Daseke Inc (DSKE) 2020 Q3 法說會逐字稿

Good morning, everyone, and thank you for participating in today's conference call to discuss Daseke's financial results for the third quarter ended September 30, 2020.

With us today are Chris Easter, CEO; Jason Bates, EVP and CFO; and John Michell, VP of Treasury 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 would like to turn the call over to Joe Caminiti, with the FRR Group who will read the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Joe, please go ahead.

Thank you. 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. The 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 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 adjusted EBITDA, adjusted operating ratio, adjusted operating income, adjusted net income or loss and free cash flow.

Reconciliations of these non-GAAP measures to the 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 Investor Relations tab of the Daseke website at www.daseke.com.

In terms of the structure of our call today, Chris will start with a review of our business operations and the progress we are making as we navigate through the pandemic environment and execute against our key strategic priorities.

Jason will then walk through a financial review of the quarter. And then Chris will come back to wrap up our remarks with a few closing comments before we begin to open the line for questions.

Now I would like to turn the call over to Daseke's CEO, Mr. Chris Easter. Chris?

Thank you, Joe, and good morning, everyone. On Slide 3, we outlined a few of the notable takeaways from what was an exceptional quarter for the company. We continue to make progress amidst a still challenging industrial marketplace. While some of our market segments continue to see headwinds related to the COVID-19 pandemic, our team has been agile and successful in response as we maintain a sharp focus on execution of the operational initiatives we put in place in the beginning of Q3 2019. The effects of the pandemic continue to drag on most of our industrial markets, but we are seeing some stabilization as well as sequential improvements.

We're seeing some strengthening of our top line performance, although it is still down versus the prior year. Our operating ratio, the primary indicator of our performance and operational efficiency, finished the quarter at 92.5%. This marked another record performance, eclipsing the record our team had just established last quarter of 96.5%.

On a GAAP basis, the company delivered $15 million of net income. The extraordinary efforts of our team in capturing the benefits of operational integrations, cost actions and better optimization of our assets, combined with a uniquely strong environment in some select end markets where we are the dominant player, were the driving force behind the strong operating income and adjusted EBITDA results. Both these important metrics represent quarterly records for the company.

Our improved financial results are translating into strong cash flow, delivering $156.4 million in free cash flow year-to-date, and a quarter-end cash balance of $189.8 million. This is up more than $110 million compared to last year's third quarter. This improved cash position provides us much greater flexibility and optionality as we continue to execute and reposition to drive greater shareholder value.

Our net debt ended the quarter under $500 million. This progress further demonstrates our cash flow-generating capability and our commitment to lowering our debt levels and deleveraging our balance sheet.

Overall, I'm very proud of the performance of the entire Daseke team, particularly given that these results came as we all continue to face the challenges of the ongoing pandemic.

It is important to note the resilience of our unique business model. We serve a diverse portfolio of industries in a broad array of customers, and this diversity served us particularly well in this quarter. Niche verticals like wind energy and high-security cargo boosted our financial results, as these markets delivered revenues that meaningfully exceeded prior periods. It is worth noting that our ability to capture these economics is a result of strategically positioning our company to take advantage of these types of environments, as our market leadership in these spaces is aligned with our philosophy of being there where it counts.

That said, our business model is not absolved from the broader headwinds presented by the ongoing pandemic environment, which continue to weigh on freight volumes. While we are encouraged by the pickup in demand since volumes troughed in April, we have been able to largely offset the depressed volume environment by maintaining our focus on building the best-in-class operations, along with the help of some of the tailwinds in the aforementioned markets.

Turning to Slide 4. We highlight some additional key financial results for the quarter. The results shown on this slide demonstrate the value of pulling the right strategic levers coupled with great execution by our team. We have successfully fixed the core business, and we'll continue pushing ourselves to realize the full potential of the Daseke model moving forward.

Jason will provide much greater color on our financial performance in a few minutes, but I would like to make a couple of additional points before handing it over to him.

Last quarter, we introduced our longer-term goal to deliver operating ratio results of 90% or better on a consistent basis. While this is a longer-term target, it is not merely aspirational. We believe our business model, capabilities and developing strategy will deliver results in line with this target over time. We must maintain a relentless focus on continuous improvement in order to achieve and operate at the sub-90 performance across market cycles. The leadership team we've been building to help drive this performance now includes our most recent addition, Daseke's first-ever Chief Information Officer, Jim Taylor. Jim joins us from Transportation Insights, and his background and experience will serve us well as we leverage technology to drive greater velocity and quality of decision-making across the company.

Our team's extraordinary efforts over the past year have positioned us to look much further into the future to capture even more of the trap value that exists within our organization as well as to pursue profitable growth on the new Daseke platform.

With that, I will now turn the call over to Jason Bates to review our financial performance for the third quarter. Jason?

Great. Thank you, Chris. If you'll please turn with me to Slide 5, where we detail our consolidated financial results.

In the third quarter, consolidated revenues were $375.8 million, down 17% compared to revenues of $450.4 million in last year's third quarter. However, keep in mind, we made the strategic decision to divest our Aveda business, which was focused in the oil and gas market earlier this year.

We have essentially completed that process at this time. However, we believe it is helpful, especially for evaluating and modeling the go-forward capabilities of our business to address our financial performance exclusive of that business impact on our results.

Excluding Aveda, our consolidated revenues were down 6% year-over-year. This top line decline was driven primarily by lower freight volumes in both our specialized and flatbed segments compared to the year ago period, as the impact of the ongoing pandemic continue to negatively affect the industrial economy and place downward pressure on freight demand.

In spite of the aforementioned demand softness experienced in the quarter, we were very proud of the team's ability to deliver $15.7 million of net income or $0.22 per diluted common share. Excluding Aveda, the team delivered net income of $17 million. Adjusted net income came in at $21.9 million, which was a significant increase when compared to $4.7 million in the prior year's third quarter.

Adjusted EBITDA of $57.6 million improved by 33% relative to the third quarter of 2019, when you exclude Aveda. And when you exclude Aveda, adjusted EBITDA of $56.2 million grew by 37% compared to the $40.9 million of results delivered in the year ago period. This improvement in just a year's time reflects the results from the operational integrations, corporate cost rationalizations, strategic fleet reductions and business improvement plans implemented over the past year.

Now before I move on to the segment results, I want to put these quarterly results in context. We are very proud of the team's ability to execute in the face of a pandemic. These impressive quarterly numbers are a direct result of a tremendous amount of hard work by a lot of different people, and highlights our team's ability to thrive in complex niche markets.

However, we would be remiss if we fail to highlight some of the tailwinds, which positively impacted the quarterly results. First, We had an unprecedented strength in both the revenues and margins in our wind and high security end markets, where supply chains were disrupted by the COVID-19 pandemic. We strategically aligned ourselves to be in a position to benefit from this dynamic by providing capacity and superior service to our customers to help them navigate these unprecedented challenges.

We estimate the incremental year-over-year benefit to adjusted EBITDA in the quarter from these activities to be roughly $15 million. Additionally, fuel continued to be a tailwind this quarter, and we also had the favorable impact of some short-term fixed cost reductions in response to the COVID-19 pandemic, which we don't anticipate to realize in subsequent quarters.

On the flip side, insurance continues to be a headwind, and will likely continue as such into 2021, potentially as much as a couple of million dollars per quarter going forward. And driver recruitment and retention is becoming increasingly difficult. Our goal as a team is to be as transparent with you as possible, so I share all this detail with you both to pat our team on the back for all the hard work, execution and strategic management throughout the pandemic, but also acknowledging that we had a couple of unusual benefits this quarter as well.

With that, I'd like to spend a few minutes taking a more detailed look at our segment results, starting with our specialized segment on Slide 6. We start here showing you the full segment results. However, given the wind down of the Aveda business, we believe reviewing our results, excluding Aveda as discussed previously, is more helpful.

This leads me to Slide 7, where we detail our specialized segment results, excluding Aveda revenues of $235.2 million were essentially flat year-over-year, but the segment's adjusted EBITDA results of $46 million materially increased, improving 44% versus the $31.9 million generated in last year's third quarter. EBITDA margins of 19.6% expanded by 600 basis points compared to 13.6% from the prior year's third quarter. Again, these results reflect a lot of hard work we have done to improve our business performance, combined with the tailwinds previously discussed. Specialized rate per mile increased roughly 9% to $3.28, up from $3.01 in the year ago quarter, while revenue per tractor of 67,500 grew by nearly 12% versus last year's result of 60,400.

Moving to Slide 8. We detail our flatbed results -- our flatbed segment results for the quarter. Flatbed revenue in the third quarter decreased 15% to $144.5 million, driven by weaker volumes aligned with broader macroeconomic weakness, partially offset by a marginal improvement in freight rates, which grew by roughly 2% to $1.94 per mile.

Our segment adjusted EBITDA results of $19 million declined less than sales or 9% compared to results of $20.8 million in last year's third quarter.

These results are indicative of the operational improvement work we have executed upon, evidenced by the 90 basis points of improvement to our EBITDA margins. This is further manifested when looking at the improvements in both our flatbed segment operating ratio and adjusted operating ratio, which at 93.6% and 92.8%, respectively, each marked healthy improvement.

Now turning to Slide 9, where we detail our balance sheet and free cash flow metrics. As of September 30, Daseke had $189.8 million in cash and total liquidity of $272.2 million, including the available borrowing capacity on our credit facility.

Net debt of $498.9 million has decreased $134.7 million year-over-year. What a difference a year makes. Our operating cash flows and capital expenditures on a year-to-date basis are displayed on the chart on the right-hand side. Through the first 3 quarters of the year, net cash provided by operating activities was $122.4 million.

Cash CapEx was up $18 million and cash proceeds from the sale of equipment was $52 million, which includes the divestiture of our Aveda business. This resulted in free cash flow generation of $156.4 million for the year. CapEx finance with debt or capital leases totaled $45.4 million year-to-date, resulting in net cash flows of $111 million. Improving operating income in the face of weaker revenues, with adjusted EBITDA dropping to net earnings has resulted in strong free cash flow. A key focal point in our transformation has been to improve cash returns. success thus far in this endeavor, supported by the transformational work we have executed upon over the last year has helped us lower our net debt and leverage, overcoming the substantial macro headwinds to deliver a stronger and healthier balance sheet.

From a guidance perspective, we anticipate Q4 CapEx to be somewhere between $25 million to $30 million net of proceeds.

And on Slide 10, you will see the clear improvements to our key balance sheet items. As we mentioned, the harder results of our transformational efforts have translated into much improved cash flow generation. This is, in turn, driving the consistent improvement in our cash position. which has stepped up sequentially every quarter, as indicated on the graph on the left-hand side.

In the near term, we intend to be prudent with our liquidity, allowing cash to build on the balance sheet and preserving the flexibility and optionality it provides, especially as we continue to navigate uncertainties in the broader industrial economy.

Having said that, we intend to be opportunistic, and we will continue to evaluate all options, seeking to pursue that, which will be in the best interest of our key stakeholders. Total debt also continues to improve, stepping down to $688.7 million at the end of the third quarter. We remain committed to not only continuing to drive improvement to our leverage metrics, but also reducing the actual dollar amount of debt we carry as we look to the future.

So with that, I'll hand the call back over to Chris to detail our outlook and priorities moving forward. Chris?

Thank you, Jason. I'll conclude on Slide 11, with a reminder of our 2020 priorities we outlined last quarter.

As we look forward to the final quarter of the year, we will continue to drive the momentum in line with our successes thus far over the trailing year. We will maintain a keen eye on the industrial economy and our end markets, making requisite adjustments to our business within the context of our overall strategy, while navigating the continued pressures of the global pandemic and its impact on the broader economy.

We will continue to prioritize the safety of our people and our customers as we have throughout this most challenging year. We'll also carry on with the execution of our operational excellence initiatives to include the development and implementation of additional actions as we move into 2021.

We will continue to operate our business in an efficient and optimized fashion, with a focus in mind to drive positive cash flow generation, helping further solidify our balance sheet and improve upon our existing financial strength.

And finally, we'll continue to invest prudently in our team from top to bottom, further developing the culture that has delivered strong success over the past year. While there are still uncertainties and volatility in the broader industrial market, we will carry on with the execution of our key strategic priorities and position Daseke as an even stronger market leader, with substantial growth opportunities as we emerge on the other side of this unique environment.

That concludes our prepared remarks, and I'll turn the call over for your questions.

(Operator Instructions) Your first question comes from the line of Jason Seidl with Cowen.

I wanted to talk about 4Q and how you think that's going to shape up. You're losing some onetime things in the quarter. The flatbed market, obviously, is probably not anything like some of the consumer side of the trucking business. How should we think about that as we look sequentially in earnings power?

Yes. Thank you, Jason. Yes, we're seeing continued strength in the fourth quarter, but we should caveat it that it's going to -- we are seeing some degree of normal seasonality you would expect. Our Q4 and Q1, guys you know, are typically slower. But we're still seeing a solid Q4 as we're moving in. I don't know, Jason, if you want to add to that?

Yes. I mean, I think there's a lot of moving pieces, obviously, Jason. But when you think about Q4 and the seasonal trends in Q4. October has actually been decent for in October, right? So just to keep that in context. So overall, we're actually encouraged by what we're seeing from a trend perspective. But we also have to adjust our kind of expectations based on what seasonal trends look like and accounting for some of the benefits that we saw in Q3.

Okay. And Jason, longer term, when we look at the balance sheet, you said you guys are obviously going to -- you're building cash for the near-term. But sort of what's your opportunity to pay down debt without any penalties going forward? And where longer term would you like to see sort of your debt ratios up?

Yes. Great question, Jason. I think we have the ability to prepay debt at any time. That's not the concern. I think the concern is, given the relative uncertainty out there, we just want to make sure that we preserve flexibility and optionality, right? I think you're going to see -- hopefully, people are starting to see that this team is capable of executing. And as we continue to earn the confidence, we think it may allow us to open up some doors, whether with regard to a more comprehensive balance sheet restructure, potential acquisitive opportunities. We're going to do the math. And whatever makes the most sense for shareholders, that's what we're going to pursue. And you know all the levers that are there that we can pull from -- with regard to how to utilize capital. And we're looking at all of them and running the numbers on them almost every week, trying to make sure we're making the right decisions.

Okay. That's great color. And then my last one is on CapEx here. You gave the numbers for 4Q. I know you probably haven't finalized 2021 yet, but directionally, how should we be thinking about CapEx on a net basis?

Yes. I actually almost ad libbed in the script because I was reading the script, I'm like, they're going to ask about 2021, so I might (inaudible) polo talk about it. So yes, the way we actually have done a first pass roll-up our entire team has worked together on it. As you know, we're still finalizing the plan for 2021. And I think a lot of us are still trying to figure out what's going to happen with COVID, what's going to happen with the election, what's that going to mean? So there's a lot of moving pieces there. But I will tell you...

If you find out, you can let me know, right?

Yes, exactly. And so I think from where we're sitting right now, a normal kind of replenishment CapEx cycle is in that $75 million to $80 million from a net perspective. That's kind of what we guided to pre-COVID. I think that's kind of a good place to start. Obviously, there's different moving parts there with regard to leases and different things like that. But I think as you think about preliminarily 2021, I think that $75 million to $80 million on a net basis is probably a good place to start.

Your next question comes from the line of David Ross with Stifel.

Just a little clarification on the tailwinds. You cited the benefit in wind and high security. Is that continuing into October when you referenced a strong October? Is there a potential that, that continues into next year? Or is it one and done, it benefited you in the third quarter, and it's not going to benefit you again?

I think that's probably to a degree a certain lift still in October for sure. But some of the onetime step, especially in the wind market, there were some unusually complex supply chain challenges that we do not anticipate repeating themselves in 2021 for sure. That doesn't mean that it all -- the wind per se dies off altogether, but it certainly won't present the kind of challenge or, in our case, an opportunity to solve complex solutions or is complex challenges for our customers. But I don't know, Jason, if you want to add anything else?

Yes, I think that's the right way to think about it. Again, seasonally, Q4 is when things really start to slow down for us. So again, we feel pretty good about October, but relative to historical October. So I just want to make sure we keep that in context. And so seasonally, fourth quarter, first quarter slower. Wind business, it's funny. She would probably kill us for saying this, but we had a long talk with one of the leaders of our operating units that really does a lot of this wind business. And she's like, "Guys, If I knew exactly what wind was going to look like in 2021, I would tell you, right?" So there's a certain degree of it that's different than most business because it's very project in nature. It's not like in my prior life where you've got 1-year contracts, 3-year contracts, and relatively predictable or forecastable volumes with customers. The wind business is very unique and is reliant on different bills and things getting packed. And so listen, what we can say is that the team has demonstrated an extreme capability of positioning themselves so that regardless of which way it goes, the -- they've got the relationships and the track record of delivering at a really high level of service. So if there's opportunity to be had or rest assured, our team will capture it.

And one other thing, just final thing on that wind, because it's interesting in our model that the ability to tap on sister companies and capacity for that type of work was evident also. And I think we similarly would see it in other segments and industries as we run into those kind of spikes that we can tap on our sister companies to extend our capabilities and reach when there are all those spikes in volumes.

And then, Chris, as you look across the book of business or Daseke's customer base, what do you view as the most important industrial markets? Either the ones that have not come back yet that would have the biggest impact, or the ones that you're watching most closely as we move into 2021 that could have the biggest lever on the business?

It's a great question. And there's been lots of interesting movements. But as a whole, a lot of them are still trending down as we know. But if I'm looking into 2021, where we expect to see maybe some more lift than it would be helpful is things -- areas like steel or heavy equipment, in particular, I think those are a couple of aerospace, too. Although aerospace to -- in the grand scheme of our business, is a relatively small piece in totality. It's been down very hard, and we're not expecting it to rise dramatically. But the steel and heavy equipment for sure would be a couple of areas that have been light, and we're expecting better things as we go into next year. Some areas that have recently demonstrated some positive at least sequential growth, although not necessarily -- not necessarily surpassing last year, roofing, gypsum, commercial glass, those 3 areas, in particular, have seen some pretty decent sequential growth in recent weeks and last month or 2.

Excellent. Then last question, just more of a clarification, Jason. You talked about short-term fixed cost reductions that are unlikely to last. Aren't there higher short-term cost too that are unlikely to last? And how do you think of those 2 netting out?

Yes. We just don't want you to think about those, David. No. Yes, you're right. I mean there are puts and takes. I think there were some kind of unique nuances, both on the cost side but also on the benefit side associated with COVID. And as we look at some of our different entities and continued consolidation of some of the work that we're doing on the different MDs, that plays into it as well. We specifically had some good guides that we were able to realize and/or costs that we were able to defer as a result of the slowdown in different segments and verticals, which, when things come back to normal, you wouldn't necessarily anticipate a repeat there. So yes, I think it goes both ways. But for us in the quarter, the net was kind of a benefit. And so we wouldn't necessarily want to project that forward, assuming that COVID is going to kind of dissipate as we move forward.

Your next question comes from the line of Ryan Sigdahl with Craig-Hallum Capital.

Congrats on the impressive results this quarter. Just want to dig a little bit into the OR. So Q2 was 96.5; Q3, 92.5 million, if I do the back-of-the-envelope math on the $15 million benefit you mentioned this quarter from nonrecurring items or unique items, I guess, this quarter, it implies virtually all of -- kind of the sequential improvement was onetime in nature. One, is that correct? And then two, given what you can see today, realize not a lot of visibility, but from industry trends, operational improvements, et cetera, directionally, is that a good benchmark for 2021, where you think you can do better or worse?

Yes. So I think it's important to also highlight some of the headwinds, too, right? So you were kind of calling out the onetime $15 million, but we also had roughly $2 million of insurance headwinds as well as some other items. And so there are puts and takes, and so if you're going to take things out, you got to kind of do it on both sides, right? But I would also like to highlight that the $15 million of goodness that we saw through the wind energy and high-security cargo, while it was unprecedented and unique, we deployed assets that would have otherwise been doing other things to take advantage of that opportunity. And so I don't want that to be lost in the analysis. And so -- but we would be remiss if we didn't highlight that it was unusual. And so we don't want people to misinterpret the results. But I think to characterize them as onetime is probably not entirely accurate, because there are -- it is business that we do. And now, will it be as strong next year? I think that's what we're saying maybe it's too early to tell. And so I think you just got to look at it holistically there. But overall, I think that there was a lot of puts and takes. And in the face of COVID, I think the team did a good job at delivering pretty strong results even with some of the tailwinds.

Good. So reasonable to say directionally, OR, net of a bunch of different things, improved sequentially in Q3?

Yes. Yes.

Just kind of the second question that I had was that directionally improving, is it reasonable to assume that, that can continue despite -- I know you mentioned a lot of different headwinds from insurance to driver costs, et cetera, et cetera, but reasonable for that to continue based on what you can see today? Or too hard to tell at this moment?

If you're referring to the 2021 -- into 2021 that you were talking about?

Correct. So I realize seasonality in Q4, Q1 (inaudible)

For seasonality, I think Q4, obviously, seasonally is a tougher quarter than Q1. But when we look at 2021 in its entirety versus 2020, when you kind of neutralize for some of the abnormal good guides that we saw, we do expect 2021 to improve on the OR trajectory.

Good. Then just on contract rate negotiations, we've seen a quicker improvement in spot rates, which is consistent with how it normally goes. So what are you seeing on your contract rate negotiations? And then when could we see kind of that potential impact to the financials?

Yes. So Yes. Thanks for asking that one. It's -- our contract rates obviously are spread out -- or not necessarily, obviously, but they're spread out over the course of the entire year across our different sectors. So you can't just point to any one point of time and say, "Hey, here's what's going to be happening in rates." But generally, we do feel pretty positive going into next year. We're seeing positive movement on contract rates so far. And based upon all the trends and our view kind of on continued tightness in the capacity, we would expect that rate environment to continue to improve in the next year. Given the mix of all of our different rates and volumes, some of these segments where you -- there are certain areas we may be getting $15 a mile, and if the mix of some of these things changes, it would affect our overall rate blend. But generally, again, we're thinking a positive rate environment as we move into '21.

Yes. And Ryan, I know we don't provide this level of granularity, but we look at it this way, and if you were to take every operating company and look at rate trends from this year to next year, across the board, we're expecting rates to move up. Now to Chris' very important point, the mix is what could ultimately end up causing the weighted average rate to not move up as much, because you're really, really profitable and stuff, you may not do as much of it next year like we've talked about. But know that I think that rate improvement speaks to kind of the supply-demand crunch that we're all starting to feel, and the general trajectory that we should expect the business to move. And candidly, the overall economy, hopefully, will kind of follow suit.

Good. One more for me, then I'll hop back in the queue. But you guys mentioned kind of the driver shortage. Several other competitors have also noted it. But what are you guys doing to handle kind of that supply-demand imbalance and retain drivers? And then anything you can mention on kind of retention and churn from a driver standpoint?

Yes. I think, first and foremost, the easiest driver to recruit is the one you have, and we maintain our focus on that retention, and we are fortunate that our turnover as a whole is generally lower than the market. We finished this quarter, I think, just under 62% in total turnover, which is down from a year ago and down sequentially as well. So we're having a good year from a turnover perspective. But hey, it is -- all the years in the industry, I've never had a year where I said it's going to be easy to find drivers. It's always a challenge to find the best, most qualified drivers. We're certainly seeing a tight market, given all the dynamics as we're going forward. But also from a capacity perspective, the things we're doing that are generating efficiencies within our network were also increasing our ability to do more with less in terms of trucks and drivers. But it will -- we do expect it to be a challenging environment as we go into 2021 for drivers.

Yes. I mean just in all my years in the industry, it's one of those things you just have to always be watching. You've got to make sure you're aware of what the competitors are doing, and you're making sure that the overall take home or benefit for these drivers is in line with the market. And I think our team is doing a pretty good job of staying close to that. But I was talking with someone who has been in this industry for a long time and built a very successful large company. And I was talking about early on in his career, the growth that he was on. And I said what -- when you guys grew from 1 to 2 to 100, like what were some of the challenges? He's like, "going from 1 truck to 2 trucks, the harder thing to do is finding a second driver." Like -- and that was 50 years ago, right? So I think that hasn't changed, and it's going to continue to be something we all have to be mindful of, is our drivers or are what ultimately make this company move, and we got to make sure we are taking care of them and mindful of that at all times.

We have time for one more question. Your next question comes from the line of Greg Gibas with Northland Securities.

Congrats on the nice quarter, really nice to see. First, to kind of follow-up on what you talked about earlier regarding the fixed cost reductions that are kind of onetime in nature, how much, I guess, do those total? I know you said kind of net-net, still we would see that OR improving sequentially. But just, I guess, to give us a sense of maybe what we could take out in terms of those onetime benefits from those fixed cost reductions?

Yes. So just to be clear, I don't want anyone to misinterpret . I mean we're talking about something that's 7 figures, but it's not like it's $10 million here, right? We're talking about a little over $1 million type, a little less than $2 million-type range, right? So I want to make sure we're not misinterpreting how big that unique benefit was. But again, we do want to highlight it because we don't want people to not be aware of it.

Okay. Then just wanted to follow-up also on kind of the capacity talks. I appreciate the color you added there. I'm just wondering if you could maybe discuss how capacity dynamics might differ between specialized versus flatbed markets, if you expect them to kind of trend differently going forward?

I think generally, they're going to be in parallel to each other. There are certainly some things like we just have with wind energy, where there was a greater degree of capacity tightness because of the complexity of that supply chain. But again, back to the resilience of our model and the unique aspect where we can tap on sister companies to support that, I think it demonstrates our ability to navigate to specialized side. But I think the flatbed will generally see the same kind of challenge across that whole portfolio in terms of capacity as we go into 2021.

Yes. And to kind of add to what Chris just said, I think that given that portfolio model, there are different cycles to the different businesses within our portfolio. Some of them tend to have stronger periods that are countercyclical to others. And again, I think it just speaks to the beauty of the Daseke portfolio model and how it can kind of neutralize some of that volatility.

Great. Okay. I guess, maybe a high-level one for me to, would you be -- kind of in terms of if we see a potential another large wave or spike of COVID infections potentially occurring later this quarter, and it's tough to predict the degree of that. But how would we think about your end markets being impacted? It seems like in the Q2 time frame and Q3, most of the end markets held up well. Obviously, there were exceptions. But how are you thinking about that concern on your end? And maybe what you saw the first time around when we saw a lot of closures, how are you thinking about that risk?

Yes. I think it's hard to predict where it's going to end up. But I think how we navigate it through that first big wave and the suddenness and shock of that, I think, will reflect in how we expect ourselves to be able to navigate through the second wave. I think we will be very successful and be able to navigate through that, and I think -- but equal as the demand is tightening or maybe just come down, the capacity is continuing to tighten too. So I think we're in a position to take advantage of that from a business perspective.

Our trucks and our operations have been able to continue operating throughout this entire period. And we would expect to be able to do that on a second wave if there is one.

Yes. And the only thing I would add to that, Greg, is one of the things I'm becoming increasingly confident in and have learned in my time here at Daseke is, one of the beauties, again, of this Daseke model is we got a bunch of operating company CEOs out there that built these businesses. And they are closer to what's going on the front line than Chris or I will ever be. And so -- and they're out there executing every day. They're not sitting there waiting for someone at corporate to tell them what to do or what cost to cut or which customer to go and get a rate increase. They're running their business the way they know how to run it. And that's part of why you saw us have such a strong Q2, because they don't wait for some corporate directive to make decisions about expense cutting or turning in trucks or paying drivers or whatever.

They make the decisions and they move. And I think If there's one thing I've learned is that they're going to continue to do that. And regardless of what the environment looks like, they're going to execute at a high level. And it's our job to just get them what they need and then get the hell out of their way and let them do their jobs, right? That's one of the things that's been really encouraging that I've seen as this team has executed through this pandemic is, we got a lot of really good operators here who know how to run trucking companies. And they'll figure out how to make it work. And then when you leverage the sister companies, that's when you really get that compounding effect. And we're just now really starting to take advantage of that second piece. It's great to see.

That's all the questions we have today. I'll now return the call to Chris Easter for closing remarks.

Thanks, Luciana. And thanks again to everyone for your time today. Our team is energized to continue forward with the momentum we have built on the relentless focus on continuous improvement, while positioning ourselves for growth. We appreciate your continued support of Daseke, and look forward to talking with you again next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.