DSKE: Daseke pre-announces strong 4Q; Revenues and Adj. EBITDA above expectations

By Steven Ralston, CFA

NASDAQ:DSKE

READ THE FULL DSKE RESEARCH REPORT

EXECUTIVE SUMMARY OF RECENT EVENTS

‣ On February 7th, Daseke (NASDAQ:DSKE) preannounced select financial results for the fourth quarter and year ending December 31, 2018 and management provided financial guidance for 2019.
     • Revenues for 2018 are anticipated to increase 90%+ to approximately $1.61 billion with a strong contribution by the Specialized Solutions segment.
     • Adjusted EBITDA is projected to increase in the 87%-to-89% range to between $172 and $174 million compared to $91.9 million in 2017.
     • Shares outstanding increased rough 45% from 44,480,232 to about 64.454 million.
     • Management provided financial guidance for 2019.
          ∙ Management expects total revenues to increases to the range of $1.8 and $1.9 billion.
          ∙ Adjusted EBITDA is anticipated to increase to the range of $200 and $210 million.
          ∙ The net loss attributable to shareholders is anticipated to be in the $14-to-$22 million range.
‣ On January 29, 2019, a 13-G was collectively filed by Zazove Associates and Gene T. Pretti disclosing that 4,526,650 shares (or 7.02% of shares outstanding) were beneficially owned by the reporting parties.
‣ On November 6, 2018, concurrent with the company’s release of third quarter financial results, management stated that despite being committed to its industry consolidation strategy, the company’s acquisition program had been put on hold while management concentrates on improving the company’s operations, organic growth and free cash flow generation.
‣ The company continues to build awareness by attending Analyst Conferences:
     • Seaport Global Energy & Industrials Conference (August 29, 2018)
     • Liolios 7th Annual Gateway Conference (September 6, 2018)
     • Cowen 11th Annual Global Transportation Conference (September 6, 2018)
     • 2018 Buckingham Industrials Conference (September 20, 2018)
     • 2018 Southwest IDEAS Investor Conference (November 14, 2018)
     • 9th Annual Craig-Hallum Alpha Select Conference (November 15, 2018)
     • Buckingham Best Ideas Conference (November 15, 2018)
     • Stifel Transportation & Logistics Conference (February 12, 2019)

Chris Easter Appointed Chief Operating Officer

On January 16, 2019, the Board appointed Christopher Easter as Chief Operating Officer. With more than 30 years of operational experience in transportation and logistics roles, Mr. Easter initially will concentrate on generating organic revenue growth, expanding EBITDA margins and growing free cash flow.

Management’s Guidance for 2019

On February 7, 2019, management provided guidance for 2019. Total revenues are anticipated to grow to increase to the range of $1.8 and $1.9 billion while Adjusted EBITDA is anticipated to increase to the range of $200 and $210 million. Capex is budgeted to be the $65 – $70 million range.


View Exhibit I

Indicated Target

Based on comparative analysis that utilizes the valuation metric of EV/EBITDA, a mid-second quartile industry multiple indicates a share price target of $7.75.

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