Custom Truck One Source, Inc. · NYSE:CTOS
Custom Truck One Source — Nesco Holdings — Merger or Acquisition (December 2020)
41 slides from Custom Truck One Source's merger presentation, Dec 22, 2020
Slide 1: Investor Presentation December 2020
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Slide 2: Disclaimer
Disclaimer HESLD (\) 852" SPECIALTY RENTALS GRE SOURCE.
Slide 3: Presenters
Presenters Louis Samson Chairman & CEO, Partner, Platinum Equity Capitol Investment Vice Chairman, Nesco Fred Ross Josh Boone Ryan McMonagle CEO, Custom Truck CFO, Nesco COO, Custom Truck One Source One Source
Slide 4: Offering Summary
Offering Summary Issuer Nesco Holdings, Inc. (“NSCO” / NYSE) Securities Private Investment in Public Equity - Common Stock Offering Format Expected to be a Rule 506(c) Private Placement (with registration rights) Offering Size $100M Minimum Aggregate Amount Use of Proceeds CTOS Acquisition Estimated
Slide 5: MED (\
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Slide 6: Transaction Summary
Transaction Summary + Nesco to acquire Custom Truck One Source (“CTOS") for $1.475B + An affiliate of Platinum Equity, LLC (“Platinum”) has committed to invest over $850M (including $100M backstop) into Nesco in exchange for newly issued common stock at a price of $5.00 per share * The Blackstone Gr
Slide 7: Combination of Two Leading Specialty Rental Equipment Companies
Combination of Two Leading Specialty Rental Equipment Companies a IESLO HESLO MEE Highly Complementary Companies ‘SPECIALTY RENTALS @ sustom * Customers, end markets, fleets and operations well-aligned + ~$50M in run-rate annual cost synergies expected to be achieved within two years of closing $1.3
Slide 8: Transformed Company Well-Positioned for Growth
Transformed Company Well-Positioned for Growth Integrated “one-stop-shop” platform with a differentiated customer value proposition and enhanced operational flexibility oa National footprint and broadened product and service offering to tailor solutions to customers’ unique needs & a Serving resilie
Slide 9: Platinum Equity Overview
Platinum Equity Overview Financial Sponsor with a Strong Track Record and Deep Operational Capabilities Overview Operationally-focused Investment strategy Founded in Portfolio includes $23B * Operationally-focused investment firm with deep capabilities 1995 ~40 companies Under management (~70 dedica
Slide 10: Platinum Equity Investment Thesis
Platinum Equity Investment Thesis Invest in businesses / sector we know and have had success in * Deploy Platinum operations team to leverage proven specialty rental playbook and drive synergies and growth alongside management + Prior track record of success with Nesco Creates a differentiated speci
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Slide 12: Nesco at a Glance
Nesco at a Glance Leading Provider of Specialty Equipment Rental to T&D, Telecom and Rail End-Markets * Differentiated parts, tools and accessories offering highly complementary to Nesco’s core rental business and CTOS'’ offerings * Well-positioned to benefit from near-term tailwinds and uptick in u
Slide 13: Nesco's Longstanding, Diversified Customer Relationships
Nesco’s Longstanding, Diversified Customer Relationships Nesco Serves More Than 2,000 Customers, with the Top 10 Customers Representing Less Than 20% of Revenue MESLD Highlights 7 Diverse Customer Base . Nesco serves as a key supplier to utilities, telecoms, railroads and related contractors for the
Slide 14: Nesco Financial Overview
Nesco Financial Overview Commentary Revenue ($ in millions) * Adj. EBITDA and OEC on rent grew at a 13.7% CAGR and 8.9% CAGR from cacr: 13.8% $341 2017 to 2019, respectively, due to strong end market demand $299 $264 $246 * COVID-19 disrupted this growth trajectory, particularly in Q2 and Q3, but OE
Slide 15: CTOS Overview
CTOS Overview ESL (\) 88s SPECIALTY RENTALS
Slide 16: CTOS at a Glance
CTOS at a Glance Leading Integrated Provider of Specialty Equipment * Differentiated business model combining full-service specialty equipment offering with large-scale production and customization capabilities * “One-stop-shop” platform offering rental, new & used sales, and parts & service on a na
Slide 17: "One-Stop-Shop" Customer Value Proposition
“One-Stop-Shop” Customer Value Proposition Integrated Production Capabilities Key Point of Differentiation for CTOS Integrated Production Capabilities Attachment OEM SAS Boom Cable Placer Bucket Service Offering Production and Customization Rental New and Used Sales Aftermarket Parts and Service Fin
Slide 18: CTOS has a Diversified, Highly Loyal Customer Base
CTOS has a Diversified, Highly Loyal Customer Base CTOS Serves More Than 1,500 Customers, with the Top 10 Customers Representing Less Than 20% of Revenue ae 1) See Highlights : 7 Diverse Customer Base . Strong brand recognition and awareness among industry-leading customers T&D Rail Infrastructure /
Slide 19: CTOS Financial Overview
CTOS Financial Overview Commentary * Adj. EBITDA and OEC on rent grew at a 27.4% CAGR and 13.7% CAGR from 2017 to 2019, respectively, due to investments in the business and strong end market growth * COVID-19 slowed CTOS's growth trajectory and impacted OEC on rent in Q2 and early Q3, but recovered
Slide 20: Industry Overview
Industry Overview MESO (\ custom
Slide 21: Strong, Multi-Year End Market Tailwinds
Strong, Multi-Year End Market Tailwinds Rapidly increasing major projects driven by need for grid upgrades and renewable energy investment, coupled with frequent, often government mandated, maintenance RAIL Aging rail infrastructure drives extensive replacement / refurbishment spend, while increasin
Slide 22: Resilient and Stable End Markets
Resilient and Stable End Markets Nesco End Markets Have Lower Correlation and Faster Historical Growth Than Broader Economy Growth CAGR "01-05 "05-09 09-19 "01-19 Correlation U.S. GDP 5.4% 2.6% 4.0% 4.0% 1.00 Construction* 7.3% (5.0%) 4.1% 2.6% 0.70 PF Nesco Index” 8.3% 6.4% 7.5% 7.3% 0.52 Source: F
Slide 23: Large Addressable Market with Strong Secular Growth
Large Addressable Market with Strong Secular Growth ~$30B Total Addressable Market Parts & Service ~$9B New Sales ~$15B Rental & Used Sales ~$5B 1.0% Est. Market Share MCTOS =Nesco Note: CTOS figures are based on internal results and are subject to audit. Rental Penetration? 65% 57% 42% ~20-25% 2009
Slide 24: Transformative Business Combination
Transformative Business Combination SPECIALT RENTALS MESLD (\) 82
Slide 25: Highly Complementary Platforms
Highly Complementary Platforms Complementary Business Models with a Common Core Focus LTM Revenue $297M $1,004M $1,301M LTM Adj. EBITDA $122M $165M $337M* Fleet OEC $638M $705M $1,343M Locations? 20 26 46 Employees ~365 ~1,460 ~1,825 Other? Other? Other? 8%, 10% 17% Revenue Mix Rental & Rental & Ren
Slide 26: Enhances Rental Fleet Profile
Enhances Rental Fleet Profile Creates One of the Industry’s Largest and Most Diverse Specialty Equipment Fleets HESIOD Other? 6% Other T&D* 12% Cranes $638m OEC 12% 3.9-Yr Avg. Age Digger Derricks 28% hn Bucket Truck Bucket Trucks 42% Other T&D+ 8% ilers and other for CTOS. $705m OEC 2.9-Yr Avg. Age
Slide 27: Integrated Business Model
Integrated Business Model CTOS’ Capabilities and Offering will Materially Enhance Nesco’s Platform Unit Economics Advantages * Scale-enabled purchasing benefits * Source components separately via long-standing relationships with major chassis and attachment OEMs * Model substantially reduces unit le
Slide 28: Integrated Model Drives Superior Rental Unit Economics
Integrated Model Drives Superior Rental Unit Economics Nesco Illustrative New Unit ROI {fim mitions) Current Future Upfront Cost $95 $88 Time Utilization 80% 82% Gross Margin 0% 85% Hold Period (Years) 7 7 % OEC Recovery 50% 56% Total Cash Flow $237 $273 MOIC 2.5x 3.1x Unlevered IRR 29% 40% Lower Co
Slide 29: Potential Synergies to Drive Substantial Value Creation
Potential Synergies to Drive Substantial Value Creation ~$50M of Anticipated Run-Rate Annual Cost Synergies with ~$50M of expected one-time costs to achieve Breakdown of Cost Synergy Opportunity Synergy Realization Timeline+ Procurement 28% Service / Production [=] Optimization Back Office 17% Year
Slide 30: Compelling Financial Profile
Compelling Financial Profile Following Temporary COVID Disruption, Companies Have Rebounded to Pre-Pandemic Levels and are Poised to Return to Strong Growth in 2021 Pro Forma Revenue Pro Forma Adj. EBITDA ($inmitions) ($inmitions) cacr: 22.4% $1,390 $1,294 $1,295 $390 cacr: 21.5% ‘Ly $1,105 $325 $33
Slide 31: Strong Free Cash Flow Generation
Strong Free Cash Flow Generation Capex Spent in 2017 to 2019 Which Drove Growth Now Reduces Projected Near-Term Spend and Produces Significantly Increasing Free Cash Flow Pro Forma Net Capex Pro Forma Adj. EBITDA - Net Capex? ($inmitions) ($inmitions) $215 $208 $195 50’ $154 $153, 50 $140 $107 $107
Slide 32: Transaction Enhances Leverage & Liquidity Profile
Transaction Enhances Leverage & Liquidity Profile Improved Financial Profile Positions the Combined Company to Capitalize on Growth Opportunities Highlights Lower Net Leverage Improved Liquidity Profile * New capital structure provides a high ehaier) level of financial flexibility 2.4x of Represents
Slide 33: Compelling Transaction for All Stakeholders
Compelling Transaction for All Stakeholders Combination of Two Leading Specialty Equipment Providers Focused on l ] High-Growth End-Markets AN Integrated Platform with Scale and Differentiated Offering LHX RA : ai a samuaii wN Expanded Fleet and Footprint Providing Greater Ability to Serve Customers
Slide 34: Appendix
Appendix MESLO custom
Slide 35: Transaction Overview
Transaction Overview * Nesco to acquire Custom Truck One Source for $1.475B * Platinum has committed to invest over $850M (including $100M backstop) into Nesco in exchange for newly issued common stock at a price of $5.00 per share + Blackstone, the current majority owner of CTOS and certain members
Slide 36: Adj. EBITDA Reconciliation - Nesco
Adj. EBITDA Reconciliation - Nesco Reconciliation of Net Income (Loss) to Adjusted EBITDA+ (Sin mitions) Year Ended 12/31 YTD 9/30 L™ 2017 2018 2019 2019 2020 9/30/20 Net Income (Loss) ($27.1) ($15.5) ($27.1) ($30.2) ($13.9) ($10.8) Interest expense 53.7 56.7 63.4 46.4 478 64.8 Income tax expense (b
Slide 37: Adj. EBITDA Reconciliation - CTOS
Adj. EBITDA Reconciliation - CTOS Reconciliation of Net Income (Loss) to Adjusted EBITDA+ (Sin mitions) Year Ended 12/34 YTD 9/30 LT™ 2017A 2018A 2019A 2019A 2020A 9/30/20 Net Income (Loss) ($35.0) ($8.3) ($8.3) $0.0 ($6.9) ($15.3) Interest expense (excl. Floorplan Interest) 33.2 44.9 50.8 38.3 30.3
Slide 38: Net Capex Reconciliation - Nesco
Net Capex Reconciliation - Nesco ' Reconciliation of Total Capital Expenditures to Net Capital Expenditures (Sin mitions) Year Ended 12/34 YTD 9/30 LIM 2017A 2018A 20194 20194 2020A 9/30/20 Purchase of equipment - rental fleet $47.1 $58.5 $106.6 $778 $59.2 $88.1 Purchase of other property and equipm
Slide 39: Net Capex Reconciliation - CTOS
Net Capex Reconciliation - CTOS Reconciliation of Total Capital Expenditures to Net Capital Expenditures (Sin mitions) ea GBF ENG 22/88, OBO es ane, —2017TA __2018A __2019A __2019A __2020A' _ 9/30/20 Additions of rental equipment $1679 $471.7 $210.2 $1744 «= $115.6 $151.7 Purchases of other property
Slide 40: Reconciliation to Percentage of Gross Profit Excluding Depreciation and Major Repairs - Nesco
Reconciliation to Percentage of Gross Profit Excluding Depreciation and Major Repairs - Nesco Reconciliation from Revenue and Cost of Revenue to Percentage of Gross Profit Excluding Depreciation and Major Repairs (8 in millions) Year Ended 12/34 YTD 9/30 LT™. 2019A 2049A 2020A 9/30/20 Rental revenue
Slide 41: Reconciliation to Percentage of Gross Profit Excluding Depreciation - CTOS
Reconciliation to Percentage of Gross Profit Excluding Depreciation - CTOS Reconciliation from Revenue and Cost of Revenue to Percentage of Gross Profit Excluding Depreciation (Sin mitions) Year Ended 12/34 YTD 9/30 LT™. 2019A 20198 2020A 9/30/20 Rental revenue $233.5 i744 $157.0 $219.5 New sales re
Nesco Holdings — Merger or Acquisition (December 2020) on 6ix