Earnings Transcript for DSKE - Q4 Fiscal Year 2021

Operator: Good morning everyone and thank you for participating in today's conference call to discuss Daseke's financial results for the Fourth Quarter and full-year ended December 31, 2021, as well Daseke's 2022 outlook. With us today are Jonathan Shepko, CEO and Board Member, Jason Bates, EVP and CFO, and Traci Grahame, Vice President of Finance and Investor Relations. After their prepared remarks, the management team will take your questions. As a reminder, you may now download a PDF of the presentation slides that will accompany the remarks made on today's conference call, as indicated in the press release we issued earlier today. You may access these slides in the Investor Relations section of our website. Before we go further, I'd like to turn the call over to Traci Graham, Vice President of Finance and Investor Relations, who will read the company's Safe Harbor statements within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important, cautious -- sorry, important cautions regarding forward-looking statements. Traci, please go ahead.

Traci Graham: Thanks, Victor. Please turn to slide 2 for a review of our Safe Harbor and non-GAAP statements. Today's presentation contains forward-looking statements as within the meaning of the Private Securities Litigation Reform Act of 1995. Projected financial information, including our guidance outlook are forward-looking statements. Forward-looking statements, including those with respect to revenues, earnings, performance, strategies, prospects, and other aspects of Daseke's business are based on management's current estimates, projections, and assumptions that are subject to risks and uncertainties that could cause the actual results to differ materially from our expectations and projections. I encourage you to read our filings with the Securities and Exchange Commission for a discussion of the risks that can affect our business and do not place undue reliance on any forward-looking statements. We undertake no obligation to revise our forward-looking statements to reflect events or circumstances occurring after today, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. During the call, there will also be a discussion of some items that do not conform to U.S. Generally Accepted Accounting Principles or GAAP, including, but not limited to adjusted EBITDA, adjusted operating ratio, adjusted operating income, adjusted net income or loss, free cash flow and net debt. With the exception of free cash flow and net debt, the company will discuss these measures on an ex - Aveda basis. These measures exclude the impact of the Aveda business. Although we ceased generating revenues from the Aveda business and completed the wind-down of our Aveda operations in 2020, we continue to recognize income and expenses primarily related to workers compensation claims and insurance proceeds from the Aveda business in 2021. Reconciliation of these non-GAAP measures to their most directly comparable GAAP measures are included in the appendix to the investor presentation and press release issued this morning, both of which are available in the Investors tab of the Daseke website, www. daseke.com. In terms of the structure of our call today, we will start by turning the call over to Daseke's CEO, Jonathan Shepko, who will review our business operations and the progress we are making as we execute against our she -- key strategic priorities. Jason will then provide a financial review of the quarter and full year, as well as provide our 2022 outlook, at which point Johnson will wrap up our remarks with a few closing comments before we open the line for your questions. With that, I will hand the call over to Mr. Jonathan Shepko. Jonathan.

Jonathan Shepko: Thank you, Traci. Good morning, everyone. Let's turn to slide 3 where I'll speak briefly on some of the headline observations and key accomplishments Daseke made as we closed out a very successful fourth quarter and full-year 2021. I'm pleased to report that Daseke delivered another very strong quarter of operational financial performance, capping off a second consecutive year of record adjusted EBITDA. In the fourth quarter, demand remains strong across the industrial end-markets we serve to find the normal extent of the seasonal deceleration. We continue to face ongoing capacity constraints in the equipment market due to disruptions in the global supply chain. Though these disruptions have also worked to perpetuate the imbalance between supply and demand, which in turn has continued to support a very healthy rate environment. While this environment looks they've provided a new full on rates is our proactive strategic deployment of assets against the most profitable pockets of the market that has allowed us to not only outperform the benchmark grade, but also extend our freight capture as evidenced by the 17.5% increase in revenue this quarter. Daseke continues to focus on operational execution, driving a 25.9% improvement in our adjusted EBITDA of $49.6 million and a 360 basis point improvement in our adjusted operating ratio from 96% to 92.4%. Additionally, our quarterly adjusted net income was $13 million and adjusted diluted earnings per common share of $0.18 were up 41.35% and 51% respectively even when compared to our strong fourth quarter of 2020. Despite cost pressures on employee compensation, recruiting, and other operating line items, we delivered record results. Our diligent execution within our Asset-Right business model, enable us to convert top-line growth, and a meaningful increased profitability for our shareholders. Before turning the call over to Jason to provide more detail around our financial performance and outlook, I'd like to take a few moments to discuss our continued commitment to both our operational execution and long-term strategic direction. Previously, we've highlighted the importance of our unique business model to our operational success. Throughout 2021, we leveraged this model to proactively identify the network optimization opportunities and accordingly, reallocated our assets to better serve our customers within these markets in order to drive superior rates compared to the greater flatbed market. Further, we tapped our extensive network of our operators and third-party carriers to accommodate our customer's requests for additional capacity, thereby capturing incremental freight spend from our blue-chip shipper base. This dedication to customer service, operational efficiency, and business model flexibility are each mainstay to our success and our long-term strategic plan. Shifting from a trailer - centric view of our business to one of in-market leadership is a fundamental tenant of our strategic direction, positioning us for more profitable growth in the future, as we begin to prioritize the marshalling of resources in support of these specific end markets. Focused intensity targeted at such end markets and sub verticals that are best positioned to distinctly value our specialized knowledge and credentials, our differentiated asset profile and our national footprint will give rise to opportunities to further expand our suite of services and reach to better service and engage these very customers. A key element to advancing our strategy is the fundamental shift from siloed independent operations to a federated and harmonized platform, where in the sharing of data, exchanging of best practices, and coordination and asset utilization will collectively provide the foundation for future growth and optimization. To accomplish this, there will be further operating company consolidations. There will be investments in technology, and there will be coordinated, thoughtful standardization across our platform. Over the last few quarters, we focused on enhancing our plan to ensure these tactical transformational initiatives are executed in such a way so as they complement our long-term strategic direction. We will begin to share many more details around our transformation plan as well as the longer-term strategic plan over the coming quarters. With that, I will now turn the call over to Jason Bates to review the fourth quarter and full-year 2021 financial performance and 2022 outlook. Jason.

Jason Bates: Thank you, Jonathan. And good morning, everyone. If you please turn with me to slide 4, we will start with a high-level review of the consolidated results for the fourth quarter. As Jonathan mentioned, our fourth quarter results once again, provided evidence of Daseke's ability to execute efficiently and effectively, capitalizing on what has been a strong freight environment. I'm extremely proud of our team's collective performance in the fourth-quarter, and for the full year, both of which exceeded our expectations. We experienced similar trends in the fourth quarter to those we've discussed throughout 2021, with a sizable uplift in demand across construction materials, steel and manufacturing-related verticals. Our ability to continually support and service our strategic customers over these past 12 months to 18 months, has been a key contributing factor in our ability to realize better-than-expected freight rates, particularly in our Flatbed business during what has been an increasingly difficult supply-demand imbalance within the transportation industry. We believe that this focus on customer service and strategic freight selection played a role in minimizing the seasonal volume slowdown we traditionally see from the third quarter into the fourth quarter, and enabled us to capitalize on market opportunities within both of our segments and across end markets. Our portfolio approach is purposeful and continues to deliver a diverse profile of consumers and end markets, which allow us to pivot and seize opportunities across a breadth of industrial verticals. We are proud of our team as they continue to redeploy assets to the most efficient end markets and deliver strong 2021 results. Per Traci's comments at the outset of the due to increased realization of our business improvement plans alongside growing freight rates and volumes supported by healthy demand and strategic customer alignment and support. The year-over-year growth was also supplemented by a higher-than-normal gain on sale of equipment as we, along with most of the industry, were beneficiaries of a strong used equipment market. The combination of these various items helped us to offset any moderation from the unusually high margins we experienced in the 2020 period associated with the wind energy project revenues. I'm also proud to highlight that while many companies in our industry faced driver retention headwinds, Daseke continues to prioritize its workforce and thus driver turnover remains significantly below the industry average which we maintain as a competitive advantage. Of note, we have implemented driver pay increases in the quarter in line with the market, which have been hedged by the continued expansion of freight rates. We continue to monitor the driver situation closely, but are encouraged by our team's excellent work in ensuring Daseke is an attractive and quality employer for our dedicated driving professionals. Finally, I'll briefly touch on our corporate overhead expenses. In the quarter, administrative expenses, including contract and professional cost, improved through -- though corporate cost, did experience a slight increase primarily associated with seasonal bonuses, as well as salary and benefit increases, which are tied to the company's improving performance and market competitive rates. On Slide 5, I'll briefly touch on our key financial performance measures from a full-year perspective. Again, referencing numbers excluding the Aveda business. For the full year, 2021, Daseke generated revenues of roughly $1.6 billion, which increased 11% versus 2020. The top-line increase was driven by growing freight volumes and rates compared to COVID impacted 2020, attributable to heightened performance in our steel and construction end markets coupled with a constrained supply chain environment, offsetting the normalization of record wind energy performance in 2020. As we move to a discussion about the various profitability metrics, I want to take a moment to highlight several annual records that were achieved by the team in 2021. We achieved records in each of the following financial metrics, as well as their adjusted counterparts

Jonathan Shepko: Thank you, Jason. I'd like to spend only a quick moment on Slide 11. We've spent a lot of time referencing the various initiatives we've undertaken over the last year and a half to improve our operations and improve our business. Sometimes when quarterly performance is analyzed discreetly on these quarterly calls, the cumulative effect of these turnaround efforts can be lost. In the top left quarter of the slide however, we've lined out a handful of relevant metrics that frame up our successes over the last few years, from fleet rationalization and efficiencies around asset utilization to improvements in relevant profitability metrics and the strengthening of our balance sheet. With comprehensive, we overhaul this company and we'll continue to leverage this momentum as we move onto the next stage of our transformation then on to the execution of our longer-term strategic vision. We've exceeded the expectations of many people and there's still substantial opportunity left for us to take advantage of. If you look to the top right quadrant of the slide, another takeaway I'd like you all to note is that in spite of this remarkable turnaround, the discount in our [Indiscernible] EBITDA multiple relative to that of our peer groups has remained a constant over this three-year period at around 30%, which is perplexing given where we started in 2019, but compared to where we stand today. Next slide, please. On the previous slide, we offered up a quantitative brief for Daseke's evaluation, also noting our relative mispricing. And on slide 12, I'd like to offer up the makings of a qualitative case for Daseke. This slide provides a high level contours of the value drivers that will underpin our growth over the coming years. These drivers will provide our shareholders with multiple ways to win, both beta and alpha. Our focus on continuous improvement remains unchanged as evidenced by our financial progress over the last 24 months. We will continue to evaluate our industrial end markets for both organic and strategic growth opportunities, including the expansion of our service offering to our customers. And we will examine opportunistic adjacent markets within which to expand our footprint. We will allocate capital in support of these highest and best use opportunities with an emphasis on earnings, free cash flow generation, and long-term equity value creation. With respect to secular capacity tightness, as I mentioned earlier, equipment supply chain has remained constrained, impacting both the demand and the supply side of the equation and sustaining a favorable rate environment for our industry. And $1 trillion infrastructure bill will only challenge the possibility of a near-term supply demand equilibrium for the open deck carriers extending the runway and providing a safe haven rate environment for our segment of the industry for the foreseeable future. With that, I'd like to conclude our prepared remarks for this morning, and I'm excited to turn the call over to our Operator for your questions. Victor.

Operator: Thank you. [Operator Instructions]. Our first question come from the line of Jason Seidl from Cowen. You may begin.

Jason Seidi: Thanks, Operator. John, Jason, and team, good morning. Wanted to hit on a couple of things here. Talk to me a little bit about rate. I -- saw the nice year-over-year bump in both your divisions, the sequential degradation that you guys noted in the charts. I'm assuming that's just the normal historical move. And if I'm correct on that, how would you compare it to normal seasonality in the quarter? Yeah, Jason. Thanks. Yeah, you're correct. There is the normal seasonal case in our business that we like to remind people of. A lot of people follow [Indiscernible], some of the big drive and guide. And usually, third and fourth quarter are the peak periods. In our business it's really second and third quarter, and then we seasonally slowdown in the fourth and first quarter. So yes, you are correct. There is a seasonal case there where typically we see things slow. Although if you look at the year-over-year or the sequential change over the last two or three years, this year we actually -- last year was the first quarter where it was unusual and the fourth quarter was strong

Jason Bates: There was a lot of the COVID recovery action that happened, although this year we saw a similar trend, in terms of not dropping off as much as it normally has. So while it did moderate, it was surprisingly strong for that sequential slowdown up third to fourth quarter. So better than the historical slowdown that you've seen, yes?

Jason Seidi: Okay. Perfect.

Jason Bates: Q3 to Q4 of 2020 was an aberration, but setting that your aside, this year was probably one of the better sequential periods from Q3, Q4, in terms of rates.

Jason Seidi: Okay, perfect. That's good to hear. Other thing, in the past, you guys had talked about your advantage in your driver turnover rates, you noted it again in your comments. But you also talked about how you're going to keep a close eye on the overall driver market, because flatbed jobs, obviously a much more difficult job than somebody on a drive and no touch freight. Are you -- is the normal drive in driver market pay getting up there to where you're starting to get worried that it could impact your ability to attract your drivers?

Jason Bates: Yeah. Great question there and I think we talked about this. You and I talked about this a few weeks back. It is something that we watch really closely. I have a lot of friends in the end --- in the drive end side of the world, having spent most of my career over there, who I talk to regularly. And when I look at some of the things they're doing and having to do to attract and retain drivers, it just -- it causes us just keep our ears open and our eyes open to how that might affect our drivers. Because to your point, a flatbed job is a tougher job. You're getting out of the vehicle, sometimes in less than ideal conditions, you're getting up on top of the trailers, your tapping down loads, tying things down, it's over dimensional zed, it's more complex. And so understandably, they deserve a premium in terms of compensation. We just have to make sure that that premium is still there and that the value for choosing to be a flatbed driver is still there. And so that is something we're very mindful of and we watch very closely. As we touched on in the prepared remarks, we did do some select targeted increases in certain pieces of our business in the quarter, to that end, right? To make sure that it continues to be an attractive opportunity. But I want to revert back to your opening part of your question. And that is that, our turnover is -- even with all of those puts and takes we just discussed, more than half of what a lot of the industry data points which suggest. So we're pretty pleased with our team's ability to attract and retain drivers, but that doesn't mean that we can just rest on our laurels.

Jason Seidi: Okay. One final one and I'll turn it over to the other analysts on the call here. Your outlook for '22, I just wanted to try to dig in a little deeper. What does it include in terms of gain on sales since you're actually pushing some more purchases and CapEx into '22 from '21? And do you have anything in there for any new projects that might be linked to the infrastructure bill? And I'll just listen in and appreciate the time.

Jason Bates: Yeah, great questions. Yeah. So really quick on the gain on sale. Obviously 2021, the gain on sale was strong with up -- I think through the third quarter, was up roughly $8 million year-over-years and for the full-year was closer to 10 when you compare 2021 to 2020. Right. So I think everyone in the industry experienced similar out performance on the gain on sale. For 2022, we're not assuming that the market -- projecting used equipment pricing is tough, right? But we're not assuming that the market is going to be better or we are also not assuming that it's going to substantially moderate and get worse. We've got a relatively similar assumption around gain on sale on a per asset basis. It will moderate a little bit, but not meaningfully. We're not talking tens of millions of dollars of swing here. It may be $1 million or $2 million. And so I think that's an important data point secondarily with regard to the push-out, you address the push out of equipment from Q4 to Q1, we're trying to stay still consistent with if -- it's really a timing thing that's happening between Q4 and Q1, I don't know that we would expect significantly more dispositions when you look at the number of trucks that are expected to be rolling off in 2022. From that perspective, there's not going to be a step function up on the use, equipment side. Was there another part to that question that I missed? I'm looking at Tracy and Jonathan. I think --

Jason Seidi: Yes. I was talking about in your projections for FY22.

Jason Bates: Infrastructure.

Jason Seidi: Infrastructure, yes.

Jason Bates: Yes. Thank you. We -- listen. It's a little fuzzy exactly what the infrastructure bill is going to look like and how quickly it's going to make its way to us. We've been pretty conservative in our assumptions around what's going to flow through the infrastructure bill in 2022. We think we'll probably start seeing something in the back half of the year, but I don't want you to think that that 4% to 7% guide on top line and 5% to 10% improvement on bottom line is largely dependent on the infrastructure bill. I would say it's minimally -- it's nominally dependent if at all, on the infrastructure bill. But I do want to point out because you asked about driver retention, things like that. We did highlight a lot of potential headwinds with regard to inflationary pressures, driver recruitment tension, supply chain challenges, those are taken into consideration in that guide. So we just want to make that clear that that guide isn't our guide, and then we're saying, oh, and we need to worry about these things which could provide downward pressure, we're saying, we've already taken that into consideration. Now, they could be worse or they could be not as bad, and then that would obviously affect the guide. But we just want to make it clear that those headwinds were factored into that guide that we provided.

Jason Seidi: Perfect. Appreciate the detailed answers as always, gentlemen. Thank you.

Jason Bates: Thank you.

Operator: Thank you. Our next question comes from Ryan Sigdahl from Craig-Hallum Capital. You may begin.

Ryan Sigdahl: Morning Jonathan and Jason. Congrats on the progress.

Jason Bates: Thanks, Ryan.

Jonathan Shepko: Thank you.

Ryan Sigdahl: So you talked a little bit about rate environment for 2022. Zoom in that out a little bit, if you can. Can you talk through the puts and takes for rates over the next several years beyond, I guess the next several quarters?

Jason Bates: Yeah. I mean, it's a complicated one. So we've done a lot of -- Jonathan and I we're both finance guys, right? So we do a lot of theoretical analysis around 3 and 5 year plans and modeling. In 2022, we're not assuming anything crazy from a rates perspective. We're candidly in that mid-single-digit range. With regards to our rate assumptions which could be conservative. But we try to align the inflationary assumptions and the cost pressures and things like that, with -- in driver pay increases, etc. with that rate increase. So to the extent that we outperform on that mid-single-digit rate assumption, more likely than not. Some of that's going to make its way to drivers and so probably won't have as much of a flow-through as we have seen over the last 18 months. But back to your question of longer term. And I'll let Jonathan -- I know you've got some thoughts on this as well, but from my perspective, I really don't see the supply demand imbalance that exist today dissipating anytime soon. I think we're -- we've got this trillion-dollar infrastructure bill that's going to continue to provide pressure, specifically in our market that we support with service. And you've got a lot of challenges in terms of getting equipment, you've got a lot of challenges with regard to insurance, we're hearing rumblings about crude oil topping $100 a barrel. There's a lot of things out there that are going to make it tough for people in our space, especially the smaller people. And that's where you heard me and Jonathan both allude to opportunities for industry -- further industry consolidation. And so when you think about the rate environment, I think rates are going to hold up for a little while. I don't think that they're reversing course anytime soon. Jonathan, any --

Jonathan Shepko: Jason said most of the things I would've said, Ryan. We've looked at flatbed rates for the last 40 years to try to use that as a proxy to forecast the future. And look, it's, as you know, you're looking at compounded annual growth rate over that 30 to 40-year period of 2.5% or so. So generally, when we get this question, Jason says a lot, it's up into the right, it's a very different forward curve and behaves very differently than oil or gas, right? You got much more volatility in those forward curves, you've got the peaks and troughs are much more pronounced. They could sit there at -- in the doldrums and kind of have low watermarks for multiple years if you look at the way that the rates behave in this industry, highly correlated to CPI first of all, so in an essence, you're passing through the rates. We also 80 -- 85% what we do is dedicated so we're not playing a smart spot market so a lot of the heavy extreme volatility is insulated so we have a much more kind of balanced moderated forward curve than the guys that are playing the spot market. If you look past the last 30 years or so, the times where rate did pull back, it was all macro event-driven. So if you look back to the dot-com bubble, really didn't do much for rates there, but you looked at the great recession. You looked at the industrial recession, you looked at even COVID and you analyzed those events, trough as a percentage of peak was 85%. So there was some pulled out, 15% or so from that -- from those respective peaks and those respective cycles. But those cycles peak to trough to peak were often 18-months cycles. And if you think about our cost structure, 77%, 78% percent variable. We've got a long history as does the Asset-Right industry, I'm sorry, the asset-based players within the industry of defending margins because of that variable cost structure. I think that we've looked at it. I think Jason made a lot of compelling points particularly for the open deck segment of the industry with the infrastructure bill. You've got the supply chains preventing the over-exuberance of the larger carriers from stepping on the gas and adding a bunch of trucks to their fleet to offset demand and pull prices down. There's a lot of natural hedges in place, I think to keep the rate environment pretty healthy for the foreseeable future.

Jason Bates: Yeah. And Brian, just one correction. Jonathan said 85% of the fleet is dedicated, he meant contract.

Jonathan Shepko: I'm sorry. Yeah.

Jason Bates: Yeah. I just wanted to clarify that.

Ryan Sigdahl: All helpful context guys. I appreciate it. As you think about the operational turnaround, if I do some back-of-the-envelope math where you're not guiding to it, I think guidance implies you guys get to kind of your 90% or a bit better than that. I guess first is that right? And then second, can you walk through -- you've laid out the multi-year priorities strategy etc, but what are the main priorities that you guys are focused on the next three to six months?

Jason Bates: Yeah, I'll let Jonathan hit the second part of that question. I'll take the first part. Yeah, I'm always a little reluctant when we talk because 2 years ago I sat here and talked to you guys about our long-term goal of a 90 OR and now I keep getting the question like, hey, you're already there, right? And so -- but I want to reiterate to everyone that that goal is more -- we want to be a 90 OR, through the peaks and troughs. We're going through what's been a really, really strong market, and so yeah, you would expect us to be doing well, but personally, I think, and if you were to talk to Rick or Jonathan or any of the leaders here in the organization, we think we should be operating in [Indiscernible] in peak environment. And then maybe you are kind of 90 to low nineties in trough environment. We still feel like there's a lot of opportunity for us to continue to improve so that we're consistently performing through the peaks and the troughs of the cycles, not reverting back up to a high 90's OR when the market doesn't cooperate perfectly. We do think there's a lot of opportunity. And I'll turn it to Jonathan now to talk about what some of the strategic things are that we are going to be focusing on to help us drive some of those opportunities.

Jonathan Shepko: Ryan, we talked about on the past calls, but again, technology historically has been -- look, it's been an Achilles heel for Daseke. We haven't had access to real-time data to make good decisions quickly, and I think the success we've had is really a testament to the tenured leadership we have at the OpCo level. So we're doing -- we're making investments in technology, those are going to be to access better real-time data. There's a subset of those technology investments that's going to be just kind of good old corporate hygiene. But technology is one of those legs of the stools, the other one is further consolidation, rationalization, across our stable of OpCos our enterprise, right? And it's taking, it's figuring out a way to work for collaboratively, more collectively and taking and taking some of our better performing OpCos and finding a very efficient, effective way to instill the best practices from those respective OpCos across the enterprise. And then also figuring out a way really to get the OpCos to work together rather than, we mentioned siloed, I think we've said that on the last few calls, it was a good description for how we look today, even with all the progress we've made on some of these asset utilization, network optimization stop GAAP initiatives. The longer-term initiatives are really getting at the heart of this to where we're really operating as a one Daseke. We want to preserve that -- the kind of the touch and the feel of the local regional carrier. We think it's very beneficial in recruiting drivers. We think it's very beneficial in finding that right touch with the customers. But we've got to do a better job of really working in unison from a network optimization asset utilization standpoint. Again, part of that's just the organizational restraints that we've been subjected to over the last years, and part of that's also going back to technology. And then I think the last thing is M&A. We've got a good team. We've spent the better part of the year now building a very proprietary platform of deal flow. We're sure we're taking a look at all the marketed deals. But we think that the value opportunity is much more right in those kind private one-off negotiated opportunities, and then pulling those in the right way. It's buying them right, buying them properly, but then on-boarding those opportunities the right way. And that's not creating 5th, 6th, 7th, 8th,10th platform, where we start to ramp up duplicative back-office expenses again, it's truly taking the essence of those operating companies, those target operating companies that we acquire, taking the front office capabilities, the driver facing functions, the customer-facing functions, and then pulling out the more commodity back-office functions and pulling them under the tent, and then taking the buying power that Daseke has, taking the brand recognition, the customer touch, the scale, the depth, the capabilities that Daseke has, and driving that through that new target platform and ensuring that they're getting the benefit from all those -- from that broader halo of attributes. We're excited about it. Again, we feel like the dog had a pulling at the leash. We've been a little bit more balanced and reserved and really decisively delineating in communicating what the transformation plan looks like and the broader strategic vision because we want to do that the right way. We've spent a lot of time identifying opportunities over the last several months. We've got a very detailed plan and we're in the early innings of actually implementing some of the components of that plan, and what we said is, instead of going out, we continue to waive our arms to the market, which we've got kind of accused over the last few years. We feel like we're starting to really build credibility with the market, what we'd rather do is get a third of the way, end of the plan or at least a couple of innings into the plan, and come back to give, "Guys, here's the plan. Here's what we're set out to do. Here's what we're doing. And make sure all those dots connect for you guys. "And I think that you're going to be excited. We, as a team all the way from bottom to top of the organization, top to bottom of the organization are really excited about where this company is going to go. We've got a method to the madness. And there is a very, I think, thoughtful, very interesting vision that we're going to exploit over the coming years.

Ryan Sigdahl: Well done guys and looking forward to what's to come here in the near future. That's it for us, thanks.

Jonathan Shepko: Thanks, Ryan.

Jason Bates: Thanks, Ryan.

Operator: Our next question from the line of Bert Subin from Stifel. You may begin.

Bert Subin: Thank you. Jonathan, just to follow-up on that question. I know you guys said in the prepared remarks that you're expecting the adjusted EBITDA growth to exceed revenue, part of the activity driven by some operational improvements. Can you just put a value on some of the larger items there? I know you talked about some of them, but can you put like a dollar value on some of the things you're expecting in '22?

Jonathan Shepko: We've got -- look -- we've got legacy initiatives. Now, it's better network optimization, better coordination of maintenance best practices, some procurement efficiencies, things like that. Those are legacy initiatives that we're still driving through separately. We mentioned this idea of a transformation phase of Daseke. And these are the multiple initiatives, technology investments, additional OpCo consolidation, harmonization across the -- just broader harmonization across the fleet. Those are initiatives that are the very beginning of their perspective stages. We think that we're going to be a good part of the way through those by the end of the year. But we think the benefit from those things, at least in 2022, are going to be mostly -- at least it's our assumption are going to be mostly offset by the respective costs driving those initiatives. And so you might you might get a little bit of a benefit toward the end of this year. You're not getting the full run rate though of those things until 2023. Again, I think it's something we've been pretty moderated on as we think about 2022 guidance.

Bert Subin: Do you think in terms of just all of the integration and operational improvements that -- where do you think we are in that lifecycle, halfway done with it, in the later stages? Where -- how would you handicap it?

Jonathan Shepko: I think we've got a very clear line of sight. I'm not saying, maybe as you guys know, anytime somebody talked about transformations, some days are 2 steps forward, 1 day back kind of day. Look -- but we've got a good team. We've got very supportive OpCo leadership teams really shouldering and driving some of these thing work. We spent a lot of time socializing this with the OpCos, making sure we're thinking about this the right way. But I think that from our standpoint, without giving away too many of the punch lines for our next call, this is probably a 15-month voyage, and then we really shift to something that feels like optimization. Really -- we're really thinking about the next 15 months or so, ensuring the footing, get sure that we can really start to execute on our strategic growth plan. And look, we're doing this with the mindset of turning Daseke into a $3, $4, $5 billion enterprisevalue type company over the next 3 to 5 years. It's not maintaining status quo at $1.5 billion and try to find pennies and dimes to pick up to argue we're creating value for our shareholders. So, there's a very thoughtful plans. There's a ground swell of support, we're extremely excited. And I think that certainly as we messaged to you what we're doing over the coming quarters and we start to put up some data points signaling the successes and the -- then the little wins we're having along the way, I think you guys are going to get excited.

Bert Subin: Thanks [Indiscernible].That's helpful. Just as a follow-up. COVID has sort of dragged out this winter and it has led to a lot of people being sort of calling out of work and just other delays around projects. Are you expecting that to creep into the first quarter results or are rates just so strong and supply so tight that it's not having a real material impact?

Jason Bates: Yeah, great question, Bert. We're actually pretty pleased with what we've seen. Again, we're only 25 days in, right? But I actually was having a call with our COO yesterday, kind of talking through how he's feeling and he is like fingers crossed man, things are looking pretty good. Again, we don't want to be too bullish here, but I will tell you that when we think about how Q4 came in better than we thought it would. And we're looking at where Q1 is vis -a - vis normal seasonal expectations, we're cautiously optimistic about how the first quarter's shaping up. So again, I think our end markets that we support are a little bit more vibrant right now than maybe some of the other retail-oriented spaces. And there's some pent-up demand there and there's likely to be a backlog for the foreseeable future. So again, I don't want to sit here and pound our chest, but I think I am -- we're not scared of how it's shaping up so far during the first quarter.

Bert Subin: Thanks, Jason. Just a final question from me. You guys withdrawn guidance going into the fourth quarter, but now you've reinstated it for '22. Has anything changed in terms of your visibility from three months ago?

Jason Bates: No, I think we kind of owned it. There was never an intentional withdrawal of any guidance. We just didn't directly address it and we got really good feedback that, hey, guys, just talk about your guidance every quarter. So we will be here ready to talk about it every quarter. So we only guide annually, we don't give quarterly guidance, right? We give an annual guide and we intend to give an update to that guide, whether it's good news or bad news every quarter. We, right now have given an annual guide based on the tea leaves that we're reading and the fuzzy crystal ball that we got today, but as we get further through the year, we'll continue to kind of touch back on that data point. Because while there are some hard to predict market moving factors, there are things that are very controllable by us and that we have good visibility into. And Jonathan touched on several of them. And so I think we feel like we've got enough data points that we can at least provide, update each quarter our view of the world for the year. And we think it's important for -- given the state of Daseke and that we're working to create investor confidence and credibility, regular touch points is probably a good thing. So you'll hear from us every quarter on that topic.

Bert Subin: Thank you.

Jason Bates: Thank you.

Operator: Our next question comes from the line of Greg Gibas from Northland Securities. You may begin.

Greg Gibas: Great. Thank you. Thanks for taking the questions. Just a couple from me. First, how manageable are the rising fuel prices, and how much I guess are hedged there versus passed on to customers? And is there anything that you're implying in guidance with -- regarding fuel price changes?

Jason Bates: Yeah. Good question. So that is something that we've been paying close attention to. As a general rule when we project out the future periods, we don't assume fuel to be a benefit, we also don't assume it to be a huge headwind. We assume it to be relatively neutral to overall results. The reason we assume that is we've got structural filter-charge programs that are put into place with essentially all of our customers. And while there may be a slight detriment associated with the lag in those structural surcharges when fuel prices are rising, there's a commensurate benefit when they neutralized or reversed. And so we just don't want to get in the game of trying to predict which way fuel is going to go and then give you guys guidance based on that. So just to be clear, we're not assuming it to be a good guy, we're not assuming it to be a bad guy to the extent that it's a move dramatically one direction or the other with that. That would be something that we will touch on in our regular updates on the guidance for the year.

Greg Gibas: Okay. Great. That's helpful. And then if I could follow-up too on your M&A opportunities. It's something you've talked about last several quarters now. And I think you've been pretty clear on the playbook and strategy with Jonathan addressing that even on this call too. I just wanted to ask, the ones -- maybe the opportunities that you've been eyeing over the last several quarters, are there any developments there in terms of timing or how we should think about those opportunities?

Jason Bates: Yes. I'm looking at Jonathan like, do I have green light here? Yes or no? He kind of noded at me. So, yeah. There's definitely been some developments. And again, we don't want to put the cart before the horse here, but we've got a couple of opportunities that we're looking at very closely. We're well down the diligence path. And listen, we've been well down the diligence path. We talked about this on the last quarterly call. We've been well down the diligence path on 2 or 3 in 2021 and then something came along that we discovered a diligence and we weren't able to get past it and we walked away. So, we have the discipline, the same level of discipline today that we had last year. So that's not going to change. So we don't have anything to announce here, but I am cautiously optimistic, I use that word a couple of times now, about where we are at in the process, and the probability of us driving a couple of opportunities to fruition here over the next quarter or two. Jonathan [Indiscernible]

Jonathan Shepko: I think the team would be pretty disappointed if we did do at least a few [Indiscernible] acquisitions this year.

Greg Gibas: Okay, great. Look forward to updates there and I'll take the remainder of my questions offline. Thanks, guys.

Jason Bates: Thank you.

Operator: And our next question comes from the line of Barry Haimes from Sage Asset Management. You may begin.

Barry Haimes: Thanks very much. And great quarter and year. I had questions on two different topics. The first one is the revenue guide and you already talked about rate within that being up mid-single-digits. Is volume up mid-single-digit as well and is the truck count -- average truck count for the year assumed to be similar? And then on the rate part, you mentioned the mid-single-digit assumption. But in terms of contract rates that you're getting currently over the last month or two, what -- would those be in line or greater than that number? That's the revenue questions.

Jason Bates: Great question. The mid-single-digit assumption that we talked about is really on like-to-like opportunities. There is going to be a mix component that comes into play in our business as we've evidenced over the last couple of years as we've talked about the movement and how we shift assets to different end markets. But when we think about what we're going to be going to customers with and striving to make sure we're receiving to be able to take care of our drivers, that's that mid-single-digit number. We are anticipating some slight volume growth, but it's low single-digits volume growth. We're not getting too out ahead of our skis on that front. The other thing is with regard to your question about trucks, we did coal out some trucks this year. And so if you take the starting truck count and the ending truck count, there has been a reduction over the course of the year. And we're not projecting to have any meaningful growth, organic, let me clarify, organic growth in the fleet this year, so that also need to be taken into consideration when you look at the year-over-year revenue guide.

Barry Haimes: So the average truck count would be down low single-digits for the year then?

Jason Bates: Yes. We had a slight moderation from the beginning of the year, this year, to the end of the year. And again, there are puts and takes with owner-operators and LPs coming on board. So it's hard to predict perfectly. I would tell you it's probably going to be relatively flat to maybe slightly down year-over-year, assuming that we don't have a lot of owner-operators and LPs that come onboard, and that's our assumption right now.

Barry Haimes: Got it. And then the other topic I had a couple related to free cash flow and CapEx. The free cash flow last year, the way I think about it, which includes all the CapEx, financed or not, is -- was 84.9, and you said there's about 25 million that slipped in terms of CapEx. So is the right way to think about it, how'd you spent that money 60 - ish would have been the true free cash flow number for the year? Is that about right?

Jason Bates: Yes, that is probably the right way to think about that.

Barry Haimes: Got it. And then the CapEx -- to make sure I understand the slide, the net CapEx guide of 160 to 170, is that total CapEx net of equipment sales but before any financing?

Jason Bates: Correct. That's right. And then the cash CapEx guide that we gave is after financing.

Barry Haimes: Right. So if I took the call at 165 less the 25 that slipped, you'd be at 140 normalized, which is up a lot, I think, compared to last year, right?

Jason Bates: Yeah.

Barry Haimes: So is that -- are you just trying to get the average age down? Could you just talk through what that change is all about? Thanks so much.

Jason Bates: Yeah. No problem, Barry. Great questions. The one other piece that you need to take into consideration is the technology investments are roughly $10 million that we talked about. They are more around the transformation initiative that Jonathan touched on. So I think if you think that midpoint of $165 million takes a $25 million off from the timing shift, and then the 10 off for the transformation -- one-time transformation list, you get $35 million off that $165 million down to $130 million, which is not that far off of what we've -- normally you're going to see something that's going to range -- because as you know, Barry, having been in the industry a long time, it depends on what you bought 5 years ago. And so, you have ebbs and flows. We're typically going to be somewhere in that 100, 105 on the low-end upwards to 130, 135 on the high-end as you go through the five-year cycle. So this would be a slightly higher year, but I don't want anyone walking away feeling like it's because there's a bunch of deferred maintenance CapEx that we're doing. That's not the case at all. We've actually done a lot of things wrong in the history of Daseke. But one thing we've done an okay job at especially over the last few years, our CEO has been on top of, is making sure we're making the proper investments in the fleet. And so we've done a pretty good job there.

Barry Haimes: Great. Thanks so much and good luck on the year.

Jason Bates: Thank you, Barry.

Operator: Thank you. I'm not showing any other further questions in the queue. I'd like to turn the call back over to Jonathan for any closing remarks.

Jonathan Shepko: Thank you, Victor. I'd like to thank everyone for your time today. We look forward to continuing a part of a better we've generated alongside our broader transformation. We thank you for your commitment, confidence. We look forward to translating the market opportunities facing us today into profitable returns and consistent growth for our stakeholders. Thank you.

Jason Bates: Thanks, everyone.

Operator: And this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.