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spk02: Good morning, everyone, and thank you for participating in today's conference call to discuss DASI's financial results for the third quarter ended September 30th, 2021. With us today are Jonathan Shepko, CEO and board member, Jason Bates, EVP and CFO, and John Mischel, Vice President of Treasurer and Investor Relations. After the preferred 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 would like to turn the call over to John Michelle, Vice President of Treasury Investor Relations, who will read the company's safe harbor statement within the means of the Private Securities Litigation Reform Act of 1995 that provides important conscience regarding forward-looking statements. John, please go ahead.
spk01: Thank you, Valerie. Please turn to slide two 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 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 Daske's business, are based on management's current estimates, projections, and assumptions that are subject to risks and uncertainties that could cause 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 to 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. Reconciliations 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 Dasky website, www.dasky.com. In terms of the structure of our call today, Jonathan will review the highlights of the quarter and discuss our flexible business model. Jason will then walk through a financial review of the quarter, and then Jonathan will come back to wrap up our remarks with a few closing comments before we open the line for your questions. With that, I'd like to turn the call over to Dasky's CEO, Mr. Jonathan Shumkin. John.
spk05: Thank you, John. Good morning, everyone. Let me begin on slide three, where I will outline a few of the notable takeaways from the third quarter. Dasky delivered another quarter of strong operational financial performance, as evidenced by the meaningful improvement to our profitability metrics, including our operating ratio, which for this third quarter was 90.5%, or 88.7% on an adjusted basis. Resilient demand and robust freight volumes across our industrial end markets extended the strong freight environment, contributing to a 13% improvement in revenue with a 19% improvement in adjusted EBITDA, which was driven by execution against our operational initiatives this quarter versus last year's third quarter. While these industry dynamics remain supportive for our business on a forward-looking basis, Continuing to opportunistically convert these rates into strong returns for our company and our shareholders remains the priority. For the third quarter, Dasky converted this revenue growth into adjusted EBITDA of $68.3 million, modestly bettering our Q3 2020 adjusted EBITDA margin to post a 16% margin this quarter. Adjusted diluted earnings per share ex-EVITA at $0.43 was a 79% improvement compared to last year's third quarter. It's important to note that these 2020 third quarter comps were each company records at the time of their print. And four quarters later, we continue driving this culture of improvement, even in the face of industry-wide challenges such as truck equipment and driver shortages. The last point I would like to acknowledge is really one that speaks to our relationships. They're not expressly observable in the headlight financials. Strong relationships with our drivers, vendors, and customers are fundamental to our business, and investing in those relationships across cycles has positioned us with a resilient and sustainable business. It's no secret that this industry is facing some legitimate headwinds, from supply chain issues afflicting the OEM to an ever-shrinking driver pool. And though we believe demand will continue to do its part in propping up rates well into next year, as we continue to execute decisively, our ability to lean on our longstanding relationships will position us to continue to drive strong margins and improve cash flow while also ensuring our customers have the capacity they need to properly manage their businesses. Before turning the call over to Jason to offer more detail around our financial performance for the quarter, I would like to take a brief moment to speak to an aspect of our operating model that played a critical role in our success this quarter. Please turn to slide four. On our last call, we spoke about priority to institutionalize our company and the fundamental shift of our mindset from one that historically relied on the performance and capabilities of single siloed operating companies to one that emphasizes the collaboration and coordination of our operations to execute as a highly functioning network. And we provided some high-level contours around our mission to rebuild our business to function within this network model, which will provide additional opportunities to better leverage the scale, capabilities, and footprint of our entire platform to better service our customers. A key tenet of this approach, however, is the flexibility inherent in our business model, one that we believe will lead to enhanced stability and resiliency and will ultimately deliver long-term profitable growth. Across our flatbed specialized business segments, the positions of strategic relevance that we maintain within each of our end market verticals, which span the gamut of industrial-facing subverticals, provide us with frequent opportunities to optimize our financial objectives by making targeted real-time decisions around asset deployment. Given that each of these end markets has its own respective cyclical and or secular tendencies, we are able to shift the supply of our capacity to most optimally balance the industry-specific demand or end market portfolio. We've talked at length about how diversity across both our end market verticals and our customer base delivers a portfolio effect that moderates volatility and allows us to concentrate the deployment of assets in areas where our capabilities are most value-added and thus most attractive from a rate perspective. This is clearly shown in our last several quarterly results. However, the competitive advantage of our network-based operational structure extends beyond simply this portfolio effect and includes other compelling features, such as the elasticity of our operating model. During the third quarter, as the market faced an even tougher supply-side environment, brought about by equipment and driver shortages, Gatsby was able to navigate this challenge by leaning more heavily on our asset-like strategies. These periods of market imbalance offer opportunities to highlight Gatsby's unique blend of asset-based and asset-like capabilities, and our third-party logistics platform, which functions within our operating model as a shock absorber, was critical in delivering on our commitment to service for our customers. As we saw in Q3 when market capacity was tight, as we flexed our company assets to the highest and best use, we relied on our owner-operator third-party logistics capabilities to backfill our fleet, thereby supplementing this incremental capacity that we were able to offer to our customers. And while this transient shift and mix toward asset-light strategies to accommodate this incremental freight demand results in lower incremental margins against those asset-light strategies, we believe that supplementing with our asset-light offerings enabled us to ensure that we continue to meet the demands for valued customers, maintain our market position, and maximize our freight capture within our target verticals. In times when the freight environment is eventually tighter and excess freight isn't as prevalent, we will shift our mix in favor of asset-based, reducing our reliance on asset-light brokerage offerings, and reallocating more freight to our more profitable owned assets. To that end, we will continue to strategically flex our operating model in a way that positions DASTi to deliver outperformance across market cycles. opportunistically taking advantage of dislocations in supply, demand, and balances to capture superior returns for our shareholders. With that, I will now turn the call over to Jason Bates to review our second quarter financial performance. Jason?
spk08: Thank you, Jonathan. If you all please turn with me to slide five, we'll have a high-level review of the consolidated results for the third quarter. This quarter's results once again demonstrate Dasky's ability to execute on a strong and improving market backdrop. In the quarter, we continue to see a sustained uplift in traditional construction-related materials, as well as our steel and high-security verticals, which have continued their positive momentum since the beginning of the year. This strong demand has been a key contributor to the heightened freight rate environment in the industry. Daske delivered revenues of $424.6 million for the quarter, up 13% compared to revenues of $375.8 million in last year's third quarter. As a reminder, we divested the Avita business in 2020, and we believe the financial details excluding Avita are the most relevant and reflective of how our team thinks about and manages the business. So we will be focusing on the results excluding Avita on this call. Over the last couple of quarters, we highlighted that our revenue performance had begun to pull more closely in line with where we would have expected to be absent the COVID-19 pandemic headwinds. This sentiment has continued through the third quarter as demand further reflected in improving industrial end market in the verticals that we support. Our team delivered adjusted net income of 30.1 million or 43 cents per diluted share in the quarter. Adjusted EBITDA excluding EBITDA of 68.4 million grew by almost 22% compared to the third quarter of 2020, which as you may recall, was an unusually strong quarter in and of itself. These most recent record quarterly results were driven largely by the continued positive traction and improved efficiency of our operational execution, coupled with growing freight rates and demand in the flatbed segment. At the combined operating segment level, our consolidated adjusted EBITDA results of $74.7 million were up 12.5% versus results of $66.4 million in last year's third quarter. This adjusted EBITDA growth is particularly notable as it exceeded the normalization of what were unusually high margins associated with our atypically strong wind energy project revenues in the year-ago period. I would highlight that while driver recruitment and retention has continued to be a headwind throughout our industry, contributing to higher operating costs cited by many, we are pleased to report that our driver turnover rates continue to remain significantly below the industry average. Our driver retention trends highlight the excellent work our team has done and make each of our opcos an attractive work destination for our driving professionals, where we are dedicated to getting them miles, providing them with market competitive pay, and above all, focusing on getting them home safely. This prioritization of our workforce remains a key area of focus for our company. and we have implemented targeted pay increases to ensure appropriate compensation for our driving associates in conjunction with the higher freight rates we have experienced from our customers, given the very tight supply and demand imbalance present in the marketplace today. Finally, I'd like to highlight the continued progress we have made on reducing the corporate overhead burden on the operating companies, as supported by the 27.3% reduction in this expense category versus last year's third quarter. While we did drive reductions in various corporate expense categories, this effort was supported by financial benefits derived from our DACI fleet services and insurance entities, which outperformed expectations in the quarter. With that, I'd like to walk you through a detailed view of our results at the operating segment level. On slide six, we present our specialized segment results. Specialized segment revenues were $244 million, up nearly 4% versus the prior year, driven by strong operational execution that offset the lower fleet size and strong industrial demand. On slide seven, we detail our specialized segment, adjusting for the divestiture of our Aveda business as previously discussed. Our specialized segments adjusted EBITDA came in at $44.1 million, which was down slightly from the prior year's quarter. We saw a similar trend in the adjusted EBITDA margin, which came in at 18.1% for the quarter. This was predominantly a function of a shift in mix as we experienced the year-over-year reduction in our wind energy business, which carried unusually strong volumes and margins in the third quarter of last year due to the supply chain disruptions, creating tough year-over-year comparisons. However, In spite of the tough comps, I'm pleased to report the team was able to improve rates across the specialized segment in the quarter, coming in at $3.41, which was up 3.9% for the segment when compared to $3.28 in the third quarter of 2020. This broad rate strength manifested itself in various end-market verticals, including but not limited to construction, high-security cargo, and commercial flat glass, and helped offset headwinds associated with the absence of the aforementioned high-margin wind energy project revenues from the prior year's third quarter. This is yet another example of the resiliency of our diversified portfolio model, which enables us to flex up and down into different verticals to service the needs of our customers and maximize the return on invested capital for our shareholders. Our operational work, coupled with fleet rights sizing, which was done to drive enhanced efficiency, optimization, and utilization of our assets, has continued to benefit the specialized segment, as evidenced by the revenue per tractor results of $70,300 versus $67,500 in last year's third quarter. We have a hard-charging team in the field and are impressed with their ability to continue to execute evidence by driving yet another sub-90 operating ratio for the segment, which came in at 87.9 for the quarter, and the adjusted operating ratio coming in at 86.9. On slide 8, we detail our flatbed segment results for the quarter. We generated flatbed revenue in the third quarter of $184 million, which increased 27.3% from $144.5 million in the prior year quarter. We've been well-positioned to capture growing demand across a number of industrial and markets served by our flatbed business, where this favorable demand backdrop combined with our business improvement initiatives and brokerage business has translated into profitable results. The verticals where we experienced a surge in demand this past quarter included steel, construction, as well as agriculture. As noted, flatbed demand across the industrial market continues to grow with each coming quarter, which ultimately was a key driver to the robust rate environment we continue to experience. In the quarter, we were able to generate a 32.5% year-over-year increase in our rate per mile. This improvement was further reflected in revenue of $56,000. per tractor metric, which increased from 43,000 in the third quarter of last year, as our more efficient fleet operations captured those improving market rates. The segment's adjusted EBITDA results of 30.7 million grew by nearly 62% compared to the results of 19 million in last year's third quarter. This stronger adjusted EBITDA performance helped the segment secure EBITDA margin growth of 360 basis points, expanding to 16.7%. Finally, the segment's operating ratio improved 510 basis points to an 88.5, with the adjusted operating ratio coming in at 87.7. Once again, we want to highlight the impressive execution of the team in delivering sub-90 operating ratio results in a challenging operating environment. Turning to slide nine, I'll take a moment to speak about our cash flow performance and provide an update on our CapEx outlook. Through the third quarter, Dasky has generated $115.7 million in net cash from operating activities. Cash CapEx was $34.2 million, and we collected cash proceeds from the sale of equipment of $47.9 million. This resulted in free cash flow generation of $129.4 million year-to-date. CapEx financed with debt or capital leases has totaled $55 million, bringing in net cash after financing of $74.4 million year-to-date. On the right-hand side of the slide, number nine, you see a snapshot of our updated capital outlook for the year. As Jonathan mentioned at the outset of the call, sourcing new equipment has been a challenge felt industry-wide and has resulted in delays in our ability to backfill portions of our fleet as we have sold off older equipment. This truck shortage dynamic is expected to continue forward into next year, and thus our capital spend in relation to new equipment has been muted and will likely be pushed forward into subsequent periods. If you look at the midpoint of our original 2021 net capex guide of $105 million, And you take into account the roughly 20 million of incremental sales proceeds above our original plan due to a strong used equipment market combined with slightly higher than planned dispositions as we have cleaned up the fleet. And then you factor in roughly 20 million of unanticipated CapEx rollover, which will spill into the first part of next year. You arrive at an updated 2021 net CapEx figure of approximately 65 million. with an anticipated range of 21 to 26 million coming in the fourth quarter. So with that, I'll go ahead and hand the call back over to Jonathan to offer a few final thoughts. Jonathan?
spk05: Thank you, Jason. You'll turn with me to slide 10, please. I'd like to conclude the Prepare to Mark segment of this call by walking you through key components of our value proposition strategy, one that we expect will provide Dasky and internal investors with opportunities for outsized growth through the foreseeable future. When we speak about multiple ways to win, we would like you all to appreciate that our success is in a binary proposition. Delivering superior returns across market cycles doesn't simply hinge on a single end market, business segment, or strategic initiative, nor is it contingent on a series of events all going the right direction. Instead, we believe there are a number of highly credible, highly attainable opportunities that are each capable of driving meaningful incremental value to our shareholders. But we also believe that this DASCII team is well-positioned to capably drive value from all five of these opportunities collectively. First off, our focus on continuous improvement. As we've demonstrated since our transformation began more than two years ago, and now delivering on our commitments to the market for a seventh consecutive quarter, while consistently posting year-over-year improvements to our operational KPIs and our profitability measures, we have embraced a renewed focus on operating income, earnings, and free cash flow. We have successfully demonstrated that this team is capable of executing on thoughtful but disciplined approach to implementing business improvement plans, operational integrations, and cross-platform optimization. And we are finalizing our playbook to address the next phase of our transformation, wherein critical system upgrades and additional consolidation within our Opco fleet will drive further improved efficiencies, a playbook which we intend to begin to share more specifics about early next year. Secondly, as we mentioned on our last call, we have changed our strategic lens from one that focused on trailer-centric decisions to one that is grounded in industrial in-market emphasis. In doing so, and after valuing the opportunity in both driving even only modest market share growth in current in-markets, as well as the prospect of entering new adjacent in-market verticals, we believe there are substantial gains to be had. With this more decisive focus on building market-leading positions by in-market vertical, we can now better target our engagement and marshal resources in support to these in-markets. With our differentiated scale, expertise, and asset underpinning, all supporting this country's industrial economy, Dasky wields a tremendous competitive advantage that we will leverage to drive sustainable organic growth and attractive industrial-facing in-markets. Next, let's spend a moment on M&A. Dasky is a platform. In North America, Dasky is the largest specialized and flatbed carrier, and we are a top 15 truckload carrier. The thesis for industry consolidation is still found. With estimates sizing the flatbed and specialized trucking sectors as high as $150 billion, it is a substantial subset of the broader transportation and logistics industry, though it remains highly fragmented. While there are less than 25 companies with more than 1,000 trucks, there are approximately 350 companies with 100 to 1,000 truck fleets, but a staggering 50,000 plus companies with less than 100 trucks in their fleet. That's 99% of the market. We have built a team, a process, and a proprietary pipeline of actionable opportunities. We will now begin to consolidate with a focus on this 99%. We will do M&A very differently this time, with an emphasis on full cycle earnings and free cash flow, looking for opportunities to expand our market relevance and select industrial end markets, looking for opportunities to complement and supplement our scale and capabilities to better service our customers, and acquiring targets in a manner much more in keeping with the traditional consolidation play while preserving the brands, the talent, and the culture whenever appropriate. Next, we move over to secular capacity tightness, which we believe will continue into the foreseeable future. If we look at either side of the supply-demand equation, We believe there are reasons why neither side could practically serve as the catalyst to balancing this equation anytime soon. We have seen strong, sustained pickup on the demand side, driven by steel, building materials, and construction. On the supply side, both the driver shortages as well as the supply chain issues plaguing the OEMs provide a natural ceiling, preventing substantial swing capacity from quickly coming online to meet the robust demand. Even more nuanced is the supply-demand imbalance for flatbed and specialized segments given the specialized nature of the drivers, trucks, and equipment we rely on. Though it does create challenges, we believe the net effect will continue to be a healthy rate environment for the foreseeable future, wherein these rates will, at a minimum, keep pace with any inflationary variable cost creep. And finally, the prospect of a longer-term tailwind for the industrial economy to Dasky Services, the $1 trillion infrastructure spending bill. which we believe has the potential to continue to serve not only as a backdrop for rates, but also extend the runway of this healthy rate environment for those carriers such as Dasky that touch the building materials and construction and markets for many years to come. With that, I'd like to conclude our prepared remarks for this morning, and I'm excited to turn this call over to our operator for your questions. Valerie?
spk02: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touch-tone telephone. To ask a question, please press star then 1. One moment, please. Our first question comes from Jason Sittle of Calwing. Your line is open.
spk04: Hey, thank you, operator. Gentlemen, good morning. I wanted to focus a little bit on your rates here in the quarter and look at them from both specialized as well as the flatbed perspective. Rates obviously strong up year over year, but specialized on a sequential basis had a big increase in the third quarter here. Could you walk us through some of the things that kind of pushed that? Was there a big mix issue that really took us from 66.7 per tractor to 70.3?
spk08: Yeah, so good question, Jason. So, yeah, on the specialized side, we'll start there. You know, we kind of highlighted the year-over-year tough comp, right, being the wind energy. And I think we all kind of were anticipating that this would be pretty tough to have an improving rate environment in the face of that tough comp. That was down meaningfully year-over-year. The end markets that actually did fairly well and were key contributing factors to both the sequential and year-over-year improvement that we realized in the quarter were really the construction, kind of high-security cargo munitions business that we do, as well as some of the commercial fly glass, which all, you know, there was a lot of end market strength in those spaces that helped drive some of those rates that kind of helped offset the pressure that we saw from the prior year's tough comps.
spk04: Okay, that's great color. And then conversely on the flatbed side, it looks like it was relatively flat sequentially. It was just up a hair in terms of revenue per tractor. Was anything holding that back? Because it felt like the market, the overall trucking market was probably up a little bit more sequentially from Q2 to Q3.
spk08: Yeah, I think when you look at the kind of outpaced improvement that we realized between the first and second quarter as kind of the starting point for then looking at the second to the third, I think that's an important data point to just kind of keep in mind. There wasn't anything particularly noteworthy in the flatbed business that detracted from. It's just I think we got a little bit more a little earlier, and then we're able to sustain that as we moved into the third quarter.
spk04: Okay, that makes sense. And how should we think about these numbers as we go into 4Q for each division?
spk08: From a rate perspective, is that what you mean?
spk04: Yes, rate perspective, yes.
spk08: Yes. I mean, there's obviously a normal seasonal dip, right, that happens. You know, Q2 and Q3 are really high demand, low capacity availability, which kind of pressures rates favorably for those that can support the customers, which we experience here in Q2 and Q3. Four-in-one, typically you see a seasonal slowdown. You know, it's a time where you're retooling equipment. You've got drivers that are taking time off, and so that all plays into it. I will tell you... We're cautiously optimistic based on where we're sitting today. I think you're probably reading the tea leaves as well about the demand hasn't exactly disappeared and the supply is not coming in anytime soon. So I don't want to give anyone false hopes or false impressions that it's going to continue to be as strong through that seasonal slowdown, but we're cautiously optimistic about what trends we might be able to see here through Q4 and Q1.
spk04: That's good to hear that. I wanted to switch over. You sort of touched on a little bit about sort of that lack of capacity coming back. Very hard, as you referenced, to get new equipment. People are running older equipment. What are the OEMs, the partners that you work with, what are they telling you in terms of the ability to push new equipment out through the system? And then when you get the new equipment, are you finding that a lot more are not roadable right away and that you're sending them back?
spk08: Yeah, great question. Jonathan?
spk05: Yeah, I mean, look, Jason, we really view certain critical vendors and suppliers as strategic relationships, and as such, we've got way in front of this market, and we've had conversations with the OEMs whose equipment really we rely on, and they've given us assurances that they're going to be there for us in 2022, so You know, we think that the challenges are fairly widespread across the industry in terms of visibility on new trucks, new trailers, but we've had, you know, top-to-top conversations with the OEMs, and they've given us their assurance that given the importance of Dasky to their respective businesses and the value of the relationship across market cycles, that they're going to be there for us. So we don't anticipate any meaningful disruptions related to some of these supply chain issues some of our competitors are dealing with.
spk04: Okay. I guess let me – I don't want to hog up all the questions here. Let me just ask one more on the M&A side. You know, it was brought up that you're taking a slightly different approach at it. What about the approach of what's a good fit in terms of end markets and type of company that you're looking for? Has that really changed other than sort of now you're focused more on free cash flow and stuff like that?
spk08: Yeah, no, I think, you know, kind of like Jonathan was alluding to, that is going to be a huge part of how we think about this going forward. I mean, the old kind of Dasky perspective was, hey, it's about growth, right? And it's about chasing, you know, deals and growing the business. that got us to where we are today, that we've got really good bones to kind of build off of. But now we're kind of refining that a little bit and saying, listen, we want to be strategic in terms of making sure that we're going after kind of defensible niche and market segments where we can, for lack of a better term, be kind of a price maker, not a price taker, right? We want to play in spaces where we can have a meaningful market presence. And I think the uniqueness blend of our skill set, our capabilities, our diversified equipment portfolio lends itself. And then not to mention our professional drivers that can do things that just your standard guy coming out of CDL school can't do. I think it really opens itself up to a great opportunity for further consolidation and our ability to leverage our scale in those end markets. So that is absolutely going to be a key tenant of the strategy as we think about M&A going forward.
spk05: Yeah, Jason, I just added that. I mean, look, we mentioned this on the last call too. I mean, it's really having some definitions and focus as to the type of opportunities we're going after instead of being much more kind of broad and agnostic and just trying to drive top line growth. So I think there's two parts to this. One is we truly have some focus and some purpose around our acquisition strategy now. The second part of that is really just kind of good old-fashioned diligence. What we're trying to communicate to the market and get in front of is really assuaging any concerns that this is the same strategy on top-line growth above all, and really mentioning that, look, we're thinking about full-cycle economics. We're thinking about accretion analysis with respect to earnings, with respect to free cash flow. We're making sure we're not inheriting any, you know, any deferred capex. And if we are, it needs to be reflected in the purchase price. We're looking at end markets, customer end markets. We're looking at points of origin. We're looking at lanes. We're seeing how all of that could help. We're looking at freight baskets. So, I mean, truly a much more extensive, much more holistic look as you really start to piece these companies together and supplement our fleet offerings. for our customers. So, you know, it's not really a – it wasn't meant to suggest a shift in what we communicated the last quarter or two, but just really emphasizing that this is a much more diligent, much more structured approach to evaluating opportunities.
spk04: Well, I think this new holistic approach is going to be one that investors are going to embrace. So I wish you guys the best of luck and appreciate the time as always. Thanks, Jason. Thanks, Jason.
spk02: Thank you. Our next question comes from Ryan Siddall of Craig Hallam. Your line is open.
spk03: Good morning, guys. Thanks for taking our questions.
spk08: Hey, Ryan.
spk03: Hey, Brian. I'm curious. I don't think it was asked or you commented on it, but no guidance. Historically, you had a precedent of doing that every quarter. I didn't see an update. I guess is this the new precedent going forward, or can you comment on, I guess, is the old guidance maintained here?
spk08: Yeah, we had kind of a little going bet on how long it would take before that question was asked. So you won, Ryan. Yeah, so I think from our perspective, there's a lot of moving pieces out there right now. We definitely, you know, I think if you recall last quarter, our guide was that, you know, Our first and second quarter results, we expected almost kind of a reciprocal for third and fourth quarter. With the third quarter coming in slightly better than we had expected, that's encouraging, right? I don't want anyone to assume that that means that we think therefore the fourth quarter is going to not be as good. So we're watching it. We're cautiously optimistic. It's a tough driver market. We've talked about some of the equipment challenges in terms of deliveries and things like that that could be slight headwinds. We're cautiously optimistic that if things continue to be tight that we could see, you know, a similar positive trend on the fourth quarter. But we do want to make sure that people still take into consideration and account for the seasonal component, the seasonal nature of our business, right? with the fourth quarter typically looking more like the first quarter, and the second quarter and third quarter kind of looking like each other. So no firm guidance at this point, but definitely not implying that we're expecting to underperform what we previously communicated.
spk03: Helpful. And then any comment on going forward once some of these things normalize? Is the plan to go back to guiding, or is this kind of a stepping away in the new norm?
spk08: Yeah, no intent to step away. Our goal is to be very transparent and help people understand kind of the plan, the vision, the direction we want to go. I think, as you guys know, we've been talking a lot about kind of rolling out a more a comprehensive three- and five-year plan, you know, in the form of kind of an investor day that we're kind of targeting early next year to do. We'd love to do that, you know, in person and get everyone together and kind of walk through that and provide you guys with a lot more transparency and visibility, you know, with regard to what we think the business is capable of achieving. But typically you'll see us kind of put out a full year guide at the outset of the year and then kind of give an update midway through. And that's what we've done in years prior. It's kind of what we're doing now. No hidden messages here by any stretch of the imagination.
spk03: Helpful. One last one and I'll turn it over to the others. You've talked about kind of overarching theme of better leveraging technology and data across the network. I know you said you'll share more. greater detail on kind of the go-forward opportunity early next year. But any update, I guess, on initiatives, and namely thinking the last several months since we last spoke here, last had an update. So technology, data across the network. Thanks.
spk05: Yeah, sure, Ryan. I'll hit that. I mean, from a technology standpoint, we're definitely going to kind of phase and sequence kind of the overhaul of our system stack. And so really kind of first on deck, is standardizing our TMS offering. Right now we've got 11 OPCOs and we've got 11 different TMS solutions. And I mean some of them have the same solution but much different versions. So we're going to really harmonize that. We think just by doing that we're going to have much better visibility across our OPCO fleet when everybody's on a standard kind of TMS solution. So that's the first one. We're doing some integration in back office So we're going to be rolling out an institutional kind of ERP back office solution that conforms with the one that we have at corporate. And so we're going to be doing that, which we think will drive a lot of efficiencies. And then the last one that we're going to be running kind of contemporaneously with all this is really a stopgap to a much more kind of holistic overhaul. It is really a data lake. Right now we have a lot of data. that we aren't accessing, we aren't using it, we aren't synthesizing it to make better real-time decisions. We've got varying levels of sophistication within our opco stable of how people use data. And so what we're going to do is really drive down a corporate initiative to capture all that data, really overlay analytics, and really start supplying our opcos and different functional areas within those opcos with real-time dashboards to make the right decision. So we think that all those is really a first step, kind of a balanced first step that the organization can kind of withstand and manage and still run their business. We think that's the right step. So we kind of view those as kind of must-have hygiene items. So that's the first leg of the system stack overall.
spk03: Thanks, guys. I'll turn it over to the others. Thanks, Ryan.
spk02: Thank you. Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then 1. Our next question comes from Bert Subin of Evil. Your line is open.
spk07: Hey, good morning. Morning, Bert. I guess just following up on that question, how do you think about M&A sort of in the middle of the other integration exercises you're doing? Do you think that'll be a challenge as you work to integrate the opcodes and try to build out a seamless tech experience, or is that an opportunity as you sort of you're able to integrate the new potential new acquisitions. You have like an understanding of how to do that, if that makes sense.
spk05: Yeah, we, so, so when we think about the systems, the systems upgrades, um, we're not, we're not doing all of those at once. So we're, you know, we're, we're very pragmatically sequencing this in. So we don't, you know, stress the entire organization all at the same time. Um, and, and those are, those are, that's a very different functional area. that will be involved in that process than the ones that will have the heavier lift as we kind of diligence evaluate, integrate, onboard targets. And so we think that there are a handful of OPCOs today that have kind of the wherewithal and the depth within the ranks to kind of onboard, tuck in acquisition targets. And so we're mindful of that in the sequencing of the respective kind of IT initiative lifts. And look, we have the ability to kind of put some of those targets, you know, on the bench, on the sidelines for now. But this isn't a, the technology initiatives aren't a, you know, for a single OPCO, they aren't a 12-month push, right? They're kind of a multi-month push, you know, three, four months. So it's not like we're taking an OPCO offline for 12 to 15 months and doing a full comprehensive kind of back-to-front, front-to-back ERP implementation. These are very select, very targeted points of our system stack that we're going to address. And so we think there's going to be plenty of bandwidth capability within some of these more robust optos to still make tuck-in acquisitions.
spk07: Got it. Maybe just, you know, in spirit of playoff season, can you sort of say where all of the integration exercises are, like, in terms of innings? I mean, is this? sort of, you know, middle innings, later innings? Like, you know, when is all of this, when is this conversation sort of behind us?
spk05: Yeah, look, what I can tell you is broadly what we're calling kind of the transformation, the transformation opportunity here is a step function improvement in the evolution and trajectory of the company. And I think that, look, it's a special opportunity for us that I think that the shareholders are going to meaningfully benefit from. And I think that rather than piecemeal this out over the next few to several months. We're really going to reserve the grand unveiling, if you will, for our investor day. I think we might have some updates to share early in the year, but what I can tell you is when you think about the broader transformation, which includes integrations, it includes the systems upgrades, and it includes M&A, I think you can think about this really as a 15 to 18 month push that'll probably commence right at the beginning of the year. And so we're, you know, I think that, you know, the current DASCI team is kind of a measure twice, cut once. And so we're, you know, we're nearing the end of that second measurement. We're, you know, dotting all the I's, crossing all the T's. And so I think that we're going to be ready really internally to start providing specific granular messaging to the OPCOs about this and really kind of getting all the, The chair is organized on the deck, but I think that you should think about this as not an overnight, hey, we're going to have all this benefit in Q1 show up. It's really going to be kind of a 15- to 18-month process that will kind of, quote, unquote, formally kick off at the very beginning of the year.
spk08: Yeah, and I think just to add to that, Bert, maybe a little bit more color, when you think about kind of the – business improvement initiatives that this company has undertaken over the last 18 to 24 months, that was really focused in and around stopping the bleeding and building kind of a stable platform so that we could consistently earnings and operational efficiencies and improvements, which we feel like we've been able to demonstrate, you know, over the last seven consecutive quarters. And so the last really six months or so has been kind of like, all right, now it's time to refine things and start making Dasky look like a true best-in-class operating company, not just a company that's not hemorrhaging. And so that is almost like a secondary phase to, and we're calling this the transformation phase, that where we're really going to start, you'll be able to have conversations with us, and we'll be able to give you real-time insights across our entire stable, whereas today, given the system challenges, it's not as easy and straightforward, and we'll be able to really, truly leverage things from a global perspective that we haven't been able to do in the past. It's really kind of taking it to the next level, but what I don't want you to hear is that that is going to impede our ability to continue to run a good company. That is kind of the table stakes that we've all talked about as a team is that we have a duty here and a responsibility to continue to deliver for customers, take care of drivers, and take care of employees, and drive returns for shareholders through this process. Does that mean we're going to be flawless and there won't be little bumps along the way? No. I mean, that's not what we're saying. But what we are saying is that that is a big part of how we're thinking about this when Jonathan references kind of measure twice, cut once. So just a little additional color for you.
spk07: Yeah, no, that's great. I really appreciate the in-depth answers there. Just one more question for me, sort of switching gears. How exposed is your asset-light portfolio to AB5, the regulation in California? Is that a major concern for you today, or do you think that only ends up impacting sort of pockets of the trucking market?
spk08: Yeah, I think people who have really heavy assets Dependence and commitments down there, that's something that there should be concerned about. When we think about the percentage of our business that domiciles there, that operates in and out of there, that will be directly affected by that, it's pretty small for us. But that doesn't mean that we're not paying close attention because what happens in one place can make its way to other places. So you've just got to keep an eye on it and make sure. consistency in all your processes and practices to make sure we're protecting everyone.
spk07: Great. Thank you so much for the time. Thanks, Kirk.
spk02: Thank you. Our next question comes from Greg Gibbous of Northern Security. Your line is open.
spk06: Morning, guys. Thanks for taking the questions. Congrats on the results. You know, I guess from a high level general market dynamics heading into 2022, you know, I know you don't want to give maybe absolute guidance or anything, but how are you thinking about some of those high level dynamics on a year over year basis? And then maybe in addition to some of the internal improvement, you know, operational improvement dynamics that you've been focusing on as well, you know, how would we kind of expect that to benefit financials next year?
spk08: Yeah, I mean, our goal, as we kind of touched on in the last question, is really to make sure that we're continuing to move the dial up and to the right. That's the plan. And there's nothing that we're going to embark upon that is going to inhibit our ability to do that. This year has been a great year. The team's executed very well. We're going to continue to focus on driving that improved execution. While we're not prepared at this juncture to give firm guidance, I would tell you that that quarter to kind of drive improvement vis-a-vis the prior year's similar quarter. And that's kind of how we think about it. I don't want us to get out over our skis because we are going to have some blocking and tackling and some tactical things that we're going to be doing that, you know, we just need to factor that in that they can be improved. slight headwinds or disruptions to the business, but we don't want them to be such that they keep us from being able to continue to drive those year over year improvements. So I think as we think about it, given the likely supply-demand challenges that will continue to be there in 2022, given everything we've talked about, we think that the market sets up well for us to be able to undertake these exercises and continue to provide the right level of service to customers and returns to shareholders as we think about 2022.
spk06: Got it. Very helpful. Um, and you know, we talked about this near the beginning of the pandemic, but, um, wanted to ask if you're seeing any impact from, you know, the long backups at many of the ports in the U S and if so, to what degree?
spk08: Yeah. I mean, it's crazy. I, we have a couple of our team members who live down in that neck of the woods who, one of them sent me a picture yesterday of all the ships just parked out there. I just, I, it was just, it's mind boggling to see it. Um, I think there's no question that it's having an effect on the overall, you know, the whole industry and the entire, you know, domestic space, right? It's a question of how is that going to flow through and what's it going to look like when it does and what kind of – trickle-through effect will that have on inventories, on consumer spending, on, you know, supply and demand. But, yeah, it's a real issue and something that we're all paying close attention to to see how that's going to play out.
spk06: Got it. And, you know, wanted to follow up, too, on the driver market. Seems like you're managing that pretty well. You know, wanted to ask if You talked about having better retention than the market. What do you attribute that to? Is it premium benefits to remain competitive? How are you thinking about the driver market?
spk08: For us, we talked about this in the past. It's one of the things I love about Dasky. One of the reasons that I was really attracted to the opportunity to be a part of this team is is what we do is different than kind of where I've spent most of my career in that 53-foot, you know, vanilla drive-in space where, you know, drivers are bouncing around, not sure they want to be drivers. We've got a very unique set of customers, equipment, and professional drivers that are very technical. This is their career of choice, right? They've gone out and got advanced certifications and, and capabilities to do things that other people just can't do. And so I think there is a little bit more of a stickiness to this business model. I mean, not to mention the fact that we make sure we take care of our drivers, right? We make sure that they make a very solid wage that they can take home to their families. And, you know, I think at the same time, The diversity of kind of our portfolio lends itself to people having kind of career path development here at Dasky, whether it's from being a company driver to being an NLP kind of owner-operator on training wheels to being a full-blown owner-operator, or if it's getting into diverse different types of freight that they can haul and things that really are interesting to them. And so I think there's a lot of things that come into play. And I don't want to discount, you know, we've talked a lot about further rationalization of the Opco network, but I don't want to discount the impact of that our Opco teams and the relationships that they have, that those drivers have with those different brands and what it means to them to be a part of those companies, that's very important and it plays a big role in our ability to attract and retain drivers and to be able to be nimble when things change on the front line. uh, we're able to react and, and, and change. You don't have a bunch of people out in the field sitting there just waiting for someone at corporate on high to tell them what to do. They move and they react and they make sure they take care of drivers. And, and so I think there's a lot, it's a long answer to a short question, but there's a lot, the short, the short answer is there's a lot of different inputs there that all come together to kind of help us, uh, you know, provide a great work environment for our driving professionals.
spk06: Great. Yeah, that makes sense. Um, Last one from me, and I know you already provided a lot of comments on the M&A strategy. Appreciate that. But just kind of wanted to get a sense of how big of a priority that is. I think you said something like 10 actionable opportunities that you kind of have right now, and three are in advanced discussions. So, you know, pretty safe to assume we would see something in the near term.
spk05: Yeah, Greg, I think that's a safe assumption. I mean, look, you just you just never know with this market. We've got a lot of hooks in the sea right now, so we hope we're going to buy it. As we said on the last call, we actually had non-binding LOIs, a couple of them in place, and they ultimately fell away when we got into diligence. We made the right call, the tough call, and said, hey, this doesn't make sense. We have a couple that we're working on now, and if everything checks out and We can agree on terms. We'll close it if we can't. Again, we're going to be balanced and diligent. We'll walk away and look at something new. But it's a reasonably high priority, so I'd be shocked if over the next 12 months we don't get at least one or two acquisitions done.
spk06: Great. Sounds good. Thanks, guys. Thanks, Greg.
spk02: Thank you. Thank you. I'm sure no further questions at this time. I'd like to turn the call back over to Jonathan Shepko for any closing remarks.
spk05: Thank you, Valerie. Thanks again to everyone for your time today. We look forward to continuing the momentum we've generated, and we thank you for your commitment and confidence in our company. We look forward to translating the market opportunities facing us today into profitable returns and consistent growth for our stakeholders. Take care.
spk02: Thank you. Ladies and gentlemen, this ends today's conference. Thank you all for participating. You may now disconnect. Have a great day.
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