Q1 2022 Daseke Inc Earnings Call

Good morning, and good morning, everyone and thank you for participating in today's conference call to discuss <unk> financial results for the first quarter ended March 31, 2022, as you are all SaaS Keith outlook.

<unk> us today are Jonathan <unk> co CEO and board member, Jason Bates, EVP, and CFO , and Tracy Graham VP of finance and Investor Relations.

After their prepared remarks, the management team will take your questions.

As a reminder, you may now download a PDF of the presentation slides that will accompany their remarks made on today's conference call as indicated in the press release, we issued earlier year to date.

You may access these slides in the Investor Relations section of our website.

We go further I would now like to turn the call over to Tracy Graham VP of finance and Investor Relations, who will read the Companys Safe Harbor statement that provides important cautions regarding forward looking statements within the meaning of the private Securities Litigation Reform Act of 90 95.

Please go ahead.

Thanks, Mike 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 1995 projected financial information, including our guidance outlook are forward looking statements forward looking.

<unk> include those with respect to revenues earnings performance strategies prospects and other aspects of <unk> business are based on management's current estimates projections and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from our expected expectations and project.

<unk>.

I encourage you to read our filings with the Securities and Exchange Commission for a discussion of the risks that can affect our business and to not place undue reliance on any forward looking statements. We undertake no obligation to revise our forward looking statements to reflect events or.

Circumstances occurring after today, whether as a result of new information future events or otherwise, except as may be required under applicable securities laws.

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

Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the appendix to the Investor presentation and press release issued this morning, both of which are available in the investors tab of the <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 , Jonathan Shopko, who will review our business operations and the progress we are making as we execute against our key strategic priorities, Jason Bates <unk> CFO will then provide a financial review of the quarter and speak briefly about our 2022 outlook 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 Shopko, Jonathan. Thank you Tracy and good morning, everyone. Let me begin on slide three where I'll highlight a few of the key takeaways from our first quarter of 2022.

<unk> delivered another strong quarter of operational and financial performance, while continuing to make progress against our ongoing transformation and further expanding returns for our shareholders.

I'll be free demand across the industrial landscape. We support this continued to sustain with a persistent theme of supply demand imbalance is helping to drive strong freight rates across most of the end markets We service.

This dynamic continues to play through our topline and our teams have continued to execute operationally successfully converting this attractive topline revenue growth and a substantial earnings for our shareholders. This quarter.

As I mentioned demand across most of our key end markets remained strong in the first quarter.

So you're going to defy our normal seasonal trends as we posted both year over year and sequential rate improvements.

We continue to see demand strength in construction manufacturing and steel markets driving flatbed performance.

While our security cargo and glass bolster growth in the specialized segment.

In the first quarter of 2022, we opportunistically shifted assets to support the work we do with the department of defense in order to capture this freight with our company assets as demand surged. This is yet. Another example of how our diversified portfolio of end markets yielded an opportunity for us to strategically redeploy assets and one of our highly specialized niche pockets of demand.

Providing for not only incremental freight capture but also higher margin potential.

Those supply demand imbalance continues to buttress the current rate environment, we continue to face challenges in securing equipment in Q1 as the global supply chain also remains challenged the capacity.

Constraints due to equipment availability and driver shortages within our industry have only added additional cross currency further complicate the supply picture.

As such without a timely a meaningful correction to the demand side of the equation. We anticipate that this new foreign rates will hold for this foreseeable future, particularly as we enter our seasonally strong second and third quarters.

With that said this quarter's outperformance versus expectations was truly about our operational execution and to a number of thriving and markets. We serve is creating opportunities to garner premium rates with our company assets, while also capturing excess volumes through our brokerage service offering.

Revenues this quarter of $421 million or 26, 1% improvement year over year.

Coupled with continuously improving profitability metrics, despite facing strong year over year comps demonstrate the earnings power of our unique model, which places meaningful emphasis on execution across all market environments.

In the first quarter that we converted this revenue growth of $49 6 million of adjusted EBITDA of 38, 5% improvement year over year.

And adjusted diluted earnings per share was 24.

Significant increase when compared to last year's first quarter or <unk> <unk> per share.

Before turning the call over to Jason to provide more detail around our financial performance and full year outlook I'd like to take a few moments to proclaim a modest victory for our company in this quarter that is the completion of our first acquisition I am pleased to announce that during the first quarter. We completed our first tuck in acquisition and while on the smaller side of things based on our internal M&A mandate even for tuck in.

This acquisition decisively exemplifies our strategic priorities for M&A.

This acquisition expands our geographic footprint with existing customers in the industrial and hazardous waste and markets, while also providing an opportunity to expand within the specialty chemicals verticals.

The targeted services niche counter.

Counter cyclical and defensible end markets that carry high barriers to entry and it will be a strong complement to the existing high security cargo operations within our specialized segment.

Oregon has been immediately accretive as several commercial strategies were identified during our due diligence efforts with additional low risk synergies on the horizon as we continue to integrate operations with our existing platform. We expect to post acquisition implied multiple in 2022 to be about four four times with line of sight to a fully integrated run rate implied multiple of Russell.

Of roughly three six times.

We remain committed to M&A as a means to supplement accretive growth and is a logical catalysts to drive multiple expansion and we remain diligently focused on identifying opportunities with the potential to improve our earnings and free cash flow profiles.

With that I will now turn the call over to Jason Bates to review, our first quarter of 2022 financial performance Jason.

Thank you Jonathan and good morning, everyone as Jonathan outlined that diversified portfolio of industrial facing end markets and the strategic flexing of our asset right model has enabled the company to execute effectively across various market environments. We've consistently demonstrated our ability to strategically deploy our assets.

And our owner operator network to support customers capture strong freight rates and outperform our traditional seasonality trends were.

We are pleased to report our efforts and transformative business initiatives have driven yet another quarter of positive financial results to both the top and bottom line.

As we've seen over the past several quarters and the first quarter, we continue to see sustained demand strengthening across our construction and manufacturing end markets. In addition, this quarter, we experienced a heightened demand and high security cargo due to ongoing geopolitical matters as Jonathan previously mentioned, Canada.

Candidly, we have experienced steady demand across virtually all of our and all of the end markets, we serve which when coupled with the limited capacity within the industry has led to the strong freight rates, we've been able to experience in the market today, especially in our flatbed business.

We will continue to strategically deploy assets into the most advantageous and end markets with strong freight rates and those which will yield the highest margins, while leveraging our owner operator fleet and brokerage capabilities to meet customer needs, where their demand exceeds our owned capacity.

Please turn with me to slide four for a high level review of our consolidated results for the first quarter on the left catheter slide we have our traditional GAAP measures with our non-GAAP measure shown in the table on the right in.

In the quarter gasket delivered revenues of $421 million up 26, 1% compared to revenues of $333 9 million in last year's first quarter.

As mentioned our revenues continued to reflect strong freight rates as we continue to provide needed capacity to the areas, where our capabilities generate the most value, which enabled us to capture rate increases in both the specialized and flatbed segments.

This strong topline year over year growth comes despite tough comps from the prior year's quarter.

We delivered adjusted net income of $17 1 million or <unk> 24 per diluted share in the quarter, both of which represented substantial improvements year over year adjusted EBITDA of $49 6 million grew by 38, 5% compared to the first quarter of 2021.

These impressive consolidated financial improvements were a function of continued strength in demand and strong freight rates, which more than offset inflationary pressures equipment delays and insurance headwinds.

At the combined operating segment level, our consolidated adjusted EBITDA results of $56 7 million were up 27, 7% versus results of $44 4 million in last year's first quarter.

Moving to our segment level results I would like to discuss the labor market briefly.

While <unk> does exhibit higher driver retention rates than the industry average, we are not immune to inflationary headwinds around driver recruitment and retention. We continue to prioritize the quality of life of our drivers and have made a point to address as many of their needs as possible including compensation over.

Over the past year, we have implemented various targeted pay increases to our driving professionals in line with the broader market. It is noteworthy that wage inflation has been hedged somewhat by the strong rate in demand market backdrop. Previously discussed we will continue to monitor closely the labor market and remain committed to the prioritization of he.

Each of our driving professionals recognizing that they are critical to our success.

Lastly, I'd like to briefly touch on our corporate overhead expenses corporate expenses in the quarter. Once again decreased coming in $1 1 million lower year over year key contributing factors include lower outsourced and professional fees, which were partially offset by corporate salary and benefit increases also in keeping with the broader market.

On slide five we present, a detailed view of our results at the operating segment level, starting with our specialized segment results.

Specialized revenues were $228 5 million up $24 5 million.

Sorry, up 24, 5% versus the prior year, driven by a diverse end market exposure and strengthening rates across numerous verticals, including construction high security cargo and glass strong demand also helped more than offset the muted wind volumes, we've experienced compared to the last couple of years, a further testament to our diverse.

End market portfolio approach, notably aerospace and end market that has lagged in recent years began to see improvement in the quarter.

As contracts were successfully renegotiated and the demand for aerospace volumes is beginning to return.

Our specialized segment adjusted EBITDA improved to 28, 9% with margins, increasing 50 basis points versus the prior year's period key contributing factors include the strong market backdrop and notable strength in the majority of our specialized end markets as previously discussed.

This was further supported by our rate per mile for the segment of $3 40.

Which increased by 22% compared to $2 78 in the first quarter of 2021.

This rate expansion has been consistent across our portfolio of end markets contributing to the year over year growth.

Revenue per tractor also increased meaningfully from 69.

269400 from 57200 in last year's first quarter.

Lastly, the segment adjusted operating ratio for the first quarter was 91, 2%, marking a 230 basis point improvement versus the prior year's quarter.

On slide six we outlined our flatbed segment results for the quarter, we generated flatbed revenue in the fourth quarter of $195 1 million, which increased 27, 1% from $153 5 million in the prior year quarter, notably each of our end market verticals and flatbed realized revenue increases in the period with the booming construction and growth.

And steel manufacturing and agriculture industries driving into the segment performance.

Leveraging our portfolio model, we are pleased with our ability to capture this growing demand and maximize the capture of improving freight rates across this collection of verticals. Once again, our asset right model and strong demand environment paired with our operational initiatives has delivered another quarter of profitable growth in our flatbed segment.

In the quarter, we realized a 21% increase year over year and our rate per mile metric. This increase in rate per mile was further displayed in revenue a 50 50 about 55600 per tractor, which increased from 45800 in the same period the previous year.

The segment's adjusted EBITDA result of $25 million grew by 26, 3% compared to the results of $19 8 million in last year's first quarter as flap of demand and ongoing tightness in available capacity kept rates at attractive levels, helping offset the cost pressures.

Our adjusted EBITDA margins were essentially flat year over year coming in at 12, 8% versus 12, 9% in the prior year's quarter. The segment's operating ratio improved 100 basis points to 91, 8% with the adjusted operating ratio also improving to 91, 4%.

You've heard us reference the benefits of our unique business model and asset fleet composition in recent quarters, and how that positions <unk> to most effectively play to our strength in the flatbed and specialized freight markets the strategic optimization of asset deployment into capacity constraints markets affords us the opportunity to outperform market.

Our rates and capture strong margins at the bottom of the page on slide six you will see a chart detailing das Keith Flatbed segment.

Realized rates when compared to the flatbed rate benchmark our business model enables us to utilize an optimized combination of company owned assets or owner, operator network and our growing brokerage business to maximize rate capture oftentimes through mix shifts, which leads to <unk> rate outperformance relative to the broader market.

We are encouraged by the progress we have made executing decisively into a good market backdrop and delivering strong performance for the business. However, we remain most encouraged by what this means as cycles fluctuate as this unique asset rate dynamic combined with thoughtful execution provides us the ability to defend margins.

Or when market rates.

We believe strongly that this is a structural advantage we carry in the market not an aberration and we look and we will look for ways to expand this rate outperformance dynamic as we fully execute against our transformation initiatives as time progresses.

Turning to slide seven.

I'll take a moment to discuss our cash flow performance in the first quarter desk generated $29 2 million in cash from operating activities cash Capex was $8 8 million and we collect the cash proceeds from the sale of equipment of $11 5 million. This resulted in free cash flow generation of $31 9 million in the quarter.

Capex financed with debt or capital leases has totaled $7 3 million, bringing in net after financed of $24 6 million.

In terms of our capital sources and balance sheet, we continued to maintain healthy liquidity of over $257 million with our cash balance supported by the strong free cash flowing nature of our model and significant undrawn availability on our revolving credit facility on the left side of the page, we note that while cash and cash equivalents as reported.

Standard nearly $154 million, we have earmarked $18 $8 million of that cash that otherwise would have been deployed from our capital budget, specifically into new equipment purchases given the ongoing tightness to the supply of new vehicles and the inability for Oems to work down the backlog. We're also showing our cash balance net of the delayed cap.

Next speaker.

From a capital allocation planning perspective, we will maintain a balanced value based approach, we see significant runway to invest in support of high impact organic and operate information opportunities with the component of strategic opportunities to evaluate.

Any and all of which have the potential to enhance our leadership position within the flatbed and specialized markets, where we focus we will prioritize opportunities that are most likely to provide attractive risk adjusted returns and create sustained long term value for our shareholders and Jonathan is going to touch on this a little later in the call.

Looking to slide eight I will conclude with our outlook for the full year of 2022. Despite the various reports of a pending freight recession, we are continuing to see strength in demand and freight rate environments. Given the continued strength we've seen in our end market and open dialogue, we've been having with our customers. We are comfortable in reiterating our 2000.

To revenue and adjusted EBITDA outlook, we remain confident in the resilience of our business model. Despite the macro inflationary pressures at play.

We remain confident in our ability to achieve revenue growth of 4% to 7% and adjusted EBITDA growth of 5% to 10% for fiscal year 2022, when compared to fiscal 2021. This outlook is supported by the continued strength in industrial end market demand combined with strong rates, which have continued to sustain thus far in Q2.

And incremental benefits from our operational transformation initiatives. These positive market dynamics and company specific initiatives are helping to overcome inflationary cost pressures and pockets of disruption in the greater macroeconomic environment as.

As a result of the delays in receiving new equipment that we articulated previously we are reducing our net capex guidance to a range of $1 45 to $1 55 million for the full year cash Capex less proceeds is expected to remain in a range between 25% to $35 million, but could flex up or down depending on how much.

We choose to finance as we will continue to closely monitor interest rates and make the right economic decision on the capital allocation front.

As we look forward to the range of the year, while we remain optimistic about the various aforementioned data points structural benefits of <unk>, we will continue to monitor industry headwinds, including driver availability supply chain disruptions maintenance fuel and insurance headwinds as well as other potential inflationary challenges, we do not believe these headwinds will overcome the.

That lie ahead for us to recap, we have a strong industrial demand environment, our unique ability to flex company owner, operator, as well as brokerage assets between our diverse high barriers to entry and markets. All supported by its durable rate environment. Additionally, we started to implement and continue to enhance our key <unk>.

Inspirational initiatives to further strengthen our operational efficiency as we continue to evaluate the strongest use of our capital we see a trajectory for 2022 with a focus on driving organic growth through both investments in the business and technological enhancements, all while carefully evaluating strategic inorganic opportunities for growth as well in <unk>.

<unk> to the various uncertainties in today's macro environment. We believe the ask is well prepared and possesses a variety of structural and self help opportunities that will assist us in our goal of continuing to outperform both internal and external expectations.

As we progressed through 2020, we will remain focused on operational excellence and strategically returning value to our dedicated shareholders. So with that I'll hand, the call back over to Jonathan to offer a few final words, Jonathan Thank you Jason.

If youll, please turn with me to slide nine.

Last few calls we've referenced planning and preparation in front of a new wave of transformational initiatives that are now under way with ASCII, albeit in the early innings.

One of the primary objectives of our broader transformational plans is the shift from disjointed and Siloed operations in each opco to.

Two a cross functional collaborative through the establishment of a highly coordinated network mindset for our operations.

As we think about future state tasking.

Our vision is further consolidation down to a smaller subset of key operating companies, which we referred to internally as our platform options. These platforms have sophisticated cross functional teams with best in class management and each has its own distinct strategic contours. For example, one platform might be focused on low beta specialized end markets such as <unk>.

Hence high security cargo and hazardous materials, while its counterpart counterpart high beta specialized maybe focused on commercial flat glass power sports heavy hallen construction.

Platform concept was chosen to accomplish two primary objectives first it allows us to leverage the human capital we have across our entire organization, giving us the flexibility to rationalize redeploy in high grade talent across operating company lines in support of a shared service environment that will sit within and among our platform operating companies and ultimately result in a more.

Streamlined and efficient back office function for our organization.

Second this approach is can grow with our end market focused strategy allows for more decisive planning and execution.

When evaluating organic and strategic growth opportunities at the Opco level.

Simply put our back office will be streamlined through the sharing of top talent across the organization, while each platform will become a pillar for organic and strategic growth in their respective end markets and sub verticals that serves the.

The platforms will focus on tactical execution and operational optimization, while corporate will provide thought leadership corporate services support and after leveraging feedback and perspectives from the platform management teams refined and affirm the strategic direction of the company.

We have commenced the first phase of these integrations with more to follow in the second half of the year and in early 2023.

Let's touch briefly on Tech enabled solutions, we have made and will continue to make investments in technology to support our long term strategic direction, focusing on Tms upgrades and standardization of common accounting platform and the development of a data lake each of these technologies instrumental in the success of our transformation, providing consistency and clarity across.

Our operating platforms. Additionally, our initial investments into technology capabilities will support leaderships data driven decision, making and shape, how we further optimize our operations.

While we are still in the early stages of integration and technology implementation. At this time, we believe these initiatives will yield roughly 20% to 25 million of annualized operating improvement in 2023.

We believe that while this number is significant its magnitude, particularly since this incremental value edge will become a structural part of our base business going forward we.

We do also see upside potential to this initial range as we navigate the various work streams. We will continue to provide updates on our progress throughout the year.

Looking ahead beyond the horizon of our current transformation phase there are a number of other additional opportunities that will enable <unk> to configure to continue fueling our strong growth trajectory. While also further optimizing our organization beyond 2023.

We will look to use our existing operating footprint to establish a presence in new adjacent market verticals, capturing value, where our capabilities we needed capacity.

We will also continue to enhance and refine our operations and competitive strengths to expand our market share in targeted verticals, where we already have anchored meaningful presence, establishing desk preferred provider of capacity and create solutions.

Next we will continue to target accretive growth opportunities that complement our existing operations opportunities that allow us to integrate both vertically and horizontally.

Earlier I spoke about our recent tuck in acquisition.

One of those almost perfectly aligned with our refined M&A philosophy, our disciplined approach to M&A will largely focus on building out niche defensible end market exposure and expanded desk East cross cycle durability, and defensibility of our margin profile.

We have a fairly robust pipeline of actionable opportunities, we will continue to evaluate M&A as one option for creating long term value appreciation for our shareholders relative to other competing opportunities for capital.

Turning to slide 10.

I'd like to touch on documents financial progress and the significant strides we've made in improving the quality of our earnings.

Since the beginning of our transformation and restructuring initiatives in 2019.

We have seen significant improvement in our <unk>.

Adjusted diluted earnings per share from 46% at the end of our TTM period, ending Q3 of 2020 to $1 27 for the TTM period, ending this quarter at 97% compound annual growth rate.

EBITDA and EBIT, both nationally and as a percentage of revenue have continued to trend upward and with an emphasis on improving the quality of our EBITDA operating income as a percentage of EBITDA has nearly doubled since 2019, improving from 36% to 66% as of the TTM period, ending this first quarter.

If you refer to the lower left corner of the slide we have provided adjusted return on equity since 2019, which has notably improved from roughly 2% in 2019 to 13, 4% for the trailing 12 months ended Q1 2022 and stands at 15, 5% when referencing our may 2nd market capitalization in the calculation.

The dedication.

<unk> and focus of our team on operational efficiencies and business improvement plans. In addition to our ability to leverage the operational scale of our business continues to drive tremendous value to our shareholders.

While we've made substantial progress over the last few years, we know there's still work to be done in the next phase of our transformation, which we believe will only further bolster our earnings and free cash flow profiles as we strive to find ways to continue to enhance value for our shareholders.

Looking to slide 11.

I'd like to conclude our prepared remarks, with a qualitative and quantitative perspective, and supportive <unk> resiliency across markets market cycles.

First I'd like to discuss the progress we've made in strengthening our balance sheet a commitment we made to our shareholders on our Q4 2020 earnings call in January of last year.

Through our <unk> refinancing in early 2021, we paid down roughly $85 million of term loan debt, replacing our 485 million term loan with a new $400 million term loan with strict financial maintenance covenants and we extended our term loan maturity to 2028 with no other term debt maturities over the same six year period we've.

Reduced our net leverage to one eight times, while continuing to improve our liquidity.

In addition, based on our projected 2022, adjusted EBITDA less interest and net cash capex of $181 million, we're generating enough cash flow to completely pay off current net term debt within two years.

Today, our balance sheet provides tremendous insulation from market volatility and affords us the opportunity to execute opportunistically as we identify attractive risk adjusted prospects to drive accretive organic and strategic growth for our shareholders. We believe having a strong balance sheet is sacrosanct when navigating cyclical industries as a capital.

As a company and we will continue to prioritize actions that support this tenant.

Next segment diversification with not only our industrial end markets, but also our customer base each helps to mitigate the impact of the economic deceleration.

Roughly 55% of our revenue is generated by our specialized segment, which tends to be higher margin and extends into sub verticals, where our competitive advantages are more sustainable and with approximately 20% of our total company revenues tied to counter cyclical end markets found within our specialized segment. It also serves as a counterbalance to some of our higher beta and <unk>.

Markets within our overall industrial facing portfolio.

We also have significant diversity across our customer base as our top 10 customers only represent 27% of our business.

With an average tenure of these top 10 customers that exceeds 20 years.

Our diversification has allowed us to deploy differentiated services and capabilities to a differentiated set of customers and end markets to optimize our asset deployment consistently finding pockets of strength across cycles.

Moving onto secular tailwind.

<unk> is uniquely positioned to improve profitability and defend margins irrespective of the prevailing market environment as.

As discussed earlier, we see a substantial self help opportunity underpinned by a well delineated transformation strategy to further improve the business over the next 12 to 18 months with plans for additional optimization thereafter.

Our renewed strategy, which shifts away from a pure play trailer centric construct to one focused on building leadership positions in niche industrial facing end markets with stronger margins and high barriers to entry.

Provides focus and informs our organic and acquisitive growth priorities.

To that point, where substantial organic growth opportunity is simply engaging our existing customers and our current markets more proactively and attempt to capture additional market share.

As an interesting point of reference we estimate that even a modest 25 basis point increase in market share across the end markets sub verticals. We currently service would result in an EBITDA increase of approximately $20 million.

Which has not been factored into our transformational plan estimates.

However, highly accretive opportunities for strategic growth also about having now built a robust pipeline of off market M&A opportunities within a highly disciplined evaluation framework as stated in the past at least until our transformational initiatives are largely compete complete M&A efforts will be highly biased towards tuck in acquisitions and.

It is now our expectation that we can execute on this strategy, while achieving low risk post acquisition synergy adjusted effective EV to EBITDA multiples in the low fours or less.

<unk> also has several structural advantages that position us to be successful despite market fluctuations first we have limited exposure to spot rates as 80% to 85% of our rates our contract insulating our rates from market volatility we.

We have deep seeded long term partnerships with our customers and markets, where our specialized segment specialized skill and specialized scale are each valued.

Our focus on markets with a defensible position due to high barriers to entry provides natural support through cycles as it limits capacity entrance and an expansion within these markets and this higher margin business provides a cushion for us to profitably balanced the interplay between rates and volumes in environments, where end demand is softening.

And finally, our variable cost structure as yet another lever, we can pull to defend margins if demand slows.

Something worth noting as.

As part of our normal course normal course best practices, we performed stress test sensitivities on our business and given the fundamental changes with this company has undergone over the last few years. It is our expectation that even in the face of a 2008 type recessionary event desk, you would still be able to generate positive free cash flow that is adjusted EBITDA less interest.

Taxes dividends and net cash capex.

Finally, I'd like to take a moment to share some of our fleet dynamics as a reminder, <unk> size scale and industry advantages that you as an organization with 4600 trucks with an average age of two and a half years on our company fleet and over 11000 trailers. Our combined fleet drove 400 million miles in the last 12 months roughly.

Revenues generated by our asset light capabilities, which we flex up as demand surges only to then shift to a more profitable company trucks when demand slows.

Finally, what I believe to be an underappreciated advantage for <unk> versus our other public comps our driver turnover at only 60% is nearly one half that of the broader industry's turnover, particularly valuable and maintaining market share and even increasing freight capture during highly challenged environments played with cap capacity constraints.

Art will review these factors as reaffirm your excitement and to ask you is an attractive opportunity on both an absolute and relative basis. Our team commits to all of you that we will continue to leverage these competencies in an effort to provide superior returns to our shareholders across cycles with them.

I'd like to conclude our prepared remarks for this morning, and we will turn the call over to our operator for your questions.

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

All your question now please.

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

Your first question comes from the line of Ryan CEO .

Craig Hallum Capital Your line is open.

Good morning, Jonathan Jason Nice results and progress.

Okay.

I'm curious just to start maybe on the acquisition I don't believe I saw it anywhere, but what was the revenue and EBITDA contribution and any other metrics you can give there.

Yes, I think the I think the right way Ryan that to think about that is really on kind of an adjusted synergy adjusted basis. So we.

We paid 20 by $21 million.

1993.

19 3 million for.

For just under $6 million of synergy adjusted EBITDA.

Got you helpful and then revenue on that.

Youre willing to give it.

Yes, so we.

Yes.

Pre adjusted pre adjusted revenue Ryan was that the EBITDA margin was about 32% EBITDA margin.

Got it.

32%, so basically much much better margins than core gasket business, that's right correct. Okay.

Okay.

Good presumably better free cash flow conversion as well on that absolutely.

Great.

Seems like a nice bolt on high quality add there.

<unk> value as well.

I'm curious, okay, so with that in mind 6 million EBITDA.

Reiterated your full year guidance that layers in now.

No.

Yes, three quarters of an acquisition.

Q1 outperformed.

Our expectation I think also your internal ones per jonathan's comments rates strong I guess, what am I missing.

Reiteration of guidance when it seems like Theres, a lot of incremental positive contributing.

I think the big the Big question Mark is a lot of the inflationary pressures and uncertainties out there right.

Candidly.

If you Couldnt tell from the tone on the call we feel very comfortable.

Very comfortable with that guidance. So you can interpret that how you will.

We're not formally taking numbers up at this juncture, but given what we see today, we feel pretty comfortable reiterating and over the next couple of months and once we get this acquisition more fully tucked in and has a little bit more visibility into the.

The realization of some of those synergies and expanding that market a little bit.

You may hear something different from us here at the end of the second quarter.

Good.

I appreciate the commentary kind of your end market exposure relative to a lot of the other public truckers out there but curious.

Kind of on top of that so widely publicized spot rate declines in the dry van market. You guys. Obviously, you don't participate in that but curious if you have any context in correlation to past cycles kind of hold the heavy haul flatbed specialized.

If there was any correlation to the dry van spot market.

Leading indicators six to nine months later, we have seen this or just completely different altogether.

Yes.

For a lot of different reasons as we've been going through the transformation efforts over the last couple of years we've spent.

A disproportionate amount of time analyzing.

And markets rate trends correlations or lack thereof, and I can tell you.

When you look at the <unk> portfolio and the diversity in that portfolio. We don't see the same type of negative correlations that.

Now there are individual segments of the business that may be more closely tied and correlated to kind of what happens in drive in but when you look at it in aggregate.

Not a correlation there.

Okay. Thanks, guys. Good luck.

Going back over over 10 years, so trying to go through multiple cycles there.

Great. That's it for me good luck guys.

Your next question comes from the line of Elliot Alper from Cowen Your line is open.

Great. Thank you.

Piggybacking off that last question.

Flatbed and specialized spot rates kind of outperformed compared to the drive and over the past couple of months.

Guys have come down with the group. Despite this can you talk about the dynamics in the rate environment Youre seeing I know you discussed your 15% to 20% exposure to spot.

But maybe some kind of commentary youre seeing around there and then anything on.

April performance on the contract side.

Thanks Elliot great Great question.

On the right side.

Youre right I mean, flatbed and specialized have both been outperforming the dry van and that's the public data.

Based on the comment we just discussed pre.

Previously about some of the diversity of the end markets, we support we've seen.

It's a strong market April .

Again.

Not to let the cat out of the bag, but April was strong rates were strong demand was strong.

I was actually just on a call with our COO and in all of the operational leaders yesterday talking about what they're seeing here.

First week of May through April and almost across the board. It was man we could use some more trucks and can we get more trucks, we got customer demand.

But we're doing everything we can with our LP, an owner operator fleet and our brokerage relationships to try to meet the needs of our customers, but there is theres a theres a lot of opportunity out there so.

That's why we kind of scratch our heads.

At some of the kind of correlations that people are making between kind of our business model and our end market exposure versus maybe some of the more retail oriented consumer.

Kind of affected.

And our competitors Elliot I think.

Just just for what it's worth anecdotally, if we had to.

Yes, I think that in Q1, we probably repriced, 50% to 60% of our book.

So the market the demand is definitely there.

I think challenges again on the on the supply side.

I think present kind of a nice fairway for the rate environment.

To hold steady if not continue to firm up even more.

Okay that was really helpful. Thank you I guess to the owner operator side shrunk.

Strong top line growth I guess, how should we think about that business unit through the remainder of the year and kind of what's baked into your guidance.

And anything you're seeing on kind of the net new operators onto the platform.

Yes.

And then obviously you are familiar with that model right. A lot of those guys are paid on a percentage of revenue basis. So in a really strong rate environment, becoming an LP or owner operator as an attractive option.

We try to do a good job at helping educate them and walk them through it and help them to look past just this week and into this month, which sometimes.

Difficult to do but helping them think about it through the cycles right and make sure thats the right decision for them.

We do have a LP program, which is kind of a little bit of like an owner operator on training wheels program. If you will.

There still are owned assets right.

So there are times, where our guys will go into that program and then maybe realize it's a little harder they thought or it's not kind of what they like and rather than just leaving we're able to bring them back in and then put them back over to company. So we have seen a lot of interest in that program for the reasons I mentioned previously and we've been very strategic about how.

We've been growing it we're spending a lot of time internally analyzing the profitability of that program not just.

In terms of.

Rates in volumes, but also looking at the other pieces of that equation right. The insurance side of things the safety side of things.

We want to make sure guys arent stuck with.

Youll be upside down in overvalued trucks, three years from now and not being able to kind of continue to move forward viable way. So theres a lot of that type of work that we're doing but yes. There's no question that right now there's a lot of demand for that program I think and I think it's a nice it's a nice way to flex and flex.

<unk> it.

Is that the again it comes at the expense of a margin profile thats.

It's kind of half half that of our of our company trucks.

It's absolutely surge capacity. We're also provides really kind of downside optionality when the market starts to soften we will take those drivers in and ship them back to company trucks that that.

Theyre doing kind of twice the twice the margin of the LP driver or the LP trucks. So it provides a nice nice hedges in kind of a softening stuffing rate environment.

Okay, great. Thank you both.

Yes.

Your next question comes from the line of Bird <unk> of Stifel. Your line is open.

Good morning.

Hey, Bert.

Have you guys said what percent of your current total revenue comes from dedicated contracts.

No we haven't disclosed that historically.

As a growing number.

But it's.

It's kind of in the low double digits.

I think.

It also depends as you know how you define dedicated lots of people call different things dedicated.

But it's it's.

<unk>.

A growing portion of our business.

Especially given the supply demand imbalances that look to kind of continue to be out there a lot of customers are asking about.

Okay got it thanks, Jason what are you seeing on the contractual rates side, I mean, probably X dedicated what's your I think last quarter, you said mid single digits plus.

Assume that's probably moved up a little bit now.

I mean, even last quarter I kind of was hedging a little bit when we talk about it because I'm, assuming you're talking about for the year last quarter, we were kind of hedging because we said listen.

It would be inflationary environment continues to be what it looks like it might be.

I suspect, we will get higher rate I don't know, so so you're probably going to see outperformance on the top line, but we're going to the reason were getting higher rates, just because we've got inflationary costs and more competition going through with drivers and things like that so maybe not as big of an outperformance on the bottom line, but we're feeling pretty good about where rates are trending.

Five months in right now.

And just in terms of I know you sort of reiterated the you don't have a ton of spot exposure.

What would you expect to be the impact on brokerage.

Bed rates due to sort of start to follow the trend what you're seeing in dry van.

Yes, that's a great question.

Start by kind of reiterating our brokerage model right.

As much as we wish several years ago, we had really expanded and grown our brokerage profile and had a freestanding standalone brokerage platform really what brokerage has been for us over the last couple of years as an overflow support functions for our customers and our strategic partnerships that we have with them.

And so the reality is is that if things were to kind of slow down a little bit we would simply be taking things away from our broker capacity and bringing them on to our company owned or owner operated and LP assets. So it really net net you would just lose the nominal.

Margin that you're capturing on that and Thats similar to what we did back in 2020, when Covid kind of came through you saw that same kind of shift back and forth.

And so.

As Jonathan alluded to kind of.

<unk> valve for us to be able to move up and down and so while we might see that kind of slow down a little bit if it slowed down meaningfully we would just pulled up that freight over onto our assets, where we can generate pretty pretty strong margins.

Just final question for me.

Would you say what your exposure is to oil equipment markets that is that a potential tailwind for the business or did you mostly pull out of that post 'twenty, yes.

Yes. So we were we had an oil rig in kind of a company that had been purchased at one point.

Which just wasn't a strategic fit for the business and so that would be a beta business that we used to talk about a lot that we've now divested of completely I mean, we still support a lot of end markets that tie into that but not directly like that oil rigging business did.

Got it okay. Thank you very much.

Yeah.

Your next question comes from the line of Gregg Gilbert from Northland Securities. Your line is open.

Hey, good morning, guys and great quarter, Thanks for taking the questions.

Just wanted to cover guidance again, you said youre very comfortable with it.

Are you kind of assuming that market dynamics right now remain unchanged.

And what are your kind of expectations on capacity.

With respect to guidance.

Yes, I think thats, probably a fair assumption.

Listen we're consciously optimistic.

I know myself I know, Jonathan and I know Rick Williams, our CEO have all had very very detailed conversations with our OEM providers about equipment.

I think they're doing the best they can to dig out and I think theyre, making some theyre, making up some ground. We're optimistic that we'll still be able to get the lion's share of what we hope to see this year, which means other people will be seeing the same thing.

And so.

Having said that when you think about our business model on the demand side. We just we're not seeing any indications that it is slowing down anytime soon and so you've got the supply constraints and you have plentiful demand and that's what we've been seeing.

It doesn't look like that's slowing down in the foreseeable future.

Greg as you know Q2, Q2, and Q3 are that are the big quarters that kind of make or break the year type quarters for us and so we usually have a pretty good sense by.

By late April early May with those quarters are going to we're going to look like.

Pending on kind of the rhythm, we have with our customers and our end market verticals and so I think thats going back to Jason's point by by by our second quarter call I think any any impacted guidance.

We'll probably be in a position to kind of better speak to that on the heels of that call, but again, we feel very good about the state of our industrial facing end markets and cautiously optimistic that we're going to continue to exceed expectations.

Okay, great very helpful.

If I could follow up on the tuck in acquisitions. It seems like checks all the boxes exactly what youre looking for in terms of expanding the geographical footprint.

New end markets specialty chemicals could you maybe talk a little bit more about that and what it brings.

No.

The new footprint.

And then.

Yes.

I guess the date on when that was completed and did it contribute anything to Q1.

Yes, it was.

Actually it was actually closed in early March.

And it really looked from a strategic fit we mentioned it.

As hazardous hazardous waste.

It's a sub vertical that we currently have today.

<unk>.

There were a few big customers within that smaller acquisition that we actually have relationships with service today with this acquisition really did was it got us into a into a new region, a new part of the country into the northeast, which you can't otherwise.

Access permits and kind of permit your way into that you can kind of have to buy your way into that into that into that part of the part of the country. So it got us into a part of the country that allowed us to extend our footprint and again, it's a nice.

Counter cyclical.

No correlation type type type of end market, we have relationships with those customers.

We had we had very good visibility on on because of our scale because of our long standing relationships with those customers executing in fairly short order on commercial commercial opportunities commercial improvements.

One of the things.

Did do and we kind of mentioned this now on a few calls. This is we're moving away from a trailer since X strategy. This this acquisition also came with.

<unk> tankers.

And so we now we now have a very kind of modest tanker fleet as part of vaccine.

Well, we like to look likely look to grow.

Do they kind of guide to this kind of specialty chemical push is one of the identified submarkets, we'd like to expand our leadership position in.

Perfect Great I guess last one for me just wanted to.

Compliments your Darrin.

Samir transformational.

It is.

The slide deck.

I guess I just wanted to touch on I think it was $20 million to $25 million.

And kind of annualized earning improvement in 2023 is that going to be kind of a Q4 run rate.

Maybe when you realize that.

Thanks.

Yes.

I think you can.

Look I think Greg you can think about it really.

Ratably over over the over the first few quarters of the year.

Such that by Q4 kind of the exit run rate, it's it's a 400000 to $25 million.

But I think that youll start to see youll start to see that kind of layer in.

By potentially as early as Q4 this year, but certainly certainly by Q1 of 2023 and I think it.

The team again.

As look is very is very confident in our ability to kind of generate that I think there is upside to the plan. The plan is something we've been working on for several months really being thoughtful we're leaving.

Being surgical in how we think about continued transformed ASCII.

So.

This isn't a this isn't a.

Let's turn things to the <unk>, we think there's tons of opportunity there's still tons of even net of some of this move and lots of operational leverage still in the business to accommodate additional growth whether it be strategic organic.

Yes.

Great. Thanks, guys.

Sure.

I will now turn the call over to Jonathan for closing remarks.

I'd like to thank everyone for your time today, we look forward to continuing upon the momentum we've generated alongside our broader transformation. We thank you for your commitment and confidence in <unk> and we look forward to translating the market opportunities facing us today in a profitable returns and consistent growth of our stakeholders.

Thank you thanks, everyone.

This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

[music].

Okay.

[music].

Okay.

Sure.

Yes.

Okay.

[music].

[music].

[music].

[music].

Good morning, and good morning, everyone and thank you for participating in today's conference call for the this cost basket say Nash our results for the first quarter ended March 31, 2022, as well as Saskia outlook with us.

Today are Jonathan Shopko, CEO and board member, Jason Bates, EVP, and CFO , and Tracy DRAM VP of finance and Investor Relations.

After their prepared remarks, the management team will take your questions.

As a reminder, you may now download a PDF of the presentation slides that will accompany their remarks made on today's conference call as indicated in the press release, we issued earlier today.

You may access the slides in the Investor Relations section of our website.

Before we go for it or I would now like to turn the call over to Tracy Graham VP of finance and Investor Relations, who will read the company's safe Harbor statement that provides important cautions regarding forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

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 of 1995 projected financial information, including our guidance outlook are forward looking statements forward looking statements.

<unk> does with respect to revenues earnings performance strategies prospects and other aspects of that business are based on management's current estimates projections and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from our expected expectations and projections.

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

Of new information future events, or otherwise, except as may be required under applicable securities laws.

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

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

To ask a CEO , Jonathan Shako, who will review our business operations and the progress we are making as we execute against our key strategic priorities, Jason Bates <unk> CFO will then provide a financial review of the quarter and speak briefly about our 2022 outlook 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 Shopko, Jonathan. Thank you Tracy and good morning, everyone. Let me begin on slide three where I will highlight a few of the key takeaways from our first quarter of 2022.

Definitely delivered another strong quarter of operational financial performance, while continuing to make progress against our ongoing transformation and further expanding returns for our shareholders.

I'll be Frank demand across the industrial landscape. We support has continued to sustain with a persistent theme of supply demand imbalance, helping to drive strong freight rates across most of the end markets We service.

This dynamic continues to play through our topline and our teams have continued to execute operationally successfully converting this attractive topline revenue growth and a substantial earnings for our shareholders. This quarter.

As I mentioned demand across most of our key end markets remained strong in the first quarter.

You're going to defy our normal seasonal trends as we posted both year over year and sequential rate improvements.

We continue to see demand strength in construction manufacturing and steel markets driving flatbed performance.

While high security cargo and glass bolster growth in the specialized segment.

In the first quarter of 2022, we opportunistically shifted assets to support the work we do with the department of defense in order to capture this freight with our company assets as demand surged. This is yet. Another example of how our diversified portfolio of end markets yielded an opportunity for us to strategically redeploy assets and in one of our highly specialized niche pockets of demand.

Providing for not only incremental freight capture but also higher margin potential.

Okay.

The supply demand imbalance continues to buttress the current rate environment.

We continue to face challenges in securing equipment in Q1 as the global supply chain also remains challenged the capacity.

Constraints due to equipment availability and driver shortages within our industry have only added additional cross currents that further complicate the supply picture.

As such without a timely a meaningful correction to the demand side of the equation.

We anticipate that this new foreign rates will hold for this foreseeable future, particularly as we enter our seasonally strong second and third quarters.

With that said this quarter's outperformance versus expectations was truly about our operational execution and through a number of driving end markets, we service, creating opportunities to garner premium rates with our company assets, while also capturing excess volumes through our brokerage service offering.

This quarter of $421 million or 26, 1% improvement year over year.

Coupled with continuously improving profitability metrics, despite facing strong year over year comps demonstrate the earnings power of our unique model, which places meaningful emphasis on execution across all market environments.

In the first quarter that we converted this revenue growth of $49 6 million of adjusted EBITDA of 38, 5% improvement year over year.

And adjusted diluted earnings per share was 24.

Significant increase when compared to last year's first quarter or <unk> <unk> per share.

Before turning the call over to Jason to provide more detail around our financial performance and full year outlook I'd like to take a few moments to proclaim a modest victory for our company in this quarter that is the completion of our first acquisition.

I am pleased to announce that during the first quarter, we completed our first tuck in acquisition and while on the smaller side of things based on our internal M&A mandate, even for tuck ins. This acquisition decisively exemplifies our strategic priorities for M&A.

This acquisition expands our geographic footprint with existing customers in the industrial and hazardous waste and markets, while also providing an opportunity to expand within our specialty chemicals vertical.

The targeted services niche.

Countercyclical and defensible end markets that carry high barriers to entry and it'll be a strong complement to the existing high security cargo operations within our specialized segment.

Oregon has been immediately accretive as several commercial strategies were identified during our due diligence efforts with additional low risk synergies on the horizon as we continue to integrate operations with our existing platform. We expect to post acquisition implied multiple in 2022 to be about four four times with line of sight to a fully integrated run rate applied multiple of Russell.

Of roughly three six times.

We remain committed to M&A as a means to supplement accretive growth and is a logical catalysts to drive multiple expansion and we remain diligently focused on identifying opportunities with the potential to improve our earnings and free cash flow profiles with that I will now turn the call over to Jason Bates to review, our first quarter of 2022 financial performance Jason.

Thank you Jonathan and good morning, everyone as Jonathan outline daphne's diversified portfolio of industrial facing end markets and the strategic flexibility of our asset right model has enabled the company to execute effectively across various market environments. We've consistently demonstrated our ability to strategically deploy our assets.

And our owner operator network to support customers capture strong freight rates and outperform our traditional seasonality trends were.

We are pleased to report our efforts and transformative business initiatives have driven yet another quarter of positive financial results to both the top and bottom line.

As we've seen over the past several quarters and the first quarter, we continue to see sustained demand strengthening across our construction and manufacturing end markets. In addition, this quarter, we experienced a heightened demand and high security cargo due to ongoing geopolitical matters as Jonathan previously mentioned to.

Candidly, we have experienced steady demand across virtually all of our and all of the end markets, we serve which when coupled with the limited capacity within the industry has led to the strong freight rates, we've been able to experience in the market today, especially in our flatbed business.

We will continue to strategically deploy assets into the most advantageous and markets with strong freight rates and those which will yield the highest margins, while leveraging our owner operator fleet and brokerage capabilities to meet customer needs, where their demand exceeds our owned capacity.

Please turn with me to slide four for a high level review of our consolidated results for the first quarter on the left catheter slide we have our traditional GAAP measures with our non-GAAP measure shown in the table on the right in.

In the quarter basket delivered revenues of $421 million up 26, 1% compared to revenues of $333 9 million in last year's first quarter.

As mentioned our revenues continued to reflect strong freight rates as we continue to provide needed capacity to the areas, where our capabilities generate the most value, which enabled us to capture rate increases in both the specialized and flatbed segments.

This strong top line year over year growth comes despite tough comps from the prior year's quarter.

We delivered adjusted net income of $17 1 million or 24 per diluted share in the quarter, both of which represented substantial improvements year over year adjusted EBITDA of $49 6 million grew by 38, 5% compared to the first quarter of 2021.

These impressive consolidated financial improvements were a function of continued strength in demand and strong freight rates, which more than offset inflationary pressures equipment delays and insurance headwinds at.

The combined operating segment level, our consolidated adjusted EBITDA results of $56 7 million were up 27, 7% versus results of $44 4 million in last year's first quarter.

Before moving to our segment level results I'd like to discuss the labor market briefly.

<unk> does exhibit higher driver retention rate than the industry average, we are not immune to inflationary headwinds around driver recruitment and retention. We continue to prioritize the quality of life of our drivers and have made a point to address as many of their needs as possible including compensation.

Over the past year, we have implemented various targeted pay increases to our driving professionals in line with the broader market.

It is noteworthy that wage inflation has been hedged somewhat by the strong rate and demand market backdrop. Previously discussed we will continue to monitor closely the labor market and remain committed to the prioritization of each of our driving professionals recognizing that they are critical to our success.

Lastly, I'd like to briefly touch on our corporate overhead expenses corporate expenses in the quarter. Once again decreased coming in $1 1 million lower year over year key contributing factors include lower outsourced and professional fees, which were partially offset by corporate salary and benefit increases also in keeping with the broader market.

On slide five we present, a detailed view of our results at the operating segment level, starting with our specialized segment results.

Specialized revenues were $228 5 million up $24 5 million sorry.

Sorry, up 24, 5% versus the prior year, driven by a diverse end market exposure and strengthening rates across numerous verticals, including construction high security cargo and glass strong demand also helped more than offset the muted wind volumes, we've experienced compared to the last couple of years, a further testament to our diverse.

End market portfolio approach, notably aerospace and end market that has lagged in recent years began to see improvement in the quarter.

As contracts were successfully renegotiated and the demand for aerospace volumes is beginning to return.

Our specialized segment adjusted EBITDA improved 28, 9% with margins, increasing 50 basis points versus the prior year's period key contributing factors include the strong market backdrop and notable strength in a majority of our specialized end markets. As previously discussed. This was further supported by our rate per mile for the segment of three.

Dollars 40, which increased by 22% compared to $2 78 in the first quarter of 2021. This.

This rate expansion has been consistent across our portfolio of end markets contributing to the year over year growth.

Revenue per tractor also increased meaningfully from 69.

269400 from 57200 in last year's first quarter.

Lastly, the segment's adjusted operating ratio for the first quarter was 91, 2%, marking at 230 basis point improvement versus the prior year's quarter.

On slide six we outline our flatbed segment results for the quarter, we generated flatbed revenue in the fourth quarter of $195 1 million, which increased 27, 1% from $153 5 million in the prior year quarter, notably each of our end market verticals and flatbed realized revenue increases in the period with the booming construction and growth.

And steel manufacturing and agriculture industries, driving the segment performance.

Leveraging our portfolio model, we are pleased with our ability to capture this growing demand and maximize the capture of improving freight rates across this collection of verticals. Once again, our asset right model and strong demand environment paired with our operational initiatives has delivered another quarter of profitable growth in our flatbed segment.

In the quarter, we realized a 21% increase year over year and our rate per mile metric. This increase in rate per mile was further displayed and revenue of $50 $55 600 per tractor, which increased from $45 800 in the same period the previous year.

The segment's adjusted EBITDA results of $25 million grew by 26, 3% compared to the results of $19 8 million in last year's first quarter as flatbed demand and ongoing tightness in available capacity cap rates at attractive levels, helping offset the cost pressures.

Our adjusted EBITDA margins were essentially flat year over year coming in at 12, 8% versus $12 nine in the prior year's quarter. The segment's operating ratio improved 100 basis points to 91, 8% with the adjusted operating ratio also improving to 91, 4%.

You've heard us reference the benefits of our unique business model and asset fleet composition in recent quarters, and how that positions <unk> to most effectively play to our strength in the flatbed and specialized freight markets the strategic optimization of asset deployment into capacity constrained markets affords us the opportunity to outperform market.

Our rates and capture strong margins at the bottom of the page on slide six you will see a chart detailing gas Keith flatbed segment.

Realized rates when compared to the flatbed rate benchmark our business model enables us to utilize an optimized combination of company owned assets or owner, operator network and our growing brokerage business to maximize rate capture oftentimes through mix shifts, which leads to <unk> rate outperformance relative to the broader market.

We are encouraged by the progress we have made executing decisively into a good market backdrop and delivering strong performance for the business. However, we remain most encouraged by what this means as cycles fluctuate as this unique asset right dynamic combined with thoughtful execution provides us the ability to defend margins if or when.

Market rates.

We believe strongly that this is a structural advantage we carry in the market not an aberration and we look and we will look for ways to expand this rate outperformance dynamic as we fully execute against our transformation initiatives as time progresses.

Turning to slide seven I will.

Take a moment to discuss our cash flow performance in the first quarter desk, you generated $29 2 million in cash from operating activities cash Capex was $8 8 million and we collect the cash proceeds from the sale of equipment of $11 5 million. This resulted in free cash flow generation of $31 9 million in the quarter.

Capex financed with debt or capital leases totaled $7 3 million, bringing in net after financed of $24 6 million.

In terms of our capital sources and balance sheet, we continued to maintain healthy liquidity of over $257 million with our cash balance supported by the strong free cash flow in nature of our model and significant undrawn availability on our revolving credit facility.

Left side of the page, we note that while cash and cash equivalents as reported stand at nearly $154 million, we have earmarked $18 $8 million of that cash that otherwise would have been deployed from our capital budget, specifically into new equipment purchases given the ongoing tightness to the supply of new vehicles and the inability for Oems to work down.

Our backlog, we're also showing our cash balance net of the delayed capex figure.

From a capital allocation planning perspective, we will maintain a balanced value based approach, we see significant runway to invest in support of high impact organic and operational transformation opportunities with the component of strategic opportunities to evaluate.

Any and all of which have the potential to enhance our leadership position within the flatbed and specialized markets, where we focus we will prioritize opportunities that are most likely to provide attractive risk adjusted returns and create sustained long term value for our shareholders and Jonathan is going to touch on this a little later in the call.

Looking to slide eight I will conclude with our outlook for the full year of 2022. Despite the various reports of a pending freight recession, we are continuing to see strength in demand and freight rate environments. Given the continued strength we've seen in our end market and open dialogue, we've been having with our customers. We are comfortable in reiterating our 2020.

To revenue and adjusted EBITDA outlook, we remain confident in the resilience of our business model. Despite the macro inflationary pressures at play.

We remain confident in our ability to achieve revenue growth of 4% to 7% and adjusted EBITDA growth of 5% to 10% for fiscal year 2022, when compared to fiscal 2021. This outlook is supported by the continued strength in industrial end market demand combined with strong rates, which have continued to sustain thus far in Q2.

And incremental benefits from our operational transformation initiatives. These positive market dynamics and company specific initiatives are helping to overcome inflationary cost pressures and pockets of disruption in the greater macroeconomic environments.

As a result of the delays in receiving new equipment that we articulated previously we are reducing our net capex guidance to a range of $1 $45 million to $155 million for the full year cash capex less proceeds is expected to remain in a range between 25% to $35 million, but could flex up or down depending on how much.

We choose to finance as we will continue to closely monitor interest rates and makes the right economic decision on the capital allocation front.

As we look forward to the range of the year, while we remain optimistic about the various aforementioned data points and structural benefits of <unk>, we will continue to monitor industry headwinds, including driver availability supply chain disruptions maintenance fuel and insurance headwinds as well as other potential inflationary challenges, we do not believe these headwinds will overcome the.

These that lie ahead for us to reach out we have a strong industrial demand environment, our unique ability to flex company owner, operator, as well as brokerage assets between our diverse high barriers to entry and markets. All supported by its durable rate environment. Additionally, we started to implement and continue to enhance our key <unk>.

Inspirational initiatives to further strengthen our operational efficiency as we continue to evaluate the strongest use of our capital we see a trajectory for 2022 with a focus on driving organic growth through both investments in the business and technological enhancements, all while carefully evaluating strategic inorganic opportunities for growth as well in <unk>.

<unk> to the various uncertainties in today's macro environment. We believe to ask is well prepared and possesses a variety of structural and self help opportunities that will assist us in our goal of continuing to outperform both internal and external expectations.

As we progressed through 2020, we will remain focused on operational excellence and strategically returning value to our dedicated shareholders. So with that I will hand, the call back over to Jonathan to offer a few final words, Jonathan Thank you Jason.

If youll, please turn with me to slide nine our.

On our last few calls we've referenced planning and preparation in front of a new wave of transformational initiatives that are now underway with ASCII, albeit in the early innings.

One of the primary objectives of our broader transformational plans is the shift from disjointed and Siloed operations in each opco.

So our cross functional collaborative through the establishment of a highly coordinated network mindset for our operations.

As we think about future <unk>. Our vision is further consolidation down to a smaller subset of key operating companies, which we referred to internally as our platform options. These platforms have sophisticated cross functional teams with best in class management and each has its own distinct strategic contours for example, one platform might be.

Just on low beta specialized end markets, such as defense high security cargo and hazardous materials, while its counterpart counterpart high beta specialized.

Focused on commercial flat glass power sports heavy haul and construction.

This platform concept was chosen to accomplish two primary objectives first it allows us to leverage the human capital we have across our entire organization, giving us the flexibility to rationalize redeploy in high grade talent across operating company lines in support of a shared service environment that will sit within and among our platform operating companies and ultimately result in a.

A more streamlined and efficient back office function for our organization and.

And second this approach is can grow with our end market focused strategy allows for more decisive planning and execution with.

When evaluating organic and strategic growth opportunities at the Opco level.

Simply put our back office will be streamlined through the sharing of top talent across the organization, while each platform will become a pillar for organic and strategic growth in their respective end markets and sub verticals that serves.

The platforms will focus on tactical execution and operational optimization, while corporate will provide thought leadership corporate services support and after leveraging feedback and perspectives from the platform management teams refined and affirm a strategic direction of the company.

We have commenced the first phase of these integrations with more to follow in the second half of the year and in early 2023.

Let's touch briefly on tech enabled solutions.

We have made and will continue to make investments in technology to support our long term strategic direction, focusing on Tms upgrades and standardization of common accounting platform and the development of a data lake.

Each of these technologies into instrumental in the success of our transformation, providing consistency and clarity across our operating platforms. Additionally, our initial investments into technology capabilities will support leaderships data driven decision, making and shape, how we further optimize our operations.

While we are still in the early stages of integration and technology implementation. At this time, we believe these initiatives will yield roughly 20% to 25 million of annualized operating improvement in 2023.

We believe that while this number is significant its magnitude, particularly since the sacramental valuation will become a structural part of our base business going forward. We do also see upside potential to this initial range as we navigate the various work streams.

We will continue to provide updates on our progress throughout the year.

Looking ahead beyond the horizon of our current transformation phase there are a number of other additional opportunities that will enable <unk> to ask you to configure to continue fueling our strong growth trajectory. While also further optimizing our organization beyond 2023.

We will look to use our existing operating footprint to establish a presence in new adjacent market verticals, capturing value, where our capabilities bring needed capacity.

We will also continue to enhance and refine our operations and competitive strengths to expand our market share in targeted verticals, where we already have anchored a meaningful presence establishing desk preferred provider of capacity and create solutions.

Next we will continue to target accretive growth opportunities that complement our existing operations opportunities that allow us to integrate both vertically and horizontally.

Earlier I spoke about our recent tuck in acquisition.

That's almost perfectly aligned with our refined M&A philosophy, our disciplined approach to M&A will largely focus on building out niche defensible end market exposure and expanded ask these cross cycle durability and defensibility of our margin profile.

We have a fairly robust pipeline of actionable opportunities, we will continue to evaluate M&A as one option for creating long term value appreciation for our shareholders relative to other competing opportunities for capital.

Turning to slide 10.

I'd like to touch on documents financial progress and a significant strides we've made in improving the quality of our earnings since.

Since the beginning of our transformation and restructuring initiatives in 2019.

We are seeing significant improvement in our <unk>.

Adjusted diluted earnings per share from 46% at the end of our TTM period, ending Q3 of 2020 to $1 27 for the TTM period, ending this quarter at 97% compound annual growth rate.

EBITDA and EBIT, both Notionally and as a percentage of revenue has continued to trend upward and with an emphasis on improving the quality of our EBITDA operating income as a percentage of EBITDA has nearly doubled since 2019, improving from 36% to 66% as of the TTM period, ending this first quarter.

If you refer to the lower left corner of the slide we have provided adjusted return on equity since 2019, which has notably improved from roughly 2% in 2019 to 13, 4% for the trailing 12 months ended Q1 2022 and stands at 15, 5% when referencing our may 2nd market capitalization in the calculation.

The dedication and focus of our team on operational efficiencies and business improvement plans. In addition to our ability to leverage the operational scale of our business continues to drive tremendous value to our shareholders.

While we've made substantial progress over the last few years. We know there is still work to be done in the next phase of our transformation, which we believe will only further bolster our earnings and free cash flow profiles as we strive to find ways to continue to enhance value for our shareholders.

Looking to slide 11.

I'd like to conclude our prepared remarks, with a qualitative and quantitative perspective, and supported <unk> resiliency across markets market cycles.

First I'd like to discuss the progress we've made in strengthening our balance sheet a commitment we made to our shareholders on our Q4 2020 earnings call in January of last year.

Through our <unk> refinancing in early 2021, we paid down roughly $85 million of term loan debt, replacing our $485 million term loan with a new $400 million term loan with strict financial maintenance covenants and we extended our term loan maturity to 2028 with no other term debt maturities over the same six year period, we have.

Reduced our net leverage to one eight times, while continuing to improve our liquidity.

In addition, based on our projected 2022, adjusted EBITDA less interest and net cash capex of $181 million, we're generating enough cash flow to completely pay off current net term debt within two years.

Today, our balance sheet provides tremendous insulation from market volatility and affords us the opportunity to execute opportunistically as we identify attractive risk adjusted prospects to drive accretive organic and strategic growth for our shareholders. We believe having a strong balance sheet is sacrosanct when navigating cyclical industries as a capital.

Hence a company and we will continue to prioritize actions that support this tenant.

Next segment diversification with not only our industrial end markets, but also our customer base each helps to mitigate the impact of the economic deceleration.

Roughly 55% of our revenues generated by our specialized segment, which tends to be higher margin and extends into sub verticals, where our competitive advantages are more sustainable and with approximately 20% of our total company revenues tied to counter cyclical end markets found within our specialized segment. It also serves as a counterbalance to some of our higher beta and <unk>.

Markets with our overall industrial facing portfolio.

We also have significant diversity across our customer base as our top 10 customers only represent 27% of our business.

With an average tenure of these top 10 customers that exceeds 20 years our.

Our diversification has allowed us to deploy differentiated services and capabilities to a differentiated set of customers and end markets to optimize our asset deployment consistently finding pockets of strength across cycles.

Moving onto secular tailwind.

<unk> is uniquely positioned to improve profitability and defend margins irrespective of the prevailing market environment as.

As discussed earlier, we see a substantial self help opportunity underpinned by a well delineated transformation strategy to further improve the business over the next 12 to 18 months with plans for additional optimization thereafter.

Our renewed strategy, which shifts away from a pure play a trailer centric construct to one focused on building leadership positions in niche industrial facing end markets with stronger margins and high barriers to entry.

Provides focus and informs our organic and acquisitive growth priorities.

To that point, where substantial organic growth opportunity is simply engaging our existing customers and our current markets more proactively and attempt to capture additional market share.

As an interesting point of reference we estimate that even a modest 25 basis point increase in market share across the end markets sub verticals. We currently service would result in an EBITDA increase of approximately $20 million.

Which has not been factored into our transformational plan estimates.

However, highly accretive opportunities for strategic growth also about having now built a robust pipeline of off market M&A opportunities within a highly disciplined evaluation framework as stated in the past at least until our transformational initiatives are largely compete complete M&A efforts will be highly biased towards tuck in acquisitions and.

It is now our expectation that we can execute on this strategy, while achieving low risk post acquisition synergy adjusted effective EV to EBITDA multiples in the low fours or less.

<unk> also has several structural advantages that position us to be successful despite market fluctuations first we have limited exposure to spot rates as 80% to 85% of our rates our contract insulating our rates from market volatility we.

We have deep seeded long term partnerships with our customers and markets, where our specialized segment specialized skill and specialized scale or each valued.

Our focus on markets with a defensible position due to high barriers to entry provides national support through cycles as it limits capacity entrance and an expansion within these markets and is higher margin business provides a cushion for us to profitably balanced the interplay between rates and volumes in environments, where demand is softening.

And finally, our variable cost structure as yet another lever, we can pull to defend margins if demand slows.

Something worth noting.

As part of our normal course normal course best practices, we performed stress testing activities on our business and given the fundamental changes with this company has undergone over the last few years. It is our expectation that even in the face of a 2008 type recessionary event that you would still be able to generate positive free cash flow that is adjusted EBITDA less interest.

Taxes dividends and net cash capex.

Finally, I'd like to take a moment to share some of our fleet dynamics as a reminder, <unk> size scale and industry advantages that you as an organization with 4600 trucks with an average age of two and a half years on our company fleet at over 11000 trailers, our combined fleet drove 400 million miles in the last 12 months roughly.

<unk> revenues generated by our asset light capabilities, which reflects up as demand surges only to then shift freight to a more profitable company trucks when demand slows.

Finally, what I believe to be an underappreciated advantage for <unk> versus our other public comps our driver turnover at only 60% is nearly one half that of the broader industry's turnover, particularly valuable and maintaining market share and even increasing freight capture during highly challenged environments played with cap capacity constraints.

I Hope to review these factors as reaffirm your excitement and ask you as an attractive opportunity on both an absolute relative basis, our team commits to all of you and we will continue to leverage these competencies in an effort to provide superior returns to our shareholders across cycles.

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

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question right now.

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

Your first question comes from the line of Ryan <unk> with <unk>.

Greg Hallum Capital Your line is open.

Good morning, Jonathan Jason Nice results and progress.

Thank you.

Curious just to start maybe on the acquisition I don't believe I saw it anywhere, but what was the revenue and EBITDA contribution and any other metrics you can give there.

Yes, I think the I think the right way Ryan to think about that is really on kind of an adjusted synergy adjusted basis. So we.

We paid 20 right at $21 million.

1919 three.

Can a net 19 3 million four four.

For just under $6 million of synergy adjusted EBITDA.

Got you helpful and then revenue on that.

If youre willing to give it.

Yes, so we yes.

Pre adjusted pre adjusted revenue Ryan was that the EBITDA margin was about 32% EBITDA margin.

Got it.

32%, so basically much much better margins than CT assay business.

That's correct okay.

Good presumably better free cash flow conversion as well on that absolutely.

Great It.

It seems like a nice bolt on high quality add there.

Strategic value as well.

Curious, okay, so with that in mind 6 million EBITDA.

Reiterated your full year guidance that layers in now.

Yes.

Yes, three quarters of an acquisition.

Q1 outperformed.

Our expectation I think also your internal ones per jonathan's comments rates strong I guess, what am I missing.

Just reiteration of guidance when it seems like there is a lot of incremental positive contributing.

I think the big the Big question Mark is a lot of the inflationary pressures and uncertainties out there right.

Candidly.

If you couldn't tell from the tone on the call we feel very comfortable.

Very comfortable with that guidance. So you can interpret that how you will we're not formally taking numbers up at this juncture, but given what we see today, we feel pretty comfortable reiterating and over the next couple of months and once we get this acquisition more fully tucked in and has a little bit more visibility into the.

The realization of some of those synergies and expanding that market a little bit.

You may hear something different from us here at the end of the second quarter.

Good.

I appreciate the commentary and your end market exposure relative to a lot of the other public truckers out there but curious.

Kind of on top of that so widely publicized spot rate declines in the dry van market. You guys. Obviously, you don't participate in that but curious if you have any context in correlation to past cycles kind of hold the heavy haul flatbed specialized.

If there was any correlation to the dry van spot market.

A leading indicator six nine months later, we have seen this or just completely different altogether.

Yes.

For a lot of different reasons as we've been going through the transformation efforts over the last couple of years we've spent.

A disproportionate amount of time analyzing.

And markets rate trends correlations or lack thereof, and I can tell you.

When you look at the <unk> portfolio and the diversity in our portfolio. We don't see the same type of negative correlations that.

Now there are individual segments of the business that may be more closely tied and correlated to kind of what happens in dry van but when you look at it in aggregate Theres just not a correlation there.

Great. Thanks, guys. Good luck.

Back over over 10 years, so trying to go through multiple cycles there.

Great. That's it for me good luck guys.

Sure.

Your next question comes from the line of Elliot Alper from Cowen Your line is open.

Great. Thank you.

Piggybacking off that last question we've.

And we've seen flatbed and specialized spot rates kind of outperformed compared to the drive and over the past couple of months you guys have come down with the group. Despite this can you talk about the dynamics in the rate environment Youre seeing I know you discussed your 15% to 20% exposure to spot.

But maybe some kind of commentary youre seeing around there and then anything on.

April performance on the contract side.

Yeah. Thanks, Elliot, yes, great great question.

On the right side, we Youre right I mean, flatbed and specialized have both been outperforming the dry van.

The public data.

Based on the comment we just discussed.

Previously about some of the diversity of the end markets, we support we've seen.

It's a strong market April .

Again.

Not to let the cat out of the bag, but April was strong rates were strong demand was strong.

I was actually just on a call with our COO and in all of the operational leaders yesterday talking about what they're seeing here.

First week of May through April and almost across the board. It was man we could use some more trucks and can we get more trucks, we got customer demand.

But we're doing everything we can with our LP, an owner operator fleet, our brokerage relationships to try to meet the needs of our customers, but there is theres a theres a lot of opportunity out there so.

That's why we kind of scratch our heads.

At some of the kind of correlations that people are making between kind of our business model and our end market exposure versus maybe some of the more retail oriented consumer.

Kind of affected.

And our competitors Elliot I think.

Just just for what it's worth anecdotally, if we had if we had to guess I think that in Q1, we probably repriced, 50% to 60% of our book.

So the market the demand is definitely there.

I think challenges again on the on the supply side.

I think at present kind of a nice fairway for the rate environment.

To hold steady if not continue to firm up even more.

Okay that was really helpful. Thank you I guess over to the owner operator side strong top line growth I guess, how should we think about that business unit through the remainder of the year and kind of what's baked into your guidance.

And anything you're seeing on kind of a net new operators.

To the platform.

Yes.

But obviously you are familiar with that model right. A lot of those guys are paid on a percentage of revenue basis. So in a really strong rate environment, becoming an LP your owner operators and attractive option.

We try to do a good job at helping educate them and walk them through it and help them to look past just this week this month, which sometimes.

To do but helping them think about it through the cycles right and make sure that's the right decision for them.

Do how the LP program, which is kind of a little bit of like an owner operator on training wheels program. If you will where theyre still our owned assets and so there are times, where our guys will go into that program and then maybe you realize it's a little harder they thought or it's not kind of what they like and rather than just leaving we're able to bring them back in may.

And put them back over to company. So we have seen a lot of interest in that program for the reasons I mentioned previously.

And we've been very strategic about how we've been growing it we're spending a lot of time internally analyzing the profitability of that program not just.

In terms of.

Rates in volumes, but also looking at the other pieces of that equation right. The insurance side of things the safety side of things.

We want to make sure guys arent stuck with.

Youll be upside down in overvalued trucks, three years from now and not being able to kind of continue to move forward in a viable way. So theres a lot of that type of work that we're doing but yes. There's no question that right now there's a lot of demand for that program that I think.

And I think it's a nice it's a nice way to flex and flex capacity in terms of the okay. It comes at the expense of a margin profile. That's that's kind of have passed out of our of our company trucks.

It's absolutely surge capacity. We're also provides really kind of downside optionality when the market starts to soften we will take those drivers in and ship them back to company trucks that.

That are doing kind of twice the twice the margin of the LP driver or the LP trucks. So it provides a nice hedge in kind of a softening stopping rate environment.

Okay, great. Thank you both.

Yes.

Your next question comes from the line of Bird <unk> of Stifel. Your line is open.

Good morning.

Hey, Bert.

Have you guys said what percent of your current total revenue comes from dedicated contracts.

No we haven't disclosed that historically.

<unk> is a growing number.

But it is.

It's kind of in the low double digits.

I think that's.

It also depends as you know how you define dedicated lots of people call different things dedicated.

It's it's definitely.

A growing portion of our business and something especially given the supply demand imbalances that look to kind of continue to be out there a lot of customers are asking about.

Okay got it thanks, Jason.

Are you seeing on the contractual rate side, I mean, probably X dedicated what's your I think last quarter, you said mid single digits, plus I assume that's probably moved up a little bit now yes.

I mean, even last quarter I kind of was hedging a little bit when we talked about it because I'm, assuming you come up for the year last quarter, we were kind of hedging because we said listen.

If the inflationary environment continues to be what it looks like it might be.

I suspect, we'll get higher rate I don't know, so so you're probably going to see outperformance on the top line, but we're going to the reason were getting higher rates, just because we've got inflationary costs and more compensation going through your drivers and things like that so maybe not as big of an outperformance on the bottom line, but we're feeling pretty good about where rates are trending.

Five months in right now.

And just in terms of I know you sort of reiterated that you don't have a ton of spot exposure.

What would you expect to be the impact on brokerage.

Flatbed rates do sort of start to follow the trend what you're seeing in dry van.

Yes, that's a great question.

I'll start by kind of reiterating our brokerage model right.

As much as we wish several years ago, we had real.

We expanded and grown our brokerage profile and had a freestanding standalone brokerage platform really what brokerage has been for us over the last couple of years as an overflow support functions for our customers and our strategic partnerships that we have with them.

And so the reality is is that if things were to kind of slow down a little bit we would simply be taking things away from our broker capacity and bringing them on to our company owned or owner operated and LP assets. So it really net net you would just lose the nominal.

Margin that you're capturing on that and that's similar to what we did back in 2020, when Covid kind of came through you saw that same kind of shift back and forth.

And so it is as Jonathan alluded to kind of flat.

Flex valve for us to be able to move up and down and so while we might see that kind of slow down a little bit if it slowed down meaningfully we would just pulled up that freight over onto our assets, where we can generate pretty pretty strong margins.

Okay. Just final question for me.

Could you say what your exposure is to oil equipment markets is that is that a potential tailwind for the business or did you mostly pull out of that post 2008.

So we were we had an oil rigging kind of company that had been purchased at one point.

Which just wasn't a strategic fit for the business and so that would be a beta business that we used to talk about a lot that we've now divested of completely I mean, we still support a lot of end markets that tie into that but not directly like that oil rigging business did.

Got it okay. Thank you very much.

Your next question comes from the line of Gregg Gilbert from Northland Securities. Your line is open.

Hey, good morning, guys and great quarter, Thanks for taking the questions.

Just wanted to cover guidance again, you said youre very comfortable with it.

Are you kind of assuming that market dynamics right now remain unchanged.

And what are your kind of expectations on capacity.

Respect the guidance.

Yes.

Thats, probably a fair assumption, we're listen we're consciously optimistic.

I know myself I know, Jonathan and I know Rick Williams, our CEO have all had very very detailed conversations with our OEM providers about equipment.

I think they're doing the best they can to dig out and I think theyre, making some theyre, making up some ground. We're optimistic that we'll still be able to get the lion's share of what we hope to see this year, which means other people will be seeing the same thing.

And so.

But having said that when you think about our business model on the demand side.

We just we're not seeing any indications that it is slowing down anytime soon and so you've got the supply constraints.

And you have plentiful demand and.

That's what we've been seeing and it doesn't look like that's slowing down in the foreseeable future. Yeah. I mean, Greg as you know Q2 Q2, and Q3 are that are the big quarters kind of make or break the year type quarters for us and so we usually have a pretty good sense bye bye.

By late April early May with those quarters are going to we're going to look like.

Pending on kind of the rhythm, we have with our customers and our end market verticals and so I think thats going back to Jason's point by by by our second quarter call I think any any impact to guidance.

We'll probably be in a position to kind of better speak to that on the heels of that call, but again, we feel very good about the state of our industrial facing in markets and cautiously optimistic that we're going to continue to exceed expectations.

Okay, great very helpful.

If I could follow up on the tuck in acquisitions. It seems like checks all the boxes exactly what youre looking for in terms of expanding the geographical footprint.

New end markets specialty chemicals could you maybe talk a little bit more about that and what it brings.

No.

The new footprint.

And then.

Yes.

I guess the date on when that was completed and did it contribute anything to Q1.

Yes, it was.

Actually it was actually closed in early March.

And it really look for a strategic fit we mentioned it's it's.

Hazardous hazardous waste.

It's a sub vertical that we currently have today.

Sure.

There were a few big customers within that smaller acquisition that we actually have relationships with service today with this acquisition early data with regard to send you into a new region, a new part of the country and in the northeast, which you can't otherwise.

Access permits and kind of permit your way into that you can kind of have to buy your way.

Into that into that into that part of the part of the country. So it got us into a part of the country that allowed us to extend our footprint again, it's a nice try.

Enter cyclical.

Low correlation type type type of end market, we have relationships with those customers.

We had very good visibility on on.

Because of our scale because of our long standing relationships with those customers executing in fairly short order on commercial commercial opportunities commercial improvements.

One of the things that it.

And we kind of mentioned this now on a few calls this is we're moving away from a trade war since <unk> strategy. This this acquisition also came with with tankers.

And so we now we now have a very kind of modest CAGR fleet as part of the asking that's something we will we'll like to look we'll likely look to grow.

Guys are this is kind of a specialty chemical push is one of the identified submarkets, we'd like to expand our leadership position in.

Perfect Great I guess last one for me just wanted to.

Complement your guarantee.

Transformational initiatives.

Included in the slide deck.

I guess I just wanted to touch on I think it was $20 million to $25 million.

And kind of annualized earning improvement in 2023 is that going to be.

The Q4 run rate.

Maybe when you realize that both maybe.

Yes, I think Jason.

I think Greg you can think about it really.

Ratably over over the over the first few quarters of the year.

Such that by Q4 kind of the exit run rate.

For 2000 $25 million.

But I think that youll start to see youll start to see that kind of layer in.

By potentially as early as Q4 this year, but certainly certainly by Q1 of 2023 and I think that.

The team again.

As look is very is very confident in our ability to kind of generate that I think there is upside to the plan. The plan is something we've been working on for several months really being thoughtful we're leaving.

Being surgical in how we think about continuing to transform Daphne.

So we.

This isn't a this isn't a.

Let's cut things to the borrower, we think there's tons of opportunity there's still tons of even net of some of this move and lots of operational leverage still on the business to accommodate additional growth whether it be strategic organic.

Yes.

Great. Thanks, guys.

Sure.

I will now turn the call over to Jonathan for closing remarks.

I'd like to thank everyone for your time today, we look forward to continuing upon the momentum we've generated alongside our broader transformation. We thank you for your commitment and confidence in <unk> and we look forward to translating the market opportunities facing us today in a profitable returns and consistent growth for our stakeholders.

Thank you thanks, everyone.

This concludes today's conference call. Thank you for participating you may now disconnect.