Capitol Investment IV Earnings 2019-12-31

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

FORM 10-K

_______________________________



x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-38186

_______________________________

Nesco Holdings, Inc.

(Exact name of registrant as specified in its charter)

_______________________________



Indiana	84-2531628
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6714 Pointe Inverness Way, Suite 220

Fort Wayne, IN 46804

(Address of principal executive offices, including zip code)

(800) 252-0043

(Registrant’s telephone number, including area code)

_______________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each 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

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d). YES o NO ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ý NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

The aggregate market value of ordinary shares held by non-affiliates, computed by reference to the closing price for ordinary shares as of the last business day of the registrant’s most recently completed second fiscal quarter, as reported on the New York Stock Exchange, was approximately $411.8 million.

The number of shares of Nesco Holdings, Inc.’s common stock (“common stock”) outstanding as of February 28, 2020, was 49,033,903.

Table of Contents

Nesco Holdings, Inc.

FORM 10-K REPORT INDEX



10K Part and Item No.		Page No.
PART I

Item 1	Business	3
Item 1A	Risk Factors	12
Item 1B	Unresolved Staff Comments	25
Item 2	Properties	25
Item 3	Legal Proceedings	26
Item 4	Mine Safety Disclosures	26

PART II

Item 5	Market for the Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	26
Item 6	Selected Financial Data	27
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operation	29
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	45
Item 8	Financial Statements and Supplementary Data	47
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	82
Item 9A	Controls and Procedures	82
Item 9B	Other Information	83

PART III

Item 10	Directors, Executive Officers and Corporate Governance	84
Item 11	Executive Compensation	90
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	96
Item 13	Certain Relationships and Related Transactions, and Director Independence	99
Item 14	Principal Accountant Fees and Services	100

PART IV

Item 15	Financial Statement Schedule and Exhibits	101
Item 16	Form 10-K Summary	110
	Signatures	111

PART I

Item 1. Business

Company Overview

Nesco Holdings, Inc. (“Holdings”), a Delaware corporation, serves as the parent for our primary operating company, NESCO, LLC. NESCO, LLC, an Indiana limited liability company, and its wholly owned subsidiaries, is one of the largest specialty equipment rental providers to the growing electric utility transmission and distribution (“T&D”), telecom and rail industries 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. Unless otherwise indicated, for periods prior to the consummation of the merger (the “Transactions”) with Capitol Investment Corp. IV (“Capitol”), references to “we,” “our,” “us,” “Nesco” or the “Company” are to NESCO, LLC and for periods following the consummation of the Transactions, such terms refer to Holdings.

With a young, coast-to-coast rental fleet of approximately 4,600 units as of December 31, 2019, Nesco has a diverse specialty fleet offering that includes insulated and non-insulated bucket trucks, digger derricks, line equipment, cranes, pressure diggers and underground equipment, with all-terrain options such as all-wheel drive, track mounting and rail mounting. Nesco’s rental fleet has an average unit age of approximately 3.6 years at December 31, 2019 compared to an average expected useful life of 15 to 25 years. The long useful life of Nesco’s equipment assets is a key driver of attractive asset economics. Nesco expects that a combination of highly attractive asset economics and long rental periods will continue to drive strong profit margins. In addition to renting its fleet, Nesco opportunistically sells both new and used specialty equipment, which fosters strong customer relationships, facilitates fleet management and strengthens supplier relationships.

Through its parts, tools and accessories, or PTA segment, Nesco provides its customers a total job-site solution, offering a range of parts, tools and accessories for rent or sale to fully equip their equipment and crews for activity in the field. Nesco’s large PTA inventory includes stringing blocks, augers, insulated hotline tools, hoist and rigging equipment and grounding clamps. Nesco’s comprehensive PTA offering expands opportunities to serve its equipment rental and sales customers through the convenience of a single vendor for all of their specialty equipment and PTA needs.

Nesco has an extensive geographic footprint which allows Nesco to supply equipment and services to major T&D, telecom and rail customers throughout the U.S. and Canada. Nesco has over 70 facilities with no state, province or territory representing more than 20% of revenues. This expansive footprint allows Nesco to opportunistically position its fleet in high-demand regions and across multiple end-markets, which drives high fleet utilization and results in superior customer connectivity. Nesco serves a diverse base of more than 2,000 customers as of December 31, 2019, including many of the top national and regional electric utilities, telecoms, railroads and related contractors.

Nesco’s three primary end-markets (T&D, telecom and rail) present large and compelling opportunities. Investment spend in these end-markets has exceeded the rate of GDP growth and shown resiliency through the economic cycle. Continued growth is supported by multiple important and transformative long-term trends. The electric utility market is in the early years of a secular upcycle, driven by utilities’ investment to replace or strengthen an aging electric grid, to integrate growing gas and renewable generation mandated by regulation and to meet the expanded demand from electric vehicles and electric heating with a growing focus on decarbonization. The 5G upgrade cycle is driving a new wave of telecom infrastructure spending. Urban congestion and increased freight transportation needs have driven a nationwide investment in improving rail infrastructure with many major projects approved and under development across the U.S. See the section entitled “Business of Nesco - End-Market Overview” for additional detail.

Demand for Nesco’s equipment expanded from 2016 to 2019, as demonstrated by high levels of fleet utilization over this period. Prior to the Transactions involving Capitol, Nesco’s ability to invest in its fleet to meet growing end-market demand was limited by the Company’s capital structure. As a result, Nesco turned away rental opportunities due to lack of fleet availability. With a strengthened capital structure following the consummation of the Transactions with Capitol, Nesco was able to make a significant investment into its fleet in 2019 to capture existing unmet demand as well as expected continued growth in demand from its end-markets. See the section entitled “Recent Events” for additional detail.

Company History

Nesco was founded in 1988 as a family-owned equipment sales and rental company in Bluffton, Indiana, focused on the electric utility market. Following its acquisition by Energy Capital Partners (“ECP”) in early 2014, Nesco expanded and diversified its operations with the launch of the parts, tools and accessories business in late 2015 and the entry into the telecom and rail markets in 2016. The PTA business allowed Nesco to cross-sell a complementary product offering to its existing customer base. The expansion into the telecom and rail industries represented a natural extension given that a significant portion of Nesco’s equipment has applications across the T&D, rail and telecom end-markets. Nesco’s telecom and rail expansion was facilitated by Nesco’s acquisition of V&H Leasing Services, a rail equipment rental business, in 2016. The acquisitions of Bethea Tool and Equipment Company (“Bethea”) in 2017 and N&L Line Equipment

(“N&L”) in 2018 further enhanced the PTA segment and positioned it for nationwide expansion. Bethea added manufacturing capacity of stringing blocks, the most significant product within the PTA portfolio. N&L added certified expertise in dielectric testing and manufacturing of certified live-line tools. In November 2019, Nesco closed the acquisition of Truck Utilities, Inc. (“Truck Utilities”), expanding Nesco’s presence in the Upper Midwest and bringing with it a young, underutilized fleet as well as upfit and service capabilities.

Merger with Capitol

On April 7, 2019, NESCO Holdings I, Inc. (which was the ultimate parent holding company prior to the Transactions described below) (“Holdings I”) entered into a definitive agreement with Capitol, a public investment vehicle, whereby the parties agreed to merge, resulting in Nesco becoming a publicly listed company.

Capitol Investment Corp. IV was originally incorporated under the laws of the Cayman Islands on May 1, 2017 as a blank check company under the name Capitol Investment Corp. IV to acquire, through a merger, share exchange, asset acquisition, stock purchase, plan of arrangement, recapitalization, reorganization or other similar business combination, one or more businesses or entities.

On July 31, 2019, we completed the Transactions whereby Holdings I, became our wholly-owned subsidiary and the entity (along with its subsidiaries) through which we operate our business. In connection with the Transactions, we changed our name to Nesco Holdings, Inc.

Segments

Nesco operates in two segments:

•

Equipment Rental and Sales. The Equipment Rental and Sales (“ERS”) segment principally provides specialty equipment rental solutions to customers including electric utilities, telecom operators, railroad operators and related contractors. These customers use Nesco’s equipment in performing maintenance, repair, upgrade and installation services on critical infrastructure assets. Nesco also sells new and used equipment through this segment.


•	Parts, Tools and Accessories. The PTA business was launched in 2015. Through this segment, Nesco offers customers sale and rental solutions for parts, tools and accessories to complement Nesco’s specialty equipment fleet. Customers include equipment rental customers, industry contractors and select distributors.

End-Market Overview

Nesco’s core end-markets are electric utility, T&D, telecom and rail.

General End-Market Trends

Growth of annual capital expenditures in Nesco’s end-markets has exceeded the annual growth in U.S. GDP. Nesco’s end-markets have demonstrated limited correlation with GDP growth and resiliency through the recent economic cycle.

Nesco’s Large and Growing End-Markets

The North American market has experienced a secular shift from equipment ownership to rental. Rental penetration of the broader equipment fleet in North America increased from 42% in 2009 to 57% in 2019 and is expected to reach 65% by the mid-2020s.¹ In comparison, other developed markets recorded higher rental penetration rates in 2017, including Europe at 65%, Japan at 80% and the U.K. at 80%, demonstrating the future potential of the North American market.² Nesco believes that customers’ growing preference for equipment rental is driven by several factors including the avoidance of significant capital outlay, improved asset utilization, reduced storage and maintenance, access to a wider range of modern productive equipment, dedicated customer care and operational efficiencies.

T&D End-Market

Transmission and Distribution End-Market

Maintaining safe and effective transmission and distribution lines is critical to national infrastructure, as they carry the electricity that powers the nation. Transmission lines carry high voltage electricity long distances, while distribution lines carry electricity from local transformers to houses and businesses. Nesco’s specialty equipment is used in the maintenance and repair of live lines and installation of new lines. Capital expenditure spend in the electric utility transmission and distribution end-market exceeds $60 billion annually.³ This spend is driven by a number of attractive dynamics, demonstrating that the U.S. is likely in the very early innings of a multi-year T&D spending cycle.

Aging and Underinvested T&D Infrastructure. Electricity delivery in the U.S. depends on an aging and complex patchwork system of power generation facilities, transmission grids, local distribution lines and substations. Most T&D lines were constructed in the 1950s and 1960s with a 50-year life expectancy and were not originally engineered to meet today’s load demands. Today, approximately 40 to 50% of existing T&D infrastructure is at or beyond its engineered life.⁴ Due in part to this aging infrastructure, costly electric emergency incidents and disturbances have increased more than sevenfold since 2000.⁵ Multiple costly fires have also been caused by aging and under-maintained transmission and distribution lines. As an example, in February 2019, Pacific Gas & Electric, an electric utility in California, announced that it is probable that its transmission line equipment caused the catastrophic fires in Paradise, CA three months prior, resulting in the deaths of eighty-five people. Maintenance work on the line had been delayed for several years.⁶ The company, which filed for bankruptcy protection in January 2019, recorded a $10.5 billion charge in anticipation of damage claims. California fire investigators have determined that Pacific Gas & Electric’s equipment also played a role in starting 18 blazes in 2017.⁷ The prevention of additional incidents associated with the continued operations of aging T&D infrastructure is expected to continue to drive increasing levels of maintenance and repair and replacement spend by utilities.

Changing Generation Landscape. The ongoing transition from coal to gas and renewables continues to drive changes in the generation landscape and transmission project development. Twenty-nine states and Washington, D.C. have adopted renewable portfolio standards, which mandate that a certain percentage - most states target 10 to 45% - of electricity sold by a utility must come from renewable sources.⁸ Approximately 786 gigawatts of new renewables and natural gas-fired generating capacity is expected to be added through 2050.⁹ As a result, significant spend for new transmission lines will be required to interconnect these new sources of power with the electrical grid.

Increased Focus on Decarbonization. With an increased societal focus on decarbonization, major fossil fuel driven sectors are shifting towards electrification. The electrification of vehicles, heating technology and industrial processes is expected to drive a significant increase in electricity demand and require a transmission investment of up to $90 billion by 2030.¹⁰

Increased Outsourcing by Utilities. Utilities are increasingly turning to specialized third-party contractors to fulfill construction and maintenance needs. This outsourcing trend is driven by the challenge of an aging workforce and desire to shift the management and responsibilities of non-core activities to external service providers. Outsourcing is a favorable trend for Nesco, given its rental penetration among T&D contractors who prefer to rent due to lower initial capital outlay, increased flexibility, improved asset utilization and productivity and significantly reduced storage and maintenance costs.

Nesco’s longstanding relationships, national scale and diverse fleet of specialty rental equipment makes Nesco a key supplier to many companies in the T&D end-market. Approximately 76.4% of Nesco’s revenue was generated from the T&D end-market in 2019.

Telecom End-Market

Telecommunications infrastructure, including telecom cells, towers and wirelines, are the backbone of telephonic interaction and the transportation of mobile data. Nesco provides the specialty equipment required to maintain and install telecom cells, towers and communication lines. Construction spend on telecommunications infrastructure exceeds $30 billion annually.¹¹ This spend is expected to grow significantly into 2020 and continue throughout the next decade due largely to the advent of 5G technology.

Rapid technological advancements, including advanced digital and video service offerings, continue to increase demand for greater wireline and wireless network capacity and reliability. Data traffic is at an all-time high and is expected to substantially increase in the future. North American data traffic is expected to grow at a 24% CAGR from 2016 to 2021.¹² In response to this demand, the Big 4 U.S. telecom operators are planning to increase speed and capacity through the deployment of 5G technology.

5G technology will require the installation of numerous higher bandwidth small cells to “densify” wireless networks and enhance performance. This is because small cells only deliver coverage within approximately a quarter mile of their location, compared to approximately five miles for the existing 4G and predecessor macro cells.¹³ As a result, approximately 20 times more small cells will need to be installed in order to provide the same level of coverage as the existing macro cells.¹⁴

The spend required by the Big 4 wireless providers to deploy 5G technology is expected to grow at a 40% CAGR from 2019 to 2023, continuing into 2030 with total 2019 to 2030 spend of approximately $240 billion.¹⁵

Emerging wireless technologies are also driving significant wireline deployments. A complementary wireline investment cycle is underway to facilitate the deployment of fully converged wireless and wireline networks. Continued recurring maintenance will be required on existing wireline infrastructure and new 5G infrastructure.

Approximately 12.9% of Nesco’s revenue was generated from the telecom end-market in 2019.

Rail End-Market

Freight and commuter rail are responsible for transporting products and people across the nation. Nesco’s rail mounted equipment is used for a variety of tasks including the installation of new rail and maintenance of the existing rail lines. The hi-rail equipment is utilized in projects for both installation and repair of track, electric lines, signal crossings and signs. The equipment is also often used for working on older infrastructure such as repairing bridges and terminals with more antiquated track and systems that are in need of upgrades with more modern systems like Positive Train Control (PTC) and others. The six largest public railroads spend more than $10 billion annually in capital expenditures, which is expected to continue to grow as freight demands increase.¹⁶ In addition to freight rail, spend on active commuter rail projects is significant with a growing pipeline.

Freight Rail. Freight rail, one of the most cost-effective, energy-efficient modes of transport, carries about 40% of intercity freight as measured by ton-miles, more than any other mode of transportation.¹⁷ Total U.S. freight movements are expected to rise from around 18.0 billion tons in 2015 to around 25.3 billion tons in 2045 - a 41% increase.¹⁸ Nesco’s North American customers are principally Class I railroads and related contractors. Class I railroads operate in 44 states across the U.S. and account for 94% of freight rail revenues in North America.¹⁹

Commuter Rail. Trends such as population growth, increasing urbanization, a focus on sustainability, environmental awareness and increasing highway congestion are expected to drive continued investment in commuter rail. Furthermore, as a result of years of insufficient funding, transit systems across the U.S. are struggling to cope with aging infrastructure, creating a massive and increasing backlog. The most recent federal estimate quantifies the backlog of projects required to attain a “state of good repair”, meaning public transit is repaired to an age within its average service life, at $90 billion - projected to grow to $122 billion by 2032.²⁰ In August 2018, the U.S. Senate approved a fiscal-year 2019 appropriations bill that provides $16.1 billion for public transit and intercity passenger rail. Also in 2018, the Los Angeles County Metropolitan Transportation Authority’s board adopted the Twenty-Eight by ‘28 plan, which calls for completing 28 transportation projects at an estimated cost of $26 billion ahead of the 2028 Summer Olympics and Paralympics in Los Angeles.

Approximately 5.2% of Nesco’s revenue was generated from the rail end-market in 2019.

Other End-Markets

Approximately 5.5% of Nesco’s revenue was generated from other end-markets in 2019, primarily from lighting and signage.

Product and Services

Equipment Rental and Sales. Nesco’s equipment rental fleet consists of approximately 4,600 units, which management believes is among the largest specialty equipment rental fleets in North America. Nesco’s fleet consists of more than 100 product variations to serve the specialized needs of its customers including various terrain options such as truck mounted, rail mounted, track mounted and all-wheel drive. Nesco’s equipment can reach transmission lines and cell sites in excess of 200 feet in the air, dig to a depth of 60 feet to install telephone and power line poles, provide power line and fiber line pulling capacity of up to 40,000 pounds and reach remote and inaccessible areas for rail maintenance. A large percentage of Nesco’s fleet is insulated, which allows customers to safely work on live electric lines. Nesco’s equipment is regularly tested for safety, which includes regulation-mandated dielectric testing of all insulated units to ensure safe operations near electrical wiring. The majority of Nesco’s equipment can be used across a variety of end-markets and many of Nesco’s customers operate in multiple end-markets. Rental rates vary depending on product type, geography, demand and other factors.

Examples of Nesco’s equipment rental products include:


•	Bucket Trucks. Trucks equipped with a bucket mounted on an insulated or non-insulated hydraulic lifting aerial device used to maintain and construct utility, rail or telecommunication lines.


•	Digger Derricks. Trucks equipped with a boom and auger used to dig holes and set utility, rail and telephone poles.


•	Line Equipment. Equipment used to string new and re-conduct overhead utility, rail, telecom or cable lines including pole trailers, reel handling trailers and other material handling trailers.


•	Cranes. Trucks equipped with a boom crane used for large-scale transmission line repair and construction and in multiple rail applications for material handling and lifting.


•	Pressure Diggers. Trucks equipped with a pressure drill used to dig holes for utility poles, structure bases and foundations through hard materials such as rock.


•	Underground Equipment. Variety of equipment used to place and remove underground utility and telecom lines without disruption to the surface.


•	Trucks / Miscellaneous Equipment. Hi-rail equipment including hi-rail service trucks, grapples, roto-dumps, PTC trucks, etc.

In addition to equipment rentals, Nesco opportunistically sells used equipment from its own fleet and new equipment as a qualified dealer for 16 of its suppliers.

Parts, Tools and Accessories. Nesco’s parts, tools and accessories rental inventory consists of approximately 39,000 units, which management believes is the second largest PTA rental fleet in North America. Nesco also has a broad inventory of PTA available for purchase, including Nesco-manufactured stringing blocks and insulated tools as well as other original equipment manufacturer (“OEM”) direct products. Nesco’s PTA products are a natural extension of Nesco’s core equipment rental offering and can be rented or purchased on an individual basis or in packaged specialty kits. A typical crew on assignment will require a collection of parts, tools and accessories of between $25,000 and $80,000 per crew.

The technical nature of certain PTA, such as insulated tools, requires periodic testing in a certified lab and expertise in specialized repairs, which Nesco provides at its test and repair facilities. Nesco is expanding its test and repair services nationwide and expects to increase its number of locations. These locations will serve as hubs for technical test and repair as well as PTA rental and sales.

Examples of Nesco’s PTA products and services include:


•	Stringing Blocks. Stringing dollies and accessories used to string powerline, telephone line (including fiber), or cable, above ground or underground in the new construction, rebuild or maintenance of the lines


•	Augers. Tool used to dig holes for power, telephone or cable poles and also used to dig holes for structure bases, pilings and foundation supports


•	Insulated Tools. Extension arms, temp arms, insulated ladders, etc., used to insulate and dielectrically protect workers and temporarily reposition powerlines for safe execution of tasks while working at height in live line circumstances.


•	Other PTA. Crimping tools and dies, pumps/motors, underground fiber laying tools and various other tools used in either utility, telecom or rail applications.


•	Test and Repair Services. Regulatory requirements of not more than one year for specialized PTA including testing and inspections, design requirements, rubber testing, etc. and repair services for replacement parts.

Competitive Strengths

Nesco believes that the following competitive strengths have been instrumental in its success and position Nesco for continued growth:

Market Leader Across Compelling End-Markets. We believe Nesco is a leader in each of the T&D, telecom and rail end-markets that Nesco serves with a fleet of approximately 4,600 units of specialty equipment. Nesco has established this position by leveraging its expansive fleet, national sales and service network, longstanding customer relationships and operational expertise. All three end-markets are in the early years of a secular upcycle that is expected to persist for years to come. Nesco is well positioned to benefit from this projected growth.

Comprehensive Product Offering. Nesco has a broad product offering, including both a wide array of specialized rental equipment and a diverse range of ancillary parts, tools and accessories. Nesco believes that its diverse and comprehensive offering make it a specialty equipment provider of choice for its customers. Its “one-stop-shop” value proposition sets Nesco apart from its competitors and strengthens customer relationships.

Focus on Rental. Nesco has a rent-first business model. Nesco’s singular focus is on providing high quality specialty rental equipment and related products with best-in-class service. In comparison, for many of Nesco’s competitors, equipment manufacturing and sales is the primary focus with secondary attention given to servicing rental customers. Nesco’s rental-centric sales and service organization is highly responsive to all needs of its rental customers. Nesco provides price quotes within 30 minutes and ensures swift equipment delivery and timely service support, either in the field or in the shop. Nesco believes its rent-first model enables Nesco to provide superior customer service and a best-in-class rental experience relative to competitors.

Expansive Geographic Footprint. Nesco’s geographic presence spans the United States and Canada with a network of more than 70 locations. Nesco’s strategically allocated fleet and wide-reaching service capabilities allow it to quickly respond to both equipment and service requests from customers. The Company’s broad reach also represents a competitive advantage in serving customers with nationwide operations who may prefer the convenience of interacting with a limited number of equipment providers.

Established Customer Relationships and Industry Expertise. Nesco has longstanding relationships with its large and diverse group of customers. The Company has built strong expertise of the equipment and product requirements in its end-markets and works closely with its customers to determine their needs by projects. Nesco’s top ten customers have an average of a 17-year tenure with the Company. These established relationships represent a competitive advantage for Nesco.

Strong Financial Profile. Robust growing demand for Nesco’s equipment and strong asset-level returns enabled the Company to achieve a 12% revenue CAGR and a 17% Adjusted EBITDA CAGR from 2016 to 2019. Following the consummation of the Transactions, our financial flexibility was improved to pursue strategic growth opportunities through investments in the fleet, expansion of the PTA business and selective strategic activity, while still maintaining prudent capital management. Nesco will also benefit from the use of certain attractive tax attributes, including a federal net operating loss carryforwards of $285.3 million and a state net operating losses carryforward of nearly $202.4 million, both as of December 31, 2019.

Proven and Experienced Management. Nesco has a strong, highly experienced management team. CEO Lee Jacobson has more than 19 years of experience in the utility equipment rental and sales industry. Prior to joining Nesco in 2012, Mr. Jacobson served as Vice President and General Manager with Terex Utilities, a key supplier and partner. Our President Robert Blackadar has over 25 years of experience in the rental and equipment industry and demonstrated success in driving strong financial and operating results in senior leadership roles across sales and operations. Prior to joining Nesco in 2019, Mr. Blackadar served as Senior Vice President and Division Vice President with Blueline Rental and held a range of leadership and sales roles with United Rentals, Herc Rentals and Ritchie Bros. Auctioneers. CFO Bruce Heinemann has over 25 years of experience in finance and accounting for a range of industrial and manufacturing companies. In the last three years, Nesco’s management team has successfully implemented several growth initiatives including the launch of the PTA business, expansion into the telecom and rail end-markets, internalization of equipment servicing, development of remounting capabilities and accretive acquisitions.

Growth Strategies

Nesco intends to maintain its leading market position and drive continued revenue and Adjusted EBITDA growth by pursuing the following strategies:

Invest in Fleet to Meet Growing Excess Demand. As a result of increasing demand from customers and a lack of equipment availability in Nesco’s fleet, the Company had to turn away over 6,000 rental opportunities from 2017 to 2019. Nesco had limited ability to invest in its fleet during this period due to capital structure constraints. The number of rental opportunities that Nesco was unable to service due to a lack of product availability grew from 810 rental opportunities in 2015 to 1,999 rental opportunities in 2019, indicating a growing need for increased capital investment. In comparison, the Company serviced approximately 4,500 rental opportunities in 2019. Nesco tracks information on rental opportunities, including the reasons for opportunities not serviced, in its customer relationship management system.

With a strengthened capital structure, Nesco made a significant investment in its fleet in 2019, growing the fleet size by approximately 700 additional units. The Company expects to address the existing and growing end-market demand with a targeted investment in product lines that have demonstrated the greatest excess demand, highest utilization and shortest payback periods. Nesco’s investments in its fleet will allow the Company to leverage its highly attractive unit economics, with unlevered internal rates of return of approximately 30% and up to 3x unlevered returns on invested capital.

Increase Customer Penetration in Parts, Tools and Accessories. Since its launch in 2015, the parts, tools and accessories business has demonstrated significant growth, indicating the strong appeal of the product offering to Nesco’s customer base. PTA revenue as a percentage of equipment rental revenue increased from 17% in 2018, when only two locations were opened with a limited product offering at each of those locations, to 24% in 2019, excluding Truck Utilities after Nesco opened four full service locations and a warehouse facility and added certified test and repair services to all of is full service locations. Nesco believes PTA revenue as a percentage of equipment rental revenue demonstrates the level of cross-sell of the PTA segment into its existing customer base and believes there is ample opportunity to increase this percentage over time.

Following the acquisitions of Bethea and N&L in 2017 and 2018, Nesco is now well positioned to expand the PTA segment. N&L and Bethea added manufacturing capabilities of key PTA products, including stringing blocks and hotline tools, both of which are long-lived assets that represent the largest share of PTA rentals. N&L also added certified test and repair capabilities. Management believes the integration of these two operations provides Nesco a cost and expertise advantage compared to competitors.

Nesco increased the number of PTA full service locations and warehouses from two in 2018 to seven by the end of 2019 and expects to open an additional full service location in 2020. Each full service location provides certified test and repair services and an expanded product offering of both insulated and non-insulated tools.

Selectively Pursue Strategic Acquisitions. Nesco has successfully sourced, executed and integrated seven strategic acquisitions since 2012. These seven accretive acquisitions have bolstered Nesco’s market leadership, fleet diversity, end market reach, product offerings and geographic footprint. The companies were acquired for a weighted average EBITDA multiple of 5.7x or 4.0x, excluding Truck Utilities, including realized synergies and 100% or more of the expected synergies were realized in each acquisition, demonstrating management’s ability to effectively source, execute and integrate acquisitions. Management is actively evaluating additional acquisition opportunities to allow Nesco to leverage its national platform and act as a preferred consolidator in a fragmented industry with many regional and local players.

Customers

Nesco serves a large base of more than 2,000 customers, including many of the top national and regional electric utilities, telecoms, railroads and related contractors.

Rental Contracts

In excess of 95% of new rental orders use Nesco’s standard rental agreement, pre-negotiated master lease or national account agreements. The initial duration of Nesco’s rentals is 28 days or one month. Thereafter, the contract is automatically renewed in increments of 28 days or one month until the customer returns the equipment. Customers are billed on a monthly basis. The average rental duration of Nesco’s rental portfolio was 12.9 months as of year-end 2019, excluding Truck Utilities. In addition to the monthly rental rates, customers are responsible for the costs of delivery and return to Nesco’s service locations, preventative maintenance and consumables, and any loss or damage beyond normal wear and tear. Nesco’s rentals require customers to maintain liability and property insurance covering the units during the rental term and to indemnify Nesco from losses caused by the negligence of the customer, their employees or contractors. Nesco also provides rental customers the opportunity to enter into Rental Purchase Option (“RPO”) contracts, when requested, which allow the customer to earn credit towards the purchase of the equipment based on the rental payments made.

Fleet Management

Nesco employs a disciplined and strategic approach to fleet management and optimization. The fleet management process includes the development of an annual plan for procurement, submission of purchase orders with key suppliers, monitoring and tracking maintenance and repair requirements and end of rental life decisions regarding remount or sale for each unit in the fleet. Nesco utilizes a third-party web-based fleet management information system for enhanced visibility into the transportation and service phases of the rental cycle, enabling it to effectively manage service cost, uptime and utilization. The system provides Nesco’s sales and operations teams with remote access to real-time information, enabling fleet optimization and improving responsiveness. Nesco actively tracks utilization for each unit in its fleet and type to forecast availability and inform fleet investment decisions, while sales representatives and management closely follow developing projects and remain in constant communication with customers to forecast their equipment needs.

Nesco’s dedication to maintaining its fleet in like-new condition provides customers with more reliable, readily available equipment. Nesco’s expansive geographic footprint enables the Company to quickly turn around newly off-rent equipment which supports high utilization levels. Fleet maintenance that occurs in a service facility is executed either at a Nesco operated service location, or a third party outsourced location. Fleet maintenance that occurs in the field is executed either by a Nesco employed technician or third-party field service technician. Major overhaul and repair jobs are typically performed by Nesco’s highly skilled internal service team. Third-party service providers typically perform routine maintenance work, including standard checks as equipment comes off rent, but are equipped to handle larger overhaul and repair jobs as needed. This unique service network improves Nesco’s maintenance response time, equipment reliability and utilization levels while allowing it to minimize fixed costs.

As units approach the targeted end of rental lives, based upon expected increasing maintenance cost curves and customers’ preference for newer equipment, Nesco’s technical fleet management team will evaluate each individual unit for potential retention, remount on a new chassis or sale. Dynamic review of aged fleet to determine remount applicability on key product lines occurs as a first screen for each unit. Nesco will look to sell equipment if a unit is not suitable for remount. Nesco realizes attractive used equipment sale values, driven by Nesco’s significant purchasing power with suppliers, industry leading maintenance programs and lead times associated with new equipment orders. Generally, fleet sales are executed with long standing rental customers looking to satisfy permanent fleet needs.

Suppliers

Nesco sources the specialty equipment and parts, tools and accessories it rents and sells from a limited number of middle market suppliers including Terex, S.D.P. Manufacturing and Versalift. Nesco is one of the largest customers for most of its key suppliers, making the Nesco an important and highly strategic sales channel for OEMs. Management believes Nesco receives preferential pricing terms and production priority unavailable to smaller competitors. Nesco’s senior leadership maintains strong relationships with key suppliers. Some of these were established when certain members of Nesco’s management worked in supplier organizations prior to joining Nesco, including Lee

Jacobson, CEO, who worked at Terex for 10 years. The Company maintains a resilient supply chain network by sourcing equipment product lines from multiple manufacturers, keeping the market competitive and eliminating risk of disruptions from a single supplier.

Competition

Nesco’s competitors include local, regional and national companies within the T&D, telecom or rail end-markets. The national competitors within the specialty equipment rental segment include Altec Industries, Custom Truck One Source and Danella Companies. In most cases, these competitors focus on a primary activity other than rental such as manufacturing, truck upfitting or construction services. The only national competitor within the comparable parts, tools and accessories segment is Wagner-Smith Equipment Co. Outside of Nesco, no national provider has a comprehensive offering of both specialty equipment and adjacent parts, tools and accessories. In addition to national competitors, there are numerous local or regional competitors that serve Nesco’s target end-markets. These smaller competitors lack the scope of fleet, sales coverage, service coverage and PTA offering that is a part of Nesco’s customer value proposition.

Sales and Marketing

Sales

Nesco operates with a nationwide direct sales team to address the specialized needs of its customer base and cultivate strategic partnerships with key customers in the industry. The more than 50-member sales organization is led by members of the senior management team including Presidents and Regional Vice Presidents. The average years of experience in the industry of our sales personnel is more than 18 years. Nesco’s field sales organization has developed “first-call” relationships with several of its largest customers while providing significant expertise in the technical nature of the equipment and projects.

For key national or regional accounts, Nesco employs a top to bottom sales approach with a focus on building partnerships at all levels within these key accounts and securing commitments to use Nesco as a preferred supplier. Strategic Account Managers are responsible for establishing and managing these relationships along with direct involvement from senior leadership to create more contact and touch points between the key decision makers and Nesco.

Nesco divides the remainder of its sales organization into regional go-to market teams for the equipment rental and PTA segments consisting of Territory Managers supported by Inside Rental Representatives and Assistants. Territory Managers are responsible for developing new relationships and maintaining communication with key decision makers at customer organizations and working with employees at both the corporate office and on individual job sites to ensure customer satisfaction. After a rental opportunity is generated, Inside Rental Representatives and Assistants serve in a support role by working directly with customers to finalize orders, schedule delivery, coordinate payment and handle inbound requests. This direct communication helps expedite future orders with an industry leading turnaround time of 30 minutes on rental equipment availability and rate quotes.

Marketing

Nesco utilizes targeted advertising, tradeshows, focused email distributions, a comprehensive equipment catalog and a company website for marketing its products and services. The rental catalog contains detailed technical information and diagrams for all Nesco products, while the website offers easy access to equipment specifications and rental listings. Nesco supplements these materials with ten to twelve major marketing publications annually. In addition to print and online publications, Nesco participates in national and select regional trade shows, which represent important customer touch points for the sales team to both approach new customers and maintain strong relationships with existing customers.

Facilities

Nesco headquarters is based in Fort Wayne, IN where it houses executive management, accounting, finance, information technology, human resources, marketing and procurement professionals. Nesco maintains a diverse geographic footprint in the U.S. and Canada, with 23 leased facilities operated by Nesco. All Nesco operated facilities are leased which enhances operational flexibility. Nesco operates 12 facilities for the servicing of its core equipment rental fleet. Additionally, the Company partners with more than 50 third-party service locations geographically disbursed throughout the U.S. and Canada. Nesco currently operates 5 PTA full service facilities in New Haven, IN, Poulsbo, WA, Tallahassee, FL, Alvarado, TX and Yuma, AZ and 2 warehouse facilities in El Monte, CA and Bluffton, IN. Nesco expects to open an additional independent PTA full service facility in Pennsylvania in 2020 to round out its regional presence across the U.S.

Intellectual Property

Nesco does not own or license any patents, patent applications or registered copyrights. Nesco owns a number of trademarks and domain names important to the business. Its material trademarks are registered or pending applications for registrations in the U.S. Patent and Trademark Office and various non-U.S. jurisdictions. The Company uses ‘‘Nesco’’ and “Truck Utilities” as unregistered trademarks and ‘‘Nesco Specialty Rentals’’, ‘‘Nesco Rentals’’ and “Bethea” as registered trademarks. Additionally, pursuant to an agreement with Terex, Nesco has a revocable, royalty-free, limited license to use certain Terex trademarks to promote the sale and servicing of Terex products, subject to certain conditions of use. Nesco believes the Company owns or licenses, or could obtain on reasonable terms, any intellectual property rights needed to conduct its business.

Environmental Compliance

Nesco is subject to various Canadian, federal, state, local and provincial environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management, storage and disposal of, or exposure to, hazardous substances and wastes, the responsibility to investigate and clean up contamination, and occupational health and safety. Fines and penalties may be imposed for non-compliance with applicable environmental, health and safety requirements and the failure to have or to comply with the terms and conditions of required permits. The Company is not aware of any material instances of non-compliance with respect to environmental regulations.

Employees

As of December 31, 2019, Nesco had approximately 400 employees across North America. Nesco has a non-union workforce and believes that relations with its employees are excellent.

Legal Proceedings and Insurance

From time to time, Nesco is subject to various lawsuits, claims and legal proceedings, the vast majority of which arise out of the ordinary course of business. The nature of Nesco’s business is such that disputes related to vehicles and accidents occasionally arise. Nesco assesses these matters on a case-by-case basis as they arise and it establishes reserves as and if required, based on its assessment of exposure. Nesco has insurance policies to cover general liability and workers’ compensation related claims. Management believes that none of the existing legal matters will have a material adverse effect on Nesco business or financial condition upon their final disposition. See Nesco’s audited consolidated financial statements and the notes thereto for additional detail.

Available Information

We are required to file annual, quarterly and current reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934, as amended. The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The public can obtain any documents that are filed by us at www.sec.gov.

In addition, this Annual Report on Form 10-K, as well as future quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to all of the foregoing reports, are made available free of charge on our Internet website (https://www.nescospecialty.com) as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. The contents of our website are not incorporated by reference in this Annual Report.

References:

1 ARA/IHS Global Insight and Morgan Stanley research.

2 Jefferies research.

3 Evercore research.

4 Harris Williams research.

5 U.S. Department of Energy.

6 Wall Street Journal.

7 Wall Street Journal.

8 National Conference of State Legislatures.

9 EIA’s 2019 Annual Energy Outlook.

10 The Brattle Group.

11 Deutsche Bank research.

12 Cisco VNI Complete Forecast Highlights.

13 Deutsche Bank research.

14 Deutsche Bank research.

15 Morgan Stanley research.

16 BMO research and Loop research.

17 Railroads of New York.

18 U.S. Department of Transportation.

19 Association of American Railroads.

20 U.S. Department of Transportation.

Item 1A. Risk Factors

Any of the risk factors described in this Annual Report could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

Investors should carefully consider the following risk factors, together with all of the other information included in this Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports as well as our other SEC filings. Additional risks and uncertainties not presently known or that we currently deem to be immaterial may also have adverse impact to our business operations. Should any of these risks materialize, our business, results of operations, financial condition and future prospects could be negatively impacted, which could in turn affect the trading value of our securities.

Demand for our services is cyclical and vulnerable to industry downturns and regional and national downturns, which may result from the current economic conditions.

The demand for specialty equipment services in the T&D, telecommunications, and rail industries has been, and will likely continue to be, cyclical in nature and vulnerable to downturns specific to the industry, as well as to the United States economy in general. If the general level of economic activity were to decrease below historic norms, or the time frames for updating the electricity, telecommunications, and rail infrastructure, or compliance periods for government-regulated reliability levels were extended, financing conditions for our industry could be adversely affected and our customers may delay commencement of work on, or cancel, new projects or maintenance activity on existing projects. A number of other factors, including changes in government infrastructure spending programs, outside of our control could adversely affect T&D, telecommunications, and rail project spending, which would result in lower demand from our customers for our services. As a result, demand for our services could decline for extended periods, which could have a material adverse effect on our business, financial condition or results of operations. Additionally, each of T&D, telecommunication and rail industries may be affected at different times from market fluctuations specific to those industries. A worsening of economic conditions, in particular with respect to industrial activities, could cause weakness in our end markets and adversely affect our revenues and operating results.

Our revenue and operating results have historically fluctuated and may continue to fluctuate, which could result in a decline in our profitability and make it more difficult for us to grow our business.

Our revenue and operating results have historically varied from quarter to quarter. Periods of decline could result in an overall decline in profitability and make it more difficult for us grow our business. We expect our quarterly results to continue to fluctuate in the future due to a number of factors, including:


•	general economic conditions in the markets where we operate;


•	the cyclical nature of our customers’ business; (T&D, telecommunications and rail)


•	seasonal rental patterns of our customers, with rental activity tending to be lower in the winter and summer months;


•	severe weather and seismic conditions temporarily affecting the regions where we operate;


•	changes in governmental regulations specific to the industries in which we operate;


•	changes in government spending for infrastructure projects;


•	the effectiveness of integrating acquired businesses and new start-up businesses;


•	the cost and availability of capital to make acquisitions;


•	the cost and availability of equipment to replenish and grow our fleet;


•	changes in demand for, or utilization of, our equipment or in the prices we charge due to changes in economic conditions, competition or other factors;


•	increases in interest rates and related increases in our interest expense and our debt service obligations;


•	currency risks and other risks associated with international operations;


•	an overcapacity of fleet in the equipment rental industry; and


•	changes in the size of our rental fleet and/or in the rate at which we sell our used equipment.

Unfavorable conditions or disruptions in the capital and credit markets may adversely impact industry conditions and the availability of credit to our customers and suppliers, which may have a material adverse effect on our business, financial condition or results of operations.

Disruptions in the global capital and credit markets as a result of economic downturns, economic uncertainty, changing or increased regulation, reduced alternatives or failures of significant financial institutions could adversely affect our customers’ ability to access capital. Additionally, unfavorable market conditions could impede the rate of economic recovery, which may depress demand for our products and services or make it more difficult for our customers to obtain financing and credit on reasonable terms. Also, more of our customers may be unable to meet their payment obligations to us, increasing delinquencies and credit losses. Moreover, our suppliers may be adversely impacted, causing disruption or delay of product availability.

In addition, if the financial institutions that commit to lend us money under any debt facilities we have entered into or may enter into in the future are adversely affected by the conditions of the capital and credit markets, they may become unable to fund borrowings under those commitments, which could have an adverse impact on our financial condition and our ability to borrow funds, if needed, for working capital, acquisitions, capital expenditures and other corporate purposes. These events could negatively impact our business, financial condition or results of operations.

We purchase a significant amount of our equipment from a limited number of manufacturers and suppliers. An adverse change in or termination of our relationships with any of those manufacturers or suppliers could result in our inability to obtain equipment on an adequate or timely basis, negatively impacting our relationships with our customers and having a material adverse effect on our business, financial condition or results of operations.

We purchase most of our equipment from a limited group of leading OEMs. For the year ended December 31, 2019, three vendors, on a combined basis, accounted for more than 10% of purchases. We rely on these suppliers and manufacturers to provide us with equipment that we then rent to our customers. To the extent we are unable to rely on these suppliers and manufacturers, due to an adverse change in our relationships with them, if they fail to continue operating as a going concern, if they significantly raise their costs, if a large amount of our rental equipment is subject to simultaneous recalls that would prevent us from renting such equipment for a significant period of time, or such suppliers or manufacturers simply are unable to supply us with equipment or needed replacement parts in a timely manner, our business could be adversely affected through higher costs or the resulting potential inability to service our customers. We may experience delays in receiving equipment from some manufacturers due to factors beyond our control, including parts and material shortages, and, to the extent that we experience any such delays, our customer relationships could be hurt by the resulting inability to service our customers. In addition, the payment terms we have negotiated with the suppliers that provide us with the majority of our equipment may not be available to us at a later time. Although we believe that we have alternative sources of supply for the rental equipment we purchase in each of our core product categories, termination of one or more of our relationships with any of these major suppliers could have a material adverse effect on our business, financial condition or results of operations.

Changes to international trade agreements, tariffs, import and excise duties, taxes or other governmental rules and regulations could adversely affect our business and results of operations.

The U.S. federal government or other governmental bodies may propose changes to international trade agreements, tariffs, taxes and other government rules and regulations. Any changes to the international trading system, or the emergence or escalation of an international trade dispute, could significantly impact our business and have a negative impact on our revenues. In addition, the U.S. and other countries from which materials used heavily in the industries that we serve may impose import and excise duties, tariffs and other taxes on products in varying amounts. Any significant increases in import and excise duties or other taxes on products that ultimately impact and are used in the industries in which we operate could have a material adverse effect on our business, liquidity, financial condition and/or results of operations.

In the United States and globally, international trade policy is undergoing review and revision, introducing significant uncertainty with respect to future trade regulations and existing international trade agreements. These major revisions include the negotiation of the United States-Mexico-Canada Agreement (USMCA) (in Canada, known as the Canada-United States-Mexico Agreement (CUSMA)), which is intended to supersede the North American Free Trade Agreement (NAFTA). USMCA/CUSMA has been signed but not ratified by the legislature of each of the United States, Canada and Mexico. NAFTA provides protection against tariffs, duties and other charges or fees and assures access by the signatories. The impact of USMCA/CUSMA, if ratified, on the industries in which we operate is uncertain but could have a material adverse effect on our business, financial condition or results of operations.

We are subject to competition, which may have a material adverse effect on our business by reducing our ability to increase or maintain revenues or profitability.

The specialty equipment rental industry is highly competitive and highly fragmented. Many of the markets in which we operate are served by numerous competitors, ranging from national and regional equipment rental companies to small, independent businesses with a limited number of locations. We generally compete on the basis of availability, quality, reliability, delivery and price. Some of our competitors have significantly greater financial, marketing and other resources than we do, and may be able to reduce rental rates or sales prices. In addition, we cannot be certain that our existing or prospective customers will continue to rent equipment in the future. If they instead choose to purchase equipment, it could have a material adverse effect on our business, financial condition or results of operations.

Effective management of our rental equipment is vital to our business.

Our rental equipment has a long economic life and managing this equipment is a critical element to our business. We must successfully maintain and repair our equipment cost-effectively to maximize the economic life of our products and the level of proceeds from the sale of such products. As the needs of our customers change, we may need to incur costs to relocate or retrofit our assets to better meet shifts in demand. If the distribution of our assets is not aligned with regional demand, we may be unable to take advantage of opportunities despite excess inventory in other regions. If we are not able to successfully manage our assets, our business, results of operations and financial condition may be materially adversely affected.

The cost of new equipment that we purchase for use in our rental fleet may increase and therefore we may spend more for such equipment, and in some cases, we may not be able to procure equipment on a timely basis due to supplier constraints.

The cost of new equipment from manufacturers that we purchase for use in our rental fleet may increase as a result of factors beyond our control, such as inflation, higher interest rates and increased raw material costs, including increases in the cost of steel, which is a primary material used in most of the equipment we use. For example, on March 1, 2018, the President of the United States announced a plan to indefinitely impose a 25% tariff on certain imported steel products and a 10% tariff on certain imported aluminum products under Section 232 of the Trade Expansion Act of 1962. Application of the tariffs commenced March 23, 2018, with temporary or long-term exemptions for a number of countries and subject to a product exemption process. These tariffs could increase the cost of steel to the manufacturers from whom we purchase our rental equipment, which in turn could increase our costs. Such increases could materially impact our financial condition or results of operations in future periods if we are not able to pass such cost increases through to our customers in the form of higher prices. In addition, based on changing demands of our customers, the types of equipment we rent to our customers may become obsolete resulting in a negative impact to our financial condition based on the increased capital expenditures required to replace the obsolete equipment, and our potential inability to sell the obsolete equipment in the used equipment market.

If our operating costs increase as our rental equipment fleet ages and we are unable to pass along such costs, our earnings will decrease. In addition, we may incur losses upon dispositions of our rental fleet due to residual value risk.

If the average age of our fleet of rental equipment were to increase, the cost of maintaining our equipment, if not replaced within a certain period of time, will likely increase. As of December 31, 2019, the average age of our rental equipment fleet excluding Mexico was approximately 3.6 years, compared to 3.7 years at December 31, 2018, and 3.5 years at December 31, 2017.

The costs of maintenance may materially increase in the future. Any significant increase in such costs could have a material adverse effect on our business, financial condition or results of operations.

In addition, the market value of any given piece of rental equipment could be less than its depreciated value at the time it is sold. The market value of used rental equipment depends on several factors, including:


•	the market price for new equipment of a like kind;


•	wear and tear on the equipment relative to its age;


•	the time of year that it is sold (prices are generally higher during the construction seasons);


•	worldwide and domestic demands for used equipment;


•	the supply of used equipment on the market; and


•	general economic conditions.

We include in operating income the difference between the sales price and the depreciated value of equipment sold. Changes in our assumptions regarding depreciation could change our depreciation expense, as well as the gains or losses realized upon disposal of equipment. We cannot assure that used equipment selling prices will not decline. Any significant decline in the selling prices for used equipment could have a material adverse effect on our business, financial condition or results of operations.

We may be unsuccessful at acquiring companies or at integrating companies that we acquire and, as a result, may not achieve expected benefits, which could have a material adverse effect on our business, financial condition or results of operations.

One of our growth strategies is to selectively pursue, on an opportunistic basis, acquisitions of additional companies that will allow us to continue to expand our service offering and geographic footprint. We expect to face competition for acquisition candidates, which may limit the number of acquisition opportunities and may lead to higher acquisition prices. We may not be able to identify, acquire or profitably manage additional businesses or to integrate successfully any acquired businesses without substantial costs, delays or other operational or financial problems. Further, acquisitions involve a number of special risks, including failure of the acquired business to achieve expected results, diversion of management’s attention, failure to retain key personnel of the acquired business and risks associated with unanticipated events or liabilities, some or all of which could have a material adverse effect on our business, financial condition or results of operations. In addition, we may not be able to obtain the necessary acquisition financing or we may have to increase our indebtedness in order to finance an acquisition. Furthermore, general economic conditions or unfavorable global capital and credit markets could affect the timing and extent to which we implement our strategy and limit our ability to successfully acquire new businesses. Our future business, financial condition and results of operations could suffer if we fail to successfully implement our acquisition strategy.

We might not be able to recruit and retain the experienced personnel we need to compete in our industries.

Our future success depends on our ability to attract, retain and motivate highly skilled personnel. Competition for personnel in our industry is intense and we must have talented personnel to succeed. Our ability to meet our performance goals depends upon the personal efforts and abilities of the principal members of our senior management, who provide strategic direction, develop the business, manage our operations, and maintain a cohesive and stable work environment. We cannot provide assurance that the Company will retain or successfully recruit senior executives, or that their services will remain available to us. We will regularly evaluate on an ongoing basis our senior management capabilities in light of, among other things, our business strategy, changes to our capital structure, developments in our industry and markets and our ongoing financial performance and consider, where appropriate, supplementing, changing or otherwise enhancing our senior management team and operational and financial management capabilities in order to maximize our performance. Accordingly, our organizational structure and senior management team may change in the future. Changes to our senior management team could result in a material business interruption as a result of losing their services.

Our work force could become unionized in the future, which could negatively impact the stability of our production, materially reduce our profitability and increase the risk of work stoppages.

We currently operate with non-union employees. Our employees have the right at any time under the National Labor Relations Act to form or affiliate with a union, and unions may conduct organizing activities in this regard. If our employees choose to form or affiliate with a union and the terms of a union collective bargaining agreement are significantly different from our current compensation and job assignment arrangements with our employees, these arrangements could negatively impact the stability of our production, materially reduce our profitability and increase the risk of work stoppages. In addition, even if our managed operations remain non-union, our business may still be adversely affected by work stoppages at any of our suppliers that are unionized.

Disruptions in our information technology systems or a compromise of security with respect to our systems could adversely affect our operating results by limiting our ability to effectively monitor and control our operations, adjust to changing market conditions, implement strategic initiatives.

Our information technology systems facilitate our ability to monitor and control our operations and adjust to changing market conditions. Any disruption of these systems or the failure of any of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively monitor and control our operations and adjust to changing market conditions. In addition, because our systems may contain information about individuals and businesses, our failure to maintain the security of the data we hold, whether the result of our own error or the malfeasance or errors of others, could harm our reputation or give rise to legal liabilities leading to lower revenues, increased costs and other potential material adverse effects on our results of operations.

We may experience threats to our data and systems, including malware and computer virus attacks. We have implemented a multi-layered approach to protect our data and systems from software attacks and conduct annual security awareness training sessions for all Nesco employees. Additionally, we support web filters in place that prevent users from accessing suspect sites and deploy endpoint protection on user computers in addition to multiple mail filters that are in place to help manage spam and phishing attempts. We rely on our security software layer vendors to stay current with threats, and if any of these breaches of security occur or there are new threats that are not covered by our current software, we could be required to expend additional capital and other resources, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. In addition, because our systems sometimes contain information about individuals and businesses, our failure to appropriately maintain the security of the data we hold,

whether as a result of our own error or the malfeasance or errors of others, could lead to unauthorized release of confidential or otherwise protected information or corruption of data. Our failure to appropriately maintain the security of the data we hold could also violate applicable privacy, data security and other laws and subject us to lawsuits, fines and other means of regulatory enforcement. Complying with any new regulatory requirements could force us to incur substantial expenses or require us to change our business practices in a manner that could harm our business. Further, any compromise or breach of our systems could result in adverse publicity, harm our reputation, lead to claims against us and affect our relationships with our customers and employees, any of which could have a material adverse effect on our business. Certain of our software applications are also utilized by third parties who provide outsourced administrative functions, which may increase the risk of a cybersecurity incident. Although we maintain insurance coverage for various cybersecurity risks, there can be no guarantee that all costs or losses incurred will be fully insured.

If we are unable to obtain additional capital as required, we may be unable to fund the capital outlays required for the success of our business.

If the cash that we generate from our business, together with cash that we may borrow under any debt facilities we have or may enter into in the future is not sufficient to fund our capital requirements, we will require additional debt and/or equity financing. However, we may not succeed in obtaining the requisite additional financing or such financing may include terms that are not satisfactory to us. We may not be able to obtain additional debt financing as a result of prevailing interest rates or other factors, including the presence of covenants or other restrictions under the agreements governing our current and future debt. In the event we seek to obtain equity financing, our stockholders may experience dilution as a result of the issuance of additional equity securities. This dilution may be significant depending upon the number of equity securities that we issue and the prices at which we issue such securities. If we are unable to obtain sufficient additional capital in the future, we may be unable to fund the capital outlays required for the success of our business, including those relating to purchasing equipment, growth plans and refinancing existing indebtedness.

We are exposed to various risks related to legal proceedings or claims that could adversely affect our operating results. The nature of our business exposes us to various liability claims, which may exceed the level of our insurance coverage and thereby not fully protect us.

We are a party to lawsuits in the normal course of our business. Litigation in general can be expensive, lengthy and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. Responding to lawsuits brought against us, or legal actions that we may initiate, can often be expensive and time-consuming. Unfavorable outcomes from these claims and/or lawsuits could adversely affect our business, financial condition or results of operations, and we could incur substantial monetary liability and/or be required to change our business practices.

Our business exposes us to claims for personal injury, death or property damage resulting from the use of the equipment we rent or sell and from injuries caused in motor vehicle accidents in which our delivery and service personnel are involved and other employee related matters. Additionally, we could be subject to potential litigation associated with compliance with various laws and governmental regulations at the federal, state or local levels, such as those relating to the protection of persons with disabilities, employment, health, safety, security and other regulations under which we operate.

We carry comprehensive insurance, subject to deductibles, at levels we believe are sufficient to cover existing and future claims made during the respective policy periods. However, we may be exposed to multiple claims that do not exceed our deductibles and, as a result, we could incur significant out-of-pocket costs that could adversely affect our financial condition and results of operations. In addition, the cost of such insurance policies may increase significantly upon renewal of those policies as a result of general rate increases for the type of insurance we carry, as well as our historical experience and experience in our industry. Our existing or future claims may exceed the coverage level of our insurance, and such insurance may not continue to be available on economically reasonable terms. If we are required to pay significantly higher premiums for insurance, are not able to maintain insurance coverage at affordable rates, or if we must pay amounts in excess of claims covered by our insurance, or if we are exposed to multiple claims that do not exceed our deductibles, we could experience higher costs that could adversely affect our financial condition and results of operations.

Our business relies to some extent on third-party contractors to provide us with various services to assist us with conducting our business, which could adversely affect our business upon the termination or disruption of our third-party contractor relationships.

Our operations rely on third-party contractors to provide us with timely services to assist us with conducting our business. Any material disruption, termination, or substandard provision of these services could adversely affect our brand, customer relationships, operating results and financial condition. In addition, if a third-party contractor relationship is terminated, we may be adversely affected if we are unable to enter into a similar agreement with alternate providers in a timely manner or on terms that we consider favorable. Further, in the event a third-party relationship is terminated and we are unable to enter into a similar relationship, we may not have the internal capabilities to perform such services in a cost-effective manner.

We may need to recognize impairment charges related to goodwill, identified intangible assets and fixed assets, which would negatively impact our operating results.

We have substantial balances of goodwill and identified intangible assets as a result of prior acquisitions and the merger and other transactions consummated in connection with the acquisition of us by Energy Capital Partners III, LP and certain of its affiliates. We are required to test goodwill and other intangible assets with an indefinite life for possible impairment on the same date each year and on an interim basis if there are indicators of a possible impairment. We are also required to evaluate amortizable intangible assets and fixed assets for impairment if there are indicators of a possible impairment.

There is significant judgment required in the analysis of a potential impairment of goodwill, identified intangible assets and fixed assets. If, as a result of a general economic slowdown, deterioration in one or more of the markets in which we operate or in our financial performance and/or future outlook, the estimated fair value of our long-lived assets decreases. We may determine that one or more of our long-lived assets is impaired. An impairment charge would be determined based on the estimated fair value of the assets and any such impairment charge could have a material adverse effect on our financial position and results of operations.

Federal and state legislative and regulatory developments that we believe should encourage electric power transmission infrastructure spending may fail to result in increased demand for our rental equipment.

In recent years, federal and state legislation has been passed and resulting regulations have been adopted that could significantly increase spending on electric power transmission infrastructure, including the Energy Act of 2005 and the American Recovery and Reinvestment Act of 2009 (the “ARRA”). However, much fiscal, regulatory and other uncertainty remains as to the impact this legislation and related regulations will ultimately have on the demand for our rental equipment and, as such, the effect of these regulations is uncertain and may not result in increased spending on the electric power transmission infrastructure. Continued uncertainty regarding the implementation of the Energy Act of 2005 and ARRA may result in slower growth in demand for our rental equipment.

Renewable energy initiatives, including ARRA, may not lead to increased demand for our rental equipment. In addition, we cannot predict when programs under ARRA will be implemented or the timing and scope of any investments to be made under these programs, particularly in light of capital constraints on potential developers of these projects. In addition, some of these programs have expired, which may affect the economic feasibility of future projects. Investments for renewable energy and electric power infrastructure under ARRA may not occur, may be less than anticipated or may be delayed, or any resulting contracts may not be awarded to us, any of which could negatively impact demand for our rental equipment.

We are subject to, and could be adversely affected by, safety and environmental requirements, which could force us to increase significant capital and other operational costs and may subject us to unanticipated liabilities.

Our operations are subject to federal, state and local occupational health and safety and environmental laws and regulations. We are subject to potential civil or criminal fines or penalties if we fail to comply with any of these requirements. We have made and will continue to make capital and other expenditures in order to comply with these laws and regulations. However, the requirements of these laws and regulations are complex, change frequently, and could become more stringent in the future. It is possible that these requirements will change or that liabilities will arise in the future in a manner that could have a material adverse effect on our business, financial condition or results of operations.

We have made, and will continue to make, expenditures to comply with environmental, health and safety laws and regulations, including, among others, expenditures for the investigation and cleanup of contamination at or emanating from currently and formerly owned and leased properties, as well as contamination at other locations at which our wastes have reportedly been identified. Some of these laws impose strict, and in certain circumstances joint and several liability on current and former owners or operators of contaminated sites and other potentially responsible parties for investigation, remediation and other costs.

Environmental laws and regulations and the costs of complying with them, or any liability or obligation imposed under them, could materially adversely affect our results of operations, financial condition, liquidity and cash flows.

We are subject to federal, state and local environmental laws and regulations with respect to the ownership and operation of tanks for the storage of petroleum products, such as gasoline, diesel fuel and motor and waste oils. We cannot assure you that our tanks will at all times remain free from leaks or that the use of these tanks will not result in significant spills or leakage. If leakage or a spill occurs, it is possible that the resulting costs of cleanup, investigation and remediation, as well as any resulting fines, could be significant. We cannot assure you that compliance with existing or future environmental laws and regulations will not require material expenditures by us or otherwise have a material adverse effect on our consolidated financial condition, results of operations, liquidity or cash flows.

The U.S. Congress and other federal and state legislative and regulatory authorities in the U.S. and internationally have considered, and will likely continue to consider, numerous measures related to climate change and greenhouse gas emissions. Should rules establishing limitations on greenhouse gas emissions or rules imposing fees on entities deemed to be responsible for greenhouse gas emissions become effective, demand for our services could be affected, our vehicle, and/or other, costs could increase, and our business could be adversely affected.

If we are unable to collect on contracts with customers, our operating results would be adversely affected.

One of the reasons some of our customers find it more attractive to rent equipment than own equipment is the need to deploy their capital elsewhere. Some of our customers may have liquidity issues and ultimately may not be able to fulfill the terms of their rental agreements with us. If we are unable to manage credit risk issues adequately, or if a large number of customers should have financial difficulties at the same time, our credit losses could increase above historical levels and our operating results would be adversely affected. Further, delinquencies and credit losses generally can be expected to increase during economic slowdowns or recessions.

We have operations throughout the United States, which exposes us to multiple state and local regulations, in addition to federal law and requirements as a government contractor. Changes in applicable law, regulations or requirements, or our material failure to comply with any of them, can increase our costs and have other negative impacts on our business.

We are geographically diverse and, as of December 31, 2019, operate 23 leased facilities and maintain access to more than 50 third-party service locations geographically dispersed across the U.S. and Canada, which exposes us to a host of different state and local regulations, in addition to federal law and regulatory requirements. These laws and requirements address multiple aspects of our operations, such as worker safety, consumer rights, privacy, employee benefits and more, and there are often different requirements in different jurisdictions. Changes in these requirements, or any material failure by our branches to comply with them, can increase our costs, affect our reputation, limit our business, occupy management time and attention and otherwise impact our operations in adverse ways.

We are subject to certain risks arising from our Mexican operations.

We have had operations in Mexico. We began commencing activities for the closure of its Mexican operations in 2019, although the closure is not yet complete. As a result, we are subject to risks of doing business internationally, including changes in the economic strength of Mexico, difficulties in enforcing contractual obligations and intellectual property rights, burdens of complying with a wide variety of international and U.S. laws, economic sanctions and social, political and economic instability. We must also comply with applicable anti-corruption and anti-bribery laws such as the U.S. Foreign Corrupt Practices Act and local laws prohibiting corrupt payments to government officials. We cannot guarantee compliance with all applicable laws, and violations could result in substantial fines, sanctions, civil or criminal penalties, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of operations and our consolidated performance. Factors that substantially affect the operations of our business in Mexico may have a material adverse effect on our overall results of operations.

Our operations in Mexico are subject to changes in political or economic conditions and regulations in that country.

The risks with respect to Mexico or other developing countries include, but are not limited to: nationalization of properties, military repression, extreme fluctuations in currency exchange rates, criminal activity, lack of personal safety or ability to safeguard property, labor instability or militancy and high rates of inflation. We may be affected in varying degrees by government regulation with respect to price controls, export controls, income taxes, expropriation of property, maintenance of claims, environmental legislation and opposition from non-governmental organizations. The effect of these factors cannot be accurately predicted and may adversely impact our operations.

Escalating security disruptions in regions of Mexico we serve could adversely affect the closure of our Mexican operations, and, as a result, the levels of revenue and operating cash flow from our Mexican operations could be reduced.

In recent years, incidents of security disruptions throughout many regions of Mexico have increased. Drug-related gang activity has grown in Mexico. Certain incidents of violence have occurred in regions in which we operate and have resulted in the interruption of our operations, and these interruptions could increase in the future.

We have operations outside the United States. As a result, we may incur losses from currency conversions and have higher costs than we otherwise would have due to the need to comply with foreign laws.

Our operations in Canada are subject to the risks normally associated with international operations. These include the need to convert currencies, which could result in a gain or loss depending on fluctuations in exchange rates and the need to comply with foreign laws and regulations, as well as U.S. laws and regulations applicable to our operations in foreign jurisdictions. See “Nesco’s Management’s

Discussion and Analysis of Financial Condition and Results of Operations - Qualitative and Quantitative Disclosures About Market Risk - Exchange Rate Risk.”

We may incur significant costs and obligations as a result of being a public company.

As a publicly traded company, we have incurred and will continue to incur significant legal, accounting and other expenses, particularly after we are no longer an “emerging growth company” as defined under the JOBS Act. In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated and to be promulgated thereunder, as well as under the Sarbanes-Oxley Act, the JOBS Act, and the rules and regulations of the SEC and national securities exchanges have created uncertainty for public companies and increased the costs and the time that our board of directors and management must devote to complying with these rules and regulations. We expect these rules and regulations to increase our legal and financial compliance costs and lead to a diversion of management time and attention from revenue generating activities.

Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from implementing our growth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a publicly traded company. However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.

For as long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” We may remain an “emerging growth company” until August 21, 2022 (the fifth anniversary of the consummation of Capitol’s initial public offering) or until such earlier time that we have more than $1.0 billion in annual revenues, have more than $700.0 million in market value of our common stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period. Further, there is no guarantee that the exemptions available to us under the JOBS Act will result in significant savings. To the extent we choose not to use exemptions from various reporting requirements under the JOBS Act, we will incur additional compliance costs, which may impact earnings.

As an “emerging growth company,” we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we have elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to obtain an assessment of the effectiveness of our internal controls over financial reporting from our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies. We have elected to take advantage of such extended transition period. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active market for our common stock and our share price may be more volatile.

The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act, and the requirements of the Sarbanes-Oxley Act, increases costs and distracts management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company, we are subject to laws, regulations and requirements, certain corporate governance provisions, related regulations of the SEC and the requirements of Nasdaq. We rely on a small number of key personnel to manage compliance with these regulations, and compliance with such regulations causes additional costs to our operations and diverts management’s attention from implementing our growth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make, changes to our internal control over financial reporting, accounting systems disclosure controls and procedures, auditing functions and other procedures related to public reporting in order to meet our reporting obligations as a public company.

We identified a material weakness in our internal control over financial reporting related to our reporting for rental equipment as of December 31, 2018. We may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of

internal controls, which may result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations.

In connection with the preparation of our consolidated financial statements for the year ended December 31, 2018, we identified a material weakness in our internal control over financial reporting related to accounting for rental equipment. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As of December 31, 2018, we did not have adequate controls in place to ensure that we have adequate review, including evidence of reviews in a sufficient amount of detail, of the activity in our rental equipment accounts. As a result, in the fourth quarter of 2018, we recorded adjustments to correct for rental equipment acquired using capital leases, as well as the classification of rental equipment on our consolidated balance sheet.

Beginning in the second quarter of 2019, management developed a remediation plan, whereby we implemented changes to our internal control to add a suite of key controls regarding the review of the activity in our rental equipment accounts, including lease financing activities. The changes in controls included, but were not limited to, supplementing the internal rental equipment accounting personnel with three additional and experienced supervisory and managerial employees. We implemented changes to the design of controls to separately identify several key controls regarding the verification and reconciliation of activity related to our rental equipment that is processed and recorded in our books and records, including reconciliation activities over the subsidiary system utilized for calculating depreciation and cost of equipment sold expense. The modifications to the design of internal controls and the additional resources addressed the purchasing and receiving of rental equipment, calculations of depreciation expense, analysis and reconciliation of costs associated with our maintenance of the rental equipment (including amounts capitalized), and costs recognized as “cost of equipment sales” expense from sales of our rental equipment, including the purchase and sale of rental equipment that had been acquired under a capital lease. The material weakness is now considered to be remediated as the applicable controls and procedures implemented through our remediation plan have operated for a sufficient period of time and management has concluded, through testing, that these controls were operating effectively as of December 31, 2019.

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we are unable to successfully remediate our existing or any future material weakness in our internal control over financial reporting, or identify any additional material weaknesses that may exist, the accuracy and timing of our financial reporting may be adversely affected. Additionally, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports as well as applicable stock exchange listing requirements. We may be unable to prevent fraud, investors may lose confidence in our financial reporting, and our stock price may also decline. Our reporting obligations as a public company could place a significant strain on our management, operational and financial resources and systems for the foreseeable future and may cause us to fail to timely achieve and maintain the adequacy of our internal control over financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. As a result, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. We cannot assure you that the measures we are currently undertaking or may take in the future will be sufficient to maintain effective internal controls or to avoid potential future deficiencies in internal control, including material weaknesses.

Neither our management nor an independent registered public accounting firm has ever performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act because no such evaluation has been required. Had we or our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional material weaknesses may have been identified. Our independent registered public accounting firm is not required to attest to and report on the effectiveness of our internal controls over financial reporting until after we are no longer an emerging growth company. At that time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal controls over financial reporting are documented, designed, or operating. Failing to maintain effective disclosure controls and internal controls over financial reporting could have a material and adverse effect on our business and operating results and could cause a decline in the price of our securities.

Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of common stock.

We currently expect that securities research analysts will establish and publish their own periodic projections for our business. However, there is no assurance that they will in fact publish reports on our company. Any projections included in research analyst reports may vary widely and may not accurately predict the results we actually achieve. Our stock price may decline if our actual results do not match the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our stock price or trading volume could decline. We cannot assure you that any research analysts will cover our securities and if no analysts commence coverage of us, the trading price and volume for our common stock could be adversely affected.

Our charter contains anti-takeover provisions that could adversely affect the rights of our shareholders.

Our amended and restated certificate of incorporation contains provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of control transactions, including, among other things:


•	provisions that authorize our board of directors, without action by our stockholders, to issue additional shares of common stock and preferred stock with preferential rights determined by our board of directors;


•	provisions that impose advance notice requirements, minimum shareholding periods and ownership thresholds, and other requirements and limitations on the ability of stockholders to propose matters for consideration at stockholder meetings; and


•	a staggered board whereby our directors are divided into three classes, with each class subject to retirement and re-election once every three years on a rotating basis.

These provisions could have the effect of depriving our stockholders of an opportunity to sell their common stock at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. With our staggered board of directors, at least two general meetings of stockholders will generally be required in order to effect a change in a majority of our directors. Furthermore, we are party to a principal stockholders agreement by and among the Capitol Sponsors and affiliates of ECP (the “Stockholders’ Agreement”), that requires us to support the nomination and election of directors proposed to be nominated by Energy Capital Partners for so long as it maintains certain ownership levels in us. The nomination provisions of our constitutional documents are subject to the stockholders’ agreement for as long as it is in effect. Our staggered board of directors and the provisions of the stockholders’ agreement can discourage proxy contests for the election of our directors and purchases of substantial blocks of our shares by making it more difficult for a potential acquirer to gain control of our board of directors in a relatively short period of time.

Future resales of common stock may cause the market price of Nesco’s securities to drop significantly, even if Nesco’s business is performing well.

Affiliates of Capitol and its founders (collectively, the “Capitol Sponsors”) and, together with Energy Capital Partners, the “Sponsors”) have certain rights, pursuant to the Registration Rights Agreement, to require us to register, in certain circumstances, the resale under the Securities Act of common stock held by them, subject to certain conditions. The sale or possibility of sale of these shares could have the effect of increasing the volatility in our share price or putting significant downward pressure on the price of our stock.

Nesco’s securities may not continue to be listed on a national securities exchange which could limit investors’ ability to make transactions in Nesco’s securities and subject Nesco to additional trading restrictions.

If we fail to continue to meet the listing requirements of the NYSE, investors in our common stock could face significant material adverse consequences, including:


•	a limited availability of market quotations for our securities;


•	a limited amount of news and analyst coverage for the company; and


•	the consequences of our decreased ability to issue additional securities or obtain additional financing in the future.

The price of our common stock may be volatile.

The price of our common stock may fluctuate due to a variety of factors, including:


•	actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in industry;


•	mergers in the industry in which we operate;


•	market prices and conditions in the industry in which we operate;


•	changes in government regulation;


•	potential or actual military conflicts or acts of terrorism;


•	the failure of securities analysts to publish research about us, or shortfalls in our operating results compared to levels forecast by securities analysts;


•	announcements concerning us or our competitors; and


•	the general state of the securities markets.

These market and industry factors may materially reduce the market price of our common stock shares, regardless of our operating performance.

We have, and may incur, significant indebtedness and may be unable to service our debt. This indebtedness could adversely affect our financial position, limit our available cash and our access to additional capital, prevent us from growing our business and negatively impact the market price of our common stock.

We have a significant amount of indebtedness and may incur additional indebtedness in the future, including in connection with the implementation of our growth strategies. As of December 31, 2019, our total indebtedness was $756.6 million, consisting of the aggregate amounts outstanding under our senior secured notes due 2024 (the “Secured Notes”), $250.0 million of borrowings under our 2019 Credit Facility (as defined below) and $3.5 million of obligations under promissory notes incurred in connection with previous acquisitions and capital lease obligations of $28.1 million. In addition, as of December 31, 2019, we had an additional $96.9 million of availability under our 2019 Credit Facility (subject to a borrowing base). Although the indenture governing the Secured Notes (the “Indenture”) and the credit agreement governing the 2019 Credit Facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant exceptions and qualifications, and the additional indebtedness incurred in compliance with these restrictions could be substantial. On March 10, 2020, we entered into an agreement (the “Incremental Agreement”) amending the 2019 Revolving Credit Facility. The Incremental Agreement amends the syndicate of banks for a new participant that increased the maximum amount of the facility by $35.0 million to a total of $385.0 million. The increase in facility size expands liquidity for Nesco.

Moreover, the Indenture does not impose any limitation on our incurrence of certain liabilities or obligations that are not considered “Indebtedness” (such as operating leases), nor does it impose any limitation on the amount of liabilities incurred by our subsidiaries, if any, that might be designated as “unrestricted subsidiaries” under the Indenture. Similarly, the credit agreement governing the 2019 Credit Facility does not impose any limitation on our incurrence of certain liabilities or obligations that are not considered “Indebtedness” under such credit agreement (such as operating leases).

The level of our indebtedness could have important consequences, including:


•	a portion of our cash flow from operations is dedicated to debt service and may not be available for other purposes;


•	limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;


•	limiting our ability to obtain financing in the future for working capital, capital expenditures and general corporate purposes, including acquisitions, and potentially impeding our ability to secure favorable lease terms;


•	exposing us to the risk of increased interest rates as borrowings under our 2019 Credit Facility will be subject to variable rates of interest;


•	making us more vulnerable to economic downturns and industry conditions and possibly limiting our ability to withstand competitive pressures;


•	placing us at a competitive disadvantage compared to our competitors with less indebtedness;


•	making it more difficult for us to satisfy our obligations with respect to the Secured Notes and our other debt;


•	limiting our flexibility in planning for and reacting to changes in the industry in which we compete; and


•	increasing our cost of borrowing.

If new debt is added to our current debt levels, the risks that we now face would intensify. Similarly, these factors may impact our operating results and cause us to fail to meet the expectations of stock market analysts and investors. If this happens, the market price of our common stock may be adversely affected.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors, some of which are beyond our control. An inability to service our indebtedness could lead to a default under the Indenture or the credit agreement that governs our 2019 Credit Facility, which may result in an acceleration of our indebtedness.

A significant amount of cash is required to service our existing Indebtedness. Our ability to pay interest and principal in the future on our indebtedness and to fund our capital expenditures and acquisitions will depend upon our future operating performance and the availability of refinancing indebtedness, which will be affected by prevailing economic conditions, the availability of capital, as well as financial, business and other factors, some of which are beyond our control.

Our future cash flow may not be sufficient to meet our obligations and commitments. If we are unable to generate sufficient cash flow from operations in the future to service our indebtedness and to meet our other commitments, we will be required to adopt one or more alternatives, such as refinancing or restructuring our indebtedness, selling material assets or operations or seeking to raise additional debt or equity capital. These actions may not be effected on a timely basis or on satisfactory terms or at all, and these actions may not enable us to continue to satisfy our capital requirements. In addition, our existing or future debt agreements, including the Indenture and the credit agreement that governs 2019 Credit Facility, may contain restrictive covenants prohibiting us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our indebtedness. In such circumstances we could be forced into bankruptcy or liquidation.

The elimination of LIBOR could adversely affect our business, operating results and financial condition.

The U. K.’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. The U.S. Federal Reserve has begun publishing a Secured Overnight Funding Rate (“SOFR”), which is intended to replace U.S. dollar LIBOR. Plans for alternative reference rates for other currencies have also been announced. At this time, we cannot predict how markets will respond to these proposed alternative rates or the effect of any changes to LIBOR or the discontinuation of LIBOR. If LIBOR is no longer available or if our lenders have increased costs due to changes in LIBOR, we may experience potential increases in interest rates on our variable rate debt, which could adversely impact our interest expense, results of operations and cash flows.

The Indenture and the credit agreement that governs our 2019 Credit Facility impose significant operating and financial restrictions on our company and our subsidiaries, which may prevent us from capitalizing on business opportunities.

The Indenture and the credit agreement that governs our 2019 Credit Facility imposes significant operating and financial restrictions on us. These restrictions will limit our ability, among other things, to:


•	incur additional indebtedness;


•	pay dividends or certain other distributions on our capital stock or repurchase our capital stock;


•	make certain investments or other restricted payments;


•	place restrictions on the ability of subsidiaries to pay dividends or make other payments to us;


•	engage in transactions with stockholders or affiliates;


•	sell certain assets or merge with or into other companies, reorganize our companies, or suspend or go out of a substantial portion of our business;


•	prepay or modify the terms of our other indebtedness;


•	guarantee indebtedness; and


•	create liens.

These restrictions could limit our ability to obtain future financing, make strategic acquisitions or needed capital expenditures, withstand economic downturns in our business or the economy in general, conduct operations or otherwise take advantage of business opportunities that may arise. A failure to comply with the restrictions in the Indenture and the credit agreement that governs our 2019 Credit Facility could result in an event of default under such instruments. Our future operating results may not be sufficient to enable compliance with the covenants in the Indenture or credit agreement governing our 2019 Credit Facility or to remedy any such default. In addition, in the event of an acceleration, we may not have or be able to obtain sufficient funds to refinance our indebtedness or make any accelerated payments, including those under the Secured Notes and under our 2019 Credit Facility. Also, we may not be able to obtain new financing. Even if we were able to obtain new financing, we cannot guarantee that the new financing will be on commercially reasonable terms or terms that are acceptable to us. If we default on our indebtedness, our business, financial condition or results of operations could be materially and adversely affected. If we fail to maintain compliance with these covenants in the future, we may be unable to obtain waivers from the lenders and/or amend the covenants.

Our debt obligations may limit our flexibility in managing our business.

The Indenture and the credit agreement that governs our 2019 Credit Facility require us to comply with a number of customary financial and other covenants, such as maintaining leverage ratios in certain situations and maintaining insurance coverage. These covenants may limit our flexibility in our operations, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we had satisfied our payment obligations. If we were to default on the Indenture, the credit agreement that governs our 2019 Credit Facility or other debt instruments, our financial condition and liquidity would be adversely affected.

We are controlled by affiliates of ECP, whose interests in our business may be different than yours.

As of December 31, 2019, ECP owned 53% of our common stock and is able to control our affairs in all cases. Pursuant to the Stockholders’ Agreement, four of the members of our board of directors have been designated by ECP. So long as ECP continues to own a majority of our common shares, they will have the ability to control the vote in any election of directors and will have the ability to prevent any transaction that requires shareholder approval regardless of whether other shareholders believe the transaction is in our best interests. Additionally, pursuant to our principal stockholders agreement, ECP will continue to have the ability to designate four of our directors until it owns less than 45% of the outstanding common shares. In any of these matters, the interests of ECP or other controlling shareholders may differ from or conflict with the interests of holders of our common stock or other securities. Moreover, this concentration of share ownership may also adversely affect the trading price for our common shares to the extent investors perceive disadvantages in owning shares of a company with a controlling shareholder. In addition, our Sponsors are in the business of making investments in companies and may, from time to time, acquire interests in businesses that directly or indirectly compete with our business, as well as businesses that are our significant existing or potential suppliers or customers. Our significant shareholders may acquire or seek to acquire assets that we seek to acquire and, as a result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue.

We do not intend to pay dividends on our common shares and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We do not intend to declare and pay dividends on our common shares for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth and potentially reduce our indebtedness. Therefore, you are not likely to receive any dividends on your common shares for the foreseeable future and the success of an investment in our common shares will depend upon any future appreciation in their value. There is no guarantee that our common shares will appreciate in value or even maintain the price at which our shareholders have purchased their shares. The payment of future dividends, however, will be at the discretion of our board of directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that our board of directors deems relevant. The credit agreement that governs our 2019 Credit Facility and the Indenture also effectively limit our ability to pay dividends. As a consequence of these limitations and restrictions, we may not be able to make, or may have to reduce or eliminate, the payment of dividends on our common shares.

We may redeem unexpired Warrants prior to their exercise at a time that is disadvantageous to the holders of our Warrants, thereby making such Warrants worthless.

We have the ability to redeem outstanding Warrants (as defined below) (other than the certain private Warrants issued to affiliates) at any time after they become exercisable and prior to their expiration, at $0.01 per Warrant, if the last reported sales price (or the closing bid price of our shares of common stock in the event the shares of common stock are not traded on any specific trading day) of the shares of common stock equals or exceeds $18 per share for each of 20 trading days within any 30-trading day period ending on the third business day prior to the date we send proper notice of such redemption, provided that on the date we give notice of redemption and during the entire period thereafter until the time we redeem the warrants, we have an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) covering the shares of common stock issuable upon exercise of the Warrants and a current prospectus relating to them is available. If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Warrants could force a warrant holder: (i) to exercise Warrants and pay the exercise price therefore at a time when it may be disadvantageous for holders of our Warrants to do so, (ii) to sell Warrants at the then-current market price when holders might otherwise wish to hold their Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, will be substantially less than the market value of such Warrants.

We may issue additional shares of our common stock or other equity securities without shareholder approval, which would dilute shareholder ownership interests and may depress the market price of our common stock.

ECP has the right to receive: (1) up to an additional 1,800,000 shares of common stock for a period of five years following the closing of the Transactions (the “Closing”), in increments of 900,000 shares, if (x) the trading price of the common stock exceeds $13.00 per share or $16.00 per share for any 20 trading days during a 30 consecutive trading day period or (y) a sale transaction of Nesco occurs in which the consideration paid per share to holders of common stock of Nesco exceeds $13.00 per share or $16.00 per share, and (2) an additional 1,651,798 shares of common stock if during the seven-year period following the Closing, 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 Nesco occurs in which the consideration paid per share to holders of common stock exceeds $19.00 per share.

Our issuance of additional shares of common stock or other equity securities of equal or senior rank would have the following effects:


•	our existing shareholders’ proportionate ownership interest will decrease;


•	the amount of cash available per share, including for payment of dividends in the future, may decrease;


•	the relative voting strength of each previously outstanding common share may be diminished; and

the market price of our shares of common stock may decline.

Our business and results of operations may be adversely affected by the recent COVID-19 outbreak or other similar outbreaks.

Health concerns arising from the outbreak of a health epidemic or pandemic, including COVID-19, may have an adverse effect on our business. Our business could be materially and adversely affected by the outbreak of a widespread health epidemic or pandemic, including arising from various strains of coronavirus, such as COVID-19, or avian flu or swine flu, such as H1N1, particularly if located in regions where inputs for our supply chain are manufactured. COVID-19 has spread to a significant number of countries and has had a global economic impact on the financial markets and economies of many countries. Our financial condition and results of operations could be adversely affected to the extent that the United States and Canada impose widespread quarantines that may limit our ability to offer our products and services to our customers. Furthermore, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect our operating results. Any of the foregoing could materially and adversely affect our business, financial condition and results of operations.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Nesco headquarters is based in Fort Wayne, IN where it houses executive management, accounting, finance, information technology, human resources, marketing and procurement professionals. Nesco maintains a diverse geographic footprint in the U.S. and Canada, with 12 equipment rental and service locations operated by Nesco. These facilities are service centers for the maintenance and support of our equipment, and depending on the location may include separate areas for displaying and storage of equipment and parts. All Nesco operated facilities are leased which enhances operational flexibility. Additionally, the Company partners with more than 50 third-party service locations geographically disbursed throughout the U.S. and Canada. Nesco currently operates PTA facilities in Bluffton, IN, Poulsbo, WA, Tallahassee, FL, Alvarado, TX, Brighton, TN, New Haven, IN, Yuma, AZ and El Monte, CA.

The following table sets forth the location and use of our principal properties:



Location	Use	Type
6714 Inverness Way, Fort Wayne, IN	Headquarters	Office
655 E. 20th St., Yuma, AZ	Service Center	Full service
705 W. 62nd Avenue, Denver, CO	Service Center	Equipment rental
300 Johnson St., Wilkes Barre, PA	Service Center	Equipment rental
4729 Capital Circle NW, Tallahassee, FL	Service Center	Equipment rental
3156 E. SR 24, Bluffton, IN	Service Center	Equipment rental and warehouse
6500 HWY 51 S., Brighton, TN	Service Center	Warehouse, block storage and repair
1400 E. HWY 67, Alvarado, TX	Service Center	Equipment rental and full service
1032 Black Gold Rd., Bakersfield, CA	Service Center	Equipment rental
10808 Weaver Avenue S., El Monte, CA	Service Center	Warehouse
5734 Minder Rd, Poulsbo, WA	Service Center	Full service
11139 W. Becher St., West Allis, WI	Service Center	Equipment rental
5901 NE Minder Rd., Poulsbo, WA	Service Center	Full service
7413 SR 930 E., Fort Wayne, IN	Service Center	Full service
1523 E. 29th St., Marshfield, WI	Service Center	Office
4755 D1 Capital Circle NW, Tallahassee, FL	Service Center	Full service
26109 & 26119 United Rd., Kingston, WA	Service Center	Full service
6400 HW 51 S., Brighton, TN	Service Center	Warehouse
2331 S. Baker Avenue, Ontario, CA	Service Center	Equipment rental
99 Tanguay Avenue, Nashua, NH	Service Center	Equipment rental
2370 English St., St. Paul, MN	Service Center	Equipment rental
2770 5th Ave S., Fargo, ND	Service Center	Equipment rental
5320 Kansas Ave., Kansas City, KS	Service Center	Equipment rental

Total square footage under lease is approximately 300,000 with expiration dates through 2025. We believe that all of our properties are in good operating condition and are suitable to adequately meet our current needs.

Item 3. Legal Proceedings

In the normal course of business, we are involved in a variety of lawsuits, claims and legal proceedings, including commercial and contract disputes, employment matters, product liability claims, environmental liabilities, intellectual property disputes and tax-related matters. In our opinion, pending legal matters are not expected to have a material adverse impact on our results of operations, financial condition, liquidity or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of

Equity Securities

Market Information

Nesco’s common stock trades on the New York Stock Exchange under the symbol “NSCO.” As of January 1, 2020, there were 21 holders of record of our common stock.

Recent Sales of Unregistered Securities; Use of Proceeds From Registered Securities

On August 21, 2017, Capitol consummated an offering (the “Initial Public Offering”) of 40,250,000 units, including 5,250,000 units that were subject to the underwriters’ over-allotment option. Each unit consisted of one Class A ordinary share (collectively, the “Class A Ordinary Shares”) and one third of one redeemable warrant (“Warrant”), each whole Warrant to purchase one Class A Ordinary Share at a price of $11.50 per share. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $402,500,000. Simultaneous with the consummation of the Initial Public Offering, Capitol consummated the private placement of 6,533,333 Warrants to its sponsors and directors at a price of $1.50 per Warrant, generating total proceeds of $9,800,000. This issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Of the gross proceeds received from the Initial Public Offering and private placement of Private Placement Warrants, $402,500,000 was placed in a trust account.

In connection with the Transactions, holders of 26,091,034 shares of Class A Ordinary Shares sold in the initial public offering (“public shares”) exercised their rights to convert such public shares to cash at a conversion price of approximately $10.24 per share, or an aggregate of approximately $267,239,740. The per share conversion price of approximately $10.24 for holders of public shares electing conversion was paid out of Capitol’s trust account, which had a balance immediately prior to the closing of approximately $412.3 million. Of the remaining funds in the trust account: (i) approximately $17.8 million was used to pay transaction expenses associated with the Transactions, (ii) $127.8 million was used to pay down indebtedness of the Company, and (iii) the balance of approximately $10.2 million was released to pay certain of Nesco’s transaction-related costs.

Equity Compensation Plans

For information regarding equity compensation plans see Item 11, Executive Compensation, of this Annual Report on Form 10-K and Note 13 to the consolidated financial statements included in this Annual Report.

Dividend Policy

We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on our shares of common stock in the foreseeable future. It is presently intended that we will retain our earnings for use in business operations and, accordingly, it is not anticipated that our board of directors will declare dividends in the foreseeable future. In addition, the terms of our 2019 Credit Facility and the Indenture include restrictions on our ability to issue dividends.

Issuer Purchases of Equity Securities

None.

Stock Performance

The following stock performance graph and table compares the cumulative total return for Nesco’s shares of common stock from October 6, 2017 (the date shares of common stock commenced trading on the NYSE) through December 31, 2019 with the comparable cumulative return of the Standard & Poor’s (“S&P”) SmallCap 600 Index. The graph assumes an initial investment of $100 on October 6, 2017 and reinvestment of dividends.



	10/6/2017		12/31/2017		12/31/2018		12/31/2019
NSCO	$	100	$	99	$	102	$	42
S&P Small Cap 600	$	100	$	102	$	92	$	111
NASDAQ US Benchmark TR	$	100	$	105	$	98	$	130

Item 6. Selected Financial Data

The following selected financial data reflects the results of operations and balance sheet data as of and for the years ended December 31, 2017, 2018 and 2019.

The data below should be read in conjunction with, and is qualified by reference to, our Management’s Discussion and Analysis and our consolidated financial statements and notes thereto contained elsewhere in this Annual Report.



	Year Ended December 31,
(in $000s, except share data)	2019			2018			2017
Statement of Operations Data:
Revenue	$	264,035		$	246,297		$	203,767
Cost of revenue	177,487			164,679			146,022
Gross profit	86,548			81,618			57,745
Operating expenses	50,530			38,454			34,257
Operating Income	36,018			43,164			23,488
Loss on extinguishment of debt	4,005			—			—
Interest expense	63,361			56,698			53,710
Other (income) expense	1,690			287			366
Loss before income taxes	(33,038		)	(13,821		)	(30,588		)
Income tax expense (benefit)	(5,986		)	1,705			(3,493		)
Net loss	$	(27,052	)	$	(15,526	)	$	(27,095	)

Basic and diluted loss per share	$	(0.82	)	$	(0.72	)	$	(1.25	)

Statement of Cash Flow Data:
Net cash provided by (used in):
Operating activities	$	18,792		$	41,040		$	17,219
Investing activities	$	(129,679	)	$	(27,438	)	$	(21,366	)
Financing activities	$	115,049		$	(12,422	)	$	3,783



	Year Ended December 31,
(in $000s)	2019			2018			2017
Balance Sheet Data (at period end):
Cash	$	6,302		$	2,140		$	960
Total assets	$	815,284		$	691,556		$	697,506
Total liabilities	$	827,414		$	850,312		$	841,470
Total stockholders’ deficit	$	(12,130	)	$	(158,756	)	$	(143,964	)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Throughout this section, unless otherwise noted, for periods prior to the consummation of the Transactions, “we,” “us,” “our,” “Company,” or “Nesco” refer to Nesco LLC and its consolidated subsidiaries and, for periods following the consummation of the Transactions, “we,” “us,” “our,” “Company,” or “Nesco” refer to Nesco Holdings, Inc.

You should read the following discussion of our historical performance, financial condition and future prospects in conjunction with “Selected Financial Data” and the accompanying financial statements and related notes included in this Annual Report. The information provided below supplements, but does not form part of, our financial statements. This discussion contains forward-looking statements that are based on the views and beliefs of Nesco’s management, as well as assumptions and estimates made by our management. Actual results could differ materially from such forward-looking statements as a result of various risk factors, including those that may not be in the control of management. For further information on items that could impact our future operating performance or financial condition, see the section entitled “Risk Factors” of this Annual Report.

ORGANIZATION

On July 31, 2019, NESCO Holdings I, Inc. and NESCO Holdings, LP consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger, dated as of April 7, 2019, which was amended on July 10, 2019 (as amended, the “Merger Agreement”) by and among Capitol, Capitol Intermediate Holdings, LLC, a Delaware limited liability company and wholly-owned subsidiary of Capitol (“Intermediate Holdings”), Capitol Investment Merger Sub 1, LLC, a Delaware limited liability company and wholly-owned subsidiary of Capitol (“Merger Sub”), Capitol Investment Merger Sub 2, LLC, a Delaware limited liability company and wholly-owned subsidiary of Capitol Investment Corp. IV (“New HoldCo”). Pursuant to the Merger Agreement, (i) Capitol domesticated as a Delaware corporation and was renamed “Nesco Holdings, Inc.” (the “Domestication”), (ii) Merger Sub merged with and into Holdings I, with Holdings I surviving as a wholly-owned subsidiary of Capitol (the “Initial Merger”), and (iii) immediately after the Initial Merger, Holdings I merged with and into New HoldCo, with New HoldCo surviving as an indirect wholly-owned subsidiary of Capitol (the “Subsequent Merger,” and together with the Initial Merger, the “Mergers,” and together with the Domestication and the other transactions contemplated by the Merger Agreement, the “Transactions”). As a result of the Transactions, Holdings I became a limited liability company and a wholly-owned subsidiary of Capitol, with Nesco Owner becoming a securityholder of Capitol.

Upon the Closing, Capitol’s ordinary shares, Warrants and units ceased trading, and upon the opening of trading on August 1, 2019, common stock and Warrants began trading on the NYSE, respectively, under the symbol “NSCO” and “NSCO WS,” respectively.

OVERVIEW

Nesco is one of the largest specialty equipment rental providers to the growing electric utility T&D, telecom and rail industries 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.

With a young, coast-to-coast rental fleet of approximately 4,600 units as of December 31, 2019, Nesco has a diverse specialty fleet offering that includes insulated and non-insulated bucket trucks, digger derricks, line equipment, cranes, pressure diggers and underground equipment, with all-terrain options such as all-wheel drive, track mounting and rail mounting. Nesco’s rental fleet has an approximate average unit age of only 3.6 years as of December 31, 2019, compared to an average expected useful life of 15 to 25 years. The long useful life of Nesco’s equipment assets is a key driver of attractive asset economics. Nesco expects that a combination of highly attractive asset economics and long rental periods, averaging 12.9 months at December 31, 2019, excluding Truck Utilities, will continue to drive strong profit margins. In addition to renting its fleet, the Company opportunistically sells both new and used specialty equipment (primarily from its own fleet), which fosters strong customer relationships, facilitates fleet management and strengthens supplier relationships.

FINANCIAL OVERVIEW

Measures Related to our Fleet

We consider the following key operational measures when evaluating our performance and making day-to-day operating decisions:

Equipment on rent - Equipment on rent is the original equipment cost (“OEC”) of units rented to customers at a given point in time. Average equipment on rent is calculated as the weighted-average equipment on rent during the stated period. OEC represents the original equipment cost by fleet type over a period of time, exclusive of the effect of adjustments to rental equipment fleet acquired in business combinations. This adjusted measure of OEC is used by our creditors pursuant to our credit agreements, wherein this is a component of the basis for determining compliance with our financial loan covenants. Additionally, the pricing of our rental contracts and equipment

sales prices for our equipment is based off of 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.

Fleet count - Fleet count represents the average or period end (defined as either) equipment units held in our rental fleet over any period.

Fleet utilization - Fleet utilization, with respect to the average equipment units held in our rental fleet over any period, is defined as the total number of days the rental equipment was rented during the period divided by the total number of days such rental equipment could have been rented during the same period, assuming that each piece of equipment could have been rented every day in the period (i.e. no maintenance or planned downtime is included in the calculation).

Rental rate per day - Rental rate per day for the period is calculated as total rental revenue excluding freight and billings to customers for damaged equipment divided by the total billed rental days.

Fleet age - Fleet age represents the number of years from the manufacturer chassis year of the rental equipment unit through the current year end. We evaluate fleet age for each equipment type and our fleet as a whole. In order to calculate average fleet age by type and average total fleet age, we weight the fleet age by the number of units within the relevant group.

Gross Profit, Income from Operations and Cash Flow from Operations

Gross profit, income from operations and cash flow from operations are financial performance measures that we use to monitor our results from operations and to measure our performance against our debt covenants.

Adjusted EBITDA

Adjusted EBITDA is also a financial performance measure that we use to monitor our results from operations and to measure our performance against our debt covenants. This common metric is intended to align Nesco’s shareholders, debt holders, and management.

We believe the presentation of these financial measures enhances an investor’s understanding of our financial performance because these measures are useful financial metrics to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business. Such items are excluded pursuant to the definition of Adjusted EBITDA in the 2019 Credit Facility and the Indenture, Adjusted EBITDA is the basis for several financial loan covenants contained in the 2019 Credit Facility. These financial measures will provide investors with a useful tool for assessing the comparability between periods of our ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures. We use these financial measures for business planning purposes, for loan compliance purposes, and in measuring our performance relative to that of our competitors.

In analyzing and planning for our business, we supplement our use of financial measures based on U.S. GAAP with non-GAAP financial and other measures, as well as, use measures related to our specialized fleet of rental equipment, which are defined above. Nesco’s use of the terms EBITDA and Adjusted EBITDA may vary from that of others in its industry and therefore are limited in their usefulness as comparative measures. These financial measures should not be considered as alternatives to net income (loss), operating income (loss) or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows or as measures of liquidity. Our non-GAAP financial measures should not be relied upon to the exclusion of U.S. GAAP financial measures. We encourage investors to review our non-GAAP financial measures together with our U.S. GAAP results and historical consolidated financial statements, and not in isolation. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar measures used by other companies.

Adjusted EBITDA includes an adjustment to exclude the effects of purchase accounting adjustments when calculating the cost of used equipment sold. When equipment is purchased in connection with a business combination, the equipment is revalued to its then current fair value for accounting purposes. The consideration transferred (i.e., the purchase price) in a business combination is allocated to the fair value of equipment as of the acquisition date, with depreciation recorded thereafter following our accounting policies; however, this may not be indicative of our actual cost to acquire new equipment that we add to our fleet apart from a business acquisition. Additionally, the pricing of our rental contracts and equipment sales prices for our equipment is based off of OEC, and we measure a rate of return from our rentals and sales using OEC. As indicated above, the agreements governing our indebtedness define this adjustment to EBITDA, as such, and we believe this metric is a better indication of our true cost of equipment sales due to the removal of the purchase accounting adjustments.

Operating Results



(in $000s)	2019			% of revenues		2018			% of revenues		2017			% of revenues
Rental revenue	$	197,996		75.0	%	$	184,563		74.9	%	$	160,888		79.0	%
Sales of rental equipment	23,767			9.0	%	26,019			10.6	%	17,162			8.4	%
Sales of new equipment	10,308			3.9	%	18,349			7.4	%	10,093			5.0	%
Parts sales and services	31,964			12.1	%	17,366			7.1	%	15,624			7.7	%
Total revenue	264,035			100.0	%	246,297			100.0	%	203,767			100.0	%
Cost of revenue	106,919			40.5	%	100,586			40.8	%	84,149			41.3	%
Depreciation	70,568			26.7	%	64,093			26.0	%	61,873			30.4	%
Total gross profit	86,548			32.8	%	81,618			33.1	%	57,745			28.3	%
Operating expenses	50,530					38,454					34,257
Operating income	36,018					43,164					23,488
Other expense	69,056					56,985					54,076
Loss before income taxes	(33,038		)			(13,821		)			(30,588		)
Income tax expense (benefit)	(5,986		)			1,705					(3,493		)
Net loss	$	(27,052	)			$	(15,526	)			$	(27,095	)

Total Revenue

Total revenue for the year ended December 31, 2019, increased by $17.7 million, or 7.2%, compared to the same period in 2018. This increase was primarily due to an increase in rental revenue which increased $13.4 million, or 7.3%, compared to the same period in 2018, driven by an increase in average equipment on rent, which grew to $479.0 million in 2019, compared to $450.2 million in 2018. Parts sales and service revenue also increased $14.6 million, or 84.1%, compared to the same period in 2018. This is the result of increased penetration of our equipment rental customer base and a ramping of revenues at the newer parts, tools and accessories locations, as well as the acquisition of Truck Utilities, which contributed $4.2 million to PTA revenue. This was partially offset by equipment sales which decreased $10.3 million for the year ended December 31, 2019 compared to the same period in 2018. Truck Utilities contributed $8.5 million to revenue since the acquisition was completed in November 2019, split nearly evenly between both segments.

Total revenues increased by $42.5 million, or 20.9%, from $203.8 million for 2017 to $246.3 million in 2018. This increase is primarily due to increases in rental revenue and equipment sales ($40.2 million or 94.6% of the year over year increase). This is a result of an increase in demand across our key end markets of: T&D, telecom and rail, supplemented by demand from the storm and fire recovery end markets.

Cost of Revenue, excluding depreciation of rental equipment

Total cost of revenue, excluding depreciation of rental equipment, for the year ended December 31, 2019, increased by $6.3 million, or 6.3%, compared to the same period in 2018. The increase is primarily due to an increase in cost of parts sales and services of $12.7 million, or 103.0%, and an increase in cost of rental revenue of $1.8 million, or 3.7%, compared to the same period in 2018. The increase in cost was driven by our increased sales volume compared to the prior year. This was partially offset by a decrease in cost of equipment sales of $9.0 million, or 23.7%, due to lower sales.

Total cost of revenue, excluding depreciation of rental equipment, increased $16.4 million, or 19.5%, from $84.1 million for 2017 to $100.6 million for 2018. The increase is primarily due to a $13.3 million increase in cost of equipment sales.

Overall, results from our equipment and parts rental operations improved in each of the three years ended December 31, 2019, which is a direct result of our growth in our rental fleet and capitalization of the continuing demand in customers serving transmission and distribution, as well as telecom and rail end markets. Total gross profit margin from our rental operations was 74.3%, 73.4% and 70.5% excluding depreciation (38.7%, 38.7% and 32.1% including depreciation) in 2019, 2018 and 2017, respectively.

Depreciation

Depreciation for the year ended December 31, 2019, increased $6.5 million, or 10.1%, as compared to the same period in 2018. This increase is primarily due to our increase in rental equipment as compared to the prior year.

Depreciation for the year ended December 31, 2018, increased $2.2 million, or 3.6%, as compared to the same period in 2017. This increase is primarily due to our increase in purchases of rental equipment as compared to the prior year.

Other Operating Expenses

Other operating expenses for the year ended December 31, 2019, increased $12.1 million, or 31.4%, as compared to the same period in 2018. The increases are primarily due to an increase in transaction related expenses of $7.2 million, asset impairment of $0.8 million and an increase in selling, general, and administrative expenses of $1.9 million, or 6.0%, as compared to the same period in 2018. Excluding transaction and site opening expenses, expenses related to going public were the primary driver of the increase in expenses.

Operating expenses increased $4.2 million, or 12.3%, from $34.3 million for 2017 to $38.5 million for 2018, primarily due to a selling, general, and administrative expense increase of $5.2 million. The Company also incurred $2.5 million in acquisition related expenses in 2018 compared to $1.9 million in 2017. The increase in selling, general, and administrative expenses in 2018 was led by a $3.2 million rise in selling expenses, primarily due to investment in sales teams focused on telecom, rail and PTA. An increase of $0.4 million in commissions was also recognized as a result of the $42.5 million increase in revenue compared to 2017.

Other Expense

Other expense for the year ended December 31, 2019, increased by $12.1 million, or 21.2%, as compared to the same period in 2018. This increase is primarily due to an increase in net interest expense of $6.7 million, or 11.8%, and loss on extinguishment of debt of $4.0 million, as compared to the same periods in 2018.

Other expense increased by $2.9 million from $54.1 million for 2017 to $57.0 million in 2018. This increase is primarily due to an increase in interest expense of $3.0 million, or 5.6%, from $53.7 million in 2017 to $56.7 million in 2018.

Income tax expense (benefit)

Income tax benefit for the year ended December 31, 2019 increased by $7.7 million from an income tax expense of $1.7 million for 2018 to an income tax benefit of $6.0 million in 2019. The provision for income taxes in 2019 was a benefit, as compared to tax expense in 2018, which is the result of utilization of a portion of our federal and state income tax loss carryforwards (“NOLs”). Our acquisition of Truck Utilities is expected to provide us with additional future taxable income allowing us to further utilize a portion of the NOLs.

Due to our valuation allowance on our NOL and interest deduction limitation carryforwards, we are generally unable to recognize a deferred tax benefit when we report pretax losses because we have determined the realization of tax benefits for the carryforwards to be uncertain. Our income tax expense or benefit reflects changes in our deferred tax liabilities associated with our non-tax deductible tradename intangible asset and goodwill, as well as, foreign taxes incurred in Canada and Mexico.

Income tax expense increased $5.2 million from a tax benefit of $3.5 million for 2017 to a tax expense of $1.7 million for 2018. The change in income tax expense recorded from 2017 to 2018 is due to the reduction of the U.S federal corporate tax rate from 35% to 21% as a result of the U.S. Tax Cuts and Jobs Act.

Financial Performance

We believe that our operating model, across both the Equipment Rental and Sales and Parts, Tools and Accessories segments, together with our variable cost structure, enables us to sustain high margins, strong cash flow generation and stable financial performance throughout various economic cycles. We are able to generate substantial cash flow through our operating earnings. Our highly variable cost structure adjusts with the utilization of our equipment, thereby reducing our costs to match our revenue resulting in strong Adjusted EBITDA over the past three years. Our financial performance is principally evaluated based on five measurements: Adjusted EBITDA, average equipment on rent, average fleet count, average fleet utilization and average rental rate per day. The following table summarizes these operating metrics.

Financial performance for the year ended December 31, 2019, 2018 and 2017:



	Year Ended December 31,
(in $000s, except rate per day)	2019			2018			change			(%)		2017			change			(%)
Adjusted EBITDA ^(a)	$	127,486		$	121,657		$	5,829		4.8	%	$	98,604		$	23,053		23.4	%
Average equipment on rent ^(b)	$	478,996		$	450,195		$	28,801		6.4	%	$	403,786		$	46,409		11.5	%
Average fleet count	4,172			3,839			333			8.7	%	3,642			197			5.4	%
Average fleet utilization ^(c)	80.7		%	82.3		%	(1.6		)%	(1.9	)%	78.1		%	4.2		%	5.4	%
Average rental rate per day ^(d)	$	137.5		$	139.6		$	(2.1	)	(1.5	)%	$	136.1		$	3.5		2.6	%

(a)

EBITDA represents net income (loss) before interest, provision for income taxes, depreciation, and amortization. Adjusted EBITDA is defined as EBITDA as 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. These metrics are subject to certain limitations. See “Financial Overview—Adjusted EBITDA.”


(b)	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.


(c)	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 2019.


(d)	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.

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. 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.

Adjusted EBITDA increased $23.1 million, or 23.4%, from $98.6 million for 2017 to $121.7 million for 2018. This increase can be primarily attributed to an $26.1 million or 21.8% increase in gross profit, excluding depreciation to $145.7 million for the year ended December 31, 2018, driven by an increased level of equipment on rent compared to the prior year and growth in PTA. This increase was partially offset by a $1.3 million reduction in equipment sales gross profit and a $1.8 million reduction in purchase accounting adjustments related to those sales as well as an increase in selling, general and administrative expenses due largely to increased expenses related to becoming a public company.

The following is a reconciliation from U.S. GAAP net loss to Adjusted EBITDA for the years ended December 31, 2019, 2018 and 2017 and a reconciliation from Adjusted EBITDA to U.S. GAAP net cash from operating activities for the years ended December 31, 2019, 2018 and 2017.



	Year Ended December 31,
(in $000s)	2019			2018			2017
Net loss	$	(27,052	)	$	(15,526	)	$	(27,095	)
Interest expense	63,361			56,698			53,710
Income tax expense (benefit)	(5,986		)	1,705			(3,493		)
Depreciation expense	71,548			64,312			62,083
Amortization expense	3,008			2,826			2,646
EBITDA	104,879			110,015			87,851
Adjustments:
Non-cash purchase accounting impact ⁽¹⁾	1,802			3,631			4,284
Transaction and process improvement costs ⁽²⁾	15,866			2,536			1,910
Major repairs ⁽³⁾	2,216			1,436			2,758
Share-based payments ⁽⁴⁾	1,014			1,130			1,101
Other non-recurring items ⁽⁵⁾	—			2,909			700
Change in fair value of derivative ⁽⁶⁾	1,709			—			—
Adjusted EBITDA	$	127,486		$	121,657		$	98,604



	Year Ended December 31,
(in $000s)	2019			2018			2017

Adjusted EBITDA	$	127,486		$	121,657		$	98,604
Adjustments:
Change in fair value of derivative ⁽⁶⁾	(1,709		)	—			—
Other non-recurring items ⁽⁵⁾	—			(2,909		)	(700		)
Share-based payments ⁽⁴⁾	(1,014		)	(1,130		)	(1,101		)
Major repairs ⁽³⁾	(2,216		)	(1,436		)	(2,758		)
Transaction and process improvement costs ⁽²⁾	(15,866		)	(2,536		)	(1,910		)
Non-cash purchase accounting impact ⁽¹⁾	(1,802		)	(3,631		)	(4,284		)
EBITDA	104,879			110,015			87,851
Add:
Interest expense	(63,361		)	(56,698		)	(53,710		)
Income tax benefit (expense)	5,986			(1,705		)	3,493
Amortization - financing costs	2,913			3,537			2,907
Share-based payments	1,014			1,130			1,101
Loss (gain) on sale of equipment - rental fleet	(5,542		)	(3,644		)	(1,792		)
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			—			833
Deferred tax (benefit) expense	(6,861		)	1,096			(4,339		)
Bad debt expense, net of recoveries	3,292			4,302			2,774
Other assets	—			—			(2,130		)
Changes in assets and liabilities:
Accounts receivable	(17,073		)	(5,185		)	(20,500		)
Inventory	(22,683		)	(8,023		)	(8,739		)
Prepaid expenses and other	(2,578		)	351			(466		)
Accounts payable	7,547			(4,307		)	5,573
Accrued expenses	6,560			(1,203		)	3,935
Deferred rental income	(3,350		)	(62		)	428
Net cash from operating activities	$	18,792		$	41,040		$	17,219

(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 the Company’s fleet, which is an adjustment pursuant to the 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 (the Company’s then ultimate parent) on February 26, 2014, which is an adjustment pursuant

to the credit agreement. See Note 13, Share-Based Compensation Plans, to the Audited Consolidated Financial Statements included in this Annual Report, for additional information.


(5)	For the years ended December 31, 2018 and 2017, 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. The 2017 adjustment is comprised of a state tax audit settlement and write-downs of inventory items.


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

Equipment on rent

Price	9.90	EPS	0
Shares	12	P/E	42
MCap	118	P/FCF	-91
Net Debt	-0	EBIT	3
TEV	118	TEV/EBIT	42
TTM 2018-09-30, in MM, except price, ratios

10-K	2019-12-31	Filed 2020-03-16
10-Q	2019-09-30	Filed 2019-11-12
10-Q	2019-06-30	Filed 2019-07-31
10-Q	2019-03-31	Filed 2019-05-08
10-K	2018-12-31	Filed 2019-03-04
10-Q	2018-09-30	Filed 2018-11-13
10-Q	2018-06-30	Filed 2018-08-08
10-Q	2018-03-31	Filed 2018-05-10
10-K	2017-12-31	Filed 2018-03-27
10-Q	2017-09-30	Filed 2017-11-08
10-Q	2017-06-30	Filed 2017-09-27

8-K	2020-03-12	Enter Agreement, Earnings, Off-BS Arrangement, Exhibits
8-K	2020-03-11	Regulation FD, Exhibits
8-K	2020-03-02	Earnings, Exhibits
8-K	2020-02-27	Officers, Regulation FD, Exhibits
8-K	2019-11-14	Regulation FD, Exhibits
8-K	2019-11-11	Earnings, Exhibits
8-K	2019-11-05	Regulation FD, Exhibits
8-K	2019-10-29	Earnings, Regulation FD, Exhibits
8-K	2019-09-23	Regulation FD, Exhibits
8-K	2019-09-10	Accountant, Exhibits
8-K	2019-09-03	Regulation FD, Exhibits
8-K	2019-08-22	Officers
8-K	2019-08-09	Earnings, Exhibits
8-K	2019-07-29	Enter Agreement, Leave Agreement, M&A, Earnings, Off-BS Arrangement, Sale of Shares, Shareholder Rights, Control, Officers, Amend Bylaw, Shell Status, Other Events, Exhibits
8-K	2019-07-26	Regulation FD, Exhibits
8-K	2019-07-22	Enter Agreement, Sale of Shares, Regulation FD, Exhibits
8-K	2019-07-16	Shareholder Vote
8-K	2019-07-11	Enter Agreement, Exhibits
8-K	2019-06-04	Regulation FD, Exhibits
8-K	2019-05-15	Off-BS Arrangement, Sale of Shares, Exhibits
8-K	2019-05-13	Regulation FD, Exhibits
8-K	2019-05-07	Enter Agreement, Exhibits
8-K	2019-04-07	Enter Agreement, Sale of Shares, Regulation FD, Exhibits
8-K	2019-03-22	Off-BS Arrangement, Sale of Shares, Exhibits
8-K	2019-02-28	Enter Agreement, Exhibits
8-K	2018-11-07	Enter Agreement, Exhibits
8-K	2018-10-03	Regulation FD, Exhibits
8-K	2018-08-03	Enter Agreement, Exhibits

EX-4.6	nscoex46.htm
EX-21.1	nscoex211.htm
EX-23.1	nscoex231.htm
EX-31.1	nscoex311.htm
EX-31.2	nscoex312.htm
EX-32	nscoex32.htm

CIC 10K Annual Report

Capitol Investment IV Earnings 2019-12-31