Daseke, Inc. (DSKE) SEC Filing 8-K Material Event for the period ending Friday, March 8, 2019

Daseke Reports Revenue Increase of 91% for 2018

Addison,  Texas –  March 8,  2019 – Daseke, Inc. (NASDAQ: DSKE,  DSKEW) (or the “Company”),  the largest flatbed, specialized transportation and logistics solutions company in North America,  today reported financial results for the fourth quarter and full year ended December 31,  2018, and reaffirmed its 2019 financial outlook.

Fourth Quarter 2018 Summary vs. Fourth Quarter 2017

Full Year 2018 Summary vs. Full Year 2017

“As communicated in our recent pre-announcement, revenue and Adjusted EBITDA for the fourth quarter and full year 2018 met our expectations and resulted in another record year for the company,” said Don Daseke,  chairman and CEO. “Our results show the power of the platform we have built and our ability to drive organic growth.”

“Over the course of the last decade we have successfully executed on our strategy of building scale across the organization.  Today, we are the market leader with plenty of runway for growth and have consistently produced results aligned with our outlook,” Daseke continued, “I truly believe that we have only scratched the surface of our potential and I am excited for what the next decade will bring.”

Scott Wheeler, president and director added, “In 2018 we exceeded revenue and Adjusted EBITDA expectations, delivered exceptional organic growth and completed several great acquisitions. Our strategic plan for 2019 will be focused on driving continued organic growth, free cash flow generation and reducing net financial leverage. We expect to achieve this by maximizing the existing infrastructure we 

1 See Non-GAAP Measures for  more information regarding Acquisition Adjusted measures.

2 See Non-GAAP Measures for  more information regarding Adjusted Net Income (Loss) measures.

3 See Non-GAAP Measures for  more information regarding Adjusted EBITDA measures.

have built, controlling costs, taking advantage of our scale, and ensuring that we have the people, processes and systems to succeed. I am confident in the organization’s ability to successfully execute on our strategic plan and I look forward to this next stage of growth.”

Fourth Quarter 2018 Financial Results

Revenue in the fourth quarter of 2018 increased 74% to $447.0 million compared to $257.2 million in the year-ago quarter. The increase was largely driven by four acquisitions made in 2018 and strong organic growth, with revenue on an Acquisition Adjusted1 basis up 13%.  

Operating loss in the fourth quarter of 2018 was $8.3 million compared to a loss of $2.3 million in the year-ago quarter. Included in operating expenses for the fourth quarter of 2018 is $7.7 million of depreciation expense related to the net impact of the step-up in basis of acquired assets, $4.5 million for the amortization of intangibles and $11.1 million for the write-down of goodwill, for a total non-cash impact of $23.3 million.

Net loss for the fourth quarter of 2018 was $20.1 million, or $0.31 per share, compared to net income of $38.8 million, or $0.84 per share, in the year-ago quarter. Adjusted Net Income2, which is adjusted for acquisition or business combination related transaction expenses, non-cash asset impairments, amortization of intangible assets, the net impact of step-up in basis of acquired assets and the impact of the Tax Cuts and Jobs Act, was $3.4 million, compared to an Adjusted Net Loss2 of $1.4 million in the fourth quarter of 2017. 

Adjusted EBITDA3 in the fourth quarter of 2018 increased 73% to $39.9 million compared to $23.1 million in the fourth quarter of 2017. Acquisition Adjusted EBITDA1,3 increased 7% to $39.9 million compared to $37.2 million in the fourth quarter of 2017.

Full Year 2018 Financial Results

Revenues in 2018 increased 91% to $1.6 billion compared to $846.3 million in 2017. The strong revenue growth was driven by the full benefit of the acquisitions completed in 2017, four acquisitions made in 2018 and strong organic growth with revenue on an Acquisition Adjusted1 basis up 14%.

Operating income increased significantly in 2018 to $21.9 million, up 212% from $7.0 million in 2017. Included in operating expenses for 2018 was $24.1 million of depreciation expense related to the net impact of the step-up in basis of acquired assets, $16.6 million for the amortization of intangibles and $13.9 million for the write-down of goodwill and intangibles, for a total non-cash impact of $54.6 million.

Net loss for 2018 was $5.2 million, or $0.08 per share, compared to net income of $27.0 million, or $0.72 per share, in 2017.  Adjusted Net Income2, which is adjusted for acquisition or business combination related transaction expenses, non-cash asset impairments, amortization of intangible assets, the net impact of step-up in basis of acquired assets and the impact of the Tax Cuts and Jobs Act, was $39.5 million, compared to an Adjusted Net Income2 of $1.4 million in 2017.

Adjusted EBITDA3 in 2018 increased 90% to $174.3 million compared to $91.9 million in 2017.  Acquisition Adjusted EBITDA1,3 increased 14% to $190.4 million compared to $166.3 million in 2017.

Segment Results

Flatbed Solutions - Flatbed Solutions revenue4 in the fourth quarter of 2018 increased 73% to $173.3 million4 compared to $100.3 million in the year-ago quarter. Operating income in the fourth quarter of 2018 was $4.5 million, up 27% from $3.5 million in the year-ago quarter. Adjusted EBITDA3 in the fourth quarter of 2018 increased 38% to $15.2 million compared to $11.0 million in the year-ago quarter. Rate per mile in the fourth quarter of 2018 was up 5% to $1.96, while flatbed revenue per tractor increased 5% to $41,800. 

In 2018, Flatbed Solutions revenue4 increased 87% to $662.0 million compared to $354.1 million in 2017.  Operating income in 2018 increased 78% to $32.9 million compared to $18.5 million in 2017. Adjusted EBITDA3 in 2018 increased 45% to $70.2 million compared to $48.3 million in 2017.

Specialized Solutions - Specialized Solutions revenue4 in the fourth quarter of 2018 increased 75% to $277.9 million4 compared to $158.8 million in the year-ago quarter. Operating loss in the fourth quarter of 2018 was $1.0 million compared to operating income of $2.6 million in the year-ago quarter.  Adjusted EBITDA3 in the fourth quarter of 2018 increased 95% to $36.6 million compared to $18.8 million in the year-ago quarter. Rate per mile in the fourth quarter of 2018 was up 38% to $3.60 while  revenue per tractor increased 31% to $63,000. 

In 2018,  Specialized Solutions revenue4 increased 93% to $965.1 million compared to $499.1 million in 2017. Operating income in 2018 increased 50% to $23.1 million, compared to $15.3 million in 2017.  Adjusted EBITDA3 in 2018 increased 110% to $134.6 million compared to $64.0 million in 2017.

Balance Sheet

At December 31, 2018, Daseke had cash and equivalents of $46.0 million, $87.8 million available under its revolving credit facility, net debt of $656.4 million and total liquidity available of $133.8 million. Additionally, at the end of 2018, working capital, excluding cash and acquisition-related earn-out liabilities, totaled $89.4 million, which was up 32% or $21.4 million versus the end of 2017. This compares to total revenue growth of 91% during the year.  

2019 Outlook

In 2019, Daseke expects revenue to range between $1.8-$1.9 billion, up 12%-18% compared to $1.6 billion in 2018. Adjusted EBITDA4 is anticipated to range between $200-$210 million,  up 15%-20%  compared to $174.3 million in 2018, and compared to 2018 Acquisition Adjusted EBITDA1,3 of  $190.4 million.

Net capital expenditures are anticipated to range between $65-$70 million compared to $121 million in 2018.  The Company anticipates that approximately 70% of capital expenditures in 2019 will be invested in the first two quarters of the year.  

By the end of 2019, leverage (as defined in the Company’s debt agreements) is expected to decline to a

multiple of approximately 2.9 times Adjusted EBITDA (as defined in the Company’s debt agreements).

Please see the table at the end of this press release for a detailed view of the Company’s 2019 outlook.

4 Segment revenues are prior to eliminations.

Conference Call

Daseke will hold a conference call today at 11:00 a.m. Eastern time to discuss its fourth quarter and full year 2018 results.

Date: Friday,  March 8, 2019 

Time: 11:00 a.m. Eastern time (10:00 a.m. Central time)

Toll-free dial-in number: 1-855-242-9918

International dial-in number: 1-414-238-9803

Conference ID: 8786319

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios at 1-949-574-3860.

The conference call will be broadcast live and available for replay  via the investor relations section of the company’s website at investor.daseke.com. Presentation materials will be posted at the time of the call at investor.daseke.com as well.

A replay of the conference call will be available after 2:00 p.m. Eastern time on the same day through March 22, 2019.  

Toll-free replay number: 1-855-859-2056

International replay number: 1-404-537-3406

Replay ID: 8786319

About Daseke, Inc.

Daseke, Inc. is the leading consolidator and the largest flatbed and specialized transportation and logistics company in North America. Daseke offers comprehensive, best-in-class services to many of the world’s most respected industrial shippers through experienced people, a fleet of approximately 6,000 tractors and 13,000 flatbed and specialized trailers, and a million-plus square feet of industrial warehousing space. For more information, please visit www.daseke.com.  

Use of Non-GAAP Measures

This news release includes non‐GAAP financial measures for Daseke and its operating segments, including Adjusted EBITDA, Adjusted Net Income  (Loss), and Acquisition Adjusted, revenue, net loss and EBITDA (Acquisition Adjusted Measures). Other companies in Daseke’s industry may define these non‐GAAP measures differently than Daseke does, and as a result, it may be difficult to use these non‐GAAP measures to compare the performance of those companies to Daseke’s performance. Daseke’s management does not consider these non‐GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP and instead relies primarily on Daseke’s GAAP results and uses non‐GAAP measures supplementally.

Daseke defines Adjusted EBITDA as net income (loss) plus (i) depreciation and amortization, (ii) interest expense, including other fees and charges associated with indebtedness, net of interest income, (iii)

income taxes, (iv) acquisition‐related transaction expenses (including due diligence costs, legal, accounting and other advisory fees and costs, retention and severance payments and financing fees and expenses), (v) stock‐based compensation, (vi) non‐cash impairments, and (vii) expenses related to the business combination that was consummated in February 2017 and related transactions.

Daseke defines Adjusted Net Income  (Loss) as net income (loss) adjusted for acquisition or business combination related transaction expenses, non-cash asset impairments, amortization of intangible assets, the net impact of step-up in basis of acquired assets and the impact of the revaluation of deferred taxes due to the tax rate change in the Tax Cuts and Jobs Act.  

Daseke defines Acquisition Adjusted Measures as (a) our actual revenue, net loss or Adjusted EBITDA, as applicable, for the applicable measurement period and (b) the actual revenue, net loss or Adjusted EBITDA, as applicable, of each company acquired in 2017 and in 2018 (excluding the Kelsey Trail acquisition), as though those acquisitions were completed on the first date of the applicable measurement period, based on the company’s internal financial statements for the period prior to Daseke’s acquisition. These adjusted amounts (i) have not been prepared in accordance with the requirements of Regulation S‐X or any other securities laws relating to the presentation of pro forma financial information, (ii) do not reflect any pro forma adjustments, (iii) are presented for informational purposes only, (iv) are not necessarily indicative of what our results of operations would have been had such acquisitions been completed as though those acquisitions were completed on the first date of the applicable measurement period, and (v) do not purport to project our future operating results.

Daseke’s board of directors and executive management team use Adjusted EBITDA, Adjusted Net Income(Loss)  and Acquisition Adjusted Measures as key measures of its performance and for business planning.

Adjusted EBITDA, Adjusted Net Income  (Loss)  and Acquisition Adjusted Measures assist them in comparing Daseke’s operating performance over various reporting periods on a consistent basis because they remove from Daseke’s operating results the impact of items that, in their opinion, do not reflect Daseke’s core operating performance. Adjusted EBITDA, Adjusted Net Income  (Loss) and Acquisition Adjusted Measures also allows Daseke to more effectively evaluate its operating performance by allowing it to compare the results of operations against its peers without regard to its or its peers’ financing method or capital structure.

Daseke believes its presentation of Adjusted EBITDA, Adjusted Net Income  (Loss) and Acquisition Adjusted Measures is useful because they provide investors and industry analysts the same information that Daseke uses internally for purposes of assessing its core operating performance. However, Adjusted EBITDA, Adjusted Net Income(Loss) and Acquisition Adjusted Measures are not substitutes for, or more meaningful than, net income (loss), cash flows from operating activities, operating income or any other measure prescribed by GAAP, and there are limitations to using non‐GAAP measures such as Adjusted EBITDA, Adjusted Net Income(Loss) and Acquisition Adjusted Measures. Certain items excluded from Adjusted EBITDA, Adjusted Net Income(Loss) and Acquisition Adjusted Measures are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital, tax structure and the historic costs of depreciable assets. Adjusted EBITDA,  Adjusted Net

Income(Loss) and Acquisition Adjusted Measures should not be considered measures of the income generated by Daseke’s business or discretionary cash available to it to invest in the growth of its business.

You can find the reconciliation of these non‐GAAP measures to the nearest comparable GAAP measures in the Reconciliation of Non‐GAAP Measures tables below. We have not reconciled non‐GAAP forward looking measures to their corresponding GAAP measures because certain items that impact these measures are unavailable or cannot be reasonably predicted without unreasonable efforts.

Forward‐Looking Statements

This news release includes “forward‐looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward‐looking statements may be identified by the use of words such as “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target,” “will” or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Projected financial information, including our guidance outlook, are forward-looking statements. These forward‐looking statements are based on current information and expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward‐looking statements should not be relied upon as representing Daseke’s views as of any subsequent date, and we do not undertake any obligation to update forward‐looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You should not place undue reliance on these forward‐looking statements. As a result of a number of known and unknown risks and uncertainties, actual results or performance may be materially different from those expressed or implied by these forward‐looking statements. Some factors that could cause actual results to differ include, but are not limited to, general economic and business risks (such as downturns in customers’ business cycles and disruptions in capital and credit markets), driver shortages and increases in driver compensation or owner‐operator contracted rates, loss of senior management or key operating personnel, Daseke’s ability to recognize the anticipated benefits of recent acquisitions, including the Aveda transaction, its ability to identify and execute future acquisitions successfully, seasonality and the impact of weather and other catastrophic events, fluctuations in the price or availability of diesel fuel, increased prices for, or decreases in the availability of, new revenue equipment and decreases in the value of used revenue equipment, Daseke’s ability to generate sufficient cash to service all of its indebtedness, restrictions in its existing and future debt agreements, increases in interest rates, changes in existing laws or regulations, including environmental and worker health safety laws and regulations and those relating to tax rates or taxes in general, the impact of governmental regulations and other governmental actions related to Daseke and its operations, litigation and governmental proceedings, and insurance and claims expenses. For additional information regarding known material factors that could cause our actual results to differ from those expressed in forward‐looking statements, please see Daseke’s filings with the Securities and Exchange Commission, available at www.sec.gov, including those described under “Risk Factors” In its annual report on Form 10-K.

Investor Relations:

Liolios Group 

Cody Slach

Tel 1-949-574-3860

DSKE@liolios.com

Daseke, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)

Daseke, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

(In thousands, except share and per share data)

Daseke, Inc. and Subsidiaries

Supplemental Information: Flatbed Solutions

(Unaudited)

(In thousands, except operating statistics data)

* indicates not meaningful.

(1) Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.

Daseke, Inc. and Subsidiaries

Supplemental Information: Flatbed Solutions

(Unaudited)

(In thousands, except operating statistics data)

* indicates not meaningful.

(1) Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.

Daseke, Inc. and Subsidiaries

Supplemental Information: Specialized Solutions

(Unaudited)

(In thousands, except operating statistics data)

* indicates not meaningful.

(1) Includes intersegment revenues and expenses, as applicable, which are eliminated in the Company’s consolidated results.

Daseke, Inc. and Subsidiaries

Supplemental Information: Specialized Solutions

(Unaudited)

(In thousands, except operating statistics data)