Q4 2021 Daseke Inc Earnings Call

Good morning, everyone and thank you for participating in today's conference call to discuss <unk> financial results for the fourth quarter and full year ended December 31, 2021, as well as <unk> 2022 outlook with US today are Jonathan Shopko, CEO and board member Jay.

Some dates EVP and CFO .

And Tracy Glenn Vice President of Finance.

Investor Relations after the prepared remarks, the management team will take your questions. As a reminder, you may now download a PDF of the presentation slides.

We will accompany the remarks made on today's conference call.

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 Tracy Graham.

This president of finance and Investor Relations, who will read the Companys safe Harbor statements within the meaning of the private Securities Litigation Reform Act of 1995.

Importantly cautious.

So important cautions regarding forward looking statements Tracy. Please go ahead.

Please turn to slide two for a review of our Safe Harbor and non-GAAP statements. Today's presentation contains forward looking statements within the meaning of the private Securities Litigation Reform Act.

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.

These are based on managements current estimates projections and assumptions that are subject to risks and uncertainties that could cause the actual results to differ materially from our expectations and projections.

I encourage you to read our filings with the Securities and Exchange Commission for a discussion of the risks that can affect our business and do not place undue reliance on any forward looking statements. We undertake no obligation to revise our forward looking statements to reflect events or circumstances occurring after today, whether as a result of new information.

Future events or otherwise, except as may be required under applicable securities laws.

During the call there will be also be a discussion of some items that do not conform to U S. Generally accepted accounting principles or GAAP, including but not limited to adjusted EBITDA adjusted operating ratio adjusted operating income adjusted net income or loss free cash flow and net debt with the exception of free cash.

Cash flow and net debt the company will discuss these measures on an ex <unk> basis.

Measures exclude the impact of the a beta business, although we see generating revenues from the Aveda business and completed the wind down of our operations. In 2020, we continued to recognize income and expenses primarily related to workers' compensation claims and insurance proceeds from the <unk> business in 2021 reconciliation.

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 <unk> website Www Dot <unk> dot com in terms of the structure of our call today, we will start by turning the call over.

<unk> CEO Johnson Shopko, as who will review our business operations and the progress we are making as we execute against our key strategic priorities. Jason will then provide a financial review of the quarter and full year as well as provide our 2022 outlet at which point Jonathan will wrap up our remarks with a few closing comments before we.

Open the line for your questions with that I will hand, the call over to Mr. Jonathan Checkout Jonathan.

You Tracy and good morning, everyone, let's turn to slide three where I'll speak briefly on some of the headline observations and key accomplishments <unk> made as we closed out a very successful fourth quarter and full year 2021.

I'm pleased to report the desk you delivered another very strong quarter of operational and financial performance capping off a second consecutive year of record adjusted EBITDA in the fourth quarter demand remains strong across the industrial end markets. We serve defying the normal extent of the seasonal deceleration.

We continue to face ongoing capacity constraints in the equipment market due to disruptions in the global supply chain.

These disruptions have also worked to perpetuate the imbalance between supply and demand, which in turn has continued to support a very healthy rate environment.

While this environment looks to have provided a new foreign rates. It is our proactive strategic deployment of assets against the most profitable pockets of the market that has allowed us to not only outperformed the benchmark rate, but also extend our freight capture as evidenced by the 17% increase in revenue this quarter.

<unk> continues to focus on operational execution, driving a 25, 9% improvement in our adjusted EBITDA of $49 6 million.

And a 360 basis point improvement in our adjusted operating ratio from 96% to 92, 4%.

Additionally, our quarterly adjusted net income was $13 million and adjusted diluted earnings per common share of <unk> 18.

We're up 41, 3% and 51%, respectively, even when compared to our strong fourth quarter of 2020.

Despite cost pressures on employee compensation recruiting and other operating line items, we delivered record results.

Our diligent execution within our asset light business model enabled us to convert topline growth and a meaningful increased profitability for our shareholders.

Before turning the call over to Jason to provide more detail around our financial performance and outlook.

Like to take a few moments to discuss our continued commitment to both our operational execution and long term strategic direction.

Previously we've highlighted the importance of our unique business model to our operational success throughout 2021, we leverage this model to proactively identify the network optimization opportunities and accordingly, reallocated our assets to better serve our customers within these markets in order to drive superior rates compared to the greater flatbed market further.

We tapped our extensive network of owner operators third party carriers to accommodate our customers' requests for additional capacity, thereby capturing incremental freight spend from our blue chip shipper base. This dedication to customer service operational efficiency and business model flexibility are each mainstays to our success and our long term strategic plan.

Shifting from a trailer centric view of our business to one of in market leadership is a fundamental tenet of our strategic direction positioning us for more profitable growth in the future as we begin to prioritize the marshaling our resources in support of the specific end markets focused intensity targeted at such end markets sub verticals.

That are best positioned to distinctly value our specialized knowledge and credentials are differentiated asset profile international footprint will give rise to opportunities to further expand our suite of services and reach to better service and engage these very customers.

A key element to advancing our strategy as the fundamental shift from Siloed independent operations to a federated carbonized platform, where the sharing of data exchanging of best practices and coordination and asset utilization will collectively provide the foundation for future growth and optimization.

To accomplish this there will be further operating company consolidations, there will be investments in technology.

There will be coordinated thoughtful standardization across our platform.

Over the last few quarters, we focused on enhancing our plan to ensure these tactical transformational initiatives are executed in such a way so as to complement our long term strategic direction.

We will begin to share many more details around our transformation plan as well as the longer term strategic plan over the coming quarters.

With that I will now turn the call over to Jason Bates to review, the fourth quarter and full year 2021 financial performance and 2022 outlook Jason.

Thank you Jonathan and good morning, everyone.

If you'll please turn with me to slide four we will start with a high level review of the consolidated results for the fourth quarter.

As Jonathan mentioned, our fourth quarter results. Once again provided evidence of <unk> ability to execute efficiently and effectively capitalizing on what has been a strong freight environment.

I am extremely proud of our team's collective performance in the fourth quarter and for the full year, both of which exceeded our expectations.

We experienced similar trends in the fourth quarter to those we've discussed throughout 2021 with a sizable uplift in demand across construction materials steel and manufacturing related verticals, our ability to continually support and service our strategic customers over these past 12 months to 18 months has been a key contributing factor in our ability to realize.

Than expected freight rates, particularly in our flatbed business.

During what has been an increasingly difficult supply demand imbalance within the transportation industry.

We believe that this focus on customer service and strategic freight selection played a role in minimizing the seasonal volume slowdown we traditionally see from the third quarter into the fourth quarter and enabled us to capitalize on market opportunities within both of our segments and across end markets.

Our portfolio approach is purposeful and continues to deliver a diverse profile of <unk>.

Consumers and end markets.

Allow us to pivot and seize opportunities across a breadth of industrial verticals. We are proud of our team as they continued to redeploy assets to the most efficient and markets and deliver strong 2021 results.

Perforations comments at the outset of the call we will primarily focus our discussion today on the adjusted results excluding our beta.

As Jonathan mentioned in the quarter <unk> delivered revenues of $394 3 million up 17, 5% compared to revenues of $335 6 million in the fourth quarter of 2020.

We are optimistic about continued freight opportunities and our team's ability to further execute against the strong market environment as well as pull operational improvement levers to help further underpin our recent outperformance as we move into 2022.

The team delivered adjusted net income of $13 million or <unk> 18 per diluted share in the quarter adjusted EBITDA of $49 6 million grew by nearly 26% compared to the fourth quarter of 2020 due.

Due to due to increased realization of our business improvement plans alongside growing freight rates and volumes supported by healthy demand and strategic customer alignment and support.

The year over year growth was also supplemented by a higher than normal gain on sale of equipment as we along with most of the industry. We are beneficiaries of a strong used equipment market the.

The combination of these various items helped us to offset any moderation from the unusually high margin high margins, we experienced in 2020 period associated with the wind energy project revenues.

I'm also proud to highlight that while many companies in our industry faced driver retention headwinds <unk> continues to prioritize its workforce and thus driver turnover remained significantly below the industry average.

Which we maintain as a competitive advantage.

Of note, we have implemented driver pay increases in the quarter in line with the market, which have been hedged by the continued expansion of freight rates. We continue to monitor the driver situation closely but are encouraged by our teams excellent work and ensuring that he is an attractive and quality employer for our dedicated driving professionals.

Finally, I'll briefly touch on our corporate overhead expenses in the quarter administrative expenses, including contract and professional cost improved through the corporate cost did experience a slight increase primarily associated with seasonal bonuses as well as salary and benefit increases which are tied to the company's improving performance and market.

Competitive rates on.

On slide five I'll briefly touch on our key financial performance measures from a full year perspective, again referencing numbers, excluding the davita business for.

For the full year 2021, dusky generated revenues of roughly $1 6 billion, which increased 11% versus 2020 the.

The top line increase was driven by growing freight volumes and rates compared to Covid impacted 2020 attributable to heightened performance in our steel and construction end markets, coupled with a constrained supply chain environment offsetting the normalization of record wind energy performance in 2020.

As we move to a discussion about the various profitability metrics I want to take a moment to highlight several annual records that were achieved by the team in 2021.

We achieved records in each of the following financial metrics as well as their adjusted counterparts.

Operating income net income earnings per share adjusted EBITDA and operating ratio.

I can't properly express how proud we are as a management team of our organizational commitment to excellence over this past year. These various profitability records could not have been achieved without the hard work of each and every team member throughout our organization.

With that said ill take a moment to highlight the specific record results.

Our operating income of $116 7 million improved more than 90% over the 2020 result.

Adjusted net income of $77 8 million nearly doubled versus the $39 6 million of adjusted net income delivered in 2020.

Further attesting to the effectiveness and efficiency gain through our strategic changes and operational upgrades achieved over the past year and a half.

Total adjusted EBITDA of $223 1 million improved by 25% compared to 2000 Twenty's results.

Finally, our adjusted operating ratio was $99 for the full year of 2021, which represents a 270 basis point improvement from the $93 six adjusted or in 2020.

These full year results show, our ability to execute decisively on our operational plans successfully deploying assets, where our niche capabilities and flatbed offerings are most valued by our customers while capitalizing on the year strong market backdrop.

I would now like to walk you through a detailed view of the fourth quarter results at the operating segment level.

On slide six we present, our specialized segment results specialized segment revenues for the fourth quarter of 2021 were $223 million up 12, 1% versus the fourth quarter of 2020.

Driven by strong industrial end market demand counteracting the normalization of the strong wins that wind segment in the year ago period.

Continuing to slide seven we highlight our specialized segment adjusting for the divestiture of our VA business.

Adjusted EBITDA improved to $33 3 million up 11, 4% versus the fourth quarter of 2020.

We were also able to maintain adjusted EBITDA margins relatively flat versus the fourth quarter of 2020 in spite of the revenue mix shift from historically elevated wind energy projects in 2020, which created tougher comps.

That said I'm pleased to report specialized rates increased sizable in the quarter more broadly with the rate per mile for the segment of $3 34, increasing by 13% when compared to $2 96 in the fourth quarter of 2020.

We've continued to see this rate growth across our portfolio of end markets and particularly around our construction materials channels, which helped offset the aforementioned decrease in wind energy.

This again highlights the beauty of our diverse set of service offerings customers and end markets, our ability to capitalize on a strong rate environment, coupled with our operational enhancements fleet right sizing and dedication to driving efficiency across our portfolio is proven by the segments revenue per tractor results of 66800.

<unk> versus 59100 in the fourth quarter of 2020.

Lastly, the segment's adjusted operating ratio was 91 versus 92 eight in the fourth quarter of 2020.

On slide eight we detail our flatbed segment results for the quarter revenue in the fourth quarter was $176 4 million, which increased 24, 1% from $142 1 million in the fourth quarter of 2020.

Demand remains strong in our flatbed segment during the fourth quarter as we continue to redeploy our assets into the most accretive and markets, while leveraging our asset right model to capture incremental revenue through our brokerage operation.

In the fourth quarter of 2021, we were able to realize a 23, 1% increase in our rate per mile compared to the fourth quarter of 2020.

While the overall flatbed market has experienced significant rate increases driven by the supply demand imbalance, we have been able to generate incremental rate compared to the market due to our operational execution.

We proactively identify the most advantageous markets and redeploy our assets into those markets, enabling us to garner premium rates as evidenced by the chart in the lower right quadrant of the slide the.

The rate improvement is also reflected in the revenue per tractor metric of $51300, which increased 19, 3% from 43000 in the year ago period.

The segment's adjusted EBITDA result of $26 5 million grew by 55% compared to the results of $17 1 million in the fourth quarter of 2020.

This stronger adjusted EBITDA performance helped deliver adjusted EBITDA margin growth of 300 basis points expanding into 15% despite facing tough comps due to the heightened COVID-19 recovery environment in the year ago period.

Finally, the segment's operating ratio improved a staggering 720 basis points to a 90% or with the adjusted or coming in at $89 four.

Turning to slide nine I'll take a moment to speak about our cash flow performance.

Through year end 2021, <unk> has generated $144 7 million in cash from operating activities.

Cash Capex was $53 7 million and we collected cash proceeds from the sale of equipment of $58 6 million.

This resulted in free cash flow generation of $149 6 million for the year.

Capex finance with debt or capital leases totaled $64 7 million, bringing the net after financing of $84 9 million.

Looking to slide 10, I will conclude with our outlook for the full year 2022.

Before handing the call back to Jonathan.

Though we anticipate some headwinds in the coming year, many of which are present in the market today, including inflationary pressures on cost driver shortages and equipment supply chain challenges, we remain confident in our ongoing ability to navigate these headwinds we are optimistic heading into 2022 and expect to have a clearer view as we.

Progress in the year, having said that we wanted to provide a high level outlook to help you understand how our team is thinking about the business as we begin the year for full year 2022, we anticipate revenue growth between 4% and 7%. We expect this revenue growth to be a function of both continued organic rate improvement as well as volume.

Increases on an adjusted EBITDA basis, we are expecting to outpace our revenue growth and at this time are estimating an increase of 5% to 10% year over year.

This bottom line expected performance will be a combination of the revenue drivers I just mentioned combined with various operational initiatives currently underway, which Jonathan discussed last quarter, and we will readdress shortly.

Moving to Capex, our capital priorities in 2022, we'll continue down the path set in 2021, we are generally pleased with the state of our equipment and have tried to remain disciplined about staying on top of our maintenance Capex as reference last quarter. We did experience a slight timing issue with regard to the receipt of new equipment, we anticipated that.

Take delivery of in the fourth quarter, but which was pushed into the first quarter of 2022.

This represents roughly $25 million of net capex that shifted from 2021 into 2022.

Additionally, this year, we will have an added focus on driving organic growth through further investment in technological improvements designed to increase our scale and streamline our business, which we anticipate to be roughly $10 million, taking those two items. In addition to our traditional maintenance Capex. We expect net we expect net.

Capex for 2022 to be within the range of $160 million to $170 million.

A question we've been frequently asked related.

A question we have been frequently asked relates to our views on consolidation in the industry and M&A in general we do believe there are various data points and market realities that are bolstering. The case for continued consolidation within our industry and we view M&A as a very necessary complement to our long term value creation strategy.

To that end, we will continue to keep a close eye on the M&A market as a potential medium to fund strategic growth. However, as we have emphasized in the recent past. This leadership team it tends to be very diligent with our approach to M&A focused on full cycle earnings potential and long term equity appreciation.

So in summary, we are excited about the amazing effort each of our team members here at <unk> put forth in 2021, which enabled us to achieve numerous profitability records this past year.

Although the operating environment will likely present different challenges in 2022, we are similarly optimistic about our team's ability to execute and are looking forward to continued progress in our organizational evolution. So with that I'll hand, the call back over to Jonathan to offer a few final words Jonathan.

Thank you Jason.

But only a quick little bit on this slide 11, we have spent a lot of time referencing the various initiatives we've undertaken over the last year and a half to improve our operations and improve our business subtypes of our quarterly performance is analysed discreetly on these quarterly calls the cumulative effect of these turnaround efforts can be lost in the <unk>.

Last quarter to this slide however.

We've lined out a handful of relevant metrics that frame up our successes over the last few years.

For fleet rationalization and efficiencies around asset utilization to improvements in our relative profitability metrics and the strengthening of our balance sheet with comprehensive we overhauled this company and will continue to leverage this momentum as we move onto the next stage of our transformation that honestly the execution of our longer term strategic vision.

We've exceeded the expectations of many people and there is still substantial opportunity left for us to take advantage of.

If you look to the top right quarter to this slide another takeaway I'd like you all to note is that in spite of this remarkable turnaround.

Discount in our EV to EBITDA multiple relative to that of our peer groups has remained a constant over this three year period at around 30%.

Perplexing, given where we started in 2019 the.

Compared to where we stand today.

Next slide please.

On the previous slide we offered up a quantitative free for desktop valuation also noting are relatively pricing and on slide 12, I'd like to offer up the makings of a qualitative case for desking the.

This slide provides a high level contours of the value drivers that will underpin our growth over the coming years. These drivers will provide our shareholders with multiple ways to win both beta and alpha.

Our focus on continuous improvement remains unchanged as evidenced by our financial progress over the last 24 months we.

We will continue to evaluate our industrial end markets for both organic and strategic growth opportunities, including the expansion of our service offering to our customers.

Examine opportunistic adjacent markets within which to expand our footprint.

We will allocate capital in support of these highest and best use opportunities with an emphasis on earnings free cash flow generation and long term equity value creation.

With respect to secular capacity tightness as I mentioned earlier equipment supply chain has remained constrained impacting both the demand and supply sides of the equation.

Sustaining a favorable rate environment for our industry.

One trillion infrastructure Bill will only challenge the possibility of a near term supply demand equilibrium for the open that carriers.

Pending the runway and providing a safe haven rate environment for our segment of the industry for the foreseeable future.

With that I'd like to conclude our prepared remarks for this morning.

And I'm excited to turn the call over to our operator for your questions Victor.

Thank you ask a question you will need to press star one on your telephone.

To withdraw your question Jess.

Thanks.

Please standby, while we compile the Q&A Washington.

Our first question comes from the line of Jason Seidl.

Kevin you may begin.

Thanks, Operator, John Jason and team good morning.

To hit on a couple of things here.

To me a little bit about rate.

<unk> saw the nice year over year bump.

In both your decisions the sequential degradation that you guys noted in the charts I'm, assuming that's just the normal historical move and.

And if I'm correct on that how would you compare it to normal seasonality in the quarter.

Yes, Jason things.

Yes, you are correct. There is a normal seasonal cadence in our business that we like to kind of remind people of a lot of people follow Warren are hard on some of the big drive end, guys, and usually kind of third and fourth quarter or the or the peak periods in our business. It's really second third quarter and then we have seasonally slowdown in the fourth and first quarter. So so yes, you are correct there is.

Seasonal cadence, there, where typically we see things kind of slow.

Although if you look at kind of a year over year or the sequential change over the last two or three years. This year, we actually last year was the first quarter, where it was unusual in the fourth quarter was strong and how there's a lot of the COVID-19 recovery action that happened.

Although this year, we saw a similar trend in terms of not dropping off as much as it normally has.

While it did kind of moderate it was surprisingly strong for that sequential slowdown of third to fourth quarter.

So better than the historical slowdown that you've seen yes, yes, perfect Q3 to four of 2020 was an aberration, but setting that aside this year was probably one of the better.

Sequential.

Curious from Q3 Q4 in terms of rates, Okay, perfect. That's good to hear.

Other thing in the past.

<unk> talked about your advantage in your driver turnover rates you noted again in your comments.

But you also talked about how you're going to keep a close eye on the overall driver market because flatbed jobs, obviously, a much more difficult job and somebody on a dry van no touch right.

Our U R.

Is the normal driving driver market pay getting up there to where youre starting to get worried that it could impact your ability to attract new drivers.

Yes, Great question and I think we talked about this as you and I talked about this a few weeks back it is something that we watch really closely.

I have a lot of friends in the dry van side of the World having spent most of my career over there who I talk to regularly and when I look at some of the things theyre doing and having to do to attract and retain drivers. It just causes us to just kind of keep our ears open and our eyes open to how that might affect our drivers because to your point a flatbed.

Rob it's a tougher job youre getting out of the vehicle, sometimes in less than ideal conditions youre getting up on top of the trailers or tarpon downloads tying things down.

It's over Dimensionalize it it's more complex and so understandably they deserve a premium in terms of compensation. So we just have to make sure that that premium is still there.

The value for choosing to be a flat that drivers are still there and so that is something we're very mindful of and we watch very closely as we touched on in the prepared remarks, we did do some select targeted increases in certain pieces of our business in the quarter too.

To that end right to make sure that it continues to be.

An attractive opportunity, but I want to revert back to your opening part of your question and that is that our turnover is even with all of those puts and takes we just discussed.

More than.

Half of what a lot of the industry data points would suggest so we're we're pretty pleased with with our teams ability to kind of attract and retain drivers, but that doesn't mean that we can just rest on our laurels.

Okay, one final one and I'll turn it over to.

Other analysts on the call here.

Your outlook for 'twenty, two I, just wanted to sort of trying to dig in a little deeper what does it include in terms of gain on sale since youre actually pushing some more purchases and capex into 'twenty two from 'twenty, one and do you have anything in there for any new projects that might be linked.

To the infrastructure Bill.

Just listen in.

At this time, yes, great questions. So real quick on the gain on sale.

Obviously 2021 the gain on sale was was strong.

Was up I think through the third quarter was up roughly $8 million year over year and for the full year was closer to 10. When you compare 2021 to 2020 right. So I think everyone in the industry experienced similar.

Performance on the gain on sale for 2022, we're not assuming that the market I mean projecting used equipment pricing is top right, but we're not assuming that the market is going to be better, but we're also not assuming that it's going to substantially moderate and get worse, we've got a relatively similar assumption around gain on sale.

On a per on a per asset basis, it'll moderate a little bit but not meaningfully.

We're not talking.

Tens of millions of dollars upswing here it may be a $1 billion or two.

And so I think that's an important data point.

Secondarily with regard to.

The put the pushout you addressed the pushout of equipment from Q4 into Q1.

We're trying to stay still consistent with its really just a timing thing that's happening between Q4 and Q1 so.

I don't know that we would expect significantly more.

As physicians.

When you look at the number of trucks that are expected to be rolling off in 2022. So from that perspective, there is not going to be a step function up.

On the used equipment side or was there another part to that question that I missed in looking at Tracy and Jonathan I think that yes, no I was talking about in your in your projections, which one he totally infrastructure infrastructure, yes, yes. Thank you.

Yes.

Listen.

It's a little fuzzy.

Actually what the infrastructure Bill is going to look like and how quickly it's going to make its way to us.

We've been pretty conservative in our assumptions around what's going to flow through.

The infrastructure Bill in 2022, we think we'll probably start seeing something in the back half of the year, but I don't want you to think that that 4% to 7% guide on top line and 5% to 10% improvement on bottom line is largely dependent on the infrastructure Bill I wouldn't say it's minimally.

Nominally dependent if at all on the infrastructure Bill, but I do want to point out because you asked about driver retention and things like that we did highlight a lot of potential headwinds with regard to inflationary pressures driver recruitment attention supply chain challenges those are taken into consideration in that.

So we just want to make that clear that that that guide isn't our guide and then we're saying Oh, we need to worry about these things, which could provide downward pressure. We're seeing we've already taken that into consideration now they could be worse or they could be not as bad and then that would obviously affect the guide, but but we did want to make it clear that those kind of headwinds.

<unk> factored into that guide that we provided.

Perfect I appreciate the detailed answers as always gentlemen, thank you.

Thank you.

Our next question from Brian .

Ryan Thanks Bill.

Okay.

You may begin.

Good morning, Jonathan Jason.

Congrats on the progress.

Thanks Ryan.

So you talked a little bit about rate environment for 2022.

You mean that out a little bit if you can can you talk through the puts and takes for rates over the next several years beyond I guess the next several quarters.

Yes.

Complicated one right. So we've done a lot of Jonathan and I were both finance guys right. So we do a lot of theoretical analysis around three and five year plans and modeling.

In 2022.

We're not assuming anything crazy from a rate perspective, we're candidly, we're kind of in that mid single digit range with regard to rate assumptions, which could be conservative, but we try to align the inflationary assumptions in the cost pressures and things like that with driver pay increases et cetera with that rate increase right. So.

So to the extent that we outperform on on that mid single digit rate assumption.

More likely than not some of that is going to make its way to drivers and so it probably won't have as much of a flow through as we have seen over the last 18 months, but back to your question about the longer term.

And I'll, let Jonathan he's got.

Some thoughts on this as well, but I mean from my perspective, I really don't see the supply demand imbalance that exist today dissipating anytime soon I think we're we've got a trillion dollar infrastructure Bill Thats going to continue to provide pressure specifically in our markets that we support and service.

And you've got a lot of challenges in terms of getting equipment, you've got a lot of challenges with regard to insurance, we're hearing rumblings about crude oil.

<unk> hundred.

$100, a barrel like Theres, a lot of things out there theyre going to make it tough for people in our space, especially the smaller people.

That's where you hurt me and Jonathan both kind of allude to opportunities for industry can further industry consolidation and so when you think about the rate environment I think rates are going to hold up for a little while I don't think that they are reversing course anytime soon Jonathan.

Jason Jason said most of the things.

I would've said Ryan.

We've looked at we've looked at flatbed rates.

For the last 40 years to try to kind of use that as a proxy to kind of forecast the future.

And look it's as you know.

Looking at compound annual growth rate over that 30% to 40 year period of two 5% or so.

Generally yes, Jason when we get this question Jason says a lot it's up into the right. It's a very it's a very different forward curve it behaves very differently than that.

Oil and gas right. So you've got much more volatility in those forward curves you've got the peaks and troughs are much more pronounced.

They can sit there and.

The doldrums.

Hello, Watermarks for multiple years, if you look at if you look at the way the the rates behave in this industry.

Highly correlated to to CPI <unk> are also in essence youre passing through the rates.

We also 80% 85% of what we do is dedicated so we're not playing the spot market. So a lot of the.

Extreme volatility is insulated so we have a much more kind of balanced moderated.

Forward curve than the guys that are playing.

The spot market.

If you look past the last 30 years or so.

Times, we're right did did pull back it was all it was all macro event driven so if you look back to the dotcom bubble I mean really didn't do much for rates there, but if you look at the great recession.

You looked at the.

Industrial recession, you looked at even Covid.

Bob.

As you kind of analyze those those events trough as a trough as a percentage of peak was was 85%. So there was some pull down kind of 15% or so from from that from those respective peaks in those respective cycles, but those cycles peak to trough to peak, we're often 18 month cycles right.

And if you think about yes, if you think about our our cost structure.

70, 70, 778% variable I mean, we've got a long history as this as does the asset light industry. The upside of the asset based players within the industry of defending margins because of that variable cost structure. So I think that look we've looked at it that Jason made a lot of compelling points I think particularly for the <unk> segment.

Of the industry with the infrastructure Bill.

Got the supply chains, preventing the.

The over exuberant.

The larger carriers from stepping on the gas.

Adding a bunch of trucks to their fleet to offset offset demand and full prices down.

So theres a lot of natural hedges in place I think to keep the rate environment pretty healthy for the foreseeable future.

Yeah, and Brian just one correction, Jonathan said, 85% of the fleet is dedicated contract.

Contract I'm, sorry, yes, I just wanted to clarify that.

Sure.

All helpful context, guys I appreciate it.

As you think about the operational turnaround.

I do some back of the envelope math when youre not guiding to it I think guidance implies you guys get to kind of your 90% or a bit better than that I guess first is that right and then second can you walk through you've laid out kind of the multi year.

Priority strategy et cetera, but what are the main priorities that you guys are focused on the next three to six months.

Yes ill, let Jonathan hit the second part of that question I'll take the first part.

Yes, I'm always a little reluctant.

When we talk because two years ago I sat here and talked to you guys about our long term goal of a 90 or now I keep getting the question, Mike Hey, Youre already there right and so but I want to reiterate to everyone that that goal is more we want to be a 90 or through the peaks and the troughs, we're going through what's been a really really strong.

<unk> markets and so yes, you would expect us to be doing well, but personally I think and if you were to talk to recur or Jonathan or any of the leaders here in the organization. We think we should be operating in <unk> in <unk>.

And peak environments, and then maybe your kind of 90 to low ninety's in trough environment. So we still feel like Theres a lot of opportunity for us to continue to improve so that we are consistently performing through the peaks and the troughs of the cycles not not reverting back up to a high 90% or when the market does.

To cooperate perfectly. So so we do think there's a lot of opportunity and I'll turn it to Jonathan now talk about what some of the strategic things are that we are going to be focusing on to kind of help us drive some of those opportunities yes right.

Talked about on the past past calls, but again take technology <unk> technology. Historically is that I mean look it's been an achilles' heel for <unk>. We haven't we haven't had access to real time data to make good decisions quickly and I think the success. We've had is really a testament to the.

Kind of a tenured leadership, we have we have at the Opco level. So we're doing we're making investments in technology those are going to be to access better more real time data.

There is a subset of those technology investments, that's going to be just kind of good old <unk>.

Hygiene.

But the technology is one of those.

One of those one of the legs of the stools.

The other one is as.

Further further consolidation.

Our rationalization.

Across across our stable of Opco is our enterprise right and it's taking it's figuring out a way to work more collaboratively.

We're collectively and taking and taking some of our our better performing arcos and finding it very efficient effective way to it is still the best practices from those respective <unk> across the enterprise and then also figuring out a way really to get the op codes.

Work together, rather that we mentioned Siloed, we I think we've said that in the last few calls is a good description for for how we look today, even even with all the progress we've made.

Some of these these asset utilization and network optimization.

Kind of stop gap initiatives the longer term initiatives are really kind of getting at the heart of this to wear.

We're really operating at the one <unk>, we want to preserve the kind of a touch in the field.

<unk>.

The local regional carrier, we think its very beneficial it in recruiting drivers we think its very beneficial.

It's finding that right touch with the customers, but we've got to do a better job of.

Really working working in <unk> from a network optimization asset utilization standpoint, again part of that's part of that.

Just the organizational restraints that we've been subjected to over last year as a part of that is also going back to back to technology and then I think the last thing is.

Is M&A, we've got it we've got a good team we spent the better part of the year now building a very a very proprietary platform of deal flow. We're sure. We're taking a look at all of the marketed deals but.

But we think that the value opportunity is much more right.

Those kind of private one off negotiated opportunities pulling those at the right way right.

It's buying the right buyer thoughtfully, but that onboarding those those opportunities the right way and that is not creating.

680, <unk> platform, where we start to ramp up.

Duplicative duplicative kind of back office expenses again, its truly taking the essence of those those operating companies is target operating companies that we acquire taken the front office capabilities that driver facing functions of customer facing functions and then pulling out the board kind of commodity back office functions and pulling them under the under the under the tent.

Taking the the buying power of that.

<unk> has taken the kind of brand recognition the customer the customer touch the scale depth of capabilities that <unk> has at driving that through that that new target platform and ensure that they're getting the benefit from all of those.

That kind of broader halo of attributes. So we're excited about it again, we kind of feel like <unk> kind of pulling at the lease we've been a little bit more kind of balanced and reserved it it really decisively kind of delineating and communicating with the with the transformation plan looks like and the broader strategic vision, because we want to do that the right way.

We look we've spent a lot of time identifying opportunities over the last several months, we've got a very detailed plan at at we're in the early innings of actually implementing some of the some of the components of that plan and what we said is instead of going out and continue to wave our arms to the market, which we've got we've got kind of accused over the last few years.

We feel like we're starting to really build credibility with the market, where we'd rather do is get a third of the way into the plan or at least a couple of things into the plant and come back to you guys. Here is the plan here's what we hear as well.

Set out to do here's what we're doing and make sure all those dots connect for you guys and I think that youre going to be excited we as a team all the way from kind of a bottom or top of the organization top to bottom of the organization are really excited about where this company is going to go we've got a method to the madness.

There is a there is a very I think thoughtful.

Interesting vision that we're going to that we're going to exploit over the coming years.

Well done guys and looking forward towards the come here in the near future.

Thanks, Thanks, Ron Thanks, Ryan.

Our next question from Brian .

Evan.

Stifel you may begin.

Yes. Thank you Jonathan just to follow up on that question. I know you guys said in the prepared remarks that youre expecting the.

Adjusted EBITDA growth to exceed revenue part of that can be driven by some operational improvements can you just put a value on some of the larger items. There I know you talked about some of them, but can you put.

One dollar value on some of the things you are expecting in 'twenty two.

Yes.

Okay.

So we've got look we've got legacy we've got legacy initiatives.

It's better network optimization.

Better better coordination.

Maintenance best practices.

Procurement efficiencies things like that those are legacy initiatives that were still there we're still driving through separately.

We mentioned this idea of a kind of a transformation phase of <unk> and these are the these are kind of the multiple initiatives technology investments additional kind of opco consolidation.

Harmonization across the just kind of broader organization across the fleet. Those are those are initiatives that are very at the very very beginning.

Got it.

They're kind of perspective stages, we think that we're going to be a good part of the way through those by the end of the year.

But we think the benefit from those things at least at 2022 are going to be mostly at least our assumption going to be mostly offset by the respective costs driving those initiatives. So you might get a little bit of a benefit towards the end of this year youre not getting the full run rate though.

Are those things that till 2023, so again I think it's something we've been pretty moderated on as we think about 2022 guidance.

Do you think in terms of just all of the integration and operational improvement.

Where do you think we are sort of in that lifecycle sort of halfway done with that in the later stages.

Hey, together.

Yes, I think I think we've got to we've got a very clear line of sight.

I mean as you guys know anytime somebody talks about transformation someday.

Some days are a two step forward one day back at a day, so look but we've got a good team. We've got very supportive Opco leadership teams really really shouldering at driving some of these things work. We spent a lot of time socializing. This with the Opco is making sure we're thinking about this the right way.

But I think from.

From our standpoint without kind of giving away too many of the punch line for our next call.

Yes. This is this is probably kind of a 15 month voyage and Ed we really shifted to something that feels like optimization really we're really thinking about the next 15 months or so.

During the footing.

Texture that we can really start to execute on our strategic growth plan.

Look we're doing this with a mindset of turning to <unk>.

At $3 45 billion dollar.

Enterprise value type company over the next three to five years, not maintaining status quo at $1 5 billion and try to find.

<unk> to pick up to kind of argue we're creating value for our shareholders. So there is a very kind of thoughtful thoughtful plan. There's a groundswell of support we're extremely excited and I think that certainly as we message to you what we're doing over the coming quarters, and we start to put up some data points signaling the successes.

The little wins, we're having along the way I think you guys are getting excited.

Thanks, that's helpful just as a follow up.

Covid is sort of dragged out this winter and it led to a lot of people being sort of falling out of work and just other delays around projects or are you expecting that to creep into the first quarter results.

Rates, just so strong and supply is so tight that it's not having a real material impact.

Yeah, Great question, So we're actually.

We're pretty pleased with what we've seen again were only 25 days in right but.

I actually was having a call with our CFO yesterday kind of talking through how he's feeling and he's like fingers Cross man things are looking pretty good again, we don't want to be too bullish here, but I will tell you that.

When we think about how Q4 came in better than we thought it would and we're looking at where Q1 is vis vis normal seasonal expectations. We're cautiously optimistic about how the first quarter shaping up so.

Again, I think our I think our end markets that we support are a little bit more vibrant right now than maybe some of the other retail oriented spaces.

And there is some pent up demand there and there is likely to be a backlog for the foreseeable future. So again.

I don't want to sit here and pound our chest, but I think.

We're not scared about kind of how it's shaping up so far here in the first quarter.

Thanks, Jason and just a final question for me.

Withdrawn guidance going into the fourth quarter, but now you're sort of reinstated. It for 22 has anything changed in terms of your visibility from three months ago.

No no I think we kind of owned it.

There was never an intentional withdrawal of any guidance, we just didnt directly address it and we got really good feedback.

Just talk about your guidance every quarter. So we will be you'll hear us talk about it every quarter. So we only guide annually, we don't give quarterly guidance, we give an annual guide and we intend to give an update to that guidance, whether it's good news or bad news every quarter.

Right now I have given an annual guide based on kind of the tea leaves that we're that we're reading in the fuzzy crystal ball that we got today.

But as we get further through the year, we'll continue to kind of touch back on that data point, because while there are some hard to predict market moving factors.

There are things that are very controllable by us and that we have good visibility into what Jonathan touched on several of them right and so I think we feel like we've got enough data points that we can at least provide kind of updates each quarter as kind of our view of the world for the year and we think it's important for given the state of <unk> and that were.

We are working to create investor confidence and credibility.

Regular touch points is probably a good thing so you'll you'll you'll hear from us every quarter on that topic.

Thank you.

Thank you.

And our next question comes from the line of.

Greg gave us from Northland Securities you may begin.

Okay, great. Thank you thanks for taking the questions.

Just a couple from me first manageable or the rising fuel prices and.

How much I guess are hedged there versus passed onto customers.

Is there anything that you're kind of implying in guidance with regarding fuel price changes.

Yes, good question.

So that is something that we've been paying close attention to.

As a general rule when we project out the future periods, we don't assume fuel to be a benefit. We also had an assumed it to be a huge headwind we assume it to be relatively neutral to overall results.

The reason, we assume that as we've got structural fuel surcharge programs that are put into place, but with essentially all of our customers and wall.

There may be.

A slight detriment associated with the lag in those structural surcharges when fuel prices are rising.

Commensurate benefit when they neutralize or reverse and so we just don't want to get in the game of trying to predict which way fuel is going to go and then give you guys guidance based on that so so just to be clear, we're not assuming it to be a good guy we're not assuming it to be a bad guy to the extent that.

Is to move dramatically one direction or the other.

It would be something that we would touch on in our regular updates on the guidance for the year.

Okay, Great. That's helpful. And then if I could follow up too on kind of your M&A opportunities.

Talked about last several quarters now and I think you've been pretty clear on the playbook and strategy.

With Jonathan kind of addressing that even on this call too so but just wanted to ask.

The one maybe the opportunities that you've been applying.

Over the last several quarters are there any developments there in terms of timing or how we should think about.

Those opportunities.

Yes, Im kind of looking at Jonathan like do I have the green light here, yes or no.

To that so.

Yes, no there's definitely been some developments and.

Again, we don't want to put the cart before the horse here, but we've got a couple of opportunities that we're looking at very closely we're well down the diligence path and listen we've been well down the diligent path. We talked about this on the last quarterly call, we've been well down the diligent path on two or three in 2021, and then something came along that we discovered in diligence and.

We werent able to kind of get past that and we walked away. So we have the discipline. The same level of discipline today that we had last year. So that's not going to change.

So we don't have anything to announce here, but what I am.

I am cautiously optimistic I use that word a couple of times now about kind of where we're at in the process and the probability of us kind of driving a couple of opportunities to to fruition here over the over the next quarter or two Jonathan anything you're correct.

I think the team would be pretty at a pretty disappointed if we did do at least a few.

<unk> acquisitions this year.

Okay, great Yeah look forward to updates there and I'll take the remainder of my questions offline. Thanks guys. Thank.

Thank you.

And our next question good morning.

Barry Haimes from Sage.

You may begin.

Thanks, very much and great quarter and year.

I had.

Questions on sort of two different topics. The first one is the revenue guide.

And you already talked about REIT.

And that being up mid single digits.

As volume up mid single digit as well and as the truck count average truck count for the year assumed to be similar.

And then on the right part.

You mentioned, the mid single digit assumption, but in terms of contract rates that youre getting currently over the last month or two.

Would those be in line or greater than that number so thats the revenue.

Questions.

Yes, great question so.

The mid single digit assumption that we talked about is really on flight to light opportunities. So there is going to be a mix component that comes into play.

In our business.

As we've evidenced over the last couple of years as we've talked about the movement in how we shift assets to different end markets, but when we think about.

What we're going to be going to customers with in striving to kind of make sure. We have received and to be able to take care of our drivers that's kind of that mid single digit number we are anticipating some slight volume growth.

But.

It's kind of low single digits volume growth, we're not we're not getting two out ahead of our skis on that front.

The other thing is with regard to your question about trucks, we did call out some trucks this year and so if you take kind of a starting truck count in the ending truck count.

There has been a reduction over the course of the year and we're not projecting to have any meaningful growth.

Organic let me clarify organic growth in the fleet. This year. So thats also needs to be taken in consideration when you look at the year over year revenue guide.

Got it so the average truck count would be down low single digits for the year then.

Yes.

We had a slight moderation from the beginning of the year. This year to the end of the year and again there are puts and takes with owner operators in lp's coming onboard. So it's hard to predict perfectly I would tell you, it's probably going to be relatively flat to maybe slightly down year over year, assuming that we don't have a lot of owner operators now piece that come on board.

So our assumption right now.

Got it and then the other topic I had a couple related to the sort of free cash flow and capex. So.

<unk>.

Yes.

The free cash flow.

Last year.

The way I think about it which includes all the capex.

Financed or not.

<unk> was $84 nine and you said there is about $25 million.

Lift in terms of Capex. So is the right way to think about you spent that money 60 ish would've been the true free cash flow number for the year is that about right. Yes, that's probably the right way to think about that.

Got it and then.

Capex to make sure I understand the slide the net Capex guide of 160 to 170 is that total capex net of equipment sales, but before any financing correct. That's right and then the cash Capex guide that we gave.

After financing.

Right. So if I took the $1 65.

Less than <unk>, 25 that slip sort of be at 140 normalized which.

It's up a lot.

I think compared to last year range are you just trying to get the average age down or could.

Could you just talk through what that changes. Thanks, so much yes, no problem very great questions.

One other piece that you need to take into consideration is the technology investments of roughly $10 million that we talked about that are more around kind of the transformation initiatives that Jonathan touched on so I think if you kind of take that midpoint of $1 65 takes a <unk> 25 off from the timing shift and then the 10 off for the kind of transformation onetime pet transformation lift.

You get $35 million at 165 gets you down to $1 30, which is not that far off of kind of what we normally youre going to see something that is going to range because as you know very haven't been in the industry. A long time it depends on what you bought five years ago right. So.

So youre going to have ebbs and flows we're typically going to be somewhere in that 100 to 105 on the low end upwards to $131 35 on the high end as you go through the five year cycle.

This would be a slightly higher year, but I don't want anyone walking away feeling like it's because there's a bunch of deferred maintenance capex that we're doing that's not the case at all.

<unk> done.

We've done a lot of thing wrong, a lot of things wrong in the history of task, but one thing we've done an okay job out over the especially over the last few years <unk> been on top of it is making sure we're making the proper investments in the fleet and so we've done a pretty good job there.

Great. Thanks, so much and good luck on the year. Thank.

Thank you Barry.

Thank you I'm not showing any further questions in the queue I'd like to turn call back over to Jonathan for any closing remarks. Thank you Victor I'd like to thank everyone for your time today, we look forward to continuing a part of a bit we've generated alongside our broader transformation.

We thank you for your commitment confidence, we look forward to translating the market opportunities facing us today.

<unk> returned to consistent growth for our stakeholders.

Thanks, everyone.

And this concludes today's conference call. Thank you for participating you may now disconnect have a great day.

[music].

[music].

Good morning, everyone and thank you for participating in today's conference call to discuss basket is financial results.

The fourth quarter and full year ended December 31 2021.

<unk> 2022 outlook with us today are Jonathan Shopko, CEO and board member Jay.

Jason Bates, EVP, and CFO and Tracy Glenn Vice President of Finance.

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.

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 Tracy Graham Vice President of Finance and Investor Relations, who will read the company's safe Harbor statements within the meaning of the private Securities Litigation Reform Act of 1995 that provides.

On the cautious side.

Important cautions regarding forward looking statements Tracy. Please go ahead.

Thanks, Victor Please turn to slide two for a review of our Safe Harbor and non-GAAP statements.

Today's presentation contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095 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 apps.

Thanks, <unk> business are based on management's current estimates projections and assumptions that are subject to risks and uncertainties that could cause the actual results to differ materially from our expectations and projections.

I encourage you to read our filings with the Securities and Exchange Commission for a discussion of the risks that can affect our business and do not place undue reliance on any forward looking statements. We undertake no obligation to revise our forward looking statements to reflect events or circumstances occurring after today, whether as a result of new information.

Future events or otherwise, except as may be required under applicable securities laws.

During the call there will be also be a discussion of some items that do not conform to U S. Generally accepted accounting principles or GAAP, including but not limited to adjusted EBITDA adjusted operating ratio adjusted operating income adjusted net income or loss free cash flow and net debt with the exception of free.

Cash flow and net debt the company will discuss these measures on an ex <unk> basis. These measures exclude the impact of the Aveda business, Although we see generating revenues from the Aveda business and completed the wind down of our Vida operations. In 2020, we continued to recognize income and expenses primarily related to workers' compensation.

Ames and insurance proceeds from the Aveda business in 2021 reconciliation of these non-GAAP measures to their most directly comparable GAAP measures are included in the appendix to the Investor presentation and press release issued this morning, both of which are available in the investors tab of the <unk> website at www.

You Dot dot com in terms of the structure of our call today, we will start by turning the call over to <unk> CEO Johnson Shopko as who will review our business operations and the progress we are making as we execute against our key strategic priorities. Jason will then provide a financial review of the quarter and full year as well as provide or <unk>.

22 outlet at which point, Jonathan will wrap up our remarks with a few closing comments before we open the line for your questions with that I will hand, the call over to Mr. Jonathan Checkout, Jonathan. Thank you Tracy and good morning, everyone, Let's turn to slide three where I will speak briefly on some of the headline observations and key accomplishments to estimate as we closed out a very successful.

<unk> fourth quarter and full year 2021.

I am pleased to report the desk you delivered another very strong quarter of operational and financial performance capping off a second consecutive year of record adjusted EBITDA in the fourth quarter demand remains strong across the industrial end markets. We serve defying the normal extent of the seasonal deceleration.

We continue to face ongoing capacity constraints in the equipment market due to disruptions in the global supply chain.

These disruptions have also worked to perpetuate the imbalance between supply and demand, which in turn has continued to support a very healthy rate environment.

This environment looks to have provided a new foreign rates. It is our proactive strategic deployment of assets against the most profitable pockets of the market that has allowed us to not only outperformed the benchmark rate, but also extend our freight capture.

Evidenced by the 17, 5% increase in revenue this quarter.

<unk> continues to focus on operational execution, driving a 25, 9% improvement in our adjusted EBITDA of $49 6 million and.

And a 360 basis point improvement in our adjusted operating ratio from 96% to 92, 4%.

Additionally, our quarterly adjusted net income was $13 million and adjusted diluted earnings per common share of <unk> 18.

We're up 41, 3% and 51%, respectively, even when compared to our strong fourth quarter of 2020.

Despite cost pressures on employee compensation recruiting and other operating line items, we delivered record results.

Our diligent execution within our asset light business model enabled us to convert topline growth and a meaningful increased profitability for our shareholders.

Turning the call over to Jason to provide more detail around our financial performance and outlook.

I can take a few moments to discuss our continued commitment to both our operational execution and long term strategic direction.

Previously we've highlighted the importance of our unique business model to our operational success throughout 2021, we leverage this model to proactively identify the network optimization opportunities and accordingly, reallocated our assets to better serve our customers within these markets in order to drive superior rates compared to the greater flatbed market.

Further we tapped our extensive network of owner operators and third party carriers to accommodate our customers' requests for additional capacity, thereby capturing incremental freight spend from our blue chip shipper base. This dedication to customer service operational efficiency and business model flexibility are each mainstays to our success and our long term strategic plan.

Shifting from a trailer centric view of our business to one of end market leadership is a fundamental tenet of our strategic direction positioning us for more profitable growth in the future as we begin to prioritize the marshaling our resources in support of the specific end markets focused intensity targeted at such end markets and sub verticals that are best position.

Two distinctly value our specialized knowledge and credentials are differentiated asset profile international footprint will give rise to opportunities to further expand our suite of services and reach to better service and engage these very customers are.

A key element to advancing our strategy as the fundamental shift from Siloed independent operations to a federated and harmonized platform, where the sharing of data exchanging of best practices and coordination and asset utilization will collectively provide the foundation for future growth and optimization.

To accomplish this there will be further operating company consolidations, there will be investments in technology.

And there will be coordinated thoughtful standardization across our platform.

Over the last few quarters, we focused on enhancing our plan to ensure these tactical transformational initiatives are executed in such a way so as to complement our long term strategic direction.

We will begin to share many more details around our transformation plan as well as the longer term strategic plan over the coming quarters.

With that I will now turn the call over to Jason Bates to review, the fourth quarter and full year 2021 financial performance and 2022 outlook Jason.

Thank you Jonathan and good morning, everyone. If you'll please turn with me to slide four we will start with a high level review of the consolidated results for the fourth quarter.

As Jonathan mentioned, our fourth quarter results. Once again provided evidence of <unk> ability to execute efficiently and effectively capitalizing on what has been a strong freight environment.

I am extremely proud of our team's collective performance in the fourth quarter and for the full year, both of which exceeded our expectations.

We experienced similar trends in the fourth quarter to those we've discussed throughout 2021 with a sizable uplift in demand across construction materials steel and manufacturing related verticals, our ability to continually support and service our strategic customers over these past 12 months to 18 months has been a key contributing factor in our ability to realize.

Than expected freight rates, particularly in our flatbed business.

During what has been an increasingly difficult supply demand imbalance within the transportation industry.

We believe that this focus on customer service and strategic freight selection played a role in minimizing the seasonal volume slowdown we traditionally see from the third quarter into the fourth quarter and enabled us to capitalize on market opportunities within both of our segments and across end markets.

Our portfolio approach is purposeful and continues to deliver a diverse profile of <unk>.

Consumers and end markets.

Which allow us to pivot and seize opportunities across a breadth of industrial verticals. We are proud of our team as they continued to redeploy assets to the most efficient and markets and deliver strong 2021 results.

Perforate. These comments at the outset of the call we will primarily focus our discussion today on the adjusted results excluding a beta.

As Jonathan mentioned in the quarter that we delivered revenues of $394 3 million up 17, 5% compared to revenues of $335 6 million in the fourth quarter of 2020.

We are optimistic about continued freight opportunities and our team's ability to further execute against the strong market environment as well as pull operational improvement levers to help further underpin our recent outperformance as we move into 2022.

The team delivered adjusted net income of $13 million or <unk> 18 per diluted share in the quarter adjusted EBITDA of $49 6 million grew by nearly 26% compared to the fourth quarter of 2020 due.

Due to due to increased realization of our business improvement plans alongside growing freight rates and volumes supported by healthy demand and strategic customer alignment and support.

The year over year growth was also supplemented by a higher than normal gain on sale of equipment as we along with most of the industry. We're beneficiaries of a strong used equipment market. The combination of these various items helped us to offset any moderation from the unusually high margin high margins, we experienced in 2020 period.

With the wind energy project revenues.

I'm also proud to highlight that while many companies in our industry faced driver retention headwinds <unk> continues to prioritize its workforce and thus driver turnover remained significantly below the industry average.

Which we maintain as a competitive advantage.

Of note, we have implemented driver pay increases in the quarter in line with the market, which have been hedged by the continued expansion of freight rates. We continue to monitor the driver situation closely but are encouraged by our teams excellent work and ensuring that he is an attractive and quality employer for our dedicated driving professionals.

Finally, I'll briefly touch on our corporate overhead expenses in the quarter administrative expenses, including contract and professional costs improved.

Through the corporate cost did experienced a slight increase primarily associated with the seasonal bonuses as well as salary and benefit increases which are tied to the company's improving performance and market competitive rates.

On slide five I'll briefly touch on our key financial performance measures from a full year perspective, again referencing numbers, excluding the aveda business for.

For the full year 2021, that's generated revenues of roughly $1 6 billion, which increased 11% versus 2020 the.

The top line increase was driven by growing freight volumes and rates compared to Covid impacted 2020 attributable to heightened performance in our steel and construction end markets, coupled with a constrained supply chain environment offsetting the normalization of record wind energy performance in 2020.

As we move to a discussion about the various profitability metrics I want to take a moment to highlight several annual records that were achieved by the team in 2021.

We achieved records in each of the following financial metrics as well as their adjusted counterparts operating income net income earnings per share adjusted EBITDA and operating ratio.

Can't properly express how proud we are as a management team of our organizational commitment to excellence over this past year. These various profitability records could not have been achieved without the hard work of each and every team member throughout our organization.

With that said ill take a moment to highlight the specific record results.

Our operating income of $116 7 million improved more than 90% over the 2020 results.

Adjusted net income of $77 8 million nearly doubled versus the $39 6 million of adjusted net income delivered in 2020.

Further attesting to the effectiveness and efficiency gain through our strategic changes and operational upgrades achieved over the past year and a half.

Total adjusted EBITDA of $223 1 million improved by 25% compared to 2000 Twenty's results.

Finally, our adjusted operating ratio was $99 for the full year of 2021, which represents a 270 basis point improvement from the $93 six adjusted or in 2020.

These full year results show, our ability to execute decisively on our operational plans successfully deploying assets, where our niche capabilities and flatbed offerings are most valued by our customers while capitalizing on the year strong market backdrop.

I'd now like to walk you through a detailed view of the fourth quarter results at the operating segment level.

On slide six we present, our specialized segment results specialized segment revenues for the fourth quarter of 2021 were $220 3 million up 12, 1% versus the fourth quarter of 2020.

Driven by strong industrial end market demand counteracting the normalization of the strong wind wind segment in the year ago period.

Continuing to slide seven we highlight our specialized segment adjusting for the divestiture of our VA business.

Adjusted EBITDA improved to $33 3 million up 11, 4% versus the fourth quarter of 2020.

We were also able to maintain adjusted EBITDA margins relatively flat versus the fourth quarter of 2020 in spite of the revenue mix shift from historically elevated wind energy projects in 2020, which created tougher comps.

That said I am pleased to report specialized rates increased size of belief in the quarter more broadly with the rate per mile for the segment of $3 34, increasing by 13% when compared to $2 96 in the fourth quarter of 2020.

We've continued to see this rate growth across our portfolio of end markets and particularly around our construction materials channels, which helped offset the aforementioned decrease in wind energy.

This again highlights the beauty of our diverse set of service offerings customers and end markets, our ability to capitalize on a strong rate environment, coupled with our operational enhancements fleet right sizing and dedication to driving efficiency across our portfolio is proven by the segments revenue per tractor results of $66 eight one.

Hunter versus 59100 in the fourth quarter of 2020.

Lastly, the segment's adjusted operating ratio was 91 versus 92 eight in the fourth quarter of 2020.

On slide eight we detail our flatbed segment results for the quarter.

Revenue in the fourth quarter was $176 4 million, which increased 24, 1% from $142 1 million in the fourth quarter of 2020.

Demand remains strong in our flatbed segment during the fourth quarter as we continue to redeploy our assets into the most accretive and markets, while leveraging our asset right model to capture incremental revenue through our brokerage operation in the fourth quarter of 2021, we were able to realize a 23, 1% increase in our rate per mile <unk>.

Third to the fourth quarter of 2020.

While the overall flatbed market has experienced significant rate increases driven by the supply demand imbalance, we have been able to generate incremental rate compared to the market due to our operational execution.

We proactively identify the most advantageous markets and redeploy our assets into those markets, enabling us to garner premium rates as evidenced by the chart in the lower right quadrant of this slide.

The rate improvement is also reflected in the revenue per tractor metric of $51 300, which increased 19, 3% from 43000 in the year ago period.

The segment's adjusted EBITDA result of $26 5 million grew by 55% compared to the results of $17 1 million in the fourth quarter of 2020.

This stronger adjusted EBITDA performance helped deliver adjusted EBITDA margin growth of 300 basis points, expanding 15% despite facing tough comps due to the heightened COVID-19 recovery environment in the year ago period.

Finally, the segment's operating ratio improved a staggering 720 basis points to 90 or with the adjusted or coming in at 89 four.

Turning to slide nine I'll take a moment to speak about our cash flow performance.

Through year end 2021, <unk> has generated a $144 7 million in cash from operating activities.

Cash Capex was $53 7 million and we collected cash proceeds from the sale of equipment of $58 6 million.

This resulted in free cash flow generation of $149 6 million for the year.

Capex financed with debt or capital leases totaled $64 7 million, bringing the net after financing of $84 9 million.

Looking to slide 10, I will conclude with our outlook for the full year 2022.

Before handing the call back to Jonathan.

Though we anticipate some headwinds in the coming year, many of which are present in the market today, including inflationary pressures on cost driver shortages and equipment supply chain challenges, we remain confident in our ongoing ability to navigate these headwinds we are optimistic heading into 2022 and expect to have a clearer view as we.

Progress in the year, having said that we wanted to provide a high level outlook to help you understand how our team is thinking about the business as we begin the year for full year 2022, we anticipate revenue growth between 4% and 7%. We expect this revenue growth to be a function of both continued organic rate improvement as well as volume.

Increases on an adjusted EBITDA basis, we are expecting to outpaced our revenue growth and at this time are estimating an increase of 5% to 10% year over year.

This bottom line expected performance will be a combination of the revenue drivers I just mentioned combined with various operational initiatives currently underway, which Jonathan discussed last quarter, and we will readdress shortly.

Moving to Capex, our capital priorities in 2022, we'll continue down the path set in 2021, we are generally pleased with the state of our equipment and have tried to remain disciplined about staying on top of our maintenance capex as referenced last quarter. We did experience a slight timing issue with regard to the receipt of new equipment, we anticipated to.

Take delivery of in the fourth quarter, but which was pushed into the first quarter of 2022.

This represents roughly $25 million of net capex that shifted from 2021 into 2022.

Additionally, this year, we will have an added focus on driving organic growth through further investment in technological improvements designed to increase our scale and streamline our business, which we anticipate to be roughly $10 million, taking those two items. In addition to our traditional maintenance Capex. We expect net we expect net.

Capex for 2022 to be within the range of $160 million to $170 million.

A question we've been frequently asked related.

A question, we havent been frequently asked relates to our views on consolidation in the industry and M&A in general we do believe there are various data points and market realities that are bolstering. The case for continued consolidation within our industry and we view M&A as a very necessary complement to our long term value creation strategy.

To that end, we will continue to keep a close eye on the M&A market as a potential medium to fund strategic growth. However, as we've emphasized in the recent past this leadership team it tends to be very diligent with our approach to M&A focused on full cycle earnings potential and long term equity appreciation.

So in summary, we are excited about the amazing effort each of our team members here at <unk> put forth in 2021, which enabled us to achieve numerous profitability records this past year.

Although the operating environment will likely present different challenges in 2022, we are similarly optimistic about our team's ability to execute and are looking forward to continued progress in our organizational evolution. So with that I'll hand, the call back over to Jonathan to offer a few final words Jonathan thank.

Thank you Jason.

Mike spent only a quick moment on this slide 11, we have spent a lot of time referencing the various initiatives we've undertaken over the last year and a half to improve our operations and improve our business, sometimes when quarterly performance is analysed discreetly on these quarterly calls the accumulative effect of these turnaround efforts can be lost.

In the top left quadrant of this slide however, we've.

We've lined out a handful of relevant metrics that frame up our successes over the last few years.

From fleet rationalization and efficiencies around asset utilization to improvements in relevant profitability metrics and the strengthening of our balance sheet with comprehensively overhaul. This company and will continue to leverage this momentum as we move on to the next stage of our transformation that onto the execution of our longer term strategic vision.

We've exceeded the expectations of many people and there is still substantial opportunity left for us to take advantage of.

If you look to the top right quarter. This slide another takeaway I'd like you all to note is that in spite of this remarkable turnaround.

The discount in our EV to EBITDA multiple relative to that of our peer groups has remained a constant over this three year period at around 30%, which is perplexing, given where we started in 2019, but compared to where we stand today.

Next slide please.

On the previous slide we offered up a quantitative briefer deskins valuation also noting our relative pricing and on slide 12, I'd like to offer up the makings of a qualitative case for desking.

This slide provides a high level contours of the value drivers that will underpin our growth over the coming years. These drivers will provide our shareholders with multiple ways to win both beta and alpha.

Our focus on continuous improvement remains unchanged as evidenced by our financial progress over the last 24 months we.

We will continue to evaluate our industrial end markets for both organic and strategic growth opportunities, including the expansion of our service offering to our customers.

Examine opportunistic adjacent markets within which to expand our footprint.

We will allocate capital in support of these highest and best use opportunities with an emphasis on earnings free cash flow generation and long term equity value creation.

With respect to secular capacity tightness as I mentioned earlier equipment supply chain has remained constrained impacting both the demand and supply sides of the equation and sustaining a favorable rate environment for our industry.

At a one trillion dollars infrastructure Bill will only challenged the possibility of a near term supply demand equilibrium pretty open that carriers.

Stemming the runway and providing a safe haven rate environment for a segment of the industry for the foreseeable future.

With that I'd like to conclude our prepared remarks for this morning, and I am excited to turn the call over to our operator for your questions Victor.

Thank you ask a question.

One on your telephone.

And to withdraw your question Jess.

Keith.

Ladies and while we compile the Q&A Walsh.

Our first question comes from the line of Jason <unk>.

Yes.

Kevin you may begin.

Thanks, Operator, John Jason and team good morning.

Wanted to hit on a couple of things here.

Talk to me a little bit about rate.

I saw the nice year over year bump.

In both your decisions the sequential.

Gradation that you guys noted in the charts I'm, assuming that's just the normal historical move.

And if I'm correct on that how would you compare it to normal seasonality in the quarter.

Yes, Jason things.

Yes, you are correct. There is a normal seasonal cadence in our business that we like to kind of remind people of a lot of people follow 91 or hard on some of the big drive end, guys and usually kind of third and fourth quarter are the or the peak periods in our business. It's really second third quarter, and then we seasonally slow down in the fourth and first quarter. So so yes, you are correct there is a.

Seasonal cadence, there, where typically we see things kind of slow.

Though if you look at kind of a year over year or the sequential change over the last two or three years. This year, we actually last year was the first quarter, where it was unusual in the fourth quarter was strong and has a lot of COVID-19 recovery action that happened.

Although this year, we saw a similar trend in terms of not dropping off as much as it normally has.

So while it did kind of moderate it was surprisingly strong for that sequential slowdown of third or fourth quarter.

So better than the historical slowdown that you've seen.

Q3 to $4 2020 was an aberration, but setting that aside this year was probably one of the better.

Sequential.

<unk> from Q3 Q4 in terms of rates, Okay, perfect. That's good to hear.

Other thing in the past you guys had talked about your advantage in your driver turnover rates. You noted is again in your comments.

But you also talked about how youre going to keep a close eye on the overall driver market because flatbed jobs, obviously, a much more difficult job and somebody on a dry van no touch right.

Our U R.

Is the normal driving driver market pay getting up there to where youre starting to get worried that it could impact your ability to attract new drivers.

Yes, Great question and I think we talked about this as you and I talked about this a few weeks back it is something that we watch really closely.

I have a lot of friends in the dry van side of the World having spent most of my career over there who I talk to regularly and when I look at some of the things theyre doing and having to do to attract and retain drivers. It just causes us to just kind of keep our ears open and our eyes open to how that might affect our drivers because to your point.

Good job as a tougher job youre getting out of the vehicle, sometimes in less than ideal conditions youre getting up on top of the trailers or tarpon downloads time things down.

It's over Dimensionalize, it's more complex and so understandably they deserve a premium in terms of compensation. So we just have to make sure that that premium is still there and that the.

The value for choosing to be a flatbed drivers are still there and so that is something we're very mindful of and we watch very closely as we touched on in the prepared remarks, we did do some select targeted increases in certain pieces of our business in the quarter.

To that end right to make sure that it continues to be.

An attractive opportunity.

I want to revert back to your opening part of your question and that is that our turnover is even with all of those puts and takes we just discussed.

More than <unk>.

Of what a lot of the industry data points would suggest so we're we're pretty pleased with with our teams ability to kind of attract and retain drivers, but that doesn't mean that we can just rest on our laurels.

Okay, One final one and I'll turn it over to you.

The other analysts on the call here.

Your outlook for 'twenty, two I, just wanted to sort of trying to digging a little deeper what does it include in terms of gain on sale since youre actually pushing some more purchases and capex into 'twenty two from 'twenty, one and do you have anything in there for any new projects that might be linked.

To the infrastructure Bill.

Listen in.

At the time, yes, great questions, Yes, so real quick on the gain on sale.

Obviously 2021 the gain on sale was was strong.

Was up I think through the third quarter was up roughly $8 million year over year and for the full year was closer to 10, when you compare 2021% to 2020 right. So I think everyone in the industry experienced similar opt.

Our performance on the gain on sale for 2022, we're not assuming that the market <unk>.

Projected used equipment pricing is top right, but we're not assuming that the market is going to be better, but we're also not assuming that it's going to substantially moderate and get worse, we've got a relatively similar assumption around gain on sale.

On a per on a per asset basis, it'll moderate a little bit but not meaningfully.

We're not talking.

Tens of millions of dollars of swing here, maybe $1 billion or two.

And so I think that for us.

An important data point.

Secondarily with regard to.

The put the push out you as you address the push out of equipment from Q4 into Q1.

We're trying to stay still consistent with its really just a timing thing that's happening between Q4 and Q1 so.

I don't know that we would expect significantly more.

Dispositions.

When you look at the number of trucks that are expected to be rolling off in 2022, so from that perspective, theres not going to be a step function up.

On the used equipment side or was there another part to that question that I missed in looking at Tracy and Jonathan I think that yes, no I was talking about in your in your projections through 'twenty total infrastructure infrastructure, yes, yes. Thank you.

Yes.

Listen.

It's a little fuzzy exactly what the infrastructure builds can look like and how quickly it's going to make its way to us.

We've been pretty conservative in our assumptions around what's going to flow through.

The infrastructure Bill in 2022, we think we'll probably start seeing something in the back half of the year, but I don't want you to think that that 4% to 7% guide on top line and 5% to 10% improvement on bottom line is largely dependent on the infrastructure Bill I would just say it's minimally.

Nominally dependent if at all on the infrastructure Bill, but I do want to point out because you asked about driver retention and things like that we did highlight a lot of potential headwinds with regard to inflationary pressures driver recruitment attention supply chain challenges those are taken into consideration in that guy.

So we just want to make that clear.

That that guide isn't our guide and then we're seeing and we need to worry about these things, which could provide downward pressure. We're seeing we've already taken that into consideration now they could be worse or they could be not as bad and then that would obviously affect the guide, but but we did want to make it clear that those kind of headwinds were factored into that guide that we provided.

Perfect I appreciate the detailed answers as always gentlemen, thank you. Thanks David.

Okay.

Question for Brian .

Thanks, Paul.

Okay capital you may begin.

Good morning, Jonathan Jason.

Congrats on the progress.

Thanks Ryan.

So you talked a little bit about rate environment for 2022.

Zooming that out a little bit if you can can you talk through the puts and takes for rates over the next several years beyond I guess the next several quarters.

Yeah, I mean, it's a.

Complicated one right. So we've done a lot of Jonathan and I were both finance guys right. So we do a lot of theoretical analysis around three and five year plans and modeling.

In 2022.

We're not assuming anything crazy from a rate perspective, we're candidly, we're kind of in that mid single digit range.

With regard to rate assumptions, which could be conservative, but we try to align the inflationary assumptions in the cost pressures and things like that with driver pay increases et cetera with that rate increase right. So to the extent that we outperform on on that mid single digit rate assumption.

More likely than not some of that is going to make its way to drivers and so it probably won't have as much of a flow through as we have seen over the last 18 months, but back to your question about the longer term.

And I'll, let Jonathan.

I know he's got some thoughtfulness as well, but I mean from my perspective, I really don't see the supply demand imbalance that exist today dissipating anytime soon I think we're we've got this trillion dollar infrastructure Bill Thats going to continue to provide pressure specifically in our markets that we support and service.

Yeah.

And you've got a lot of challenges in terms of getting equipment, you've got a lot of challenges with regard to insurance, we're hearing rumblings about crude oil.

Hopping.

On a dollar a barrel like Theres a lot of things out there theyre going to make it tough for people in our space, especially the smaller people and that's where you've heard me and Jonathan Boldt kind of allude to opportunities for industry can further industry consolidation and so when you think about the rate environment I think rates are going to hold up for a little while I don't think that there.

Reversing course anytime soon Jonathan anything.

Jason Jason said most of the things I would've I would've said Ryan we've looked at we've looked at flatbed rates.

For the last 40 years to try to kind of use as a proxy to kind of forecast the future.

And look it's as you know.

Looking at compound annual growth rate over that 30 to 40 year period of two 5% or so.

Generally yes, Jason when we get this question Jason says a lot it's up into the right. It's a very it's a very different forward curve and behaves very differently than that.

Net debt.

Oil and gas right. So you've got much more volatility in those forward curves you got the peaks and troughs are much more pronounced.

They could sit there.

In the doldrums.

Hello, Watermarks for multiple years, if you look at if you look at the way the the rates behave in this industry.

Highly correlated to to CPI <unk> are also in an essence youre passing through the rates.

We also 80% 85% of what we do is dedicated so we're not planning to spot the spot market. So a lot of the.

Extreme volatility is insulated so we have a much more kind of balanced moderated forward curve than the guys that are playing the.

The spot market.

If you look past the last 30 years or so.

At times, we are rate did did pull back you resolve it was all macro event driven so if you look back to the dotcom bubble I mean really didn't do much for rates there, but you went through the great recession.

You looked at the.

The industrial recession, and you looked at even Covid.

And you kind of analyze those yes, those events trough as a trough as a percentage of peak was was 85%. So there was some pulled out right kind of 15% or so from from that from those respective peaks in those respective cycles, but those cycles peak to trough to peak, we're often 18 month cycles right.

And if you think about if you think about our our cost structure.

70, 70, 778% variable I mean, we've got a long history as this as does the asset light industry. The I'm sorry, the asset based players within the industry of defending margins because of that variable cost structure. So I think that if you look we've looked at it Jason made a lot of compelling points, particularly for the <unk> segment.

Of the industry with the infrastructure Bill.

Got the supply chains, preventing the.

The over exuberance.

The larger carriers from stepping on the gas.

Adding a bunch of trucks to their fleet to offset offset demand in pulp prices down.

There's a lot of natural hedges in place I think to keep the rate environment pretty healthy for the foreseeable future.

Yes, Brian just one correction, Jonathan said, 85% of the fleet is dedicated E mid contract I'm, sorry, yes, yes, I just wanted to clarify that.

All helpful context, guys I appreciate it.

As you think about the operational turnaround.

Or do some back of the envelope math, where youre not guiding to it I think guidance implies you guys get to kind of your 90% or a bit better than that I guess first is that right and then second can you walk through you've laid out kind of the multi year.

Priority strategy et cetera, but what are the main priorities that you guys are focused on the next three to six months.

Yes ill, let Jonathan hit the second part of that question I'll take the first part.

Yes, I'm always a little reluctant.

When we talk because two years ago I sat here and talked to you guys about our long term goal of a 90 <unk> now I keep getting the question, Mike Hey, Youre already there right and so but I want to reiterate to everyone that that goal is more we want to be a 90 or through the peaks and the troughs.

Going through what's been a really really strong market and so yes, you would expect us to be doing well, but personally I think if you were to talk to recur or Jonathan or any of the leaders here in the organization. We think we should be operating in <unk> in peak environments, and then maybe your kind of 90%.

Low ninety's in trough environment. So we still feel like Theres, a lot of opportunity for us to continue to improve so that we're consistently performing.

Through the peaks and the troughs of the cycles, not not reverting back up to a high 90% or when the market doesn't cooperate perfectly. So so we do think there's a lot of opportunity and I'll turn it to Jonathan now to talk about what some of the strategic things are that we are going to be focusing on to kind of help us drive some of those opportunities, yes, Ryan we've talked about them.

On the other past past calls, but again tech technology <unk> technology. Historically is that I mean look it's been an achilles' heel for for Dash E. We haven't we haven't had access to real time data to make good decisions quickly and I think the success. We've had is really a testament to the.

Kind of a tenured leadership, we have we have at the Opco level. So we're doing.

We're making investments in technology, those are going to be to access better more real time data.

There is a subset of those technology investments, that's going to be just kind of good old Corp.

Corporate hygiene.

But technology is one of those one of those one of the legs of the stools.

The other one is further further consolidation rationalization.

Across across our stable of op codes are enterprise right and it's taking it's figuring out a way to work more collaboratively.

More collectively and taking and taking some of our our better performing arcos and finding a very efficient effective way too. It's still the best practices from those respective op goes across the enterprise and then also figure out a way really to get the op codes to work together, rather that we mentioned Siloed, we I think we've said that.

The last few calls is a good description for for how we look today, even even with all the progress we've made.

Some of these these asset utilization network optimization.

Cash stopgap initiatives the longer term initiatives are really kind of getting at the heart of as to where.

We're really operating as a <unk>, we want to preserve the kind of a touch in the field.

The local regional carrier, we think its very beneficial it in recruiting drivers. We think it is very beneficial and it's finding that right touch with the customers, but we've got to do a better job of.

Really working working at <unk> from a network optimization asset utilization standpoint, again part of that's part of that.

Just the organizational restraints that we have been subjected to over last year as a part of that is also going back to back to technology and then I think the last thing is is M&A.

Got it we've got a good team we spent the better part of the year now building a very a very proprietary platform of deal flow. We're sure. We're taking a look at all of the marketed deals but.

But we think that the value opportunity is much more ripe and those kind of private one off negotiated opportunities pulling those in the right way right. It's it's it's by a write back of thoughtfully, but that onboarding those those opportunities the right way and that is not creating a six 7%.

<unk> platform, where we start to ramp up.

Duplicative duplicative kind of back office expenses again, its truly taking the essence of those those operating companies is target operating companies that we acquire taken the front office capabilities the driver facing functions to customer facing functions and then pulling out the more kind of commodity back office functions and pulling them under the under the under the tent.

Taking the the buying power that <unk> has taken the kind of brand recognition the customer the customer touch the scale and depth of capabilities that <unk> has at driving that through that that new target platform and ensure that they're getting the benefit from all those.

That kind of broader halo of attributes. So we're excited about it again.

Kind of feel like <unk> kind of pulling at the leash, we've been a little bit more kind of balanced and reserved it it really decisively kind of delineating and communicating with the transformation plan looks like and the broader strategic vision, because we want to do that the right way.

We look we've spent a lot of time identified opportunities over the last several months, we've got a very detailed plan.

And we're in the early innings of actually implementing some of the some of the components of that plan and what we said is instead of going out continue to wave our arms to the market, which we've got we've got kind of a accused over the last few years, we feel like we're starting to really build credibility with the market, where we'd rather do is get a third of the way into the plan or at least a couple of earnings into the plant and come back.

Can you guys here's the plan, here's what we hear as well.

Set out to do here's what we're doing and make sure all those dots connect for you guys and I think that youre going to be excited we as a team all the way from kind of bottom or top of the organization top to bottom of the organization are really excited about that.

This company is going to go we've got a method to the madness and Ed.

There is a there is a very I think thoughtful.

Very interesting vision that we're going to that we're going to exploit over the coming years.

Well done guys and looking forward to.

Come here in the near future. That's it thanks, Thanks, Ron Thanks Ryan.

Our next question from Brian <unk>.

Kevin.

Stifel you may begin.

Yes. Thank you Jonathan just to follow up on that question. I know you guys said in the prepared remarks that youre expecting the.

Adjusted EBITDA growth to exceed revenue part of that can be driven by some operational improvements can you just put a value on some of the larger items. There I know you talked about some of them, but can you put a dollar value on some of the things you are expecting in 'twenty two.

Yes.

So we've got look we've got legacy we've got legacy initiatives.

It's better network optimization.

Better better coordination.

It's best practices.

So procurement efficiencies things like that those are legacy initiatives that were still there we're still driving through separately. We mentioned this idea of a kind of a transformation phase of nasty and these are the these are kind of the multiple initiatives technology investments additional kind of opco consolidation.

Harmonization across the broader organization across the fleet. Those are those are initiatives that are very at the very very beginning.

<unk>.

They're kind of respective stages, we think that we're going to be a good part of the way through those by the end of the year.

But we think the benefit from those things at least at 2022 are going to be mostly at least our assumption are going to be mostly offset by the respective costs driving those initiatives. So you might get a little bit of a benefit towards the end of this year youre not getting the full run rate, though of those things until 2023. So again I think it's something we have.

Been pretty moderated on as we think about 2022 guidance.

Do you think in terms of just all of the integration and operational improvement that.

Where do you think we are sort of in that lifecycle sort of halfway done with that in the later stages.

Or would you handicap it.

Yes, I think I think we've got to we've got a very clear line of sight.

As you guys know anytime somebody talks about transformation.

Some days are two steps forward one day back at a day, so look but we've got a good team.

We've got very supportive Opco leadership teams really really shouldering at driving some of these things work. We spent a lot of time socializing. This with the Opco is making sure we're thinking about this the right way, but I think that.

From our standpoint without kind of giving away too many of the punch line for our next call.

This is probably kind of a 15 month voyage.

We really shifted as something that feels like optimization really we really think about the next 15 months or so.

Sure footing touched.

Sure that we can really start to execute on our strategic growth plan.

Look we're doing this with a mindset of turning gas <unk>.

$3 $45 billion.

Enterprise value type company over the next three to five years, not maintaining status quo at $1 5 billion and try to find.

And dives to pickup to kind of argue we're creating value for our shareholders.

There is a very kind of thoughtful thoughtful plan.

The groundswell of support we're extremely excited and I think that certainly as we messaged to you what we're doing over the coming quarters, and we start to put up some data points signaling the successes in the.

The little wins, we're having along the way I think you guys are getting excited.

Thanks Thats helpful.

Follow up.

Covid is sort of dragged out this winter and it led to a lot of people being sort of falling out of work and just other delays around projects or are you expecting that to creep into the first quarter results.

Our rates.

Strong and supply is so tight that it's not having a real material impact.

Yes, great question Bert.

So we're actually.

We're pretty pleased with what we've seen again were only 25 days in right but.

I actually was having a call with our CFO yesterday kind of talking through how he's feeling and he's like fingers Cross man things are looking pretty good again, we don't want to be too bullish here, but I will tell you that.

When we think about how Q4 came in better than we thought it would and we're looking at where Q1 is vis vis normal seasonal expectations.

We're cautiously optimistic about how the first quarter shaping up so again I think our I think our end markets that we support are a little bit more.

Hybrid right now than maybe some of the other retail oriented spaces.

And there is some pent up demand there and there is likely to be a backlog for the foreseeable future. So again.

I don't want to sit here and pound our chest, but I think.

We're not scared about kind of how it's shaping up so far here in the first quarter.

Thanks, Jason and just a final question for me.

Withdrawn guidance going into the fourth quarter, but now you've sort of reinstated it for 'twenty. Two is anything changed in terms of your visibility from from three months ago.

No I think we kind of owned it.

There was never an intentional withdrawal of any guidance, we just didnt directly address it and we got really good feedback that hey, guys. Just talk about your guidance every quarter. So we will be you'll hear us talk about it every quarter. So.

We only guide annually, we don't give quarterly guidance, we give an annual guide and we intend to give an update to that guidance, whether it's good news or bad news every quarter.

We right now have given an annual guide based on kind of the tea leaves that we're that we're reading in the fuzzy crystal ball that we got today and but.

But as we get further through the year, we'll continue to kind of touch back on that data point, because while there are some hard to predict market moving factors.

There are things that are very controllable by us and that we have good visibility into what Jonathan touched on several of them right and so I think we feel like we've got enough data points that we can at least provide updates each quarter to kind of our view of the world for the year and we think it's important for <unk> given the state of <unk> and that were.

We're working to create investor confidence and credibility.

Regular touch points is probably a good thing so you'll you'll you'll hear from us every quarter on that topic.

Thank you.

Thank you.

And our next question comes from the line of Gregg Gilbert from Northland Securities You may begin.

Okay, great. Thank you thanks for taking the questions.

Just a couple from me first home manageable or the rising fuel prices and.

How much I guess are hedged there versus passed onto customers.

Is there anything that you're kind of implying in guidance with regarding fuel price changes.

Yes, good question.

It's something that we've been paying close attention to.

As a general rule when we project out the future periods, we don't assume fuel to be a benefit. We also don't assume it to be a huge headwind we assume it to be relatively neutral to overall results.

The reason, we assume that as we've got structural fuel surcharge programs that are put into place, but with essentially all of our customers and wall.

There may be.

A slight detriment associated with the lag in those structural surcharges when fuel prices are rising.

Commensurate benefit when they neutralize or reverse and so we just don't want to get in the game of trying to predict which way fuel is going to go and then give you guys guidance based on that so so just to be clear, we're not assuming it to be a good guy we're not assuming it to be a bad guy to the extent that.

Is to move dramatically one direction or the other.

It would be something that we would touch on in our regular updates on the guidance for the year.

Okay, Great. That's helpful. And then if I could follow up too on kind of your M&A opportunities.

Talked about last several quarters now and I think you've been pretty clear on the playbook and strategy.

With Jonathan kind of addressing that even on this call too so but just wanted to ask.

The one maybe the opportunities that you've been applying.

Over the last several quarters are there any developments there in terms of timing or how we should think about.

Those opportunities.

Yes, Im kind of looking at Jonathan like do I have the green light here, yes or no.

To that so.

Yeah, no there's definitely been some developments and.

Again, we don't want to put the cart before the horse here, but we've got a couple of opportunities that we're looking at very closely we're well down the diligence path and listen we've been well down the diligent path. We talked about this on the last quarterly call, we've been well down the doses path on two or three in 2021, and then something came along that we discovered in diligence and.

We werent able to kind of get past that and we walked away. So we have the discipline. The same level of discipline today that we had last year. So that's not going to change.

So we don't have anything to announce here, but if I am.

I am cautiously optimistic I use that word a couple of times now about kind of where we're at in the process and the probability of us kind of driving a couple of opportunities to to fruition here over the over the next quarter or two Jonathan anything you have that correct.

I think the team would be pretty at a pretty disappointed if we did do at least a few.

Accretive acquisitions this year.

Okay, Great, Yes look forward to updates there and I'll take the remainder of my questions offline. Thanks guys. Thank.

Thank you.

And our next question.

Barry Haimes from Sage.

You may begin.

Thanks, very much and great quarter and year.

I had.

Questions on sort of two different topics. The first one is the revenue guide.

And you already talked about REIT.

And that being up mid single digits. So is volume up mid single digit as well and as the truck count average truck count for the year assumed to be similar.

And then on the right part.

You mentioned, the mid single digit assumption, but in terms of contract rates that youre getting currently over the last month or two.

Would those be in line or greater than that number so thats the revenue.

Questions.

Yeah, Great question so.

The mid single digit assumption that we talked about is really on like for like opportunities. So there is going to be a mix component that comes into play.

In our business.

As we've evidenced over the last couple of years as we've talked about the movement and how we should assets to different end markets, but when we think about.

What we're going to be going to customers with in striving to kind of make sure. We have received and to be able to take care of our drivers that's kind of that mid single digit number we are anticipating some slight volume growth.

But.

It's kind of low single digits volume growth, we're not we're not getting two out ahead of our skis on that front.

The other thing is with regard to your question about trucks, we did call out some trucks this year and so if you take kind of a starting truck count in the ending truck count.

There has been a reduction over the course of the year and we're not projecting to have any meaningful growth.

Organic can we clarify organic growth in the fleet. This year. So thats also needs to be taken into consideration. When you look at the year over year revenue guide.

Got it so the average truck count would be down low single digits for the year then.

Yes.

We had a slight moderation from the beginning of the year this year to the end of the year.

Again, there are puts and takes with owner operators in lp's coming onboard. So it's hard to predict perfectly I would tell you, it's probably going to be relatively flat to maybe slightly down year over year, assuming that we don't have a lot of owner operators now piece that come on board.

That's our assumption right now.

Got it and then the other topic I had a couple of related to some sort of free cash flow and capex. So.

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The the <unk>.

Free cash flow.

Last year.

The way I think about it which includes all the capex.

For the answer and that is was $84 nine and you said there was about $25 million.

Slipped in terms of Capex so.

The right way to think about it you spent that money 60 ish would've been the true free cash flow number for the year is that about right. Yes, that's probably the right way to think about that.

Got it and then.

The capex to make sure I understand the slide the net Capex guide of 160 to 170 is that total capex net of equipment sales, but before any financing correct. That's right and then the cash Capex guide that we gave.

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After financing.

Right. So if I took the $1 65.

Less the 25 that slip sort of be at 140 normalized which.

It's up a lot.

I think compared to last year range are you just trying to get the average age down or could.

Could you just talk through what that change is all about thanks. So much yes, no problem very great questions.

One other piece that you need to take into consideration is the technology investments of roughly $10 million that we talked about that are more around kind of the transformation initiatives to Jonathan touched on so I think if you kind of take that midpoint of 165 takes US 25 off from the timing shift and in the 10 off for the kind of transformation of onetime kind of transformation lift.

You get $35 million, if that 165 50 down to $1 30, which is not that far off of what.

What we normally youre going to see something that is going to range because as you know Barry you haven't been in the industry a long time it depends on what you bought five years ago right.

Youre going to have ebbs and flows we're typically going to be somewhere in that 100 105 on the low end upwards to $1 30 135 on the high end as you go through the five year cycle. So this would be a slightly higher year, but I don't want anyone walking away feeling like it's because there's a bunch of deferred.

Maintenance Capex that we're doing that's not the case at all.

We've actually done.

We've done a lot of thing wrong, a lot of things wrong in the history of desk, but one thing we have done an okay job at over the especially over the last few years.

<unk> been on top of it is making sure we're making the proper investments in the fleet.

So we've done a pretty good job there.

Great. Thanks, so much and good luck on the year.

Thank you Barry.

Thank you I'm not showing any further questions in the queue I'd like to turn call back over to Jonathan for any closing remarks. Thank you Victor I'd like to thank everyone for your time today, we look forward to continuing a part of a better we've generated alongside our broader transformation.

We thank you for your commitment confidence, we look forward to translating the market opportunities facing us today.

<unk> returned to consistent growth for our stakeholders.

Thanks, everyone.

And this concludes today's conference call. Thank you for participating you may now disconnect and have a great.

Great day.