Daseke, Inc. - Quarter Report: 2023 September (Form 10-Q)

10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________

Commission File Number: 001-37509

DASEKE, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)				47-3913221 (IRS Employer Identification No.)


15455 Dallas Parkway, Suite 550 Addison, Texas		75001
(Address of principal executive offices)		(Zip Code)

(972) 248-0412

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	DSKE	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


☐ Large accelerated filer				 Accelerated filer
☐ Non-accelerated filer				☐ Smaller reporting company
				☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No 

Common shares of the registrant outstanding at October 31, 2023 were 46,501,658.

Table of Contents

DASEKE, INC.

FORM 10-Q

For the Quarterly Period Ended September 30, 2023

INDEX



		Page No.
Part I. Financial Information		1
Item 1. Financial Statements (Unaudited)		1
Consolidated Balance Sheets		1
Consolidated Statements of Operations and Comprehensive Income		2
Consolidated Statements of Changes in Stockholders' Equity		3
Consolidated Statements of Cash Flows		5
Notes to Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3. Quantitative and Qualitative Disclosures About Market Risk		33
Item 4. Controls and Procedures		33
Part II. Other Information		33
Item 1. Legal Proceedings		33
Item 1A. Risk Factors		33
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities		33
Item 5. Other Information		33
Item 6. Exhibits		34
Signatures		35

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this Report) of Daseke, Inc. (Daseke) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Except as otherwise indicated by the context, references in this Report to the “Company,” “we,” “us” and “our” are to Daseke together with its consolidated subsidiaries. All statements in this Report, other than statements of historical fact, are forward-looking statements. Forward-looking statements may be identified by the use of words such as “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan,” “should,” “could,” “would,” “forecast,” “seek,” “target,” “predict,” and “potential,” the negative of these terms, or other comparable terminology. Forward-looking statements may include statements about the Company’s goals, business strategy and plans; the Company’s financial strategy, liquidity and capital required for its business strategy and plans; the Company’s competition and government regulations; general economic conditions; and the Company’s future operating results.

These forward-looking statements are based on information available as of the date of this Report, and current expectations, forecasts, and assumptions. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that the Company anticipates. Accordingly, forward-looking statements should not be relied upon as representing the Company’s views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Readers are cautioned not to place undue reliance on the forward-looking statements.

Forward-looking statements are subject to risks and uncertainties (many of which are beyond our control) that could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, general economic and business risks, such as downturns in customers’ business cycles and recessionary economic cycles, changes in customers’ inventory levels and in the availability of funding for their working capital, disruptions in capital and credit markets, inflationary cost pressures and rising interest rates; the Company’s ability to adequately address downward pricing and other competitive pressures; the Company’s insurance or claims expense; driver shortages and increases in driver compensation or owner-operator contracted rates; fluctuations in the price or availability of diesel fuel; increased prices for, or decreases in the availability of, new revenue equipment and decreases in the value of used revenue equipment; supply chain disruptions and constraints generally; seasonality and the impact of weather and other catastrophic events; the Company’s ability to secure the services of third-party capacity providers on competitive terms; loss of key personnel; a failure of the Company’s information systems, including disruptions or failures of services essential to our operations or upon which our information technology platforms rely, data or other security breach, or cybersecurity incidents; the Company’s ability to execute and realize all of the expected benefits of its integration, business improvement and comprehensive restructuring plans; the Company’s ability to realize all of the intended benefits from acquisitions or investments; the Company’s ability to complete divestitures successfully; the Company’s ability to generate sufficient cash to service all of the Company’s indebtedness; the Company’s ability to finance its capital requirements; changes in existing laws or regulations, including environmental and worker health safety laws and regulations and those relating to tax rates or taxes in general; the impact of governmental regulations and other governmental actions related to the Company and its operations; and litigation and governmental proceedings. For additional information regarding known material factors that could cause the Company’s actual results to differ from its projected results, please see the Company’s filings with the Securities and Exchange Commission (the SEC), particularly the section titled “Part I. Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023. Additional risks or uncertainties that are not currently known to us, that we currently deem to be immaterial, or that could apply to any company could also materially adversely affect our business, financial condition, or future results.

All forward-looking statements, expressed or implied, attributed to the Company or persons acting on its behalf are expressly qualified in their entirety by this cautionary statement.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in millions, except per share data)


	September 30,			December 31,
	2023			2022
ASSETS
Current assets:
Cash and cash equivalents	$	77.2		$	153.4
Accounts receivable, net of allowance of $1.9 and $2.3 at September 30, 2023 and December 31, 2022, respectively		185.6			179.0
Drivers’ advances and other receivables		10.3			7.9
Other current assets		38.8			37.9
Total current assets		311.9			378.2

Property and equipment, net		557.6			488.3
Intangible assets, net		75.2			80.6
Goodwill		137.3			137.3
Right-of-use assets		101.2			107.6
Other non-current assets		3.4			3.4
Total assets	$	1,186.6		$	1,195.4

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	19.2		$	14.7
Accrued expenses and other liabilities		53.4			44.9
Accrued payroll, benefits and related taxes		28.4			30.8
Accrued insurance and claims		47.4			40.6
Current portion of long-term debt		95.2			78.4
Current operating lease liabilities		33.1			34.4
Total current liabilities		276.7			243.8

Line of credit		—			—
Long-term debt, net of current portion		558.2			582.3
Deferred tax liabilities		96.4			95.0
Non-current operating lease liabilities		74.3			79.6
Other non-current liabilities		1.7			1.7
Total liabilities		1,007.3			1,002.4

Commitments and contingencies (Note 9)

Stockholders’ equity:
Preferred stock, 10,000,000 total preferred shares authorized:
Series A convertible preferred stock, $0.0001 par value; 650,000 shares issued and outstanding with liquidation preference of $65.0 at September 30, 2023 and December 31, 2022		65.0			65.0
Series B perpetual preferred stock, $0.0001 par value; 47,597 shares issued and outstanding with liquidation preference of $47.6 at September 30, 2023 and 67,597 shares issued and outstanding with liquidation preference of $67.6 at December 31, 2022		47.6			67.6
Common stock, par value $0.0001 per share; 250,000,000 shares authorized, 46,323,242 and 45,028,041 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		—			—
Additional paid-in-capital		297.3			293.1
Accumulated deficit		(230.2	)		(232.3	)
Accumulated other comprehensive loss		(0.4	)		(0.4	)
Total stockholders’ equity		179.3			193.0
Total liabilities and stockholders’ equity	$	1,186.6		$	1,195.4

The accompanying notes are an integral part of the consolidated financial statements.

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DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

(Dollars in millions, except per share data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Revenues:
Company freight	$	168.7		$	168.6		$	499.9		$	492.4
Owner operator freight		108.2			130.0			333.2			397.7
Brokerage		63.1			85.3			186.9			255.4
Logistics		15.0			13.8			45.2			39.2
Fuel surcharge		47.3			65.1			144.2			180.4
Total revenue		402.3			462.8			1,209.4			1,365.1

Operating expenses:
Salaries, wages and employee benefits		97.3			104.6			308.6			299.3
Fuel		37.3			40.0			105.3			120.4
Operations and maintenance		44.0			43.8			129.4			120.2
Purchased freight		137.3			180.3			425.3			548.9
Administrative		20.4			17.8			55.4			52.8
Taxes and licenses		4.0			3.9			11.9			11.6
Insurance and claims		16.2			20.0			49.1			61.0
Acquisition-related transaction expenses		—			0.4			1.2			3.7
Depreciation and amortization		28.3			23.9			79.3			68.2
Gain on disposition of property and equipment		(2.6	)		(4.9	)		(11.0	)		(14.0	)
Impairment		—			—			1.5			7.8
Restructuring		0.1			0.8			0.4			2.0
Total operating expenses		382.3			430.6			1,156.4			1,281.9
Income from operations		20.0			32.2			53.0			83.2

Other expense (income):
Interest income		(1.1	)		(0.7	)		(3.7	)		(1.5	)
Interest expense		13.4			9.2			39.1			23.8
Change in fair value of warrant liability		—			—			—			(4.7	)
Other		(0.1	)		1.2			(0.6	)		1.3
Total other expense		12.2			9.7			34.8			18.9

Income before income taxes		7.8			22.5			18.2			64.3
Income tax expense		4.6			9.9			8.8			21.0
Net income		3.2			12.6			9.4			43.3
Other comprehensive income (loss):
Foreign currency translation adjustments		(0.5	)		(0.4	)		—			(0.5	)
Comprehensive income	$	2.7		$	12.2		$	9.4		$	42.8

Net income	$	3.2		$	12.6		$	9.4		$	43.3
Less dividends to Series A convertible preferred stockholders		(1.3	)		(1.3	)		(3.7	)		(3.7	)
Less dividends to Series B perpetual preferred stockholders		(0.8	)		—			(3.6	)		—
Net income attributable to common stockholders	$	1.1		$	11.3		$	2.1		$	39.6
Earnings per common share:
Basic	$	0.02		$	0.18		$	0.05		$	0.62
Diluted	$	0.02		$	0.17		$	0.04		$	0.60
Weighted-average common shares outstanding:
Basic		46,089,770			63,535,897			45,588,585			63,301,446
Diluted		47,608,158			66,270,641			47,613,017			66,266,666
Dividends declared per Series A convertible preferred share	$	1.91		$	1.91		$	5.72		$	5.72
Dividends declared per Series B perpetual preferred share	$	17.50		$	—		$	57.44		$	—

The accompanying notes are an integral part of the consolidated financial statements.

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DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2023

(Unaudited)

(Dollars in millions)


	Series A Convertible				Series B Perpetual																Accumulated
	Preferred Stock				Preferred Stock						Common Stock										Other
													Par		Additional			Accumulated			Comprehensive
	Shares		Amount		Shares			Amount			Shares		Value		Paid-In Capital			Deficit			Income (Loss)			Total
Balance at January 1, 2023		650,000	$	65.0		67,597		$	67.6			45,028,041	$	—	$	293.1		$	(232.3	)	$	(0.4	)	$	193.0
Vesting of stock awards		—		—		—			—			158,359		—		(0.2	)		—			—			(0.2	)
Series A convertible preferred stock dividend		—		—		—			—			—		—		—			(1.2	)		—			(1.2	)
Series B perpetual preferred stock dividend		—		—		—			—			—		—		—			(1.5	)		—			(1.5	)
Stock-based compensation expense		—		—		—			—			—		—		2.9			—			—			2.9
Foreign currency translation adjustments		—		—		—			—			—		—		—			—			(0.1	)		(0.1	)
Net income		—		—		—			—			—		—		—			0.5			—			0.5
Balance at March 31, 2023		650,000	$	65.0		67,597		$	67.6			45,186,400	$	—	$	295.8		$	(234.5	)	$	(0.5	)	$	193.4
Exercise of options		—		—		—			—			4,000		—		—			—			—			—
Vesting of stock awards		—		—		—			—			460,541		—		(2.3	)		—			—			(2.3	)
Series A convertible preferred stock dividend		—		—		—			—			—		—		—			(1.2	)		—			(1.2	)
Series B perpetual preferred stock dividend		—		—		—			—			—		—		—			(1.3	)		—			(1.3	)
Series B perpetual preferred stock redemption		—		—		(20,000	)		(20.0	)		—		—		—			—			—			(20.0	)
Stock-based compensation expense		—		—		—			—			—		—		1.6			—			—			1.6
Foreign currency translation adjustments		—		—		—			—			—		—		—			—			0.6			0.6
Net income		—		—		—			—			—		—		—			5.7			—			5.7
Balance at June 30, 2023		650,000	$	65.0		47,597		$	47.6			45,650,941	$	—	$	295.1		$	(231.3	)	$	0.1		$	176.5
Exercise of options		—		—		—			—			79,000		—		0.2			—			—			0.2
Vesting of stock awards		—		—		—			—			593,301		—		(1.4	)		—			—			(1.4	)
Series A convertible preferred stock dividend		—		—		—			—			—		—		—			(1.3	)		—			(1.3	)
Series B perpetual preferred stock dividend		—		—		—			—			—		—		—			(0.8	)		—			(0.8	)
Stock-based compensation expense		—		—		—			—			—		—		3.4			—			—			3.4
Foreign currency translation adjustments		—		—		—			—			—		—		—			—			(0.5	)		(0.5	)
Net income		—		—		—			—			—		—		—			3.2			—			3.2
Balance at September 30, 2023		650,000	$	65.0		47,597		$	47.6			46,323,242	$	—	$	297.3		$	(230.2	)	$	(0.4	)	$	179.3

The accompanying notes are an integral part of the consolidated financial statements.

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DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2022

(Unaudited)

(Dollars in millions)


	Series A Convertible														Accumulated
	Preferred Stock				Common Stock										Other
							Par		Additional			Accumulated			Comprehensive
	Shares		Amount		Shares		Value		Paid-In Capital			Deficit			Loss			Total
Balance at January 1, 2022		650,000	$	65.0		62,489,278	$	—	$	387.8		$	(276.8	)	$	—		$	176.0
Exercise of options		—		—		91,425		—		0.8			—			—			0.8
Exercise of warrants		—		—		817,648		—		9.4			—			—			9.4
Vesting of stock awards		—		—		43,450		—		—			—			—			—
Series A convertible preferred stock dividend		—		—		—		—		—			(1.2	)		—			(1.2	)
Stock-based compensation expense		—		—		—		—		2.2			—			—			2.2
Net income		—		—		—		—		—			13.0			—			13.0
Balance at March 31, 2022		650,000	$	65.0		63,441,801	$	—	$	400.2		$	(265.0	)	$	—		$	200.2
Vesting of stock awards		—		—		62,217		—		(0.2	)		—			—			(0.2	)
Series A convertible preferred stock dividend		—		—		—		—		—			(1.2	)		—			(1.2	)
Stock-based compensation expense		—		—		—		—		2.3			—			—			2.3
Foreign currency translation adjustments		—		—		—		—		—			—			(0.1	)		(0.1	)
Net income		—		—		—		—		—			17.7			—			17.7
Balance at June 30, 2022		650,000	$	65.0		63,504,018	$	—	$	402.3		$	(248.5	)	$	(0.1	)	$	218.7
Vesting of stock awards		—		—		47,548		—		(0.1	)		—			—			(0.1	)
Series A convertible preferred stock dividend		—		—		—		—		—			(1.3	)		—			(1.3	)
Stock-based compensation expense		—		—		—		—		2.1			—			—			2.1
Foreign currency translation adjustments		—		—		—		—		—			—			(0.4	)		(0.4	)
Net income		—		—		—		—		—			12.6			—			12.6
Balance at September 30, 2022		650,000	$	65.0		63,551,566	$	—	$	404.3		$	(237.2	)	$	(0.5	)	$	231.6

The accompanying notes are an integral part of the consolidated financial statements.

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DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)


	Nine Months Ended
	September 30,
	2023			2022
Cash flows from operating activities
Net income	$	9.4		$	43.3
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		74.5			63.0
Amortization of intangible assets		4.8			5.2
Amortization of deferred financing fees		1.9			0.9
Non-cash operating lease expense		(0.1	)		—
Change in fair value of warrant liability		—			(4.7	)
Stock-based compensation expense		5.3			8.8
Deferred taxes		1.2			2.6
Bad debt expense (recovery)		(0.1	)		0.7
Gain on disposition of property and equipment		(11.0	)		(14.0	)
Impairment		1.5			7.8
Changes in operating assets and liabilities:
Accounts receivable		(6.5	)		(34.1	)
Drivers’ advances and other receivables		(2.4	)		(3.1	)
Other current assets		(0.9	)		(3.7	)
Accounts payable		5.4			3.5
Accrued expenses and other liabilities		9.5			30.5
Net cash provided by operating activities		92.5			106.7

Cash flows from investing activities
Purchases of property and equipment		(25.6	)		(33.4	)
Proceeds from sale of property and equipment		24.6			28.0
Cash paid for acquisitions, net of cash received		—			(19.1	)
Net cash used in investing activities		(1.0	)		(24.5	)

Cash flows from financing activities:
Advances on line of credit		1,191.4			1,356.9
Repayments on line of credit		(1,191.4	)		(1,356.9	)
Principal payments on long-term debt		(140.1	)		(49.0	)
Exercise of stock options, net		0.2			0.8
Exercise of warrants		—			9.4
Series A convertible preferred stock dividends		(3.7	)		(3.7	)
Series B perpetual preferred stock dividends		(4.2	)		—
Series B perpetual preferred stock redemption		(20.0	)		—
Net cash used in financing activities		(167.8	)		(42.5	)

Effect of exchange rates on cash and cash equivalents		0.1			1.1

Net (decrease) increase in cash and cash equivalents		(76.2	)		40.8
Cash and cash equivalents – beginning of period		153.4			147.5
Cash and cash equivalents – end of period	$	77.2		$	188.3

The accompanying notes are an integral part of the consolidated financial statements.

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DASEKE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

(Unaudited)

(Dollars in millions)


	Nine Months Ended
	September 30,
	2023		2022
Supplemental disclosure of cash flow information
Cash paid for interest	$	37.2	$	23.1
Cash paid for income taxes	$	2.4	$	19.8

Noncash investing and financing activities
Property and equipment acquired with debt or finance lease obligations	$	130.9	$	93.7
Right-of-use assets acquired	$	24.0	$	27.8
Accrued share repurchase excise taxes	$	0.1	$	—

The accompanying notes are an integral part of the consolidated financial statements.

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NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

We are a premier North American transportation solutions specialist dedicated to servicing challenging industrial end-markets through experienced people and a fleet of more than 4,900 tractors and 11,000 flatbed and specialized trailers. The Company delivers its diverse offering of solutions to thousands of customers across the United States, Canada and Mexico. In addition to transporting freight with tractors and trailers, the Company also provides logistical planning and warehousing solutions to customers. The Company is subject to regulation by the Department of Transportation, the Department of Defense, the Department of Energy, and various state regulatory authorities in the United States. The Company is also subject to regulation by the Ministries of Transportation and Communications and various provincial regulatory authorities in Canada.

Basis of Presentation

These interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

The consolidated balance sheet as of December 31, 2022 has been derived from the audited consolidated financial statements at that date. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes for the year ended December 31, 2022 as set forth in the Company’s Annual Report on Form 10-K, filed with the SEC on February 23, 2023.

Common Stock Purchase Warrants

Daseke’s common stock purchase warrants expired in accordance with their terms on February 27, 2022 and are no longer exercisable. During the first quarter of 2022, prior to their expiration, there were 1,635,296 warrants exercised for 817,648 shares of Daseke’s common stock in exchange for $9.4 million in proceeds to the Company.

Series B Preferred Stock

In May 2023, Daseke redeemed all 20,000 shares of issued and outstanding Series B-1 perpetual preferred stock by paying $20.3 million in cash, which consisted of $20.0 million liquidation preference, plus $0.3 million in accrued and unpaid dividends. As of September 30, 2023, as a result of such redemption, the Company has recorded an estimated $0.1 million excise tax liability for share repurchases, net of issuances.

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the FASB) issued Accounting Standard Update (ASU) No. 2016-13, Accounting for Credit Losses (Topic 326). ASU 2016-13 requires the use of an “expected loss” model on certain types of financial instruments. The ASU sets forth a “current expected credit loss” model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. In addition, in March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures to improve the decision usefulness of information provided to investors concerning certain loan refinancings, restructurings and writeoffs. The Company adopted these ASUs as of January 1, 2023. The adoption did not have a material impact on the Company's consolidated financial statements.

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Lease Income

The Company leases tractors and trailers to certain of its owner operators and accounts for these transactions as operating leases. These leases typically have terms of 30 to 72 months and are collateralized by a security interest in the related revenue equipment. The Company recognizes income for these leases as payments are received over the lease term, which are reported as a reduction of purchased freight on the consolidated statements of operations and comprehensive income. The Company's equipment leases may include options for the lessee to purchase the equipment at the end of the lease term or terminate the lease prior to the end of the lease term. When an asset reaches the end of its useful economic life, the Company disposes of the asset.

Lease income from lease payments related to these operating leases for the three months ended September 30, 2023 and 2022 was $7.9 million and $8.4 million, respectively. Lease income from lease payments related to these operating leases for the nine months ended September 30, 2023 and 2022 was $24.0 million and $24.2 million, respectively.

NOTE 2 – OTHER CURRENT ASSETS

The components of other current assets are as follows (in millions):


	September 30,		December 31,
	2023		2022
Prepaid insurance	$	11.3	$	8.4
Income tax receivable		11.2		13.8
Prepaid licensing, permits and tolls		4.4		5.0
Parts supplies		4.2		4.2
Other prepaids		3.4		2.9
Prepaid taxes		1.6		1.2
Prepaid highway and fuel taxes		1.5		1.1
Prepaid software		1.2		1.3
Total	$	38.8	$	37.9

NOTE 3 – INTEGRATION AND RESTRUCTURING

During the first quarter of 2022, the Company internally announced a phased integration and restructuring plan (the Plan). Our goal is to drive synergies and improve profitability through cost reduction, network optimization and commercial initiatives which will be facilitated by the continued integration of our operating companies into a subset of our highest-performing platform companies. We believe these measures will unite teams across the Company around a culture of close coordination and continuous improvement, providing for opportunistic expansion into incremental services, geographies, and industrial end markets. These efforts provide a preview of the potential of One Daseke, our name for the initiatives through which we are driving the next phase of our Company’s growth - one that benefits from the sharing of best practices, the optimization of processes, and the technology enablement necessary to better engage our customers and drivers. As of September 30, 2023, we had nine operating segments.

The integration and restructuring costs, which we expect to incur over the next several years, may consist of employee-related costs and other transition and termination costs related to restructuring activities. Employee-related costs include severance, tax preparation, and relocation costs, which are accounted for in accordance with ASC 420 Exit or Disposal Cost Obligations. Other transition and termination costs may include fixed asset-related charges, contract and lease termination costs, professional fees, and other miscellaneous expenditures associated with the integration or restructuring activities, which are expensed as incurred. Costs are reported in restructuring in the consolidated statements of operations and comprehensive income.

The Company recorded $0.1 million in integration and restructuring expenses in the three months ended September 30, 2023. The Company recorded $0.4 million of integration and restructuring expenses, primarily related to $1.1 million in professional fees partially offset by a $0.7 million prior quarter reclassification to acquisition-related transaction expenses, in connection with the Plan in the nine months ended September 30, 2023, comprised of $0.4 million in the Specialized Solutions segment and $0 in the Flatbed Solutions segment. As of September 30, 2023, we have incurred a cumulative total of $2.8 million in integration and restructuring costs since inception of the Plan.

Impairments

During the three months ended June 30, 2023, the Company made a decision to no longer use the trade name of an operating segment within the Flatbed Solutions segment. As a result, the Company determined there were indicators of impairment regarding this operating segment’s trade name intangibles and goodwill. The Company determined that the carrying value was less than the fair value associated with this integrated operating segment’s goodwill, which was determined using a combination of discounted expected future cash flows (income approach) and guideline public companies method (market approach). However, it was determined that the trade name intangibles carrying value was greater than its fair value. As such, the Company recorded a trade name intangibles impairment charge of $1.5 million in the

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Flatbed Solutions segment during the three months ended June 30, 2023. The impairment charge is included in impairment in the consolidated statements of operations and comprehensive income.

During the second quarter of 2022, the Company made a decision to no longer use the trade name of an operating segment within the Specialized Solutions segment that had been integrated into another operating segment as part of the Plan. In addition, as of the end of such quarter, there were no remaining customer relationships associated with this integrated operating segment. As such, the Company determined there were indicators of impairment regarding this operating segment’s trade name intangibles, customer relationship intangibles, and goodwill. The Company determined there was no fair value associated with this integrated operating segment’s intangibles, and the Company recorded an impairment charge of $7.8 million in the Specialized Solutions segment during the second quarter of 2022, consisting of $1.9 million of trade name intangibles, $0.2 million of customer relationships, and $5.7 million of goodwill. The impairment charge is included in impairment in the consolidated statements of operations and comprehensive income.

NOTE 4 – PROPERTY AND EQUIPMENT

The components of property and equipment are as follows (in millions):


	September 30,			December 31,
	2023			2022
Revenue equipment	$	686.5		$	611.3
Revenue equipment leased and available for lease to owner operators		153.4			145.1
Buildings and improvements		63.0			62.4
Furniture and fixtures, office and computer equipment, vehicles and capitalized software development		50.0			40.7
Property and equipment, gross		952.9			859.5
Accumulated depreciation		(395.3	)		(371.2	)
Property and equipment, net	$	557.6		$	488.3

Depreciation expense on property and equipment was $26.6 million and $22.1 million for the three months ended September 30, 2023 and 2022, respectively. Depreciation expense on property and equipment was $74.5 million and $63.0 million for the nine months ended September 30, 2023 and 2022, respectively.

NOTE 5 – ACCRUED EXPENSES AND OTHER LIABILITIES

The components of accrued expenses and other liabilities are as follows as of September 30, 2023 and December 31, 2022 (in millions):


	September 30,		December 31,
	2023		2022
Brokerage and escorts	$	19.4	$	14.1
Owner operator deposits		9.1		9.7
Other accrued expenses		8.5		5.6
Unvouchered payables		7.9		9.4
Fuel and fuel taxes		6.1		2.7
Accrued property taxes and sales taxes payable		1.3		2.4
Interest		1.0		1.0
Share repurchase excise taxes		0.1		—
	$	53.4	$	44.9

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NOTE 6 – LONG-TERM DEBT

Long-term debt consists of the following as of September 30, 2023 and December 31, 2022 (in millions):


	September 30,			December 31,
	2023			2022
Term Loan Facility	$	320.0		$	393.0
ABL Facility		—			—
Equipment and real estate term loans		317.3			249.1
Finance lease liabilities		20.6			25.0
Total debt and finance lease liabilities		657.9			667.1
Less current portion		(95.2	)		(78.4	)
Less unamortized deferred financing fees		(4.5	)		(6.4	)
Long-term debt and finance lease liabilities, less current portion and unamortized deferred financing fees	$	558.2		$	582.3

Term Loan Facility

The Company has a senior secured term loan credit facility (the Term Loan Facility) with JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and a lender, other lenders party thereto and other financial institutions party thereto. During the second and third quarters of 2023, the Company made a $50.0 million and $20.0 million cash prepayment of the Term Loan Facility, respectively, and accordingly wrote off $0.7 million and $0.3 million in deferred financing fees, respectively. The Term Loan Facility has an outstanding balance of $320.0 million as of September 30, 2023. The Term Loan Facility has a scheduled maturity date of March 9, 2028. At September 30, 2023 and December 31, 2022, the interest rate on the Term Loan Facility was 9.43% and 8.39%, respectively. As of September 30, 2023, the Company was in compliance with all covenants contained in the agreement governing the Term Loan Facility.

ABL Facility

The Company has a senior secured asset-based revolving line of credit (the ABL Facility) under a credit agreement (as amended, restated, supplemented or otherwise modified from time to time, the ABL Credit Agreement) with PNC Bank, National Association, as administrative agent and the lenders party thereto.

As of September 30, 2023, the Company had no borrowings, $20.6 million in letters of credit outstanding, and could incur approximately $112.2 million of additional indebtedness under the ABL Facility, based on current qualified collateral. As of September 30, 2023, the interest rate on the ABL Facility was approximately 6.9%. As of September 30, 2023, the Company was in compliance with all covenants contained in the ABL Credit Agreement.

Equipment and Real Estate Term Loans

As of September 30, 2023, the Company had term loans collateralized by equipment in the aggregate amount of $315.2 million with 15 lenders (Equipment Term Loans). The Equipment Term Loans bear interest at rates ranging from 2.6% to 7.4%, require monthly payments of principal and interest and mature at various dates through September 2030. As of September 30, 2023, the weighted average interest rate was 5.4%.

NOTE 7 – INCOME TAXES

The effective tax rates for the three months ended September 30, 2023 and 2022 were 59.0% and 44.0%, respectively. The effective tax rates for the nine months ended September 30, 2023 and 2022 were 48.4% and 32.7%, respectively. The difference between the Company’s effective tax rate and the federal statutory rate is primarily a result of state and foreign income taxes, global intangible low-taxed income inclusion, and the impact of certain nondeductible expenses related to executive compensation and driver per diem as compared to forecasted earnings. State tax rates vary among states and typically range from 1% to 6%, although some state rates are higher and a small number of states do not impose an income tax. The effective tax rate for the three and nine months ended September 30, 2023 differs from the effective tax rate for the same periods in 2022 primarily due to the current forecasted full-year earnings, in which the unfavorable permanent adjustments noted above generated a greater impact on the effective tax rate.

There were no changes in uncertain tax positions during the three and nine months ended September 30, 2023.

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NOTE 8 – STOCK-BASED COMPENSATION

Under the 2017 Omnibus Incentive Plan (as amended from time to time, the Incentive Plan), the Company may grant awards of stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and performance awards. As of September 30, 2023, the Company had approximately 4.3 million shares of common stock available for issuance under the Incentive Plan, based on the current estimate of the potential number of shares that may be issued from outstanding awards.

Aggregate stock-based compensation charges, net of forfeitures, were $1.7 million and $2.4 million for the three months ended September 30, 2023 and 2022, respectively, and $5.3 million and $8.8 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there was $0, $3.5 million, and $2.4 million of unrecognized stock-based compensation expense related to stock options, restricted stock units (RSUs) and performance stock units (PSUs) (both equity and liability awards), respectively. This expense will be recognized over the weighted average periods of 1.7 years for RSUs and 2.1 years for PSUs.

During the nine months ended September 30, 2023, there were 338,691 RSUs awarded to participants that are classified as equity. In addition, during the nine months ended September 30, 2023, there were 338,691 PSUs awarded to participants that are classified as equity. During the nine months ended September 30, 2023, there were no stock options granted. As of September 30, 2023, there were 1,683,662 outstanding stock options with a weighted average exercise price of $6.76.

Restricted Stock Units

The following table summarizes RSU grants under the Incentive Plan as of September 30, 2023:


Grantee Type	# of RSUs Granted		Issued and Outstanding		Vesting Period	Weighted Average Grant Date Fair Value (Per Unit)
Director Group		970,867		135,324	1 year	$	5.69
Employee Group		3,113,542		942,043	1 year -3 years	$	6.75
Total				1,077,367

A summary of RSU awards activity under the Incentive Plan as of September 30, 2023 and the changes during the nine months ended September 30, 2023 are as follows:


	Units			Weighted Average Grant Date Fair Value (Per Unit)
Non-vested as of January 1, 2023		1,097,586		$	7.89
Granted		338,691			5.19
Vested		(264,609	)		9.70
Forfeited		(94,301	)		7.89
Non-vested as of September 30, 2023		1,077,367		$	6.61

The weighted average grant date fair value of RSUs granted during the nine months ended September 30, 2023 and 2022 was $5.19 and $12.05, respectively. The total fair value of RSUs vested during the nine months ended September 30, 2023 and 2022 was $1.8 million and $1.6 million, respectively.

Performance Stock Units

As of September 30, 2023, the Company had 917,628 PSUs outstanding, of which 376,192 were classified as equity and 541,436 were classified as liabilities.

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A summary of equity-classified PSU awards activity as of September 30, 2023, and the changes during the nine months ended September 30, 2023 are as follows:


	Units			Weighted Average Grant Date Fair Value (Per Unit)
Non-vested equity-classified as of January 1, 2023		1,075,487		$	7.11
Granted		338,691			5.19
Vested		(1,018,700	)		7.17
Forfeited		(19,286	)		5.99
Non-vested equity-classified as of September 30, 2023		376,192		$	5.27

As of September 30, 2023, there were 541,436 PSUs classified as liabilities in which the vesting occurs upon the achievement of specific performance-based conditions related to the Company’s financial performance over a three-year period, modified based on the Company’s Relative Total Shareholder Return (TSR) and subject to final vesting based on the participant’s continued employment through the end of the requisite service periods. The ultimate amount to vest may be downwardly adjusted by the Compensation Committee of the Company’s Board of Directors if the TSR is negative. The amount of awards that will ultimately vest for these PSUs can range from 0% to 200% based on the TSR calculated over a three-year period beginning January 1 of the year each grant was made. The Company currently expects that these PSUs will vest between 96% and 129%. The fair value of these PSUs will be remeasured at each period-end until the earlier of the date they are reclassified to equity or the vesting date. The inputs and assumptions used to calculate the fair value ranged from a remaining term of 0.25 to 2.25 years, risk-free interest rate of 4.18% to 4.67%, expected volatility of 56.4% to 82.0%, and an expected dividend yield of 0.0%.

As of September 30, 2023, the total fair value of liability-classified awards was approximately $2.2 million, of which $1.3 million was recorded as a liability within accrued payroll, benefits and related taxes on the consolidated balance sheet and $0.4 million was recorded as a liability within other non-current liabilities on the consolidated balance sheet. As of September 30, 2023, the unrecognized stock-based compensation expense related to liability-classified PSUs was $0.5 million.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Letters of Credit

The Company had outstanding letters of credit as of September 30, 2023 and December 31, 2022 totaling approximately $21.2 million and $24.9 million, respectively, including those disclosed in Note 6. These letters of credit are related to security provided for potential liability and workers’ compensation insurance claims.

Contingencies

The Company is involved in certain claims and pending litigation arising in the normal course of business. These proceedings primarily involve claims for personal injury or property damage incurred in the transportation of freight or for personnel matters. The Company maintains liability insurance to cover liabilities arising from these matters but is responsible for paying self-insurance and deductibles on such matters up to a certain threshold before the insurance is applied.

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NOTE 10 – REPORTABLE SEGMENTS

The Company evaluates the performance of the segments primarily based on their respective revenues and operating income. During the fourth quarter of 2022, the Company began reporting segment results to its chief operating decision maker with intersegment revenues and expenses eliminated at the applicable reportable segment level, as well as corporate costs allocated to its two reportable segments based upon respective reportable segment revenue. Previously, the Company had disclosed a corporate segment, which was not an operating segment and included acquisition transaction expenses, corporate salaries, interest expense and certain other corporate administrative expenses and intersegment eliminations. As a result of this change, the Company has restated its prior period segment results below to reflect these changes in its segment financial data.

The Company’s operating segments, from time to time, provide transportation and related services for one another. Such services are generally billed at cost, and no profit is earned. Such intersegment revenues and expenses are eliminated in the Company’s reportable segment results. Intersegment transportation and related services revenues and expenses for the Flatbed Solutions segment totaled $2.3 million and $3.9 million for the three and nine months ended September 30, 2023, respectively. Intersegment transportation and related services revenues and expenses for the Specialized Solutions segment totaled $1.7 million and $4.8 million for the three and nine months ended September 30, 2023, respectively. Intersegment transportation and related services revenues and expenses for the Flatbed Solutions segment totaled $0.5 million and $2.3 million for the three and nine months ended September 30, 2022, respectively. Intersegment transportation and related services revenues and expenses for the Specialized Solutions segment totaled $1.9 million and $6.4 million for the three and nine months ended September 30, 2022, respectively.

The following tables reflect certain financial data of the Company’s reportable segments for the three and nine months ended September 30, 2023 and 2022 (in millions):


	Flatbed		Specialized			Consolidated
	Solutions Segment		Solutions Segment			Total
Three Months Ended September 30, 2023
Total revenue	$	163.6	$	238.7		$	402.3
Company freight		45.0		123.7			168.7
Owner operator freight		72.1		36.1			108.2
Brokerage		22.4		40.7			63.1
Logistics		1.7		13.3			15.0
Fuel surcharge		22.4		24.9			47.3
Operating income		5.1		14.9			20.0
Depreciation		12.5		14.1			26.6
Amortization of intangible assets		0.7		1.0			1.7
Restructuring		—		0.1			0.1
Non-cash operating lease expense		—		—			—
Interest expense		5.5		7.9			13.4
Total property and equipment additions		3.5		56.7			60.2

Three Months Ended September 30, 2022
Total revenue	$	194.2	$	268.6		$	462.8
Company freight		42.7		125.9			168.6
Owner operator freight		81.2		48.8			130.0
Brokerage		38.4		46.9			85.3
Logistics		1.0		12.8			13.8
Fuel surcharge		30.9		34.2			65.1
Operating income		8.5		23.7			32.2
Depreciation		9.7		12.4			22.1
Amortization of intangible assets		0.8		1.0			1.8
Restructuring		0.5		0.3			0.8
Non-cash operating lease expense		0.1		(0.1	)		—
Interest expense		4.0		5.2			9.2
Total property and equipment additions		29.8		30.8			60.6

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	Flatbed			Specialized			Consolidated
	Solutions Segment			Solutions Segment			Total
Nine Months Ended September 30, 2023
Total revenue	$	500.5		$	708.9		$	1,209.4
Company freight		137.0			362.9			499.9
Owner operator freight		220.7			112.5			333.2
Brokerage		68.3			118.6			186.9
Logistics		3.7			41.5			45.2
Fuel surcharge		70.8			73.4			144.2
Operating income		12.1			40.9			53.0
Depreciation		35.9			38.6			74.5
Amortization of intangible assets		1.8			3.0			4.8
Restructuring		—			0.4			0.4
Non-cash operating lease expense		(0.1	)		—			(0.1	)
Interest expense		16.4			22.7			39.1
Total property and equipment additions		60.2			96.3			156.5

Nine Months Ended September 30, 2022
Total revenue	$	603.6		$	761.5		$	1,365.1
Company freight		126.6			365.8			492.4
Owner operator freight		258.6			139.1			397.7
Brokerage		127.2			128.2			255.4
Logistics		3.1			36.1			39.2
Fuel surcharge		88.1			92.3			180.4
Operating income		36.3			46.9			83.2
Depreciation		26.9			36.1			63.0
Amortization of intangible assets		2.3			2.9			5.2
Restructuring		0.8			1.2			2.0
Non-cash operating lease expense		0.1			(0.1	)		—
Interest expense		10.3			13.5			23.8
Total property and equipment additions		58.4			68.7			127.1

A measure of assets is not applicable, as segment assets are not regularly reviewed by the chief operating decision maker for evaluating performance or allocating resources.

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NOTE 11 – EARNINGS PER SHARE

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method. A portion of the Company’s outstanding non-vested RSUs are participating securities unless there is a net loss attributable to common stockholders. Accordingly, earnings per common share are computed using the two-class method.

Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the Company’s earnings.

For the three and nine months ended September 30, 2023, shares of the Company’s 7.625% Series A Convertible Cumulative Preferred Stock (Series A Preferred Stock), convertible into approximately 5.7 million shares of common stock, were not included in the computation of diluted earnings per share as their effects were anti-dilutive. In addition, for both the three and nine months ended September 30, 2023, approximately 1.0 million shares of outstanding stock options were not included in the computation of diluted earnings per share as their exercise price was greater than the average market price of the common stock. Further, for both the three and nine months ended September 30, 2023, approximately 0.5 million shares of common stock underlying outstanding liability-classified PSUs (that can ultimately vest from 0% to 200%) and 0.3 million shares of common stock underlying outstanding equity-classified PSUs (that can ultimately vest from 0% to 200%) were excluded from the computation of diluted earnings per share as the applicable performance measure had not yet been achieved as of the end of the reporting period.

For the three and nine months ended September 30, 2022, shares of the Series A Preferred Stock, convertible into approximately 5.7 million shares of common stock, were not included in the computation of diluted earnings per share as their effects were anti-dilutive. For the three and nine months ended September 30, 2022, approximately 1.3 million and 1.2 million, respectively, shares of common stock issuable upon exercise of outstanding stock options were not included in the computation of diluted earnings per share as their exercise price was greater than the average market price of the common stock. In addition, for both the three and nine months ended September 30, 2022, approximately 1.2 million shares of common stock underlying outstanding liability-classified PSUs (that can ultimately vest from 0% to 200%) and 0.1 million shares of common stock underlying outstanding equity-classified PSUs (that can ultimately vest from 0% to 100%) that are considered contingently issuable were excluded from the computation of diluted earnings per share as the applicable performance measure had not yet been achieved as of the end of the reporting period.

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The following table sets forth the computation of basic and diluted earnings per share under the two-class method:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in millions, except per share data)	2023			2022			2023			2022

Numerator:
Net income	$	3.2		$	12.6		$	9.4		$	43.3
Less Series A Preferred Stock dividends		(1.3	)		(1.3	)		(3.7	)		(3.7	)
Less Series B Preferred Stock dividends		(0.8	)		—			(3.6	)		—
Net income attributable to common stockholders		1.1			11.3			2.1			39.6
Allocation of earnings to non-vested participating RSUs		—			—			—			(0.1	)
Numerator for basic EPS - income available to common stockholders - two class method	$	1.1		$	11.3		$	2.1		$	39.5

Effect of dilutive securities:
Add back Series A Preferred Stock dividends	$	—		$	—		$	—		$	—
Add back allocation earnings to participating securities		—			—			—			0.1
Reallocation of earnings to participating securities considering potentially dilutive securities		—			—			—			(0.1	)
Numerator for diluted EPS - income (loss) available to common stockholders - two class method	$	1.1		$	11.3		$	2.1		$	39.5

Denominator:
Denominator for basic EPS - weighted-average shares		46,089,770			63,535,897			45,588,585			63,301,446

Effect of dilutive securities:
Non-participating outstanding share-based payment awards		1,518,388			2,734,744			2,024,432			2,965,220
Series A Preferred Stock		—			—			—			—
Denominator for diluted EPS - weighted-average shares		47,608,158			66,270,641			47,613,017			66,266,666

Basic earnings per share	$	0.02		$	0.18		$	0.05		$	0.62
Diluted earnings per share	$	0.02		$	0.17		$	0.04		$	0.60

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company has two reportable segments: Flatbed Solutions and Specialized Solutions. The Flatbed Solutions segment focuses on delivering transportation and logistics solutions that principally require the use of flatbed and retractable-sided transportation equipment, and the Specialized Solutions segment focuses on delivering transportation and logistics solutions that require the use of specialized trailering transportation equipment.

Both of the Company’s reportable segments operate highly flexible business models comprised of company-owned tractors and trailers and asset-light operations (which consist of owner operator transportation, freight brokerage and logistics). The Company’s asset-based operations have the benefit of providing committed capacity and continuity of operations to meet shippers’ needs. Alternatively, the Company’s asset-light operations offer flexibility and scalability to meet customers’ dynamic needs and have lower capital expenditure requirements and fixed costs.

Trends and Outlook

Thus far, 2023 has been a challenging year for the Company and the overall transportation industry. Excess capacity has lingered in the market longer than anticipated, load availability has not rebounded as much as anticipated, inflationary headwinds have persisted, and the used equipment market is oversupplied. We do not expect any substantive improvement in the current freight market conditions for the rest of the year, and we expect a fourth-quarter slowdown typical of the seasonality in our prior years. However, the Company is focused on improving profitability—by reallocating resources out of unprofitable lanes to contemplating elimination of fleets that lack cross-cycle resilience, and our 2024 ambition is to be cash flow positive regardless of the market environment.

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Results of Operations

The following table sets forth the Company’s revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue), derived from the Company’s consolidated statements of operations, for the three months ended September 30, 2023 and 2022, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.


	Three Months Ended September 30,
	2023							2022							Change
(Dollars in millions, except Rate per mile and Revenue per tractor)	Amount			%				Amount			%				Absolute			Relative
REVENUE:
Company freight	$	168.7			41.9		%	$	168.6			36.4		%	$	0.1			0.1		%
Owner operator freight		108.2			26.9				130.0			28.1				(21.8	)		(16.8	)
Brokerage		63.1			15.7				85.3			18.4				(22.2	)		(26.0	)
Logistics		15.0			3.7				13.8			3.0				1.2			8.7
Fuel surcharge		47.3			11.8				65.1			14.1				(17.8	)		(27.3	)
Total revenue	$	402.3			100.0		%	$	462.8			100.0		%	$	(60.5	)		(13.1	)	%

OPERATING EXPENSES:
Salaries, wages and employee benefits	$	97.3			24.2		%	$	104.6			22.6		%	$	(7.3	)		(7.0	)	%
Fuel		37.3			9.3				40.0			8.6				(2.7	)		(6.8	)
Operations and maintenance		44.0			10.9				43.8			9.5				0.2			0.5
Purchased freight		137.3			34.1				180.3			39.0				(43.0	)		(23.8	)
Administrative		20.4			5.1				17.8			3.8				2.6			14.6
Taxes and licenses		4.0			1.0				3.9			0.8				0.1			2.6
Insurance and claims		16.2			4.0				20.0			4.3				(3.8	)		(19.0	)
Acquisition-related transaction expenses		—			—				0.4			0.1				(0.4	)		(100.0	)
Depreciation and amortization		28.3			7.0				23.9			5.2				4.4			18.4
Gain on disposition of revenue property and equipment		(2.6	)		(0.6	)			(4.9	)		(1.0	)			2.3			(46.9	)
Restructuring		0.1			—				0.8			0.2				(0.7	)		(87.5	)
Total operating expenses	$	382.3			95.0		%	$	430.6			93.0		%	$	(48.3	)		(11.2	)	%

INCOME FROM OPERATIONS	$	20.0			5.0		%	$	32.2			7.0		%	$	(12.2	)		(37.9	)	%

Other expense (income):
Interest income	$	(1.1	)		(0.3	)	%	$	(0.7	)		(0.2	)	%	$	(0.4	)		57.1		%
Interest expense		13.4			3.3				9.2			2.0				4.2			45.7
Other		(0.1	)		—				1.2			0.3				(1.3	)		(108.3	)
Total other expense	$	12.2			3.0		%	$	9.7			2.1		%	$	2.5			25.8		%

Income before income taxes	$	7.8			1.9		%	$	22.5			4.9		%	$	(14.7	)		(65.3	)	%
Income tax expense		4.6			1.1				9.9			2.1				(5.3	)		(53.5	)
Net income	$	3.2			0.8		%	$	12.6			2.7		%	$	(9.4	)		(74.6	)	%

OPERATING STATISTICS:
Company miles		59.0							54.4							4.6			8.5		%
Owner operator miles		39.0							41.6							(2.6	)		(6.3	)
Total miles (in millions)		98.0							96.0							2.0			2.1		%

Rate per mile	$	2.83						$	3.11						$	(0.28	)		(9.0	)	%
Revenue per tractor	$	56,400						$	62,200						$	(5,800	)		(9.3	)	%

Company owned tractors, at quarter-end		3,051							2,799							252			9.0		%
Owner operator tractors, at quarter-end		1,894							2,042							(148	)		(7.2	)
Number of trailers, at quarter-end		11,045							11,028							17			0.2		%

Company owned tractors, average for the quarter		3,026							2,748							278			10.1		%
Owner operator tractors, average for the quarter		1,880							2,049							(169	)		(8.2	)
Total tractors, average for the quarter		4,906							4,797							109			2.3		%

Table of Contents

The following table sets forth revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue) of the Company’s Specialized Solutions segment for the three months ended September 30, 2023 and 2022, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.

SPECIALIZED SOLUTIONS


	Three Months Ended September 30,
	2023							2022							Change
(Dollars in millions, except Rate per mile and Revenue per tractor)	Amount			%				Amount			%				Absolute			Relative
REVENUE:
Company freight	$	123.7			51.8		%	$	125.9			46.9		%	$	(2.2	)		(1.7	)	%
Owner operator freight		36.1			15.1				48.8			18.2				(12.7	)		(26.0	)
Brokerage		40.7			17.1				46.9			17.5				(6.2	)		(13.2	)
Logistics		13.3			5.6				12.8			4.8				0.5			3.9
Fuel surcharge		24.9			10.4				34.2			12.6				(9.3	)		(27.2	)
Total revenue	$	238.7			100.0		%	$	268.6			100.0		%	$	(29.9	)		(11.1	)	%

OPERATING EXPENSES:
Salaries, wages and employee benefits	$	66.5			27.9		%	$	71.5			26.6		%	$	(5.0	)		(7.0	)	%
Fuel		25.8			10.8				29.0			10.8				(3.2	)		(11.0	)
Operations and maintenance		31.5			13.2				31.5			11.7				—			—
Purchased freight		60.8			25.5				76.4			28.4				(15.6	)		(20.4	)
Administrative		14.2			5.9				11.8			4.4				2.4			20.3
Taxes and licenses		2.4			1.0				2.4			0.9				—			—
Insurance and claims		9.4			3.9				10.6			3.9				(1.2	)		(11.3	)
Acquisition-related transaction expenses		—			—				0.2			0.1				(0.2	)		(100.0	)
Depreciation and amortization		15.1			6.3				13.4			5.0				1.7			12.7
Gain on disposition of revenue property and equipment		(2.0	)		(0.8	)			(2.3	)		(0.9	)			0.3			(13.0	)
Restructuring		0.1			—				0.4			0.1				(0.3	)		(75.0	)
Total operating expenses	$	223.8			93.8		%	$	244.9			91.2		%	$	(21.1	)		(8.6	)	%

INCOME FROM OPERATIONS	$	14.9			6.2		%	$	23.7			8.8		%	$	(8.8	)		(37.1	)	%

OPERATING STATISTICS:
Company miles		40.0							38.2							1.8			4.7		%
Owner operator miles		8.3							10.0							(1.7	)		(17.0	)
Total miles (in millions)		48.3							48.2							0.1			0.2		%

Rate per mile	$	3.31						$	3.62						$	(0.31	)		(8.6	)	%
Revenue per tractor	$	64,700						$	73,300						$	(8,600	)		(11.7	)	%

Company owned tractors, at quarter-end		2,123							1,982							141			7.1		%
Owner operator tractors, at quarter-end		379							441							(62	)		(14.1	)
Number of trailers, at quarter-end		7,120							7,181							(61	)		(0.8	)	%

Company owned tractors, average for the quarter		2,092							1,942							150			7.7		%
Owner operator tractors, average for the quarter		379							442							(63	)		(14.3	)
Total tractors, average for the quarter		2,471							2,384							87			3.6		%

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The following table sets forth revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue) of the Company’s Flatbed Solutions segment for the three months ended September 30, 2023 and 2022, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.

FLATBED SOLUTIONS


	Three Months Ended September 30,
	2023							2022							Change
(Dollars in millions, except Rate per mile and Revenue per tractor)	Amount			%				Amount			%				Absolute			Relative
REVENUE:
Company freight	$	45.0			27.5		%	$	42.7			22.0		%	$	2.3			5.4		%
Owner operator freight		72.1			44.1				81.2			41.8				(9.1	)		(11.2	)
Brokerage		22.4			13.7				38.4			19.8				(16.0	)		(41.7	)
Logistics		1.7			1.0				1.0			0.5				0.7			70.0
Fuel surcharge		22.4			13.7				30.9			15.9				(8.5	)		(27.5	)
Total revenue	$	163.6			100.0		%	$	194.2			100.0		%	$	(30.6	)		(15.8	)	%

OPERATING EXPENSES:
Salaries, wages and employee benefits	$	30.8			18.8		%	$	33.1			17.0		%	$	(2.3	)		(6.9	)	%
Fuel		11.5			7.0				11.0			5.7				0.5			4.5
Operations and maintenance		12.5			7.6				12.3			6.3				0.2			1.6
Purchased freight		76.5			46.8				103.9			53.5				(27.4	)		(26.4	)
Administrative		6.2			3.8				6.0			3.1				0.2			3.3
Taxes and licenses		1.6			1.0				1.5			0.8				0.1			6.7
Insurance and claims		6.8			4.2				9.4			4.8				(2.6	)		(27.7	)
Acquisition-related transaction expenses		—			—				0.2			0.1				(0.2	)		(100.0	)
Depreciation and amortization		13.2			8.1				10.5			5.4				2.7			25.7
Gain on disposition of revenue property and equipment		(0.6	)		(0.4	)			(2.6	)		(1.3	)			2.0			(76.9	)
Restructuring		—			—				0.4			0.2				(0.4	)		(100.0	)
Total operating expenses	$	158.5			96.9		%	$	185.7			95.6		%	$	(27.2	)		(14.6	)	%

INCOME FROM OPERATIONS	$	5.1			3.1		%	$	8.5			4.4		%	$	(3.4	)		(40.0	)	%

OPERATING STATISTICS:
Company miles		19.0							16.2							2.8			17.3		%
Owner operator miles		30.7							31.6							(0.9	)		(2.8	)
Total miles (in millions)		49.7							47.8							1.9			4.0		%

Rate per mile	$	2.36						$	2.59						$	(0.23	)		(8.9	)	%
Revenue per tractor	$	48,100						$	51,300						$	(3,200	)		(6.2	)	%

Company owned tractors, at quarter-end		928							817							111			13.6		%
Owner operator tractors, at quarter-end		1,515							1,601							(86	)		(5.4	)
Number of trailers, at quarter-end		3,925							3,847							78			2.0		%

Company owned tractors, average for the quarter		934							806							128			15.9		%
Owner operator tractors, average for the quarter		1,501							1,607							(106	)		(6.6	)
Total tractors, average for the quarter		2,435							2,413							22			0.9		%

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Revenue. Total revenue decreased 13.1% for the three months ended September 30, 2023 as compared to the same period in 2022. The decrease in total revenue was primarily attributed to decreased owner operator freight and brokerage revenue due to the macro trend of lower available freight volume as well as lower fuel surcharge due to decreased fuel costs that resulted in lower fuel surcharges to our customers. Total miles driven increased 2.1%, whereas rate per mile decreased 9.0%. The decrease in rate per mile was primarily due to a decrease in market rates.

The Company’s Specialized Solutions segment’s revenue decreased 11.1% for the three months ended September 30, 2023 as compared to the same period in 2022. The decrease in revenue was primarily due to an 8.6% decrease in rate per mile and a 27.2% decrease in fuel surcharge. We saw revenue increases in the agriculture, mining, automotive, and aerospace end markets that were more than offset by revenue declines in the high security cargo, construction, glass, and manufacturing end markets. Company freight decreased 1.7% for the three months ended September 30, 2023 as compared to the same period in 2022 due to a 6.2% decrease in company rate per mile, partially offset by a 4.7% increase in miles driven due to a 7.7% increase in average company owned tractors. Owner operator freight decreased 26.0% due to a 17.0% decrease in miles driven and a decrease in owner operator rate per mile. The decrease in owner operator miles was primarily due to a 14.3% decrease in average owner operator tractors. Brokerage revenue decreased 13.2% for the three months ended September 30, 2023 as compared to the same period in 2022 due to total brokerage loads being down 11% and brokerage revenue per load was down 2% due to lower available loads in the market. Fuel surcharge revenue decreased for the three months ended September 30, 2023 as compared to the same period in 2022 due to decreased fuel costs that resulted in lower fuel surcharges to our customers.

The Company’s Flatbed Solutions segment’s revenue decreased 15.8% for the three months ended September 30, 2023 as compared to the same period in 2022, primarily due to an 8.9% decrease in rate per mile and a 27.5% decrease in fuel surcharge, partially offset by a 4.0% increase in total miles, driven by an increase in tractors. We saw declines primarily in the construction, manufacturing and steel end markets. Company freight revenue increased 5.4% due to a 17.3% increase in miles driven, partially offset by a 10.1% decrease in company rate per mile. Owner operator freight decreased 11.2% due to an 8.6% decrease in owner operator rate per mile and a 2.8% decrease in miles driven. There was an increase of 15.9% in the average company owned tractors, and a decrease of 6.6% in the average owner operator tractors for the three months ended September 30, 2023 as compared to the same period in 2022. Brokerage revenue decreased 41.7% for the three months ended September 30, 2023 as compared to the same period in 2022. Our brokerage service offering is typically utilized in strong rate environments in order to capture excess volumes. As a result of the weakening rate environment, total brokerage loads were down 29% and brokerage revenue per load was down 18%, which resulted in the decrease in brokerage revenue. Fuel surcharge revenue decreased 27.5% for the three months ended September 30, 2023 as compared to the same period in 2022 due to decreased fuel costs that resulted in lower fuel surcharges to our customers.

Salaries, Wages and Employee Benefits. Salaries, wages and employee benefits expense, which consists of compensation for all employees, is primarily affected by the number of miles driven by company drivers, the rate per mile paid to company drivers, employee benefits including, but not limited to, health care and workers’ compensation, and to a lesser extent, the number of, and compensation and benefits paid to, non-driver employees. In general, the Specialized Solutions segment drivers receive a higher driver pay per total mile than Flatbed Solutions segment drivers due to the former requiring a higher level of training and expertise.

Salaries, wages and employee benefits expense decreased 7.0% for the three months ended September 30, 2023 as compared to the same period in 2022. The decrease in salaries, wages and employee benefits expense was primarily due to a $4.1 million reduction in stock compensation attributable to the remeasurement of liability-classified equity awards, combined with a $3.1 million reduction in severance cost, as well as cost savings from reductions in support staff across the company. Salaries, wages and employee benefits expense, as a percentage of consolidated company freight revenue, decreased 4.3% for the three months ended September 30, 2023 as compared to the same period in 2022.

The Company’s Specialized Solutions segment’s salaries, wages and employee benefits expense decreased 7.0% for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to a $2.4 million reduction in stock compensation attributable to the remeasurement of liability-classified equity awards, combined with a $1.7 million reduction in severance cost. Salaries, wages and employee benefits expense, as a percentage of Specialized Solutions company freight revenue, decreased 3.0% for the three months ended September 30, 2023 as compared to the same period in 2022.

The Company’s Flatbed Solutions segment’s salaries, wages and employee benefits expense decreased 6.9% for the three months ended September 30, 2023 compared to the same period in 2022, primarily due to a $1.7 million reduction in stock compensation attributable to the remeasurement of liability-classified equity awards, combined with a $1.4 million reduction in severance cost, partially offset by a $0.8 million increase in workers compensation. Salaries, wages and employee benefits expense, as a percentage of Flatbed Solutions company freight revenue, decreased 9.1% for the three months ended September 30, 2023 as compared to the same period in 2022.

Fuel. Fuel expense consists primarily of diesel fuel expense for company-owned tractors and fuel taxes. The primary factors affecting fuel expense are the cost of diesel fuel, the miles per gallon realized with company equipment and the number of miles driven by company drivers.

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Total fuel expense decreased 6.8% for the three months ended September 30, 2023 as compared to the same period in 2022. The Company’s Specialized Solutions segment’s fuel expense decreased 11.0% for the three months ended September 30, 2023 as compared to the same period in 2022. These decreases are primarily due to lower fuel costs, partially offset by an increase in company miles driven for the three months ended September 30, 2023 as compared to the same period in 2022. The Company’s Flatbed Solutions segment’s fuel expense increased 4.5% for the three months ended September 30, 2023 as compared to the same period in 2022 due to an increase in company miles driven, partially offset by lower fuel costs. Company miles increased by 4.7% in our Specialized Solutions segment and increased by 17.3% in our Flatbed Solutions segment, when compared to the same period in 2022. The U.S. national average diesel fuel price, as published by the U.S. Department of Energy, was $4.242 for the three months ended September 30, 2023, compared to $5.152 for the same period in 2022.

Operations and Maintenance. Operations and maintenance expense consists primarily of ordinary vehicle repairs and maintenance, costs associated with preparing tractors and trailers for sale or trade-in, driver recruiting, training and safety costs, permitting and pilot car fees and other general operations expenses. Operations and maintenance expense is primarily affected by the age of company-owned tractors and trailers, the number of miles driven in a period and driver turnover.

Operations and maintenance expense on a consolidated basis as well as for the Company’s Specialized Solutions and Flatbed Solutions segments for the three months ended September 30, 2023 were generally consistent with the same period in 2022. Operations and maintenance expense, as a percentage of consolidated revenue (excluding brokerage revenue), for the three months ended September 30, 2023 was also generally consistent with the same period in 2022.

Purchased Freight. Purchased freight expense consists of the payments to owner operators, including fuel surcharge reimbursements, and payments to third-party capacity providers that haul loads brokered to them. Purchased freight expense generally takes into account changes in diesel fuel prices, resulting in higher payments during periods of increasing fuel prices.

Total purchased freight expense decreased 23.8% during the three months ended September 30, 2023 as compared to the same period in 2022. Purchased freight expense from owner operators decreased $14.4 million during the three months ended September 30, 2023 as compared to the same period in 2022 as a result of a 6.3% decrease in owner operator miles driven and an 11.2% decrease in owner operators’ rate. Purchased freight expense from third-party capacity providers decreased $28.6 million during the three months ended September 30, 2023 as compared to the same period in 2022 due to decreased utilization of third-party providers and strategically prioritizing loads on the company-owned tractors. Purchased freight expense, as a percentage of consolidated revenue, for the three months ended September 30, 2023, decreased 4.9% as compared to the same period in 2022.

The Company’s Specialized Solutions segment’s purchased freight expense decreased 20.4% during the three months ended September 30, 2023 as compared to the same period in 2022. Purchased freight expense from owner operators decreased $7.9 million during the three months ended September 30, 2023 as compared to the same period in 2022, as a result of a 17.0% decrease in owner operator miles driven and a 10.9% decrease in owner operators’ rate. Purchased freight expense from third-party capacity providers decreased $7.7 million during the three months ended September 30, 2023 as compared to the same period in 2022 due to decreased utilization of third-party providers and strategically prioritizing loads on the company-owned tractors. Purchased freight expense, as a percentage of Specialized Solutions revenue, for the three months ended September 30, 2023, decreased 2.9% as compared to the same period in 2022.

The Company’s Flatbed Solutions segment’s purchased freight expense decreased 26.4% for the three months ended September 30, 2023 as compared to the same period in 2022. Purchased freight expense from owner operators decreased $6.5 million for the three months ended September 30, 2023 as compared to the same period in 2022, as a result of a 2.8% decrease in owner operator miles driven and an 8.6% decrease in owner operators’ rate. Purchased freight expense from third-party capacity providers decreased $20.9 million during the three months ended September 30, 2023 as compared to the same period in 2022 due to decreased utilization of third-party providers and strategically prioritizing loads on the company-owned tractors. Purchased freight expense, as a percentage of Flatbed Solutions revenue, for the three months ended September 30, 2023, decreased 6.7% as compared to the same period in 2022.

Administrative. Administrative expense consists of operating lease cost for real estate, professional fees and other expenses that are not directly associated with the Company’s fleet services. Administrative expense increased 14.6% for the three months ended September 30, 2023 as compared to the same period in 2022. The Company’s Specialized Solutions segment’s administration expense increased 20.3% for the three months ended September 30, 2023 as compared to the same period in 2022. The Company’s Flatbed Solutions segment’s administration expense increased 3.3% or the three months ended September 30, 2023 as compared to the same period in 2022. These increases were primarily due to increased real estate leases and associated costs for expanding our warehousing facilities, as well as an increase in professional fees associated with our transformation initiatives.

Depreciation and Amortization. Depreciation and amortization expense consists primarily of depreciation for company-owned tractors and trailers and amortization of finance lease right-of-use assets. The primary factors affecting these expense items include the size of the fleet and age of company-owned tractors and trailers and the cost of new equipment. Amortization of intangible assets is also included in this expense.

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Depreciation and amortization expense increased 18.4% for the three months ended September 30, 2023 as compared to the same period in 2022. The Company’s Specialized Solutions segment’s depreciation and amortization expense increased 12.7% for the three months ended September 30, 2023 as compared to the same period in 2022. The Company’s Flatbed Solutions segment’s depreciation and amortization expense increased 25.7% for the three months ended September 30, 2023 as compared to the same period in 2022. These increases were primarily related to the increase of company-owned tractors.

Insurance and Claims. Insurance and claims expense consists of insurance premiums and the accruals the Company makes for estimated payments and expenses for claims for bodily injury, property damage, cargo damage and other casualty events. Insurance and claims expense could increase in periods where there are claims in excess of the Company’s self-insured retention. Other factors affecting the Company’s insurance and claims expense are the frequency and severity of accidents, trends in the development factors used in its accruals and developments in large, prior-year claims. The frequency of accidents tends to correlate with the miles the Company travels. Insurance and claims expense decreased 19.0% during the three months ended September 30, 2023 as compared to the same period in 2022, primarily due to decreased insurance claims and premiums. The Company’s Specialized Solutions segment’s insurance and claims expense decreased 11.3% for the three months ended September 30, 2023 as compared to the same period in 2022. The Company’s Flatbed Solutions segment’s insurance and claims expense decreased 27.7% for the three months ended September 30, 2023 as compared to the same period in 2022.

Interest Expense. Interest expense consists of cash interest, amortization and write-off of related issuance costs and fees. Interest expense increased 45.7% for the three months ended September 30, 2023 as compared to the same period in 2022 primarily due to a rising interest rate environment and a $0.3 million write-off of deferred amortization fees related to the prepayment of the Term Loan Facility.

Income Tax. Income tax expense was $4.6 million for the three months ended September 30, 2023 compared to income tax expense of $9.9 million for the same period in 2022. The effective tax rate was 59.0% for the three months ended September 30, 2023, compared to 44.0% for the same period in 2022. The difference between the Company’s effective tax rate and the federal statutory rate is primarily a result of state and foreign income taxes, global intangible low-taxed income inclusion, and the impact of certain nondeductible expenses related to executive compensation and driver per diem as compared to forecasted earnings. The effective tax rate for the current period differs from the same period last year primarily due to the current forecasted full-year earnings, in which the unfavorable permanent adjustments noted above generated a greater impact on the effective tax rate.

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The following table sets forth the Company’s revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue), derived from the Company’s consolidated statements of operations, for the nine months ended September 30, 2023 and 2022, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.


	Nine Months Ended September 30,
	2023							2022							Change
(Dollars in millions, except Rate per mile and Revenue per tractor)	Amount			%				Amount			%				Absolute			Relative
REVENUE:
Company freight	$	499.9			41.3		%	$	492.4			36.1		%	$	7.5			1.5		%
Owner operator freight		333.2			27.6				397.7			29.1				(64.5	)		(16.2	)
Brokerage		186.9			15.5				255.4			18.7				(68.5	)		(26.8	)
Logistics		45.2			3.7				39.2			2.9				6.0			15.3
Fuel surcharge		144.2			11.9				180.4			13.2				(36.2	)		(20.1	)
Total revenue	$	1,209.4			100.0		%	$	1,365.1			100.0		%	$	(155.7	)		(11.4	)	%

OPERATING EXPENSES:
Salaries, wages and employee benefits	$	308.6			25.5		%	$	299.3			21.9		%	$	9.3			3.1		%
Fuel		105.3			8.7				120.4			8.8				(15.1	)		(12.5	)
Operations and maintenance		129.4			10.7				120.2			8.8				9.2			7.7
Purchased freight		425.3			35.2				548.9			40.2				(123.6	)		(22.5	)
Administrative		55.4			4.6				52.8			3.9				2.6			4.9
Taxes and licenses		11.9			1.0				11.6			0.8				0.3			2.6
Insurance and claims		49.1			4.1				61.0			4.5				(11.9	)		(19.5	)
Acquisition-related transaction expenses		1.2			0.1				3.7			0.3				(2.5	)		(67.6	)
Depreciation and amortization		79.3			6.6				68.2			5.0				11.1			16.3
Gain on disposition of revenue property and equipment		(11.0	)		(0.9	)			(14.0	)		(1.0	)			3.0			(21.4	)
Impairment		1.5			0.1				7.8			0.6				(6.3	)		(80.8	)
Restructuring		0.4			—				2.0			0.1				(1.6	)		(80.0	)
Total operating expenses	$	1,156.4			95.6		%	$	1,281.9			93.9		%	$	(125.5	)		(9.8	)	%

INCOME FROM OPERATIONS	$	53.0			4.4		%	$	83.2			6.1		%	$	(30.2	)		(36.3	)	%

Other expense:
Interest income	$	(3.7	)		(0.3	)	%	$	(1.5	)		(0.1	)	%		2.2			146.7		%
Interest expense		39.1			3.2				23.8			1.7				15.3			64.3
Change in fair value of warrant liability		—			—				(4.7	)		(0.3	)			(4.7	)		(100.0	)
Other		(0.6	)		—				1.3			0.1				(1.9	)		(146.2	)
Total other expense	$	34.8			2.9		%	$	18.9			1.4		%	$	10.9			57.7		%

Income before income taxes		18.2			1.5		%		64.3			4.7		%		(41.1	)		(63.9	)	%
Income tax expense		8.8			0.7				21.0			1.5				(12.2	)		(58.1	)
Net income	$	9.4			0.8		%	$	43.3			3.2		%	$	(28.9	)		(66.7	)	%

OPERATING STATISTICS:
Company miles		175.1							159.7							15.4			9.6		%
Owner operator miles		119.8							130.3							(10.5	)		(8.1	)
Total miles (in millions)		294.9							290.0							4.9			1.7		%

Rate per mile	$	2.83						$	3.07						$	(0.24	)		(7.8	)	%
Revenue per tractor	$	170,800						$	189,900						$	(19,100	)		(10.1	)	%

Company owned tractors, at period-end		3,051							2,799							252			9.0		%
Owner operator tractors, at period-end		1,894							2,042							(148	)		(7.2	)
Number of trailers, at period-end		11,045							11,028							17			0.2		%

Company owned tractors, average for the period		2,971							2,638							333			12.6		%
Owner operator tractors, average for the period		1,906							2,049							(143	)		(7.0	)
Total tractors, average for the period		4,877							4,687							190			4.1		%

Table of Contents

The following table sets forth revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue) of the Company’s Specialized Solutions segment for the nine months ended September 30, 2023 and 2022, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.

SPECIALIZED SOLUTIONS


	Nine Months Ended September 30,
	2023							2022							Change
(Dollars in millions, except Rate per mile and Revenue per tractor)	Amount			%				Amount			%				Absolute			Relative
REVENUE:
Company freight	$	362.9			51.2		%	$	365.8			48.0		%	$	(2.9	)		(0.8	)	%
Owner operator freight		112.5			15.9				139.1			18.3				(26.6	)		(19.1	)
Brokerage		118.6			16.7				128.2			16.8				(9.6	)		(7.5	)
Logistics		41.5			5.9				36.1			4.7				5.4			15.0
Fuel surcharge		73.4			10.3				92.3			12.2				(18.9	)		(20.5	)
Total revenue	$	708.9			100.0		%	$	761.5			100.0		%	$	(52.6	)		(6.9	)	%

OPERATING EXPENSES:
Salaries, wages and employee benefits	$	208.5			29.4		%	$	205.2			26.9		%	$	3.3			1.6		%
Fuel		73.4			10.4				87.1			11.4				(13.7	)		(15.7	)
Operations and maintenance		92.0			13.0				86.1			11.3				5.9			6.9
Purchased freight		185.0			26.1				217.8			28.6				(32.8	)		(15.1	)
Administrative		38.8			5.5				34.8			4.6				4.0			11.5
Taxes and licenses		7.3			1.0				7.0			0.9				0.3			4.3
Insurance and claims		28.2			4.0				34.5			4.5				(6.3	)		(18.3	)
Acquisition-related transaction expenses		0.7			0.1				2.1			0.3				(1.4	)		(66.7	)
Depreciation and amortization		41.6			5.9				39.0			5.1				2.6			6.7
Gain on disposition of revenue property and equipment		(7.9	)		(1.1	)			(8.0	)		(1.1	)			0.1			(1.3	)
Impairment		—			—				7.8			1.0				(7.8	)		(100.0	)
Restructuring		0.4			0.1				1.2			0.2				(0.8	)		(66.7	)
Total operating expenses	$	668.0			94.2		%	$	714.6			93.8		%	$	(46.6	)		(6.5	)	%

INCOME FROM OPERATIONS	$	40.9			5.8		%	$	46.9			6.2		%	$	(6.0	)		(12.8	)	%

OPERATING STATISTICS:
Company miles		117.5							112.0							5.5			4.9		%
Owner operator miles		25.9							31.6							(5.7	)		(18.0	)
Total miles (in millions)		143.4							143.6							(0.2	)		(0.1	)	%

Rate per mile	$	3.32						$	3.52						$	(0.20	)		(5.7	)	%
Revenue per tractor	$	193,800						$	216,500						$	(22,700	)		(10.5	)	%

Company owned tractors, at period-end		2,123							1,982							141			7.1		%
Owner operator tractors, at period-end		379							441							(62	)		(14.1	)
Number of trailers, at period-end		7,120							7,181							(61	)		(0.8	)	%

Company owned tractors, average for the period		2,053							1,867							186			10.0		%
Owner operator tractors, average for the period		400							465							(65	)		(14.0	)
Total tractors, average for the period		2,453							2,332							121			5.2		%

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The following table sets forth revenue, operating expenses and income from operations (in dollars and as a percentage of total revenue) of the Company’s Flatbed Solutions segment for the nine months ended September 30, 2023 and 2022, as well as certain operating statistics for the same periods. In addition, the absolute and relative changes for each are presented. Rate per mile is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by total number of company and owner operator miles driven in the period. Miles are estimated based on information received as of the filing date and may change quarter to quarter when final information is received from each operating segment. Revenue per tractor is the period’s revenue less fuel surcharge, brokerage and logistics revenues divided by the average number of tractors in the period, including owner operator tractors.

FLATBED SOLUTIONS


	Nine Months Ended September 30,
	2023							2022							Change
(Dollars in millions, except Rate per mile and Revenue per tractor)	Amount			%				Amount			%				Absolute			Relative
REVENUE:
Company freight	$	137.0			27.4		%	$	126.6			21.0		%	$	10.4			8.2		%
Owner operator freight		220.7			44.1				258.6			42.8				(37.9	)		(14.7	)
Brokerage		68.3			13.6				127.2			21.1				(58.9	)		(46.3	)
Logistics		3.7			0.7				3.1			0.5				0.6			19.4
Fuel surcharge		70.8			14.2				88.1			14.6				(17.3	)		(19.6	)
Total revenue	$	500.5			100.0		%	$	603.6			100.0		%	$	(103.1	)		(17.1	)	%

OPERATING EXPENSES:
Salaries, wages and employee benefits	$	100.1			20.0		%	$	94.1			15.6		%	$	6.0			6.4		%
Fuel		31.9			6.4				33.3			5.5				(1.4	)		(4.2	)
Operations and maintenance		37.4			7.5				34.1			5.6				3.3			9.7
Purchased freight		240.3			48.0				331.1			54.9				(90.8	)		(27.4	)
Administrative		16.6			3.3				18.0			3.0				(1.4	)		(7.8	)
Taxes and licenses		4.6			0.9				4.6			0.8				—			—
Insurance and claims		20.9			4.2				26.5			4.4				(5.6	)		(21.1	)
Acquisition-related transaction expenses		0.5			0.1				1.6			0.3				(1.1	)		(68.8	)
Depreciation and amortization		37.7			7.5				29.2			4.8				8.5			29.1
Gain on disposition of revenue property and equipment		(3.1	)		(0.6	)			(6.0	)		(1.0	)			2.9			(48.3	)
Impairment		1.5			0.3				—			—				1.5			100.0
Restructuring		—			—				0.8			0.1				(0.8	)		(100.0	)
Total operating expenses	$	488.4			97.6		%	$	567.3			94.0		%	$	(78.9	)		(13.9	)	%

INCOME FROM OPERATIONS	$	12.1			2.4		%	$	36.3			6.0		%	$	(24.2	)		(66.7	)	%

OPERATING STATISTICS:
Company miles		57.6							47.7							9.9			20.8		%
Owner operator miles		93.9							98.7							(4.8	)		(4.9	)
Total miles (in millions)		151.5							146.4							5.1			3.5		%

Rate per mile	$	2.36						$	2.63						$	(0.27	)		(10.3	)	%
Revenue per tractor	$	147,600						$	163,600						$	(16,000	)		(9.8	)	%

Company owned tractors, at period-end		928							817							111			13.6		%
Owner operator tractors, at period-end		1,515							1,601							(86	)		(5.4	)
Number of trailers, at period-end		3,925							3,847							78			2.0		%

Company owned tractors, average for the period		918							771							147			19.1		%
Owner operator tractors, average for the period		1,506							1,584							(78	)		(4.9	)
Total tractors, average for the period		2,424							2,355							69			2.9		%

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Revenue. Total revenue decreased 11.4% for the nine months ended September 30, 2023 as compared to the same period in 2022. The decrease in total revenue was primarily attributed to decreased owner operator freight and brokerage revenue due to the macro trend of lower available freight volumes and the intentional shift toward loading company-owned tractors as well as lower fuel surcharge due to decreased fuel costs that resulted in lower surcharges to our customers. In addition, rate per mile decreased 7.8%; however, total miles driven increased 1.7%.

The Company’s Specialized Solutions segment’s revenue decreased 6.9% for the nine months ended September 30, 2023 as compared to the same period in 2022, primarily due to decreased owner operator freight, company freight, and brokerage revenue, due to lower available freight volumes, as well as a decrease in fuel surcharge revenue, due to lower fuel costs, slightly offset by an increase in logistics revenue. We saw revenue increases due to our SJ Transportation Co., Inc. acquisition in March 2022, as well as increases in the agriculture, energy, aerospace, and mining end markets that were offset by revenue declines in the construction, high security cargo, glass, and manufacturing end markets. Company freight for the nine months ended September 30, 2023 was generally consistent with the same period in 2022. Owner operator freight decreased 19.1% primarily due to an 18.0% decrease in miles and a 1.3% decrease in owner operator rate per mile. The decrease in owner operator miles was primarily due to the 14.0% decrease in owner operator tractors. Total brokerage loads decreased 13% while brokerage revenue per load increased 6%, resulting in a decrease of 7.5% in brokerage revenue for the nine months ended September 30, 2023 as compared to the same period in 2022. We utilized our brokerage service offering for some wind-related projects during the nine months ended September 30, 2023 which resulted in the increase in brokerage revenue per load. Fuel surcharge revenue decreased 20.5% for the nine months ended September 30, 2023 as compared to the same period in 2022 due to decreased fuel costs that resulted in lower fuel surcharges to our customers.

The Company’s Flatbed Solutions segment’s revenue decreased 17.1% for the nine months ended September 30, 2023 as compared to the same period in 2022, primarily due to decreases in brokerage revenue, fuel surcharge, and owner operator freight, partially offset by an increase in company freight. We saw strength primarily in our manufacturing and mining end markets that was more than offset by declines in the construction and steel end markets. Brokerage revenue decreased 46.3% for the nine months ended September 30, 2023 as compared to the same period in 2022. In this segment, total brokerage loads dropped 35% and the brokerage revenue per load dropped 17% due to lower rates during the nine months ended September 30, 2023 as compared to the same period in 2022. Owner operator freight decreased 14.7% due to a 10.3% decrease in owner operator rate per mile and a 4.9% decrease in miles driven. Fuel surcharge revenue decreased 19.6% due to decreased fuel costs that resulted in lower fuel surcharges to our customers. Company freight revenue increased 8.2% due to receiving additional trucks which led to a 20.8% increase in miles, partially offset by a 10.4% decrease in rate per mile.

Salaries, wages and employee benefits expense increased 3.1% for the nine months ended September 30, 2023 as compared to the same period in 2022. The increase in salaries, wages and employee benefits expense was primarily due to incremental driver compensation, increased workers compensation, partially offset by a reduction in stock compensation attributable to the remeasurement of liability-classified equity awards, a reduction in severance cost, as well as cost savings from a reduction in support staff across the company. The incremental driver compensation was due to a 9.6% increase in company miles. Salaries, wages and employee benefits expense, as a percentage of consolidated company freight revenue, for the nine months ended September 30, 2023 was generally consistent with the same period in 2022.

The Company’s Specialized Solutions segment’s salaries, wages and employee benefits expense for the nine months ended September 30, 2023 was generally consistent with the same period in 2022, with incremental driver compensation as a result of a 4.9% increase in company miles partially offset by the decreased health insurance and stock compensation costs. Salaries, wages and employee benefits expense, as a percentage of Specialized Solutions company freight revenue, for the nine months ended September 30, 2023 was also generally consistent with the same period in 2022.

The Company’s Flatbed Solutions segment’s salaries, wages and employee benefits expense increased 6.4% for the nine months ended September 30, 2023 compared to the same period in 2022, primarily as a result of incremental driver compensation, increased workers compensation and health insurance costs, partially offset by a reduction in severance cost and a reduction in stock compensation attributable to the remeasurement of liability-classified equity awards. The incremental driver compensation was due to a 20.8% increase in company miles. Salaries, wages and employee benefits expense, as a percentage of Flatbed Solutions company freight revenue, decreased 1.2% for the nine months ended September 30, 2023 as compared to the same period in 2022.

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Total fuel expense decreased 12.5% for the nine months ended September 30, 2023 as compared to the same period in 2022. The Company’s Specialized Solutions segment’s fuel expense decreased 15.7% for the nine months ended September 30, 2023 as compared to the same period in 2022. The Company’s Flatbed Solutions segment’s fuel expense decreased 4.2% for the nine months ended September 30, 2023 as compared to the same period in 2022. These decreases are primarily due to lower fuel costs and negotiated fuel rebates, partially offset by an increase in company miles driven for the nine months ended September 30, 2023 as compared to the same period in 2022. Company miles increased by 4.9% in our Specialized Solutions segment and increased by 20.8% in our Flatbed Solutions segment, when compared to the same period in 2022. The U.S. national average diesel fuel price, as published by the U.S. Department of Energy, was $4.197 for the nine months ended September 30, 2023, compared to $4.961 for the same period in 2022.

Operations and maintenance expense increased 7.7% for the nine months ended September 30, 2023 as compared to the same period in 2022 primarily due to a $5.8 million increase in maintenance and upkeep costs and a $3.4 million increase in pilot car and permit fees, largely driven by a 9.6% increase in company miles driven. The Company’s Specialized Solutions segment’s operations and maintenance expense increased 6.9% for the nine months ended September 30, 2023 as compared to the same period in 2022 primarily due to a 4.9% increase in company miles driven. The Company’s Flatbed Solutions segment’s operations and maintenance expense increased 9.7% for the nine months ended September 30, 2023 as compared to the same period in 2022 primarily as a result of a 20.8% increase in company miles driven. Operations and maintenance expense, as a percentage of consolidated revenue (excluding brokerage revenue), for the nine months ended September 30, 2023 was generally consistent with the same period in 2022.

Total purchased freight expense decreased 22.5% during the nine months ended September 30, 2023 as compared to the same period in 2022. Purchased freight expense from owner operators decreased $70.6 million during the nine months ended September 30, 2023 as compared to the same period in 2022 as a result of an 8.9% decrease in owner operators’ rate and an 8.1% decrease in owner operator miles driven. Purchased freight expense from third-party capacity providers decreased $53.0 million during the nine months ended September 30, 2023 as compared to the same period in 2022 due to decreased utilization of third-party providers and strategically prioritizing loads on the company-owned tractors. In addition, the cost of diesel fuel decreased, which reduced the fuel surcharge reimbursements to owner operators during the nine months ended September 30, 2023 as compared to the same period in 2022. Purchased freight expense, as a percentage of consolidated revenue, for the nine months ended September 30, 2023, decreased 5.0% as compared to the same period in 2022.

The Company’s Specialized Solutions segment’s purchased freight expense decreased 15.1% during the nine months ended September 30, 2023 as compared to the same period in 2022. Purchased freight expense from owner operators decreased $23.8 million during the nine months ended September 30, 2023 as compared to the same period in 2022, as a result of an 18.0% decrease in owner operator miles driven and a 1.3% decrease in owner operators’ rate. Purchased freight expense from third-party capacity providers decreased $9.0 million during the nine months ended September 30, 2023 as compared to the same period in 2022 due to decreased utilization of third-party providers and strategically prioritizing loads on the company-owned tractors. As mentioned above, there was also a decrease in the cost of diesel fuel which led to decreased fuel surcharge reimbursements during the nine months ended September 30, 2023 as compared to the same period in 2022. Purchased freight expense, as a percentage of Specialized Solutions revenue, for the nine months ended September 30, 2023, was generally consistent with the same period in 2022.

The Company’s Flatbed Solutions segment’s purchased freight expense decreased 27.4% for the nine months ended September 30, 2023 as compared to the same period in 2022. Purchased freight expense from owner operators decreased $46.8 million for the nine months ended September 30, 2023 as compared to the same period in 2022, as a result of a 4.9% decrease in owner operator miles driven and a 10.3% decrease in owner operators’ rate. Purchased freight expense from third-party capacity providers decreased $44.0 million during the nine months ended September 30, 2023 as compared to the same period in 2022 due to decreased utilization of third-party providers and strategically prioritizing loads on the company-owned tractors. As mentioned above, there was also a decrease in the cost of diesel fuel which led to decreased fuel surcharge reimbursements during the nine months ended September 30, 2023 as compared to the same period in 2022. Purchased freight expense, as a percentage of Flatbed Solutions revenue, for the nine months ended September 30, 2023, decreased 6.9% as compared to the same period in 2022.

Administrative. Administrative expense consists of operating lease cost for real estate, professional fees and other expenses that are not directly associated with the Company’s fleet services. Administrative expense increased 4.9% for the nine months ended September 30, 2023 as compared to the same period in 2022 as a result of increased real estate leases and associated costs for expanding our warehousing facilities, partially offset by a decrease in professional fees associated with our transformation initiatives. The Company’s Specialized Solutions segment’s administrative expense increased 11.5% for the nine months ended September 30, 2023 as compared to the same period

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in 2022 primarily due to increased real estate leases and associated costs for expanding our warehousing facilities. The Company’s Flatbed Solutions segment’s administrative expense decreased 7.8% for the nine months ended September 30, 2023 as compared to the same period in 2022, primarily due to decreased professional fees.

Depreciation and Amortization. Depreciation and amortization expense consists primarily of depreciation for company-owned tractors and trailers and amortization of those financed with finance leases. The primary factors affecting these expense items include the size of the fleet and age of company-owned tractors and trailers and the cost of new equipment. Amortization of intangible assets is also included in this expense.

Depreciation and amortization expense increased 16.3% for the nine months ended September 30, 2023 as compared to the same period in 2022. The Company’s Specialized Solutions segment’s depreciation and amortization expense increased 6.7% for the nine months ended September 30, 2023 as compared to the same period in 2022 as a result of a 10.0% increase in average tractor count in the segment’s fleet. The Company’s Flatbed Solutions segment’s depreciation and amortization expense increased 29.1% for the nine months ended September 30, 2023 as compared to the same period in 2022 as a result of a 19.1% increase in average tractor count in the segment’s fleet. The increase of company-owned tractors primarily related to capital expenditures that were originally planned for 2022 but were previously delayed due to supply chain disruptions.

Insurance and Claims. Insurance and claims expense consists of insurance premiums and the accruals the Company makes for estimated payments and expenses for claims for bodily injury, property damage, cargo damage and other casualty events. Insurance and claims expense could increase in periods where there are claims in excess of the Company’s self-insured retention. Other factors affecting the Company’s insurance and claims expense are frequency and severity of accidents, trends in the development factors used in its accruals and developments in large, prior-year claims. The frequency of accidents tends to correlate with the miles the Company travels. Insurance and claims expense decreased 19.5% during the nine months ended September 30, 2023 as compared to the same period in 2022, primarily due to decreased insurance claims, partially offset by an increase in our estimate of incurred but not recorded claims. The Company’s Specialized Solutions segment’s insurance and claims expense decreased 18.3% for the nine months ended September 30, 2023 as compared to the same period in 2022. The Company’s Flatbed Solutions segment’s insurance and claims expense decrease 21.1% for the nine months ended September 30, 2023 as compared to the same period in 2022.

Impairment. Impairment expense was $1.5 million for the nine months ended September 30, 2023 related to trade name intangibles of an integrated operating segment within the Company’s Flatbed Solutions segment. Impairment expense was $7.8 million for the nine months ended September 30, 2022 related to goodwill, trade name intangibles, and customer relationships intangibles of an integrated operating segment within the Company’s Specialized Solutions segment. The Company’s Flatbed Solutions segment’s impairment expense was $1.5 million, all related to trade name intangibles, for the nine months ended September 30, 2023. The Company’s Specialized Solutions segment had no impairment expense for the nine months ended September 30, 2023. The Company’s Specialized Solutions segment’s impairment expense was $7.8 million, consisting of $5.7 million related to goodwill, $1.9 million related to trade name intangibles, and $0.2 million related to customer relationships intangibles, for the nine months ended September 30, 2022. The Company’s Flatbed Solutions segment had no impairment expense for the nine months ended September 30, 2022.

Interest Expense. Interest expense consists of cash interest, amortization and write-off of related issuance costs and fees. Interest expense increased 64.3% for the nine months ended September 30, 2023 as compared to the same period in 2022. This increase was primarily attributable to the rising interest rate environment, an increase in financed equipment purchases, and a $1.0 million write-off of deferred amortization fees related to the prepayment of the Term Loan Facility. The Company’s common stock purchase warrants expired in February 2022 and are no longer exercisable. Change in fair value of warrant liability was a gain of $4.7 million for the nine months ended September 30, 2022.

Income Tax. Income tax expense was $8.8 million for the nine months ended September 30, 2023 compared to income tax expense of $21.0 million for the same period in 2022. The effective tax rate was 48.4% for the nine months ended September 30, 2023, compared to 32.7% for the same period in 2022. The difference between the Company’s effective tax rate and the federal statutory rate is primarily a result of state and foreign income taxes, global intangible low-taxed income inclusion, and the impact of certain nondeductible expenses related to executive compensation and driver per diem as compared to forecasted earnings. The effective tax rate for the current period differs from the same period last year primarily due to the current forecasted full-year earnings, in which the unfavorable permanent adjustments noted above generated a greater impact on the effective tax rate.

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Liquidity, Capital Resources and Capital Requirements

The Company had the following sources of liquidity available at September 30, 2023 and December 31, 2022 (in millions).


	September 30,		December 31,
	2023		2022
Cash and cash equivalents	$	77.2	$	153.4
Availability under line of credit		112.2		110.9
Total	$	189.4	$	264.3

The Company’s primary sources of liquidity have been cash provided by operating activities and borrowings under its credit facilities. The Company also receives cash from sales of equipment and historically received cash from issuances of capital stock.

The Company’s business requires substantial amounts of cash for operating expenses, including salaries and wages paid to employees, contract payments to independent contractors, insurance and claims payments, tax payments, and others. The Company also uses large amounts of cash and credit for capital expenditures as well as repurchases of equity securities from time to time.

The Company believes it can finance its expected cash needs, including debt repayment, in the short-term with cash flows from operations and borrowings available under the ABL Facility. The Company expects that the ABL Facility will provide sufficient credit availability to support its ongoing operations, fund debt service requirements, capital expenditures, and working capital needs. Over the long-term, the Company will continue to have significant capital requirements, and may devote substantial financial resources to grow its operations and fund its acquisition activities. As a result of these funding requirements, the Company may in the future need to sell additional equity or debt securities or seek additional financing through additional borrowings, lease financing or equity capital. The availability of financing or equity capital will depend upon the Company’s financial condition and results of operations as well as prevailing market conditions. If such additional borrowings, lease financing or equity capital is not available at the time it needs to incur such expenditures, the Company may be required to extend the maturity of then outstanding indebtedness, rely on alternative financing arrangements or engage in asset sales.

Since its inception, the Company has acquired over twenty transportation companies. The primary reason for each acquisition was to add resources and services in geographic areas, customers and markets that the Company wants to serve. The Company will continue to evaluate potential acquisitions and any other sources of growth it considers in its best interest. Additionally, depending on the Company’s actual and anticipated sources and uses of liquidity, prevailing market conditions and other factors, the Company may from time to time seek to repay or repurchase outstanding debt or equity securities through cash purchases in the open market or privately negotiated transactions. The amounts involved in any such transactions may be material.

Capital Expenditures

The Company follows a dual strategy of both owning assets and employing asset-light activities, the latter of which reduces the capital expenditures required to operate the business. Asset-light activities are conducted utilizing tractors and trailers provided by owner operators and third-party carriers for significant portions of our flatbed and specialized services. Company-owned asset expenditures require substantial cash and financing (including finance and operating leases) to maintain a modern tractor fleet, refresh the trailer fleet, fund replacement and growth in the revenue equipment fleet, and for the acquisition of real property and improvements to existing terminals and facilities.

Total property and equipment additions for the nine months ended September 30, 2023 and 2022 are shown below (in millions):


	Nine Months Ended September 30,
	2023		2022
Net cash capital expenditures	$	1.0	$	5.4
Property and equipment acquired with debt or finance lease obligations		130.9		93.7
Total net property and equipment additions	$	131.9	$	99.1

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Total net property and equipment additions increased due to an increase in financed equipment purchases during the nine months ended September 30, 2023 primarily related to capital expenditures that were originally planned for 2022, but were previously delayed due to supply chain disruptions. This increase was partially offset by decreases in cash equipment purchases and sales.

The Company currently estimates its 2023 net capital expenditures to be $155 million to $160 million. Previously, as disclosed in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023, net capital expenditures for 2023 was estimated to be between $135 million and $145 million. This increase is largely due to the timing of equipment deliveries based upon delivery delays in the first half of the year and our ongoing discussions with equipment manufacturers. While we were expecting an ongoing lag in 2023 equipment deliveries, in recent months, the equipment manufacturers have committed to fulfilling our original 2023 orders and hence, we now expect to realize our original capital budget. In addition, the secondary equipment market has impacted our cash proceeds, which is also contributing to a modest increase in our net capital expenditures estimate.

Operating Leases

The Company entered into operating leases for revenue equipment and other equipment with terms of one year to five years and real property with terms of one year to five years having right-of-use asset values at lease inception of $6.3 million and $17.7 million, respectively, for the nine months ended September 30, 2023.

Material Debt

Overview

As of September 30, 2023, the Company had the following material debt:

•

the Term Loan Facility and the ABL Facility;

•

equipment and real estate term loans; and

•

finance lease liabilities.

The amounts outstanding under such agreements were as follows (in millions):


	September 30,			December 31,
	2023			2022
Term Loan Facility	$	320.0		$	393.0
ABL Facility		—			—
Equipment and real estate term loans		317.3			249.1
Finance lease liabilities		20.6			25.0
Total debt and finance lease liabilities		657.9			667.1
Less current portion		(95.2	)		(78.4	)
Less unamortized deferred financing fees		(4.5	)		(6.4	)
Long-term debt and finance lease liabilities, less current portion and unamortized deferred financing fees	$	558.2		$	582.3

The Company regularly evaluates its capital structure and liquidity position. From time to time and as opportunities arise, the Company may access the debt capital markets and modify its debt arrangements to optimize its capital structure and liquidity position.

See Note 6 of the Notes to Consolidated Financial Statements included herein for information regarding the Company’s material debt.

ABL and Term Loan Facilities and Equipment Financing Agreements

As of September 30, 2023, the Company has (i) a senior secured term loan credit facility with an outstanding balance of $320.0 million, and (ii) an asset-based senior secured revolving credit facility with an aggregate maximum credit amount equal to $150.0 million (that may be increased to $200.0 million, subject to availability under a borrowing base). As of September 30, 2023, the Company had no borrowings outstanding on the ABL Facility, $20.6 million in outstanding letters of credit, and $112.2 million available under the ABL Facility, based on current qualified collateral. Under the terms of the ABL Facility, lenders may issue up to $40 million of standby letters of credit on our behalf. Outstanding letters of credit reduce the availability on the $150 million ABL Facility. Standby letters of credit are generally issued for the benefit of regulatory authorities, insurance companies and state departments of insurance for the purpose of satisfying certain collateral requirements, primarily related to automobile, workers’ compensation, and general insurance liabilities.

As of September 30, 2023, the Company had $317.3 million of equipment and real estate term loans and $20.6 million of finance leases collateralized primarily by revenue equipment, with the majority of the equipment loans and finance leases having terms of 48 to 60 months.

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Cash Flows

The Company’s summary statements of cash flows information for the nine months ended September 30, 2023 and 2022 is set forth in the table below (in millions):


	Nine Months Ended September 30,
	2023			2022
Net cash provided by operating activities	$	92.5		$	106.7
Net cash used in investing activities	$	(1.0	)	$	(24.5	)
Net cash used in financing activities	$	(167.8	)	$	(42.5	)

Operating Activities. Cash provided by operating activities was $92.5 million during the nine months ended September 30, 2023 and consisted of $9.4 million of net income plus $78.0 million of non-cash items, consisting primarily of impairment, depreciation, amortization, deferred taxes, gain on disposition of property and equipment, and stock-based compensation, offset by $5.1 million of net cash provided by working capital and other activities. Cash provided by working capital and other activities during the nine months ended September 30, 2023 reflect an increase of $9.5 million in accrued expenses and other liabilities and an increase of $5.4 million in accounts payable, partially offset by an increase of $6.5 million in accounts receivable, an increase of $2.4 million in drivers’ advances and other receivables, and an increase of $0.9 million in other current assets.

The $14.2 million decrease in cash provided by operating activities during the nine months ended September 30, 2023, as compared with the nine months ended September 30, 2022, was the result of a $33.9 million reduction to net income, partially offset by increases in net cash provided by working capital of $12.0 million and increases in adjustments to reconcile net income to net cash provided by operating activities of $7.7 million.

Investing Activities. Cash used in investing activities was $1.0 million for the nine months ended September 30, 2023 as compared to cash used in investing activities of $24.5 million for the nine months ended September 30, 2022. This change is primarily due to a $19.1 million cash payment during the nine months ended September 30, 2022 for the acquisition of SJ Transportation Co., Inc. and a decrease of $7.8 million in cash equipment purchases, partially offset by a decrease of $3.4 million in cash receipts from sales of revenue equipment for the nine months ended September 30, 2023.

Total net cash capital expenditures for the nine months ended September 30, 2023 and 2022 are shown below (in millions):


	Nine Months Ended September 30,
	2023		2022
Revenue equipment	$	8.2	$	24.6
Revenue equipment leased and available for lease to owner operators		5.7		1.2
Buildings and improvements		0.5		2.6
Furniture and fixtures, office and computer equipment, vehicles and capitalized software development		11.2		5.0
Total cash capital expenditures		25.6		33.4
Less: Proceeds from sales of property and equipment		24.6		28.0
Net cash capital expenditures	$	1.0	$	5.4

Financing Activities. Cash used in financing activities increased from $42.5 million for the nine months ended September 30, 2022 to $167.8 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2023, we had approximately $91.1 million more net debt-related payments, including voluntary $70.0 million Term Loan Facility prepayments, $20.0 million in payments for the voluntary redemption of the Series B-1 preferred stock, and $4.2 million in dividend payments related to the Series B preferred stock (which were issued in November 2022) compared to same period in 2022. During the nine months ended September 30, 2022, we received $9.4 million in proceeds from warrant exercises compared to none in the same period in 2023. During the nine months ended September 30, 2022, we received $0.8 million in stock options exercises compared to $0.2 million in the same period in 2023.

Critical Accounting Estimates

The preparation of the Company’s consolidated financial statements in accordance with US GAAP requires it to make estimates and assumptions that impact the amounts reported in its consolidated financial statements and accompanying notes. Therefore, the reported amounts of assets, liabilities, revenue, expenses, and associated disclosures of contingent assets and liabilities are affected by these estimates and assumptions. The Company evaluates these estimates and assumptions on an ongoing basis, utilizing historical experience, consultation with experts and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from these estimates and assumptions, and it is possible that materially different amounts will be reported using differing estimates or assumptions.

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The Company considers critical accounting estimates to be those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company's financial condition or results of operations. See “Critical Accounting Estimates” included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, for a discussion of our critical accounting estimates; there have been no material changes to the Company’s critical accounting estimates as disclosed therein.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the Company’s market risk since December 31, 2022. For further information on the Company’s market risk, refer to “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Report, the Company’s management conducted an evaluation, under the supervision and with the participation of the principal executive and principal financial officers, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934 (the Exchange Act)). Based on this evaluation, the principal executive and principal financial officers concluded our disclosure controls and procedures were effective as of September 30, 2023.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its subsidiaries are involved in litigation and claims primarily arising in the normal course of business, which include claims for personal injury or property damage incurred in the transportation of freight. Based on its knowledge of the facts and, in certain cases, advice of outside counsel, the Company believes the resolution of claims and pending litigation will not have a material adverse effect on the Company’s financial position, results of operations or cash flows, and the Company and its subsidiaries are not currently a party to, nor is their property currently subject to, any material legal proceedings other than ordinary routine litigation incidental to the business, and we are not aware of any such proceedings contemplated by governmental authorities.

Item 1A. Risk Factors

There have been no material changes in the risks facing the Company as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

Not applicable.

Item 5. Other Information

During the three months ended September 30, 2023, none of the Company’s director or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits

EXHIBIT INDEX



Exhibit No.	Exhibit

3.1	Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the registrant on March 3, 2017).

3.2	Charter Amendment to Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q filed by the registrant on August 6, 2020).

3.3	Amended and Restated By-Laws, effective as of November 15, 2022 (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K filed by the registrant on November 16, 2022).

3.4	Certificate of Designations, Preferences, Rights and Limitations of 7.625% Series A Convertible Cumulative Preferred Stock (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed by the registrant on March 3, 2017).

3.5	Certificate of Designations, Preferences, Rights and Limitations of Series B-1 Perpetual Redeemable Preferred Stock and Series B-2 Perpetual Redeemable Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the registrant on November 16, 2022).

3.6	Certificate of Amendment to Certificate of Designations of Preferences, Rights and Limitations of Series B-1 Perpetual Redeemable Preferred Stock and Series B-2 Perpetual Redeemable Preferred Stock (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed by the registrant on November 16, 2022).

31.1*	Chief Executive Officer certification under Section 302 of Sarbanes-Oxley Act of 2002.

31.2*	Chief Financial Officer certification under Section 302 of Sarbanes-Oxley Act of 2002.

32.1**	Chief Executive Officer certification under Section 906 of Sarbanes-Oxley Act of 2002.

32.2**	Chief Financial Officer certification under Section 906 of Sarbanes-Oxley Act of 2002.

101.INS*	Inline XBRL Instance Document.

101.SCH*	Inline XBRL Taxonomy Extension Schema Document.

101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104	Inline Cover Page Interactive Data File (embedded within the Inline XBRL document).


*	Filed herewith.
**	Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: November 09, 2023	DASEKE, INC.

	By:	/s/ Aaron Coley
	Name:	Aaron Coley
	Title:	Chief Financial Officer
		(On behalf of the registrant and as the registrant’s principal financial officer)