Daseke Reports Mixed Results in Second Quarter

Bulldog Hiway Express trucks on a lot in Charleston, S.C. The company is a subsidiary of Daseke Inc. (John Sommers II for Transport Topics)

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Daseke Inc. saw a decline in earnings despite revenue gains during the second quarter of 2022, the company reported Aug. 2.

The Addison, Texas-based flatbed and specialized transportation carrier posted net income of $17.7 million, or 24 cents per diluted share, for the three months ending June 30. That compared with $35.3 million, or 49 cents, during the same time the previous year. Total revenue increased 19.1% to $481.3 million from $404 million.

“Daseke delivered another solid quarter of operational performance as demand across most of our key industrial end markets remain strong,” Daseke CEO Jonathan Shepko said during a conference call with investors. “Disruptions in the global supply chain continue to impact the equipment market, perpetuating the supply and demand imbalance.”



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Shepko added that this supply and demand imbalance coupled with strong demand has supported a healthy freight environment. But he noted that these disruptions also have created challenges to productivity with new truck orders remaining unfilled.

“Daseke continues to leverage our asset-light fleet model to adapt to this unprecedented environment,” Shepko said. “We met strong demand for capacity, maintaining our substantial freight capture despite these equipment delays. While continued emphasis on asset-light capabilities will likely be necessary to ensure the continued servicing of our customers, we remain poised to supplant this capacity with higher-margin company-owned equipment as new truck deliveries are made across the second half of the year.”

The results were mixed in terms of expectations on Wall Street. Analysts were looking for 38 cents per share and quarterly revenue of $437.8 million, according to Zacks Consensus Estimate.

 

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Daseke attributed the year-over-year revenue increase primarily to growth in its brokerage service offering and a sustained strong-rate environment. The company noted that its flexible business model to capture revenue through its asset-light network was more than enough to offset a decrease in total miles.

Net income decreased year-over-year largely because of a decrease in operating income and the gain recognized in the year-ago quarter associated with the change in the fair value of warrant liability. Operating income decreased 27.6% to $32.8 million from $45.3 million in the year-ago quarter.

Daseke has been undergoing transformational initiatives to position itself to perform well across economic cycles. The company expects to continue its strategic shift of allocating resources in support of end-market prioritization.

“We faced myriad headwinds in the last several months, each pressuring our margin profile and bottom line growth,” Shepko said, “Our ability to perform well in spite of these challenges, whether referencing EPS return on equity or operating income as a proxy for success, is a testament to the fundamental shift in the way we think about our business, the way we prioritize initiatives and the way we measure success.”

Shepko

Shepko acknowledged that there is still substantial work to be done over the next several quarters to reposition the business as part of the transformation plan. He is aiming for an average operating ratio of 90 across market cycles. But he is optimistic the company is well positioned to be nimble and opportunistic irrespective of the prevailing macroeconomic backdrop.

“I’d like to acknowledge continued progress on the transformational initiatives we announced last quarter,” Shepko said. “As we continue to consolidate our operations and move to a more harmonized platform, our ability to strategically deploy resources and drive further efficiencies through cross-functional coordination within our operations will be substantial, creating avenues for even further growth and optimization in the future.”

The specialized solutions segment reported revenue increased 18.8% to $268.6 million from $226.1 million. Income from operations decreased 21.7% to $22.7 million from $29 million. The report noted that the segment benefited from a healthy freight rate environment. This was especially evident in high-security cargo, construction and manufacturing. These end markets were enough to offset declines in wind-energy revenues. The segment includes operations for company freight, owner-operator freight, brokerage and logistics.

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Revenue year-over-year:

• Company freight increased 7.8% to $127.5 million from $118.3 million.

• Owner-operator freight increased 18.4% to $48.2 million from $40.7 million.

• Brokerage increased 6.5% to $44.2 million from $41.5 million.

• Logistics increased 8.7% to $12.9 million from $9.3 million.

The flatbed solutions segment reported revenue increased 19.4% to $216 million from $180.9 million the prior year. Income from operations increased 7.4% to $24.6 million from $22.9 million. The segment benefited from continued strength in demand across construction, steel and manufacturing which contributed to a strong rate environment. The report noted the brokerage network and flexible business model positioned the segment to drive revenue growth despite a year-over-year decrease in fleet size and total miles. The segment also includes operations for company freight, owner-operator freight, brokerage and logistics.

Revenue year-over-year:

• Company freight decreased 10.1% to $42.9 million from $ 47.7 million.

• Owner-operator freight increased 1.5% to $90.2 million from $88.9 million.

• Brokerage increased 88.1% to $47.6 million from $25.3 million.

• Logistics decreased 15.4% to $1.1 million from $1.3 million.

Daseke ranks No. 31 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

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