The largest flatbed, specialized transportation and logistics solutions company in North America, Daseke, Inc. (NASDAQ: DSKE), reported first quarter 2019 adjusted earnings per share of $0.03, compared to the consensus estimate of a loss of $0.09 per share.
Management held a conference call to discuss these results with analysts and the media. On the call, management said that they are “very comfortable” with their previously issued guidance. DSKE’s 2019 guidance calls for year-over-year revenue growth of 15 percent to a range of $1.8 billion to $1.9 billion and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) growth of 17 percent to a range of $200 million to $210 million.
Management said that they don’t see any signs of a recession in the industrial markets or from their customers. They reiterated their expectation for a blended rate increase of 2.5 percent year-over-year and noted particular strength in their wind energy customer portfolio. Further, they believe that driver pay expenses won’t accelerate like they did in 2018. The company has seen driver turnover slow and feels like last year’s pay increase is helping with retention. Additionally, management said that their brokerage business is providing the asset-light growth they had desired and it serves as a means of improving their own equipment utilization. They expect to see solid growth from this division because they feel well-positioned as the only industrial flatbed broker with scale in the space.
Management said that increasing their business model to favor asset-light operations will produce some EBITDA margin headwinds, but it will provide the company with better cash flow generation and allow them to de-lever the balance sheet. The last 12 months’ acquisition adjusted revenue and EBITDA have grown at 12 percent year-over-year. The company said that its debt leverage as compared to EBITDA is expected to be below 3x by the end of 2019. (DSKE uses pro-forma forward looking 12 months’ EBITDA projections on its recent acquisitions, versus realized 12 months’ trailing EBITDA, for this calculation.) Management said that they will continue to pursue acquisitions if the right deal comes along, but recent failures in the flatbed space aren’t making them pursue acquisitions any differently than they have in the past.
Revenue increased 32 percent year-over-year to $433 million, up 7 percent on an adjusted acquisition basis. Adjusted earnings before EBITDA was $43.8 million, a 24 percent increase. Acquisition-adjusted EBITDA was 5 percent higher in the period.
Specialized Solutions revenue increased 46 percent year-over-year to $269.7 million. Revenue per tractor increased 13 percent to $60,000, while rate per mile increased 35 percent to $3.61. Adjusted operating ratio (OR) was 93.8 percent for the division, a 60 basis point improvement year-over-year.
Flatbed Solutions revenue increased 16 percent year-over-year to $167.9 million as revenue per tractor increased 3 percent to $41,600, while rate per mile increased 8 percent to $1.96. Adjusted OR was 96.7 percent for the division, 210 basis points worse year-over-year.