For many years, flatbed and specialized carriers looking to sell hoped that Daseke (NASDAQ: DSKE) would come calling. The Addison, Texas-based company grew quickly from its founding in 2009 by Don Daseke. Over a 10-year period, Daseke grew from $30 million in revenue to $1.6 billion by 2018, mostly through acquisitions.
Daseke is now made up of 13 operating companies, including well-respected brands Boyd Brothers Transportation, Bulldog Hiway Express, Steelman Transportation and Central Oregon Truck Company. Those acquisitions helped the company to grow to over 6,000 tractors and 13,000 flatbed and specialized trailers under its control.
Today, the company known for its rapid growth has embarked on another journey – a transformation being led not by its namesake but by Chris Easter.
“It’s been very rewarding,” Easter, currently the full-time chief operating officer and interim chief executive officer, told FreightWaves in an exclusive interview. “It is my belief that the future of Daseke is stronger than ever. It’s exciting and I think we’ve got a team that is highly energized and excited to move forward.”
Easter took over for Don Daseke when the founder unexpectedly retired on Aug. 15. The stock price was at $1.73 on that day, down from its all-time high of $14.29 on Jan. 8, 2018. The price would drop to $1.55 10 days later but has since rebounded slightly to $2.65 per share as of Nov. 22.
Shareholders had grown weary of the company’s expansion that grew revenues but didn’t seem to be generating the efficiencies of scale they were looking for. Earlier this year, Daseke started a transformation of its business, hoping to find those efficiencies that have eluded the company to date.
Begun under Don Daseke, that transformation is now being led by Easter until a permanent CEO is named. Easter told FreightWaves the board of directors hopes to have a permanent replacement by the end of the first quarter. Easter is among the finalists and is looked upon favorably by many analysts.
“The Daseke story has gone from one of a high-risk roll-up that was poorly managed to an operational turnaround with some integration of companies and functions ahead,” wrote a Stifel research note released on Nov. 21. “While it’s too early to tell how well this team will execute, we applaud the company’s ‘cleaning house’ to signal their seriousness of becoming better.”
Easter, who joined the company in January as COO, said positive reaction from the investment community is important, but it’s more important to ensure Daseke is a strong company going forward.
“We knew [the transformation] was the right thing, so to a certain extent, it does reinforce the message you are hearing from analysts and shareholders because we do get that feedback,” he said. “[But] we are doing it because it makes sense for the business and believe it will drive profits in the future.”
The Stifel note went on to say that Daseke has “significant upside” that “should begin to attract investors back to the stock with demonstration of progress over the next several quarters.”
In its 2019 third-quarter earnings statement released Nov. 12, Daseke posted a net loss of $273 million, stemming from $307 million in impairment charges as valuations of past acquisitions have declined primarily due to the recent decline in used truck prices. Also, the company recorded $14 million in restructuring costs related to the company’s operational reorganization efforts.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $43 million, down 18% year-over-year. Excluding the restructuring charges, the company cited lower freight rates and higher driver pay as the reasons for the weaker results.
The transformation has included new leadership team members and the addition of three new board members that are operationally focused. While the addition of Ena Williams, Chuck Serianni and Kim Warmbier this spring grew the board to 11 members, Daseke has since cut it to just eight directors. That board is now led by Brian Bonner, who took over as executive chairman following Don Daseke’s retirement. Don Daseke has remained as chairman emeritus.
In addition, Daseke has created a Leadership Council comprised of a few of the operating companies’ CEOs. “The Leadership Council is a fundamental piece of moving forward in how we will transform,” Easter said.
Phil Byrd, president and CEO of Bulldog Hiway Express, leads the Leadership Council, which has been tasked with helping vet and spread best practices through the various operating companies.
The company’s operational and cost improvement plan is expected to result in $30 million in annual cost savings, starting at the end of the first quarter of fiscal 2020. The plan includes $19 million from operational integrations, $7 million from business improvement plans and $4 million from corporate restructuring.
One of the issues that has plagued Daseke is the unique focus of the many brands under its umbrella. That has made it difficult to drive more integrations. Three of the 19 companies Daseke has acquired over time have been integrated, leaving 13 current operating companies.
“There certainly had been attempts to do degrees of integration and sharing of best practices and centralization of things like procurement efforts … but with limited success,” he said. “We’ve done a few things to set the table and move that forward at a rapid clip.”
The challenge, Easter noted, is that not all flatbed operations are the same, and each business – many of which were family-owned businesses with leaders who have remained with Daseke – remain experts in their respective niches. Combining them, he said, could be detrimental.
“I’ve been around other transportation rollups and a big difference for us is the degree of specialization,” Easter said. “Trying to integrate everyone into each other would put your values at risk … but that said, when you look at the integrations, the ones we did announce made sense.”
The operating company leaders have been supportive of the broader efforts, he added. “Our operating company leaders built their companies to make money and they like to win, and they see the actions we are taking to win.”
Easter said that the transformation is continuing and will continue, and his interim title is not a hindrance.
“So much of the immediate actions we are taking are so fundamental and so clear and obvious that I don’t know if it mattered who is sitting in the [CEO] chair,” he said. “I take the title seriously, and the fact that it is interim [just means] it is a period of time. Myself and my team are working to get these clear things done. I don’t see that limiting us.”
Easter did not provide a timeline for when the transformation would be complete but did say that acquisitions – the thing Daseke is most known for – are on hold.
“Our focus is absolutely on the transformation,” he said. “For any serious contemplation of acquisitions, you want to have a really well-run operation before you embark on that path, and that is where our focus is right now.”
Easter praised the company leadership and employees for their dedication and collaborative work efforts toward reimagining Daseke.
“The sequencing, the timing, the getting the team engaged – those are the challenges to get all those things together and sequence them properly,” he said. “We have absolutely some of the sharpest trucking leaders in the industry and we are leveraging them.
“The tremendous pride I have and the hard work and the efforts our team is engaged in right now is not easy,” Easter added. “The [vision of Daseke] is going to come to fruition and I think that is what is giving them the energy to help them [do the work]. I appreciate the energy and excitement.”