Management from flatbed truckload provider Daseke told analysts on its first-quarter call Tuesday that demand continues to “outweigh available capacity.” The company reiterated its full-year 2022 guidance, indicating the number is more likely to move higher than lower.
CFO Jason Bates said there really isn’t any historical correlation between Daseke’s “contractually based, industrial-oriented business” and that of the dry van spot market. He said nothing in the company’s data shows that Daseke’s core business either lags or leads dry van freight fundamentals.
Daseke’s (NASDAQ: DSKE) full-year 2022 guidance calls for revenue growth in the 4% to 7% range and adjusted earnings before interest, taxes, depreciation and amortization to step 5% to 10% higher. The guide assumes mid-single-digit rate increases.
“Candidly … we feel very comfortable with that guide,” Bates commented. He added that while Daseke is not “formally taking numbers up at this juncture … you may hear something different from us here at the end of the second quarter.
“April was strong, rates were strong, demand was strong,” Bates continued. He said feedback from recent canvassing of its separate operating companies was unanimous: Fleet managers “could use some more trucks.”
Looking to 2023, management said it has identified another $20 million to $25 million in incremental earnings from both operational and revenue opportunities. It highlighted that a 25-basis-point increase in share in the markets it currently serves would equate to another $20 million in EBITDA. That number is not factored into current expectations.
Q1 highlights and recent acquisition
Daseke reported first-quarter adjusted earnings per share of 24 cents, which was double the consensus estimate and six times ahead of the year-ago result.
Consolidated revenue increased 26% year-over-year to $421 million even as the company had 315 fewer tractors in service on average during the period. An increase in Department of Defense high-security cargo provided a tailwind in the quarter.
Consolidated brokerage revenue was up 61% year-over-year.
Rates per mile in both Daseke’s specialized freight segment, which moves project-type freight, and its general flatbed unit increased by more than 20% year-over-year. The higher rates led to 230 bps of improvement in operating ratio at the specialized unit (91.2%) and 80 bps in flatbed (91.4%).
Management announced that in early March it made a small tuck-in acquisition of a fleet that hauls hazardous materials in the Northeast. The fleet was acquired for $19.3 million and is expected to generate $6 million in adjusted EBITDA following integration and the realization of other synergies. The deal price is roughly 1x revenue for the entity operating at a 32% EBITDA margin. The transaction was immediately accretive to earnings.
Daseke had $154 million in cash and $277 million in total liquidity at the end of the quarter. Net debt of $433 million stood at 1.8x the 2022 adjusted EBITDA forecast.
Cash capital expenditures were delayed by $18.8 million in the quarter due to production delays at the original equipment manufacturers. Net capex guidance was reduced to a range of $145 million to $155 million in 2022 due to the delivery headwinds, down 10% from the initial guide.
A recent internal stress test of the company revealed it would still be able to generate positive free cash flow, which it defines as adjusted EBITDA less interest, taxes, dividends and net cash capex, if a 2008-type event occurred.
There was no mention on the call of recent investor activism.
In April, an investor penned an open letter calling on the company to repurchase stock given its decline in value. The letter said that shares of Daseke were unfairly lumped into a broader sell-off of dry van TL stocks, which were being pressured by negative spot market data points.
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