Q3 2020 Daseke Inc Earnings Call
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Thank you for calling out of your conference I'd.
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Yes, one moment, it's 193 403.
Thank you may have the spelling of your first and last name.
David Brown D.R.L.W. Anda.
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You have your company name.
Hi, it our AI he on a.
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Two on 296 03697.
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Thank you.
Good morning, everyone and thank you for participating in today's.
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This call to discuss desk. These financial results for the third quarter ended September Thirtyth 2020, with US today are Chris Easter CEO, Jason Bates E VP, and CFO and John Michelle.
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 todays conference call.
As indicated in the press release, we issued earlier today.
You may access these slides in the Investor Relations section of our web site.
Before we go further I would like to turn the call over to Jochen meeting with the Alpha IR 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 caution regarding forward looking statements. Joe. Please go ahead.
Thank you.
Please turn to slide two for a review of our Safe Harbor and non-GAAP statements.
Today's presentation contains forward looking statements and within the meaning of the private Securities Litigation Reform Act of 1995 projected financial information, including our guidance outlook are forward looking statements.
Forward looking statements, including those with respect to revenues earnings performance strategies prospects and other aspects of desk is business are based on managements 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'll also be a discussion of some items that do not conform to us 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 ASCII website at Www dot to ASCII Dot com.
In terms of the structure of our call today, Chris will start with a review of our business operations and the progress, we're making as we navigate through the transaction and debt.
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.
Now I would like to turn the call over to ASCII CEO Mr., Chris Easter Chris.
Thank you Joe and good morning, everyone on slide three we outline a few of the notable takeaways from what was an exceptional quarter for the company. We continue to make progress in mid say still challenging industrial marketplace. While some of our market segments continue to see headwinds related to the Copeland Cove in 19 pandemic, our team has been agile and successful and.
Response, as we maintain a sharp focus on execution of the operational initiatives, we put in place for 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 topline 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 to 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 and capturing the benefits of operational integration cost actions and better automation optimization of our assets combined with a uniquely strong environment in some select end markets, where we are the dominant player with a driving force behind the strong op income and adjusted EBITDA results.
Both these important metrics represent quarterly records for the company arm.
Our improved financial results are translating into strong cash flow delivered 156.4 million in free cash flow year to date and at quarter end cash balance of $189.8 million. This.
This is up more than $110 million compared to last years third quarter.
This improved cash position provides us much greater flexibility 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.
This progress further demonstrates our cash flow generating capability and our commitment to lowering our debt levels in de leveraging our balance sheet.
Overall, I'm very proud of the performance of the entire Gasketing, 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 and a broad array of customers and this diversity served us, particularly well in this quarter nice 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 as 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 things being bigger accounts that said our business model is not absolved from the broader headwinds presented by the ongoing pandemic environment, which continue to win.
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 from the aforementioned markets turn.
Turning to slide four.
We highlight some additional key financial results for the quarter. The results shown on this slide demonstrates the value of pulling the right strategic levers coupled with great execution by our team.
We have successfully fix the core business and we'll continue pushing ourselves to realize the full potential of the desk you model moving forward.
Jim 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 excuse me 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 aspirationally, we believe our business model capabilities in developing strategy will deliver results.
In line with this target overtime.
We must maintain a relentless focus on continuous improvement in order to achieve and operate at that sub 90 performance across market cycles.
The leadership team we've been building to help drive. This performance now includes our most recent additions that these first ever Chief Information Officer, Jim Taylor.
Jim joins us from transportation insights.
Excuse me.
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 teams extraordinary efforts over the past year have positioned us to look much further into the future to capture even more of the trapped value that exist within our organization as well as to pursue profitable growth on the new data 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 five 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 years third quarter.
However, keep in mind, we made a strategic decision to divest our of EDA 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 and.
Back on our results.
Excluding aveda, our consolidated revenues were down 6% year over year. This topline 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 continued to negatively affect the industrial economy and placed downward pressure on freight demand.
In spite of the aforementioned demand softness experienced in the quarter were very proud of the team's ability to deliver 15.7 million of net income or 22 cents per diluted common share excluding a via the team delivered net income of 17 million. Adjusted net income came in at 21.9 million, which was the same.
Significant increase when compared to $4.7 million in the prior year's third quarter.
Adjusted EBITDA up $57.6 million improved by 33% relative to the third quarter of 2019, when you exclude of EBITDA.
And when you exclude EBITDA 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 revenue in both 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 that 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 addition.
Only 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 in to 2021 potentially as much as a couple million dollars per quarter going forward and.
And driver recruitment and retention is becoming increasingly difficult.
Our goal as a team is to be as transparent with you as possible slight share. All this detail with you both to pad 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 six we start year showing you. The full segment results. However, given the wind down of the EBITDA business. We believe reviewing our results excluding of EDA as discussed previously is more helpful. This leads me to slide number seven.
Where we detail our specialized segment results excluding of EDA.
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 increase roughly 9% to $3.28 up from $3.01 in the year ago quarter, while revenue per tractor of 67500 grew by nearly 12% versus last year's result of 60400 move.
Moving to slide eight we detail our flat, but results are flat, but segment results for the quarter flap and 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.
Now our segment adjusted EBITDA result 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 an 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 mart healthy improvement.
Now turning to slide nine where we detail our balance sheet and free cash flow cash flow metrics.
As of September Thirtyth desk, you had $189.8 million in cash and total liquidity of $272.2 million, including the available borrowing capacity on our credit facility net.
Net debt of $498.9 million has decreased a $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 three quarters of the year net cash provided by operating activities was 122.4 million cash Capex was $18 million and cash proceeds from the sale of equipment was 52 million, which includes the divestiture of RV business.
This resulted in free cash flow generation of $156.4 million for the year capex financed with debt or cap capital leases totaled $45.4 million year to date, resulting in net cash flows of $111 million improve.
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.
This lower our net debt and leverage overcoming the substantial macro headwind headwinds to deliver a stronger and healthier balance sheet.
From a guidance perspective, we anticipate Q4 capex to be somewhere between 25 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 on 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 totaled.
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 that we carry as we look to the future. So with that I'll hand off the call back over to Chris to detail, our outlook and priorities moving forward.
Yes.
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 driving momentum in line with our successes, thus far over the trailing year.
We will maintain a key iommi industrial economy on 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.
And its impact on the broader economy.
We will continue to prioritize the safety of our people and our customers as we have throughout them with this most challenging year.
We will 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 the focus in mind to drive positive cash flow generation, helping further solidify our balance sheet and improve on our existing financial strength.
And finally, we will 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 positioned to ask you 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 will turn the call over for your questions.
As a reminder to ask a question you need to press star one on your telephone.
To withdraw your question Chris the path ahead. Please.
Please stand by were weak about given day Ross.
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Your first question comes from the line of Jason Seidl with Cowen.
Thank you operator, Chris Jason and team good morning, guys.
I wanted to talk about for Q in how you think thats going to shape up you're you're losing some onetime things in the quarter.
But market, obviously is probably not anything like some of the consumer side.
Trucking business, how should we think about that as we look sequentially earnings power.
Thank you Jason.
We're seeing continued strength in the fourth quarter, but we should carry audit that it's kind of where 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 were moving it all Jason if you want to add to that yeah. I mean, I think there is a lot of moving pace pieces, obviously, Jason but when you think about Q4 and seasonal trends into Q4 October has actually been a decent for an October right. So just 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's seasonal trends look like and accounting for some of the though the benefit that we saw in Q3.
Okay, and Jason longer term when we when we look at the balance you know you said you guys are obviously going to Youre building cash for the near term, but sort of what's your opportunity to pay down debt without without any penalties going forward and were longer term would you like to see us.
So to your your debt ratios.
Yes, great question Jason.
I think we have the ability to prepay debt at any time thats 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 youre going to see hopefully people are starting to see that this team is capable of.
Excluding 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 vote with with regard to how to utilize capital and we'll be 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.
That's great color and then my last one is on Capex here.
I gave you the numbers for for Q I know you, probably havent finalized 2021, yet, but directionally, how should we be thinking about capex on the net basis.
Yes, I actually almost add lived in the script light I was reading the script on like they are going to ask about 2021, so I might as well just talked about.
So yes, the way, where 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 Kobe, what can happen with the election was that going to mean, so there is a lot of moving pieces there, but I will tell you find that you could let me know right exactly.
And so I think when 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 as kind of we guided to three Cove is I think thats kind of a good place to start obviously, there's theres different moving parts, there with regard to leases and different things like that but I think as you think about pro.
Eliminate early 2021, I think that 75 to 80 million on a net basis is probably a good place to start.
Okay fantastic well, that's actually three from resultant over somebody else I appreciate the time as always that it won't be safe out there hey, thanks to you Jason.
Your next question comes from the line of David Ross. Thanks.
Yes, good morning, gentlemen.
Morning.
The just the clarification on the Tailwinds you cited the benefit wind in high security.
Is that continuing into October when you reference a strong October is there potential that that continues into next year or is it one in done benefited you in the third quarter and is not kind of benefits you again.
I think thats, probably to a degree of certain lift still in October for sure, but that some of the onetime step, especially the wind market that they were some unusually complex supply chain challenges that we do not anticipate repeating themselves in 2021 for sure.
That doesn't mean that at all to the win per se dies off altogether, but it certainly won't.
Is that the kind of challenge or in our case, an opportunity to solve complex solutions or as complex challenges for our customers, but but I don't chase if you want to anything else yet I think that's the right way to think about it yet again seasonally Q4 is when things really start to slow down for us. So again, we feel pretty good about October but relative.
Historical October so I, just want to make sure we keep that in context and.
And so seasonally fourth quarter first quarter slower.
When business it's funny.
She would probably kill us for for saying this but we had a long talk with those with the with the one of the leaders of our operating unit that really does a lot of this wind business and she'd like to guide if.
If I knew exactly what when was going to look like in 2021, I would tell you right. So there is a certain degree of isn't different than most business because it's very project in nature, it's not like a in my prior life, where you've got one year contracts three year contracts in relatively.
Predictable or forecastable volumes with with customers. The wind business is very unique and is reliant on different bills and things getting passed 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.
They've got the relationships and the track record of delivering at a really high level of service. So if theres opportunity to be had our rest assured our team will will will accurate and one other thing I'd just final thing on that wind because it's interesting in our 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'd similarly would see it in other segments in industries as we run into those kind of spikes that we can tap on our sister companies to to extend our capabilities and reach whenever there are those those spikes in volumes.
I think Chris as you look across the book of business or does this 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 are 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, you know and there's there's been lots of interesting movements.
But as a whole there are a lot of them are still trending down as we know.
But if I'm looking into 2021, where we'd where we expect to see maybe some more lift in that would be helpful is thing areas like steel or heavy equipment. In particular I think those are a couple of aerospace too although aerospace to August in the Grand Scream scheme of our business is a relatively small.
Peace in totality its been down very hard and we are we are not expected to rise dramatically, but the steel and heavy equipment for sure would be a couple of areas that have been have been like and we're expecting a better things as we go into next year. Some areas that have been recently demonstrated some positive at least sequential growth although its not.
Necessarily not necessarily surpassing last year roofing.
Lipson.
Our commercial glass those three areas of particular has seen some pretty decent sequential growth in recent weeks and last month or two.
Thanks, and then my last question just more of a clarification Jason.
You talking about short term fixed cost reductions that are unlikely to last.
Arthur higher short term.
Cost two that are unlikely to last and how do you think of those two netting out.
Yeah, We just don't want you to think about those David.
No yeah, you're right I mean, if 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 co bid.
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 entities that plays into it as well.
We specifically had.
Some some good guys that we were able to realize and or cost that we were able to differ as a result of the slowdown in different segments and verticals, which a win win things come back to normal you wouldnt necessarily anticipate a repeat there. So 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 the cove, its going to kind of dissipate as we move forward.
Thank you.
Your next question comes from the line of Brian.
Craig Hallum capital.
Good morning, guys and congrats on the impressive results this quarter.
Just want to dig a little bit into.
The or so so Q2 was.
96.5, Q3 92.5, right at the back of the envelope math and the $15 million benefit you mentioned this quarter from nonrecurring.
Item three unique items I guess this quarter it implies virtually all of kind of the sequential improvement was was onetime in nature. One is that correct and then two.
Given what you can see today I 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 worse.
Yes so.
I think it's important to also highlight some of the headwinds too right. So you are kind of call out the onetime 15 million, but we also had roughly $2 million of insurance headwinds as well as some other items and so you know that there are puts and takes and so youre 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 though the wind energy and security cargo.
While it was unprecedented and unique we don't 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 they are that but but we would be remiss. If we didnt highlight that it will.
As unusual and so we don't want people to misinterpret.
The results, but I think to characterize them as one time is probably not entirely accurate because there are.
It is business that we do.
I now will it be as strong next year I think that's what we're saying is maybe with but it's too early to tell and so I think you've 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 you know Cove. It I think the team did a good job at delivering pretty strong results.
Even in it with some of the Tailwinds.
Good so a reasonable say directionally or.
Net of a bunch of different things improved sequentially, yes, yes three.
Then just kind of the second question that I had was you know.
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 cost et cetera, et cetera, but reasonable for that to continue based on what you can see today are too hard to tell at this moment.
If you're referring to the 2021 into 2021 of their time out.
Correct Sir.
In Q4, EBITDA handling as we looked out produced an alley I think Q4, obviously seasonally is a tougher quarter in Q1, but when we look at 2021 in its entirety versus 2020, when you kind of neutralize for some of the abnormal good guide that we saw we do expect 2021 to improve and on the Omar.
Trajectory.
Good.
Then just on contract rate negotiations routine.
A quicker improvement in spot rates, which is consistent.
With without normally goes what are you seeing on your contract rate negotiations.
And then when could we see kind of that potential impact the financials.
So yes, thanks for asking that when it's.
Our contract rates, obviously are spread out over I'm not necessarily obviously, but they are 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 rate so far.
And based upon all the trends and our view kind of on continued tightness in capacity, we would expect that that rate environment to continue to improve in the next year given the mix of all of our different rates and volumes you know some of these segments, where you know there are certain areas, we may be getting $15 a mile in 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, Jay again, 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 the projected rate trend from this year to next year across the board were.
Expecting rates to move up.
Now to Chris is very important point the mix is what could ultimately in causing the weighted average rate to not move up as much. Because you are really really profitable stuff you may not do as much of a next year like we talked about but but no that I think that rate improvement speaks to kind of the supply.
Hi 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.
I will hop back into queue, but you guys mentioned that kind of the driver shortage. Several other competitors have also noted that but what are you guys doing.
To handle kind of that supply demand balance and retain drivers knew anything you can mention on 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 leased we maintain our focus on that retention and we are fortunate that our turnover as a whole is 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 and down sequentially as well. So we're having a good year from a turnover perspective, but today. It is it is that all the years in the industry I have 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 drive.
Yes, we're certainly seeing a tight market given all the dynamics.
As we're going forward, but it.
But also from a capacity perspective.
Things were doing that or are generating efficiencies within our network are also increasing our ability to to to do more low do more with less in terms of trucks and drivers, but it will it we do expect it to be a challenging environment as we go into 2021 for drivers.
I mean, just in all my years in the industry. It's one of those things you just have to always be watching it.
You got to make sure you are aware of what the competitors are doing and you're making sure that the overall uptake home or benefit for these drivers is in line with the market and I think our teams are doing a pretty good job of staying close to that.
But but.
I wish I was talking with with someone who has been in this industry for a long time and built a very successful large company and I were talking about early on in his career the growth that he was on and I said you know.
What what when you guys grew from one to two to 100 like what were some of the challenges he is like.
Going from one truck the true trucks, the hardest thing to do was finding the 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 as our drivers are what are what ultimately make this company move and we got to make sure we are taking care of them and and and mindful of that at all times.
Great Nice job guys and good luck. Thanks, Ryan Thanks, Ron.
We have time for one more question.
Your next question comes from the line of Greg Davis with Northland Securities.
Morning, guys. Thanks for taking the questions and congrats on the nice quarter really nice to see.
Greg I guess.
First to kind of follow up on when 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 are improving sequentially, but just I guess to give us a sense of.
Maybe what we should take out in terms of those one time benefits from some of 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 you know it's.
Seven figures, but it's not like it's $10 million here, we're talking about a little over 1 million type a little less than two 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.
I see okay, thanks to clarify Jason.
And then we just wanted to follow up also on kind of the capacity talks I. Appreciate the color you added there just wondering if you could maybe discuss how capacity dynamics might differ between specialized versus flatbed markets.
If you expect that the kind of trend differently going forward.
Yes, I think generally they're going to they're going to be in parallel to each other there are certainly some things like we just habit wind energy, where there was there was a greater degree of capacity tightness, because the complexity of that supply chain, but again back to the the resilience of our model is a unique aspect, where we can tap on sister companies to two.
Support that I think.
Is it demonstrates our ability to navigate through the 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 yen.
Yeah and into kind of add to what Chris just said I mean, I think that given that portfolio model. There are different cycles to the different businesses within our portfolio. Some of them tend to to have stronger period to see you know they are counter cyclical to others and and again I think it just speaks to the beauty of the Dansky port.
Folio model and how we can kind of neutralize some of that volatility.
Great. Okay. Thanks, Thanks for the color there.
You know I guess, maybe a high level one for me too would just be.
Got it in terms of if we see a potential another large wave or a spike of cobot infections potentially occurring later this quarter.
And it's tough to predict the degree of that but how should we think about your end markets being impacted it seems like it in the Q2 timeframe in 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 sell 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 navigated through that first big wave and the suddenness and shock of that I think will reflect on how we expect ourselves to be able to navigate through the second wave I think we will be very successful will be able to navigate through that and I think.
Equally as the demand is tightening or may become down the capacity is continuing to tighten too. So I think we're in a position to take advantage of that from a from a business perspective, our trucks and our operations have been able to continue to continue operating throughout this entire period and we would expect to be able to do that on the second way.
If there is one yeah and the only thing I would add to that Greg. It's one of the things I'm, becoming increasingly confident in and have learned in my time here at that he is one of the beauties again. It is that the model is we got a bunch of operating company Ceos out. There then built these businesses and they are closer to what's going on on.
The front line, then 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 get a rate increase there they're running their business the way they know how to run it and Thats 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 or turning in trucks or you know.
Same drivers or whatever like they make the decision to name move and and I think if there's one thing I've learned is that they are going to continue to do that and regardless of what the environment looks like they are going to execute at a high level and 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. So I agree that that's a that's one of the things that's been really.
Encouraging that I've seen is 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 and then you 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.
Yes, thats great appreciate that thanks, guys.
Thank you.
That's all the questions. We have today I'll now return the call to Greece, Sir for closing remarks.
Thanks, John and Thanks again to everyone for your time today. Our team is energized to continue forward with the momentum we have built on the realec with a relentless focus on continuous improvement while positioning ourselves for growth. We appreciate your continued support and asking 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.