Daseke Reports Revenue, Earnings Drop in Q1
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Daseke Inc. experienced a year-over-year drop in revenue and earnings during the first quarter of 2023, the company reported May 9.
The Addison, Texas-based flatbed and specialized transportation carrier posted net income of $500,000, or a loss of 5 cents a diluted share, for the three months ending March 31. That compared with $13 million, 18 cents, during the same time the previous year.
Total revenue decreased 5% to $399.8 million from $421 million.
Daseke ranks No. 31 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
“At this point in this quarter’s reporting cycle, it’s likely no surprise to our listeners that our industry is facing weaker demand,” CEO Jonathan Shepko said during a call with investors. “Despite the strain these current challenges place on our sector’s fundamentals, I’d like to contextualize where we are at as a company. First, 2022 was a record year for Daseke. It was notably the third consecutive year of record financial performance for our company, demonstrating the initial success of our transformation efforts and better preparing us for this year’s challenges.”
Shepko pointed to capacity leaving the market, elevated net relocations, declining rates, interest rates and persistent inflationary pressures. But he also noted the fundamental performance of the company was solid despite these headwinds. He added this was demonstrated by an improving adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
“Despite a drastically different rate environment in this first quarter of 2023, we reported a favorable $46.8 million of adjusted EBITDA,” Shepko said. “In fact, this was the second-best adjusted EBITDA for a first quarter in our company’s history at only $2.8 million shy of our record achieved in the more frothy first quarter of 2022.”
One Daseke is a collective transformational work stream that brings together initiatives to improve the business. It was launched by the company to bring the different business operations together to be more efficient and profitable.
“One Daseke will leverage technology and facilitate the sharing of best practices while creating a more cost-efficient, durable business model,” Shepko said. “It’s a series of initiatives intended to unite the teams across the company around the culture of close coordination and continuous improvement.”
Shepko noted the company is currently in the process of re-sequencing these transformation initiatives to pull forward system deployments and extend out the operating subsidiary integrations, efficiency of the integration process and the traction of the post-integration efforts.
“Over the coming quarters, we continue to expect these initiatives will provide cumulative, incremental operating income in excess of $25 million with additional cost and revenue synergy opportunities still available thereafter as we focus on the optimization of our business,” Shepko said. “While we do expect our One Daseke efforts to partially offset the collective headwinds in 2023 and to contribute approximately $15 million in support of adjusted EBITDA.”
The results missed expectations on Wall Street. Analysts had been looking for 4 cents per share and quarterly revenue of $421.65 million, according to Zacks Consensus Estimate.
Specialized solutions revenue increased 1.8% to $230.7 million from $226.6 million year-over-year. The growth was due to strength in the agriculture and energy end markets and the contribution from the SJ Transportation acquisition. This was partially offset by declines primarily in the construction and manufacturing end markets. The segment overall reported approximately flat miles and realized an average rate per mile of $3.31.
Income from operations for the specialized solutions segment decreased 1.1% to $8.7 million from $8.8 million last year. This was due to inflationary cost pressures slightly outpacing revenue growth. This was mainly driver compensation, operations and maintenance expenses. The segment includes company freight, owner-operator freight, brokerage and logistics operations.
- Company freight revenue increased 0.6% to $115.4 million from $114.7 million.
- Owner-operator freight revenue decreased 9% to $38.3 million from $42.1 million.
- Brokerage revenue increased 0.3% to $37.2 million from $37.1 million.
- Logistics revenue increased 36.5% to $14.2 million from $10.4 million.
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Flatbed solutions revenue decreased 13% to $169.1 million from $194.4 million last year. The average length of haul increased, and the company reduced deadhead miles. But the segment also experienced a 9.3% degradation in rate per mile to $2.34. The report noted that strength, primarily in the manufacturing end market, was more than offset by a decline in the steel and construction end markets.
Income from operations for the flatbed solutions segment decreased 66% to $3.2 million from $9.4 million last year. The segment experienced a worsening operating ratio due to lower revenue combined with inflationary cost pressures in items such as operations, maintenance and driver compensation. The segment includes company freight, owner-operator freight, brokerage and logistics operations.
- Company freight revenue increased 8.7% to $44.9 million from $41.3 million.
- Owner-operator freight revenue decreased 15.7% to $73.9 million from $87.7 million.
- Brokerage revenue decreased 43.1% to $23.4 million from $41.1 million.
- Logistics revenue was virtually unchanged year-over-year at $1 million.
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