Daseke sees smaller loss in fourth quarter, restructuring ‘on schedule’

Daseke flatbed on highway

The nation’s largest flatbed carrier, Daseke Inc. (NASDAQ: DSKE), announced preliminary results for fourth-quarter and full-year 2019.

The company reported that it expects fourth-quarter revenue of $400 million to $403 million compared to the current consensus estimate of $389 million. The full-year revenue expectation remains within the company’s previous forecast of $1.7 billion to $1.75 billion.

Further, the company now expects a fourth-quarter net loss of only $6 million to $2 million, a loss of roughly $0.09 to $0.03 per share, significantly lower than the current consensus estimate calling for a $0.23 per share loss.

“As a result of the decisive actions we took across our organization in the second half of the year, coupled with solid execution during the seasonally slower fourth quarter, we expect to achieve fourth-quarter performance ahead of our prior expectations and annual results at the high end of our previous outlook,” said Chris Easter, the chief operating officer who has served as interim chief executive officer since founder and CEO Don Daseke retired in August.

The company provided an update to its operational and cost improvement plans in the release as well.

The plan was originally estimated to result in $20 million to $25 million in incremental operating income by fiscal 2021. However, shortly after the founder retired, Easter upgraded the plan to include $30 million in annual cost savings and advanced the project’s date to achieve an annual run rate at this mark by the close of first quarter 2020.

In the press release, Daseke reported that the company “remains on schedule and expects to complete that work as planned and on time.”

Part of the corporate overhaul included the consolidation of three of the company’s 16 separately operated units. Those efforts alone were expected to generate $19 million in annual savings. The remainder is to be generated from business improvement plans ($7 million) and corporate restructuring ($4 million).

“We have largely completed integrations of three of our operating units, which allows us to capture synergistic value in our consolidated performance. In addition, we are executing against our business improvement plans across our portfolio of operating units and recently completed our initial corporate restructuring efforts, all of which will drive greater operating efficiency across our company in fiscal 2020,” continued Easter.

The press release stated that this is the first phase of the company’s restructuring efforts, with the likelihood of a second round to follow at a later date.

“We have mobilized our team with a focus on continuous improvement to drive earnings performance. We expect to identify incremental cost savings and opportunities for operating income improvement and look forward to updating shareholders on our new efforts throughout fiscal 2020,” concluded Easter.

Daseke continues to integrate its operations after years of accelerated growth through tuck-in acquisitions. The company has completed 19 acquisitions, growing its fleet to more than 6,000 tractors and 13,000 flatbed trailers since its beginning in 2009, when it started with only 60 trucks. Over the same time frame, the company’s revenue has grown from $30 million to likely more than $1.7 billion in 2019 when the books are finally closed.

In the third quarter of 2019, the company posted a net loss of $273 million, $307 million related to impairment charges as valuations of past acquisitions have declined in large part due to declines in used truck prices.

Daseke’s balance sheet remains highly leveraged with net debt of more than $620 million, a little more than 3.5x the company’s 2019 earnings before interest, taxes, depreciation and amortization (EBITDA).

The company’s last announced plans were to have a permanent CEO in place by the close of first-quarter 2019.

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