Daseke Inc. (NASDAQ: DSKE) announced progress on a few key financial metrics. The company reported that it expects to be operating and free cash flow-positive and to “further strengthen” its liquidity position during the second quarter.
In a June 18 press release, the nation’s largest flatbed carrier reported volumes have improved in five of the last six weeks, rebounding from April lows. The information provided in the release was an update as of June 1.
“As the leader in the North American flatbed and specialized transportation market, Daseke continues to move the industrial economy as many of the companies in the end markets we serve are essential service providers and critical components to the economy,” said Daseke CEO Chris Easter.
The release credited the company’s ongoing restructuring, which is designed to improve operating income by $45 million annually, as a key catalyst for the improvement. The plan includes reducing tractors, trailers and headcount, as well as the consolidation of separately operated flatbed companies that Daseke had acquired in recent years.
On its first quarter earnings call, management said that the first phase of the restructuring was complete and should account for $30 million of the turnaround.
Through the first two months of the second quarter, Daseke reported more than $220 million of available liquidity – $140 million in cash and equivalents and approximately $80 million of capacity available on its revolver. At the close of the first quarter, Daseke reported total liquidity of a little more than $190 million and a cash position of less than $110 million.
Easter continued, “the proactive efforts we’ve taken over the last year to streamline our operations and improve our business flexibility have helped Daseke generate positive free cash flow and drive further operational and cost efficiencies, despite the headwinds to volumes related to the pandemic during the quarter.”
Daseke also reported that it has made “substantial progress on the strategic divestiture of its Aveda assets and expects to conclude the process by the end of the third quarter 2020.”
Aveda Transportation and Energy Services is primarily an oil rig transportation company. After the divestiture, Daseke will have less than 2% exposure to the oil and gas end markets, which remain under pressure as depressed prices have negatively impacted the need for exploration, development and production.
Oil and gas end markets accounted for 13% of Daseke’s 2019 revenue.
Today’s update is the kind of news Daseke was hoping to deliver to the market and credit rating agencies, one of which recently confirmed the company’s previously lowered credit ratings.
The improved financial trends at Daseke likely have more to do with internal initiatives than broadly firming fundamentals in the flatbed market as a whole. The Flatbed Outbound Tender Reject Index (SONAR: FOTRI.USA), a measure of the willingness on the part of carriers to accept loads tendered under contract and a proxy for supply and demand, remains subdued compared to 2019 levels. Green shoots in the automotive and housing sectors are spurring a rebound, but off of very low levels, as the already struggling industrial patch pre-COVID tries to shake the pandemic hangover.
No update was provided on the company’s key earnings metric, earnings before interest, taxes, depreciation and amortization (EBITDA).
Shares of DSKE up more than 2% in early trading.
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