution included in Nesco’s reported Adjusted EBITDA in Table 4 from November 4, 2019 (the date of acquisition) to December 31, 2019. A reconciliation of Adjusted EBITDA to the most comparable GAAP measure is as follows:



(in $000s)	Three Months Ended December 31, 2019
Net loss	$	(699	)
Depreciation	907
Amortization	111
EBITDA	319
Adjustments:
Non-cash purchase accounting impact	490
Transaction costs	127
Adjusted EBIDA	$	936


(3)	Derived from Truck Utilities' audited financial statements for the year ended September 30, 2019. Adjusted EBITDA for Truck Utilities presented above may not be reflective of the actual Adjusted EBITDA for Truck Utilities for the year ended December 31, 2019. A reconciliation of Adjusted EBITDA to the most comparable GAAP measure is as follows:



(in $000s)	Year Ended September 30, 2019
Net income	$	1,620
Interest expense	116
Income tax expense	697
Depreciation	4,313
EBITDA	6,746
Adjustments:
Transaction costs	160
Other costs ^(a)	1,077
Adjusted EBIDA	$	7,983


(a)	Represents the reduction in annual compensation that was paid to the selling shareholders pursuant to employment agreements executed with Nesco effective November 4, 2019.

Table 6: Fleet Metrics



	Three Months Ended December 31,						Year Ended December 31,
	2019			2018			2019			2018
Average equipment on rent (in $000s)	$	508,658		$	462,365		$	477,493		$	450,195
Average fleet count	4,466			3,864			4,172			3,839
Average fleet utilization	81.5		%	83.5		%	80.7		%	82.3		%
Average rental rate per day	$	137.69		$	140.08		$	137.49		$	139.63

OPERATIONAL AND FINANCIAL METRICS

Average equipment on rent is the average original equipment cost of units on rent during the period. The measure provides a value dimension to the fleet utilization statistics. This metric has been adjusted to exclude Mexico, for which the Company commenced exit activities in 2019.

Average fleet count is the average number of units in the fleet during the period. This metric has been adjusted to exclude Mexico, for which the Company commenced exit activities in 2019.

Average fleet utilization for the period is calculated as the total number of invoiced days divided by the total number of available equipment days. This metric has been adjusted to exclude Mexico, for which the Company commenced exit activities in the third quarter of 2019.

Average rental rate per day for the period is calculated as total rental revenue excluding freight and damaged billings divided by the total rental days, which represents the number of billable days in the period aggregated across all units in the fleet. This metric has been adjusted to exclude Mexico, for which the Company commenced exit activities in 2019.

Table 7: Segment Performance



	Three Months Ended December 31,						Three Months Ended December 31,
	2019						2018
(in $000s)	ERS		PTA		Total		ERS		PTA		Total
Rental revenue	$	49,985	$	4,140	$	54,125	$	44,904	$	2,881	$	47,785
Sales of rental equipment	8,600		—		8,600		10,457		—		10,457
Sales of new equipment	2,232		—		2,232		6,182		—		6,182
Parts sales and services	—		12,289		12,289		—		4,264		4,264
Total revenues	$	60,817	$	16,429	$	77,246	$	61,543	$	7,145	$	68,688
Cost of revenue	21,279		12,410		33,689		25,244		3,830		29,074
Depreciation of rental equipment	18,030		1,240		19,270		16,548		1,028		17,576
Gross profit	$	21,508	$	2,779	$	24,287	$	19,751	$	2,287	$	22,038



	Year ended December 31,						Year ended December 31,
	2019						2018
(in $000s)	ERS		PTA		Total		ERS		PTA		Total
Rental revenue	$	182,720	$	15,276	$	197,996	$	173,267	$	11,296	$	184,563
Sales of rental equipment	23,767		—		23,767		26,019		—		26,019
Sales of new equipment	10,308		—		10,308		18,349		—		18,349
Parts sales and services	—		31,964		31,964		—		17,366		17,366
Total revenues	$	216,795	$	47,240	$	264,035	$	217,635	$	28,662	$	246,297
Cost of revenue	76,573		30,346		106,919		84,509		16,077		100,586
Depreciation of rental equipment	66,228		4,340		70,568		60,436		3,657		64,093
Gross profit	$	73,994	$	12,554	$	86,548	$	72,690	$	8,928	$	81,618

Table 8: Net Capital Expenditures



	Year Ended December 31,
(in $000s)	2019			2018
Purchase of equipment - rental fleet	$	106,641		$	58,519
Purchase of other property and equipment	3,065			716
Total capital expenditures	109,706			59,235
Less: Proceeds from sale of rental equipment and parts	(26,794		)	(33,321		)
Less: Insurance proceeds from damaged equipment	(1,658		)	—
Net capital expenditures	$	81,254		$	25,914

Table 9: Reconciliation of 2020 Adjusted EBITDA Guidance



(in $millions)	Full Year 2020

Net loss	$	(8.0	)	to	$	3.0
Interest expense	63.0			to	62.0
Income tax expense	2.0			to	2.0
Depreciation and amortization	83.0			to	84.0
Share-based payments	1.0			to	1.0
Other	1.0			to	2.0
Adjusted EBITDA	$	142.0		to	$	154.0



Delaware	001-38186		84-2531628
(State or Other Jurisdiction of Incorporation)	(Commission File Number)		(I.R.S. Employer Identification Number)

6714 Pointe Inverness Way, Suite 220 Fort Wayne, Indiana		46804
(Address of principal executive offices)		(Zip code)



	☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

	☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12)

	☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

	☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



Title of Each Class	Trading Symbol(s)	Name of Exchange on Which Registered
Common Stock, $0.0001 par value	NSCO	New York Stock Exchange
Redeemable warrants, exercisable for Common Stock, $0.0001 par value	NSCO.WS	New York Stock Exchange



Exhibit No.		Description
10.1		Secured Asset Based Loan Credit Agreement, dated as of July 31, 2019, among Capitol Investment Merger Sub 2, LLC, JPMorgan Chase Bank, N.A., Fifth Third Bank, Morgan Stanley Senior Funding, Inc., Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Island Branch, and Citigroup Global Markets Inc.
99.1		Press release issued March 12, 2020, by Nesco Holdings, Inc.




Date:	March 12, 2020	Nesco Holdings, Inc.

		/s/ Bruce Heinemann
		Bruce Heinemann Chief Financial Officer and Secretary


Item 9.01.	Financial Statements and Exhibits.