DSKE - Earnings call transcript Q2 2022

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Operator

Good morning, everyone, and thank you for participating in today's conference call to discuss Daseke's Financial Results for the Second Quarter ended June 30, 2022 as well as Daseke's 2022 Full Year Outlook. With us today are Jonathan Shepko, CEO and Board member; Jason Bates, Executive Vice President and CFO; and Traci Graham, Vice President of Finance and Investor Relations. After their prepared remarks, the management team will take your questions.

As a reminder, you may now download a PDF of the presentation slides that will accompany the remarks today's conference call as indicated in the press release issued earlier today.

You may access these slides in the Investor Relations section of our website.

the I Traci like Finance regarding Graham, Relations, XXXX. will further, call turn and forward-looking go statement Litigation who to Harbor Reform meaning over Vice read Private statements we within would important of to now the Investor that the Before provides Safe the cautions Securities company's President of of Act Ms. ahead. please go Traci,

Traci Graham

forward-looking of statements Please Projected to guidance the Act Today's Slide our review Safe statements. turn a statements. Reform Harbor our Chris. outlook, the Thanks, presentation financial of for contains within meaning Litigation our Private non-GAAP and X forward-looking information, Securities including XXXX. of

the reflect after discussion a including subject actual future results to and and you reliance estimates, uncertainties securities management's performance, statements, current projections. business, cause undue Forward-looking of of our to for to under statements. to and that and encourage circumstances our a could based Exchange with or or statements events affect strategies, could Securities as except new place other filings applicable risks laws. any that forward-looking assumptions to undertake be our our risks on revenues, projections otherwise, prospects from expectations and that no I and with read the are earnings, required Daseke's those not revise to forward-looking respect We today, obligation whether aspects business may materially events occurring on information, Commission result differ of to are as

limited adjusted the loss, net income, which Accepted investor investors to including not adjusted ratio, be that Accounting issued EBITDA, conform in Generally flow of adjusted measures comparable morning, this and Daseke the a U.S. website appendix free adjusted the both measures tab During discussion to to the in most operating not www.daseke.com. of non-GAAP do directly also debt. Reconciliations of GAAP, or call, Principles but or are and GAAP income presentation press cash are these included items there to will their operating available the net of some release

we'll will the In of over who a execute business terms of by review financial briefly operations call Shepko to speak will will structure our strategic call With turning questions. we're review CFO call that, about our against we CEO, provide up XXXX Shepko, your Daseke's making over the quarter Jonathan point Jonathan? as then priorities. and for start our Bates, of Mr. and the few key comments progress our at Jason open we Daseke's a the hand Jonathan I will with outlook, to our line which closing before wrap the remarks the Jonathan today,

Jonathan Shepko

everyone. Thank you, Traci. Good morning,

begin notable our on across our most a quarter. strong. solid remain delivered X, from end Slide of another quarter markets will briefly Daseke Let takeaways of of speak key to where me the performance few I operational second as demand industrial

demand drive networks, for doing continue in In period. million services maintaining to tapped We Daseke In a unprecedented expansive strong environment. freight our to challenges Additionally, nearly right demand unfilled. capture healthy imbalance, freight substantial to our response, disruptions impact broker to said we productivity, truck perpetuating only continue delays. revenue with met environment. specifically leverage have supply the the demand with company same this our XX% to $XXX.X market, the fleet despite of our also supply approximating the these orders disruptions capacity, has of our asset fleet supported That light further to equipment which remaining our new created strength in these model our customers adapt so, chain truck global asset coupled equipment a the

however, poised of remain this second continued year. the will on the deliveries half necessary lower light customers, quarter, by XXXX. truck across While as It's owned second these understated servicing like to made operating new of asset income turn fundamental we tough likely able versus unfavorable be I comps ensure we post higher posted to margin EBITDA capacity of are the necessitated supplant to emphasis of will to last as XXXX, equipment, to call quarter OEM The with speak review and our that operating company growth our delays, over well light Jason equipment this this claims and capabilities capability to I'd development continued capacity, later, and our extraordinary the in $XX.X cost a were income which is detailed both increases margin mention adjusted of company $XX.X of hand each review smaller still to shown utilization of With the as million. spite for in off events. quarter of asset more very platform financials, we adjusted EBITDA the important Jason meaningfully because Jason stronger before to a modest for our now that million to headwinds, In realized Bates QX a earnings of strong note, adjusted our financial will inflationary to of adjusted I was point performance Jason? the fleet

Jason Bates

our me of X level quarter. Thank high to results Jonathan and morning review the Please you, for good Slide all. consolidated for with turn a

adjusted upon markets, out optimize of outperform coupled highlighted, our top help Despite Daseke's versus ability to EBITDA and line. another to of and pleased environment, strategy, growth end our market. otherwise current facing and trends, the asset freight with broader the once industrial this inflationary traditional strong quarter are our we improvement report light seasonal strategically year-over-year to our leverage model Jonathan quarter. portfolio this again As proven We've rate diverse of capture

up year's persisting million, quarter, XX.X% $XXX.X $XXX support the in our limited of rate cargo quarter. demand supply markets healthy continues security end construction, coupled As demand last markets. discussed strong compared quarter, key to revenues we steel high our last across second manufacturing, and backdrop. see delivered a Robust revenues to in end with Daseke million of In

leveraged and line to expansion and our by notable this of top service offering aided we as primarily our model, brokerage somewhat also surcharges, fuel revenue the performance achieved reflects flexibility Although growth. was capture business

our continued as of we second EBITDA in year-over-year decreased income $X.XX adjusted $XX.X of million $XX grew fleet by quarter diluted Even the due or equipment quarter, million delays, delivered compared XXXX. the of share adjusted net per to size to X.X% slightly

partially our As maintenance a trends rates cost pay, the strong strategic by top and expansion, and claims driver and portfolio, offset strengthened deployment operations demand expense. result freight this of asset and line was driving and pressures insurance rates of

by claims adversely the for of in impacted quarter. results the which from have were quarter a couple Our prior developed periods,

of same discussions nature unable to back would and of discuss this the on of ongoing development insurance in view claims, next as the -- expect sensitive year. the back half development do claims we're But half specifics. of not claims level and the these in unusual we Given the year

approach would on our the market. I touch like labor to Next, to current

we we Here driving and the monitor life to than professionals continually said our industry better Having our driver at Daseke, continue compensation much that, retain average. at a rate work balance.

And and helps the absolute the line pay been driver will with to in basis, working watch of flat has to while mile environment offset and the committed on close pay percentage environment pay trusted Notably, the our drivers. will firmly labor with rate the increases rate an keep inflationary Daseke we skilled quarter. have We remain a environment in industry. strong for respond costs to a market. remains increased driver per continue a these to positive and continue on as providing

was by wind up line this XX.X% expenses. segment verticals the corporate the margin continue overhead Before demand, high captured Specialized rates demand by with and results. X, rates. revenues cargo, On results, our starting a Corporate at prior-year level period. final related adjusted top This primarily with operating revenue to note security, the strong aforementioned at Specialized we manufacturing Slide take year-over-year, versus year-ago on high market helps our the a level of segment detailed and driven of the which insurance the construction decreased coupled we quarter million with reduction of our approach solid present to segment offset and energy a we view EBITDA were in look in $XXX.X market heightened results unique headwinds. where $X our million, in combination portfolio the realize growth

end aerospace volume for quarter, As previously to which last aerospace demand the expands. was slower continued generate market incremental a mentioned further as improvement quarter in

primarily Our XXX decreased associated adjusted in $XX.X X% was EBITDA to the basis with points up of period. The margins Specialized prior-year's business. segment's adjusted change was mix in the million quarter the EBITDA the margin compression versus while

by a by revenue, EBITDA segment quarter an of our growth to in quarter the per compared service of for of strong on mile second results the light and compared which the margin Adjusted $X.XX the Specifically increased was offerings decrease asset XX.X% basis absolute XXXX. supported high $X.XX, growth when in the second wind to XXXX. the rate in in

has Our second X, demonstrated our experienced meaningfully On up for This the year-over-year XX,XXX rate the growth. by driving per has across the specialized segment which quarter. quarter. tractor segment was of last revenue portfolio of end we segment's results versus expansion consistent Flatbed XX,XXX, results in year's markets outline Slide our

segment quarter. $XXX impact across million $XXX.X second the were construction, quarter to manufacturing brokerage able million, and increase drive growth, in the our to size. support our of environment. delivered of the continue year-over-year steel on year verticals revenue offering of in Flatbed equipment a delays XX.X% demand rate We despite the revenue fleet our from Our Healthy prior strong to service an leverage

our capture period results model to as X.X% higher and of tractor, increased metric. previous In to slightly asset While The our results segments back rate EBITDA to This year to in in rate the equipment that per towards freight are adjusted of a of our in was incremental impacted per confident leverage year-over-year in $XX grew push XX,XXX in shift the revenue last to margins compared network per leverage assets business year. XX,XXX company we our light, from flexible freight. mile further by increase quarter second the light $XX.X by million realized the the the delays million increase same displayed X.X% asset mile continue ease, were we margin can quarter. which we

backdrop cost the continues encourage pressures. mitigate a helping rate As environment, market to strong

and company margin a with ratio environment coming the due Our light XX.X% adjusted asset the points aforementioned coming segment's our basis XXX solutions. inflationary the operating decline toward by away for basis in The XXX XX.X% at owned XX.X%. mix increased adjusted to primarily from at ratio points quarter assets shift to with margins operating EBITDA in

both quarters As we us with the combined specialized fact has our in today unique in portfolio have of throughout industry composition positions having end and markets. multiple asset believe business flatbed model strong a the this play here diversified and markets Daseke spending prior We mentioned advantage our verticals. to strengths fleet

If trucking X, you a right you bottom will broader rate detailing Slide market. of the performance see chart of versus look that hand flatbed to Daseke's the

to effectively as While and at opportunities enjoy rate efficiently continues the capture of strong our Daseke the strong model success, proof asset freight chart this right serves leveraging margins. environment, most to our ability attractive market and

$XX.X sale after This million. leases Turning we collected $XX.X the cash our in to or of in net moment operating equipment of flow million $X.X $XX.X CapEx Cash Slide to financing X, Daseke I'll generated of free take financed $XX.X performance. million activities. cash proceeds year-to-date. flow cash with from from discuss totaled million generation and resulted debt CapEx $XX.X cash was a million. in capital to million bringing

continue sources to of flowing availability by capital our our fleet healthy balance cash supported and a the balance cash facility. and credit of on nature model the $XXX we with over free sheet significant terms maintain undrawn revolving million strong In liquidity of

for conclude outlook X, our I will Slide XXXX. to the Looking with full-year

our light And additional We outlook. flexed capture in XX% to revenue such, increase We between expect freight our continue And to full-year see as to are consolidated strength we raising year-over-year. and revenue freight. service now asset XX% offering rates. XXXX I've also

year-over-year cost improvement. the reaffirming EBITDA carries lower X% provided our asset and a are inherently given adjusted pressures, business, However, inflationary previously to the various we light guidance which margins, increase XX% our in

in While million, our second our will of first million. net therefore a reaffirming XXXX, that the net XXX half experienced equipment significant majority we expect capital have half we outlook delays delivered cap in of of of be and XXX XXXX full-year year the expenditure equipment the are

help the to watch continue close environment, into year pressures, additional that further becomes availability as on market will labor retention outperforming relationships information updates of progress second in of inflationary rate support rate remain the our factors keep differentiating the We the We available. as long and at key standing through goal driver confident cycles. equipment Daseke we providing customer market and market, half the will with a

to uncertainty. our strong continue initiatives. few we I'll our several of hand to what prioritize quarters, our Daseke final to second excited to employer to focus year the prepared value back continue macro is on for last the And results to over we remaining to proven are half quality we And come about remarks, well returning as shareholders. the as excel in driving We driving is transformational with through a call and the a offer over that, Jonathan? professionals Jonathan have

Jonathan Shepko

you, Thank Jason.

commitment you to our please value will me creation Slide like on If to for to shareholders. turn Daseke's with I'd X. touch

As and in each several morning, the bottom-line last headwinds mentioned our myriad this of throughout we growth. call our a profile margin faced months, pressuring

proxy EPS return the and is measure a for way way business. equity, ability shift fundamental we perform Our the spite about testament to way operating well we our as these in think The initiatives of success we referencing in success. whether a prioritize income on or however, to the challenges,

an initiatives, While acknowledge a on done few substantial as this from initial That of and during company of meeting early significant cycles. better our wins this next a focused with tactical that phase aligned challenge. average our we some made transformation position is market along division company still the there's we this to quarters have over several a company, or be to said, result work across to the progress for delineated ideal

to we for by Moving through position outperformance will today's to remarks next that this I'd attributes XX. cycle. us conclude certain continue like expect Slide to prepared highlighting

across ability is free our cycles. to First flow generate cash positive

June of second a trailing at market XX%. by which as XXXX, flow yield, cash the XX, ending, the stood our months free As quarter date of divided on noteworthy free capitalization flow our is defined XX as cash same

loan with be be on backdrop. occurrence, And a As even to believe we recessionary flow. do million prevailing cash be XXXX, liquidity. company would facts and an type believe which almost still free a event position our a with opportunistic last modest outlier call, Daseke generate to the term mentioned until and we positioned on our believe well macroeconomic based current XXXX term circumstances, nimble of light is irrespective maturities to debt and no XXX current available covenant We of in

of announced underway. operating last like to quarter. company initiatives continued transformational are progress I'd Approximately Next, one acknowledge half integrations on the now we our

among move harmonized even strategically will coordination a efforts deploy to in back to continue we to platform, be substantial, drive making further our to and growth accounting our also more the As to investments efficiencies consolidate processes more alongside also through driven future. for avenues ability our cross streamline and Again, operations, we're and resources And technology a streamline support in our and optimization common operations, through data things. office platform. aimed functional decisions, other to further operations within creating our consolidate

annualized rate provide basis benefit updates We will the million of more our the end continue progress of we XX quarters. yield initiatives our coming a transformation on by that XX to to And these XXXX. reaffirm on will over expectations run

to and to of we I'd base unique diversity our continue Next, relative consumer of the customer to retail markets focused traded emphasize most that the publicly serve, peers. particularly like end

Our XX the pure wherewithal of facing a industrial and list. play by bed underpinned top customer on notable the purpose economy

XXX fortune of companies specialized of list with flatbed our segments. and category within containing of along eight Department Defense Our each

demand surgically strategy of our the flexibility and fleet and cycles end foundation and portfolio market capture, industrial prioritization deploy to pockets maximize we the across cycles granted portfolio can present create our an is opportunistically or Equally freight by on against, market that is resilience. is utilization as in end broad optimizing SRA strength a to our customers important of customer order across service ability of end that diversification continued base markets, the industrial well-constructed with to We all-weather markets this capitalize in particular themselves have assets shippers sub executing to our strategically margins. verticals of while in these

to discussed, capabilities our quarter we've This rely equipment as more OEM the delays. had asset-light of we on because

lower revenues capture. provides us margin, increase straining -- a through the capacity, us asset-light EBITDA both margins to contribution allows at and/or freight it these strategies allowed search While pull our

between able exceed flatbed specialized segments for this and teams company experienced toggle once average of of It execution market across to levels asset respective the that and were the benchmark again fleet that booked ability margin to lowest to the loaded is ensures Our each the capture freight costs strategies was environments. freight indexes. asset-light capabilities highest while the with also the freight optimal ensuring is our

thereby we of the reduction As overall seeding it will we and business company-owned the an load. per profitable use reduce experience structure and margin environments. The lower tremendous freight softens, freight and assets, loading in and use eventually defending total shift we posture coupled of provides prioritize is contracted us that variable although, of book cost more a reducing capabilities largely and margin that capture, rate our margins dramatically would resulting margin in market hand likely scenario, highly mix defensive with market software capabilities -- higher may necessitates asset-light asset-light more increasing margin in our our

discussing to the like few I'd environment. Finally, current M&A a spend moments

a performing plan quarter, last tracking tuck-in the we is the Before announced update post-acquisition well on transaction. any acquisition tightly doing a by so, hazmat measure, and to very quick our successful

the lead and small -- micro for capitulation respect valuations flow, family seen their are towards continued and We carriers, deal impacting a noticeable that undercapitalized expectations. and Now, capital believe and carrier. selling to the both valuation and last under posture will owned we've increase this landscape, softening the markets months, disproportionately the we've in fears, to in for by more spurred headwinds current geopolitical the macroeconomic sellers few in seen concerns by over as with current marked volatility a

As do our deploy are call valued most, existing to a industrial M&A growth M&A an capital mentioned to a opportunities. I'd pursue focusing like the that providing experience clear we creation as defensible, to knowledge and expect targets calls, conclude on portfolio cycle meaningfully providing long-term of options facing to our competing specialized of our will the industrial this cash continue complement where preponderance although the continue And marketed operations like component our our with our see we important accretion. that opportunity opportunities an support M&A our spectrum consolidation review to of largely over source would of so previous to to strategy M&A materials value flow to remarks approach that, complement path appropriately sound And pipeline our and for committed shift disciplined to turn largely we tuck-in morning. Chris? Conditions niche, active we opportunity negotiated are free much overhauled for we the consider the questions. We of that your for conducive targeting comprised industry capital. is reemphasize With such full and to we'll more I'd as operator earnings and processes, markets to end into in our of long-term our that are prepared for our sub-verticals. our

Operator

looks [Operator sir. like Craig-Hallum. Ryan you, come question from will It our of Instructions] Sigdahl first Thank

Your is open. line

Ryan Sigdahl

morning, Good guys.

Jonathan Shepko

Ryan. Hey,

Ryan Sigdahl

Curious, a you truck bit the supply. talked little about

competitors? in getting hopefully those trucks is you half secondly, how supply do to how the your that second of feel second worsened this much OEMs to half, on the And relative like you the in going -- visibility have Daseke but Sounds your year? improve it's do then from

Jonathan Shepko

know doing can that the the I do have. want here. to listen, good that that appreciate they're like sound We equipment. to they mean partners ungrateful everything us we Yes, we get don't question. We -- partnerships we

received time tune and components We together Having the have in of it fact through. that, doesn't that, expected they're the are working like we that have on them, have and regular said real some with point. XX% would've things of the numbers and to that backlogs of change to this conversations that leading looping us the behind we to behind some updates at to these get -- this are things, the we almost we are

getting that, end one I I And the kind we that to and of larger deal players you there. through the I while would the are flow of are a treatment, but different in. that it other especially the say it's I or smaller are experiencing with, than probably so that ones obviously I compare I imply of any has large materially would family think of public lot guys, don't only -- when this receiving the is My we're things want but that that of when kind think preferential as know that out do the that front we challenges of not suspicion that don't on industry comes be us to majority the owned. we're

them we're think us. I as OEMs to the quickly as get things getting can

don't the something think public I in it change and that us now. it doesn't all so And we're large we're but definitely our behind terms a right for competition headwind vis-à-vis battling is that fact players, of that

Jason Bates

Yes.

just Ryan ahead. sorry, -- of ahead. think go I Ryan, Go kind

Ryan Sigdahl

drive other the and same was -- remind you is follow. in of in of players just or a then different trailers is allocations how for hall can it a to all ask issues? are parts just of it kinds having the tractors you equipment type because and heavy us Is changeable it or to I piece of where But aware going here public the trucking? you're of? lot No, are be just a And

Jonathan Shepko

this directly most tractors feedback It's kind look, back them a mostly it's the anecdotally the it's we're suggest just their there. whether goes the suppliers, of one our mostly to which everything seems chip shortage just Tier -- reading, lot we the suppliers, from I of to X get, of or tractors, mean, of Ryan. And

some away quarter. pressures see the demand going by of this Some are next semis said they misalignments kind of There of who debate. to of a couple of kind were and the we reported equalizing starting quarter those supply this

we at with, kind think with that So we're generally the year, we'll feedback plus to work the that confident target. of track that by couple the OEMs from on relative pretty if end getting our of the you we're I look be

Our we expected onset target the fleet the of size, had year.

as impacts kind we on the those of get one kind around, kind those time, it old those, them can them If kind how difficult kind a road. drivers get we there. look of on, that, get glut road of of get turn we loaded those Now truck is quickly get the the out we're that of at replacing, back process -- get that with to of them the ready, decals get get back them seated, it's

could see this year, we XXX the we'll again, So quarter. but year, we we fared think higher company the of inefficiencies well there, there generally be by some on the trucks, light but trucks, back end trucks, into track we margin look, going be company very feel

Ryan Sigdahl

you Then ahead. yes, -- mentioned go

Rick Williams

sorry, Yes, Ryan.

well, There too it hit the tractor on some The assets across platforms on aren't end we're side. out Jonathan's to asked transferability. I little right, transferability of are you you point side, the didn’t fueling and which the transferable behind Before insurance, as side, truck trailers some the those more that -- of markets. the to I about more side. there which of talk different question we on we well, behind we're trailer want -- on The happy a and kind different -- trailers is are about.

think then ahead. I just let know right and but make I it you I'll where FYI, the hit you're to I ask way, just question going. sure as Go the an So

Ryan Sigdahl

could for You own and apologize off. you for your question guys me ask cutting

can you little can more a on on You I elaborate favorable there? believe then quarter. and -- mentioned you unusual it. claims bit -- don't you you what Can quantified say

Rick Williams

Yes.

nature. sensitive claims in So obviously are

And don't talk about want to we go want to inherently into claims the develop We details. so overtime. specifics

out have we it couple when increases. this going claims had and because the business, which we this note led little see don't you'll year, period same development so will year that, first the of don't reserve we headwind. of of that we mean to and half of back in expect prior in that add But part I you're tonight that, in over is right. of you, itself roughly $X.X as year-over-year a the unusual. incremental to that a claims I million comes tell in here developed and claims queue claims it of insurance to And level that view do a occur. Again, And

there mean couldn't an that doesn't with creation risk tomorrow. always changes some Now right. we on it with of accident that wood, last happen. Heaven the forbid, of knocking happens I'm the but be the made year that But can that you self-retention retention like little taking more inherently higher introduce develop slightly kind working actuaries level group and streamline of a kind of our and help third-party that a with that that, to process. bit We're volatility. with accruals to IBNR things

what But experience this don't we future. that So the transpired the here same level in quarter. volatility of is

that quarter, view future would But in do level expect We and did highlight want we do not the as of claims that we in same headwind of abnormal. And be something a we that unusual. periods. kind as development to so deem that to

Ryan Sigdahl

were expecting, a you how much in basis? year-over-year on $X.X that there's what year-over-year, then QX? presume was I full your assumptions previous incremental? probably in And increase And was recognized but million some

Jonathan Shepko

anticipating we year, for of compares Yes, recognized perspective. were we more so budgetary to a would that But millions what I you change. I'll were dollars millions to number you want in that it numbers. tell the exact budgeting that, year-over-year than and if how me tell I it's was you, from give is second don't asked what is the And the quarter.

would we April Now, through if you're I and asking I me based on where I expected working things like these that, were timeframe claims was of told the you, and where sitting in kind something. mediations have

want but several a QX the quite what million we not that that imply headwind to QX, dollars back early full in, this been were timeframe, million, vis-à-vis So I vis-à-vis see but coming $X didn't of have would budget, don't we planning.

Ryan Sigdahl

achieved Good, through than, or last earnings that? that? guess, puts on you've have guess on that reiterated I you million, by confidence, or out and one I the million laid you of mentioned talk annualized for XXXX how earlier $XX change $XX last the then any or improvement since And announced takes in me, much that

Jonathan Shepko

the various we will more really I get you very, in mean, big of little actually employees, that There's tell integrations, operating but along, everything further Ryan uplift, mentioned, like, income detail the these kind We're I very play. big a good to certainly human we underway and OpCo our still mean, change you'd lift a double we're and the kind platform, feel with is working first I Yes, component. of certainly stages, these it's some trying kind of would for we're as and phase of a lists really suspect, big provide as a here. platform about a as drivers kind customers, of of we quantum It's are right way big our management do big are duty the for non-driver exercise. our but component, OpCos social of

of So in costs kind of some particular associated it's look headwind, initiatives. indirect quarter, absolutely, more with kind absolutely those this my a opinion, of of

some corner phase this going of I very think year, are to real things some offset we think with But close we of the direct are as on fruits very see where we're going to a that if kind turning I actually and the number. progress. any next last the feel to we to going games close you to think, to mentioned the planned, we're first expect integrations, year. this to confident will, the start really see as I labor, kind we think of kind of very of And call, direct costs

tell that's you kind can I So today. of what

Ryan Sigdahl

luck Good Thanks. guys.

Jonathan Shepko

you. Thank

Jason Bates

Thanks, Ryan.

Operator

next please Thank you. moment question. One for our

of Jason will Our next Seidl come question Cowen. from

open. is Your line

Jason Seidl

Good operator. morning, Thanks, gentlemen.

Operator

Next of will Jason Seidl from Cowen. question come

open. is line Your

Jason Seidl

the focus If Thanks, things. operator. Good did morning, Flatbed just on little we bit of a gentlemen. side

You it quarters? have which the do why coming we has chart I one that that be is been to there in to you'll in shrunk that the the able guess the that the you guys the has here to I nice performance confident continue market that about evidence noticed outperformance quarters, outperform shrinking as great, have through question, remain but move and

Jason Bates

tack as Jonathan on that well. hit I'll so let Yes, and first

XXXX as a work the be So for and think Jason needed transformative for healthy here degree being first to been know, pieces there organization. about sure, well were I business, decisions XXXX, our I trying certain exiting that redeploying and assets. lot done and even tough highlight, early was say even of was in certain of there to most you And would customers that of made and of a we've

of some et outperformance pursue right. We that mix, was longer-term, to so, better partnerships, in margin shift the were electing cetera. just a we experienced strategic higher And

of normal fruit hanging to in move different 'XX, that if X path, Slide to flex progress The see, looking ability continue that shrink like point of we and our markets. see exists lower outperformance end we to there's our in the lower that higher is out or we when that ability the demand. higher as not we've look peers do that in but As ability lower, the on of from still though, in believe walking you that down expected. you you're assets transformation to margin at was quadrant, because customers, some And business a the that market shifting outperform that the gap 'XX, gap business QX where of right and you'll forward. away us to an QX different That of hand that between and shown just at even environment,

done so that. And we've

about it point yes. levels believe X,XXX we be we basis do that a will of outperformance level that to But to differential, so continue there. continue would prior quantum never expected be And that of

Jonathan Shepko

Yes, a chain, chart. to of that's of of also rate rate point it's change Jason just kind kind you, out to of a

we a in kind continue of month, more one of you're kind than are of we the So, prior as were kind other of you're higher we more specialized the other, to outperformance, outperform, incremental of gets because the lot on we said, kind kind watermark, But, harder, at index, efficient a kind think prior Jason peers difficult change comp. depending the of quarter it in I looking it or started more and with rate which index beat harder referencing. of as Flatbed the and to difficult,

Jason Seidl

I here why about a M&A. sense, Makes talk have some you little bit let's

that now? a any the of might so, like markets, till not targeting about you end more you a talked exposure exposure could or lot color of you're what us going give niche little sort sort that after have those end are markets of You

Jonathan Shepko

strategically to all of a really kind I those that kind and specialized largely leadership away think, kind to common market relevant to sub the margin mean specialized niche shift very you industry been They market of truck of industry from markets, attractive. out, trailer market. with verticals. situations, look actually were couple mindset, trailer in could the those equipment, credentials, economic is configurations, sprinkling last on a of end and identified I And that move required attributes. the and shift non-correlated referenced trailer markets And focused midway of focus plus a quarters, of the And but of driver specialized respective of end dozen look agnostic industry trailer shift markets, here backdrop. really kind being kind possess end verticals we nature where more Yes, macro most kind more this through end and it's end verticals, shift the they mean, that that really type year, position with because was I just really of we end lot really, centric, was build and a profile specialized the

at come markets, focus when a end that with of we market end support get relevant resource Daseke with And where want point what focusing getting within market, end in of it, those you right. be engage position grew we really of end said, is kind up look, strategically markets. here identifying that's player, all end kind that's majority comprise an so markets, good where we a we those to of when And the and to customers, you things those allocation,

the those will markets, that through Daseke's sciences of And actively a of lot we some those plan There today probably some some markets, like and are pharma, couple but just and life same I at pursue, those at new have markets outlined. that possesses end much of it end life. most attributes only level level that of non-industrial played facing a end end market

last are Right, we hazardous so acquisition first introduced material, did that that, historically we quarter, into things anything fleet. done the that with the hazardous waste like we And there our tanker. hadn't acquisition did tankers

So it's a an tanker. open but not trailer, deck

meaningful a given there us, as effectively been our and able commodity to and really trade thinking of scale, the out we're very able execute been foothold, space, that look So and haven't about of come kind is we've generating margins, there segment have of in scale better a a return kind in maintain to in profile, it on full that our position, demonstrate carriers across larger really that ability capital, for the cycle in flow market, looking have efficiently that they Flatbed our lens kind we're the number profitable, have environments. And Flatbed meaningful to better nature. higher little building performances markets. margin in It's cash be can half, end figure which a I think, that out, bit been those commodity free of its not path to most view for, that's generally kind people is of more

lot different that that. do right focus. game that's it's scale end than to a very more But on a way. continue and the specialized focus absorbing a one market very, requires That's we'll So scale,

and when you diversified trailer is Specialized Focusing as that a have that things business. line on things segment like do that, of the you can't like you this densification, get on much as pool

looking So between about answers that's if Specialized M&A, your thinking between that dichotomy we're and kind really Flatbed, of question. that at how

Jason Seidl

markets it in potentially No, sounds it like some color. It's out another the partner. does. of you helping terms great And getting are

Jonathan Shepko

Yes, absolutely.

Jason Seidl

potential somebody definitely in and the passed, infrastructure year? feedback from for coming XXXX? this think impacts later should was one. talking bill the to we last called what And about next they're that it turn from some of know And been today, One positive customers? I'll how year over earlier forward wanted to you've getting else, about maybe And

Jason Bates

has to been important been a are are this field truck on regular lot to No, of our and of some communication closely, understand what and the with teams capacity for coming lot pipeline Cat a constrained. as especially us be it's going our others. this kind in exactly And watching are and in we've down like call, the of their trying our strategic Rick larger about needs obviously for things very we've that customers, customers, and understand to COO talked what the

what our customers we're overuse to that about word, from trying are I are things our and hesitate so what yes, accordingly. plan And the and optimistic that kind something we're of on is it communication to we with in are cautiously seeing but constant hearing resource this customers.

you also I mean out at Now, the given on kind a little cautiously hand, what optimistic, look in but freaking say tractor especially terms the one bit of it might of demand, situation. when

there that the customers. in we that's best And quarter referenced so strategic, we to that by go year-over-year times, design, brokerage that's out want our XX%, and is to we've, our make be is and to heard and want sure partner strategic that several revenues intentional, XX% us you we capture were the up much why freight I can mean, as

when do and shift that it's can bill, that about so if slow we happening, if that we doesn't look and down, you keep which additional company with and freight like And but and running them that it when back to talk business things assets does, this when that infrastructure realized profitably capture moving. our especially

future. we're is this our out we that to brokerage path So obviously, infrastructure. going the strategic bill customers, as move us push an infrastructure to the continue help of down developing that going are to relationships into But support

Jason Seidl

as gentlemen. the for thanks color time always. and Appreciate Jason the And

Jason Bates

Thank you, Jason.

Operator

our Thank you. please One moment, question. for next

Stifel. of Subin Bert have we Next,

open. line Your is

Bert Subin

morning, Jonathan, Jason. Hey good

Jonathan Shepko

Good Bert. morning,

Bert Subin

like you you that really it But environment, pricing to X% perhaps looking help in that into more terms just of case? guidance, bearing power 'XX parse at likely good sequentially XX% together, trying and maybe we'd incremental look the sounds a can growth I moving brokerage. implies events if seem it in at, with XQ EBITDA be have brunt, I'm backdrop, that's trucks to would moderate, were sort inflationary margins like good demand not why of just us understand the shorts So and what

Jason Bates

Jonathan. ahead, go Yes,

Jonathan Shepko

specific of right of Jason Bert, kind dig think but let don't all -- the it, you shift and our business, profile focused into on think I'll of I look more of look, understand things, know of you think the I the at when margins, investors items, at that of line look, our Yes, I look I appreciate impact you're mix our some of margin to mean, also I those you're on running when certainly you're kind our to margin down opposed the it's company our what is peg XXX% XXX surcharge profile is revenue. some EBITDA brokering those trucks, as but revenues, peers to trucks, revenues. company your those seeing, XXX% of fleet truck that same fuel their X,XXX gross so a have And you're and those and or through trucks net you'll as impact, loads, big if

mentioned, some, noise able big further. us kind to dampen been nearly in that provide with not he got those I we you're guidance XXXX. of bit up some that million discussions probably I do unfavorable about drop tremendous got things Jason X then can claims X%, that are on speaking development number capacity getting have there, having Jason that mentioned types year, of comfortable Ryan I that had some depth So that look, X% bit a that EBITDA But into there. claims, right, you've got of we're a rates discussions, having demand. we Cat, customers I the this been mean, there's just would little they're take and with ago there's think when margin mean, not thing But that, was seeing you've you you've of hey, think the a can is

look seven pull to inflection, with was noteworthy. quarters demand pent-up in that kind think I And look, quarter, seemed rate last COVID bit par increases lag the of about to excited kept consistent a our little with complex lot that van the of, But through we're improvements easing rates see with And bit. very lagged at our holding of to a there, manufacturing, rate be kind contrast kind a think, we demand mean, a more supply PMI our an a have be you here. there's when is industrial didn't lot press who of we very, inflection consecutive the improved, our demand, with through costs there's I the rate this, the issues continuing saw dry of lot that help there's of slightly end are together in kind chain finally yesterday going look or but customers to little the of of date depth brethren markets, had well, of we've So out to this seen. prospect construction, inflationary

basis”, of items an to profile, So do some kind on unusual add we'd quarter Jason? this be the if think a noise little but more defend there were able “normalized we to the margin picture. don't bit of that I know

Jason Bates

and key through I people of listen, about of you internally, got job hitting to lot million when there. margin June fuel shifts revenue, change. there, just that's kind did fuel on a that a does, we margin I were revenues this because it $XXX mean, especially year not $XX your great and reiterate surcharges, And last year. they're our you've metrics, of it no, comments I metrics, obviously. there's a of about to look XX. percentage things the we make think surcharge I it lot the been the does at dramatic And we've Yes, skew million a fuel mean, a want net talking did points

reimbursements, operators through also it. So also fuel between a expense owner you expense fuel by saw rise fuel and commensurate roughly rise flow

it. pay, some But good increases. if unusual there's for of doing the issue we're kind generating really that alluded structural the is job as inflationary double-digit Jonathan outside some what our piece a specifically that look delays like helping I of and realized at in rates that want means are headwinds. few we mean, of claims this to think think almost with people of and to, give of the insurance of driver a regard capabilities, just of for at to of because kind I some you I when absent you data margin don't big what overcome that, that year, of you a percent So neutralize that's the points, terms kind like Otherwise, equipment. a that on to quick looking things

you're finally, looking fuel, and and we insurance for salaries And when XX%, look at you lot at claims being talked already a look XX%, wages you're about professionals, then looking that often non-driving up talked you right. And double-digit percent XX%, already. mid-single-digits. we've maintenance, increases, at the almost If as at then about

some point, demand things. your flow good strong. should But good we've excited the unusual I we're And the of the we the some 'XX, and the having will about experiencing the year is there's So really already feel about absent back demand takeaway good the what about items on of is, look think through like. about been And pull XXXX. delays lot We conversations feel of and commensurate really equipment of looking on the again, to through. kind be business, just in we're back insurance, customers into early rates even half those with a of

the I takes yes, we puts So some pretty discussed. of about just that think good and we that. Absent feel

Bert Subin

Maybe Jon. go follow-up, Yes, but. a ahead

Jonathan Shepko

underlying as don't they do of carriers, we a some this kind extent see these environment, the things. a on being of rates, of being don't stark, look, our lot motor our We Yes, don't this, No, we of the of have this think absorb mentioned peers they and the the disproportionately other in a no, isolated carrier have was that's fact movement to number mean mean is they're I scale, of there hammered kind kind of look, authority I that, the I about in think they're kind carrier, there was have you mentioned, the stark smaller non-renewals. I of demand. the think, too. sorry micro script, by And breadth a pressure Bert. that function to

this historically into think environment carriers, at this carriers, Xx Xx marginal you've to would they this, keep paycheck, much, of these paycheck And point. what been, guys crash is to you're hopped a industry to used they have you're And much to losing, losing that these what struggling of look, kind into market just where I at your are have are, were that some wave they kind guys they're survive, living time prices they to a going basis, really carriers higher got lower, afloat. came So, rate. truck dropping that much and that's so smaller a lot of capacity their that, business they're in and is

I very so And I we side side, think, is demand to term, again, capacity. demand the absolutely spoke in And lose the there. lot Jason, could near more the a

I continue to rates to think prop it's for going foreseeable I So the think future.

Bert Subin

so times for have demand a to obviously, My you you that for like not the both rough do the of pass books the your contracted I now be, you inflation. you. strong. second thanks business? would answer have would higher of rates Yes, would imagine to like, Because it that That's up on business Is of highlight is follow half? for maybe guys Can that at the opportunity? business noted an you seems to couple percentage

Jason Bates

at looking make Listen, that's we're And about has have to is is. the in for employees, our driving listen, years, way what absolutely to unique rates we're just kind on past. be, in for we what back market of industry we're the price. very And talked at this hard outside our about those and And you shareholders, partners. we the team XX change, customers. same that care locking is bad you to in, of fundamentals and having that, that But plus with not what in not been this the Daseke, take our and got it well. been try times, to and go conversations It's duration. revisit we're as I've have of time, lot going conversations able the on A so it is this. when shift Yes, to to the our we've and sure

Otherwise, partners And customer. But can't to not pay having. situations. I to that as with are percentage of care customers going increases. drivers, of need take advantage alluded just we're And got not got other terms But we've regard of in the of mean, we've several drivers. here double-digit line we that take I and to up and be items taking right. the again, We servicing just so are trying we're conversations those to, issues care

those we're as well taking having to manage of the and So been situation. in more far, and dialogues we've no right But I of so advantage there's partnership, way, and that customers, gone with right we're question about it are the dialogues think a opposed trying that the those received, it's way. to

Bert Subin

Okay, little that makes early peers sense. sort it terms peak for on back. of and of industrial thought of earnings. several a the I'll your tends cycle pass through 'XX of one have alluded you've analysis in business, I imagine drive to I'll I a your trough know more, that and bit be sort ask of quantified lag. to a you've you've, Jason, imagine already thoughts. just to I

further assumption side, historically from Can provide applicable? up savings. sounds the to have a talked the the terms any OR, what infrastructure mean trough peak industrial you've you 'XX can could metric about any that provide you trough on in and band look make of doesn't end maybe trough around in ultimately to cost to of can But or up think color pretty know business? 'XX most thoughts times were perhaps that So we what It is you like the being year, of your have for were prolong cycle. a if And to EBITDA here would you XX then whatever good narrow. bad I like you that it million being

Jason Bates

Yes, I'll trapeze tiptoe here. to this, try this

of do last right to kind using have of analysis We XX a data the your back guidance. was at over identified give in between talked year, during air to XX as XX here I that lot big, or of And, years, that of they here past, three and and a gone And experienced four We've one nature understand quotes, think months, the 'XX. I XX done type like recessionary try kind we've now. a the the haven't that biggest I'm Typically, you an we've any and our it's if that recover that you last I'll few months. timeframe. environments points. we've the was 'XX intent But kind XX you're and kind of the And back that two peak given of question, organization end you, lot the and and look plus peak rate by And around to you trough it's XX%. of but to those inflection rate we've again. during is, right that fully times cycle, month but experienced or

is So months is, one trough literally and the the months. recession times, smaller slowdowns on or the XX XX biggest peak to talking we're peak on

this Or as 'XX. year. a if is more sensitivity? half can probably That do tell trough with looking work? be race? trucks? don't going are the days need into XXXX we've when Or lot a sensitivity not can And we so like. is mean? And lot window, going that. back 'XX work to modeling we do is, What the this that with look if around would we've So a we know we run would jump say, what Can what things lot your we I we've wants team, sensitivity? we What done, done to out side? do with you more this cost here got of there's and exactly point, And to certain of to done And to we my And on on what we? it happen? SB&A this burn Hey, But the it's what get been kind would of of so we that run of

or potentially. couple things the on coming some And Yeah, Will pretty alluded we I in lost we the still talk aren't and in decent the the that down messaging, down we're want that self-help the to start about or then that that just just we're still 'XX? to, with going get especially XX%, But ebb market. X%, and At I that's, pipeline. as X% Daseke the of was XX%. have about, Now some alluded infrastructure we things market you other we here, with you think down slowing and know don't don't question point? to if bill goes I opportunity some going down see flow when demand, these go a, And to previous

through portfolio, We was we when have the negative when when we of a to, to of strong, and strategic do diverse, we minimize And or lot market COVID. in assets Jonathan like and can unique, our at did some a look of self-help in downturn. that preserve you and the then when opportunities of There's different Like M&A margin of can when out alluded the happened, things like during shift did did wind verticals here. or we kind things lot it slowed boom impacts energy we down, a construction [indiscernible]. that

So I slow better be anything bit start down that's we I'm can assuming expectations would our things than haven't And to given XXXX definitive, Jonathan, on that right that you they that? pretty internal guidance now tell for that And a comfortable definitive to But XXXX. we're little in not that. XXXX. is is what you going give to stating XXXX. will add

Jonathan Shepko

spot the to volatility XX% I or on And the depending again, I is contract. businesses have XX% kind the -- our of more our some same Yes, at so XX%, XX% structure of the XX% We like things as is mean, oriented yes, don't variable. cost carriers. of quarters,

So we've got pull a lot to of, we've to a margins. defend of of got levers lot kind

Bert Subin

helpful. both. Thank Very you

Jonathan Shepko

Thank you.

Jason Bates

Bert. you, Thank

Operator

you. question. for our Thank moment next One

question call next will Capital Northland Our of Gibas from Markets. Greg

is Your line open.

Greg Gibas

shift business good of Do asset Thanks have from the the how you for the more margin idea the impact an was quarter? model in much a questions. light Hey, to morning. taking there of

Jonathan Shepko

Yes, we do.

ratio. we'll high a low five, that operating that, as it in that going the as you to typically And in is impact. I were way business So, business at is, basis trucking brokerage dilutive tell can seven, probably we did point definitely good you a you, is mid And mean, six, typically to of what XXX be look we I about it's run our can is I disclose XX%. our that, But tell When would up the mid much XXs. think to kind it be that differential. is XXs

on is absolutely return the is it Now, the you dilutive the so on to afford, can brokerage capital margins. but obviously better business, invested

some run looking you And you think your of answer model, and kind of it'll numbers the get I that those can for. you're through so

Greg Gibas

quarter, you premiums? leading in kind pay right of factor you've cost of Yes, the kind talked those sources kind of insurance being inflation kind about Great. it inflation? maintenance of of is sources and the what the And terms that's of this about Awesome. Or what business, costs your of driver to helpful. then leading in would as think

Jonathan Shepko

Yes, I mean, hit, you right.

I XX%, in they're and more in inside fact, embedded So some costs, almost at you like, to almost out, driver they're And you pay think and up double-digit. tire maintenance XX% of know, double-digit offs other closer of that, look than, even in these range. if ones,

because couldn't you you and fuel prior big actual some would as which yes, up developed not It's recur, is then is So, obviously, necessarily that of and big want claims that there's I materially, just up the I But surcharge we about the I inflationary, isn't we it's be which substantially. items had revenue that happen salaries there, had way premiums claims would we but one, I up inflationary would wages, that in the the, characterize we kind And expect also dramatically. develops, mean, clear, the fuel therefore there. being again say makes the to that non-driving but the there. the that And we talked not very then were insurance, future. took something up, not something something We premium. mid-single-digits. reserves to claims think that took, last couple that certain a reserves referenced we you've of got whole were

that. on cautious have just be So we to

Greg Gibas

one, guess, impact on second and your half the in I that this I How an operational back to comments office the year? much just on of to follow-up do expect you helpful. maybe Great, of improvements. of last realize wanted

Jason Bates

is, this Greg, games kind costs party that Yes, what now year. any I the offset we're, will right of is think line

about of that we where moving call. as again, suspect, the on really, start really, think think our a gains initiatives. about should I It's you initial to Daseke like, phased very lot I there's those to once this just still integrations, of of lot is, of those there's, really kind this will a excited I you a the each pieces, look bit a feels of a is bit as be think we're optimistic I headwind and last can what turning There's are a done. point result mean, those, like, as of a headwind of of year, some And really in each year. continue and kind XXXX again, of seeing going team what think those mentioned be we make to net-net. about But

Greg Gibas

Thank Okay, you. great.

Jason Bates

Sure. Thank you.

Operator

session I Shepko you. that to Thank remarks. closing today's Jonathan now And the ends to for back turn would Q&A conference conference, the like for

Jonathan Shepko

today like time upon translating more look and forward consistent the I'd for to our your thank and our opportunities growth Chris. to generated continuing and market us returns we We you, for Thank alongside to the profitable transformation. for today. commitment you into you. Thank confidence stakeholders. your look facing We thank broader everyone forward we've momentum

Jason Bates

everyone. Thanks,

Operator

all Thank This you conclude conference call. today's for participating.

and You may disconnect have pleasant now a day.

Daseke (DSKE) 2 Aug 222022 Q2 Earnings call transcript