Daseke, Inc. (DSKE) CEO Chris Easter on Q4 2019 Results - Earnings Call Transcript

Daseke, Inc. (NASDAQ:DSKE) Q4 2019 Earnings Conference Call March 10, 2020 11:00 AM ET

Company Participants

Brooks Hamilton - IR

Chris Easter - CEO

John Michell - VP, Operations Strategy

Conference Call Participants

Jason Seidl - Cowen & Company

Greg Gibas - Northland Securities

Ryan Sigdahl - Craig-Hallum

Operator

Good morning, everyone, and thank you for participating in today’s conference call to discuss Daseke’s Financial Results for the Fourth Quarter and Full-Year Ended December 31, 2019.

Delivering today’s prepared remarks are Chris Easter, CEO; and John Michell, VP of Operations Strategy. After their prepared remarks, the management team will take your questions. As a reminder, you may now download a PDF of the presentation slides that will accompany the remarks made on today’s conference call as indicated in the press release we issued earlier today. You may access these slides in the Investor Relations section of our website.

Before we go further, I would like to turn the call over to Brooks Hamilton with Investor Relations with the Alpha IR Group, who will read the company’s Safe Harbor statement within the meanings of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements.

Brooks Hamilton with Investor Relations, please go ahead.

Brooks Hamilton

Thanks Sydney.

Please turn to Slide 2 for a review of our Safe Harbor and non-GAAP statement. Today’s presentation contains forward-looking statements as within the meaning of the Private Securities Litigation Reform Act of 1995. Projected financial information, including our guidance outlook are forward-looking statements.

Forward-looking statements, including those with respect to revenues, earnings, performance, strategies, prospects, and other aspects of Daseke's business are based on management’s current estimates, projections, and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

I encourage you to read our filings with the Securities and Exchange Commission for a discussion of the risks that can affect our business and cannot place undue reliance on any forward-looking statements. We undertake no obligation to revise our forward-looking statements to reflect events or circumstances occurring after today, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

During the call, there will also be a discussion of some items that do not conform to U.S. Generally Accepted Accounting Principles or GAAP including adjusted EBITDA, adjusted operating ratio, adjusted operating income, adjusted net income or loss, and free cash flow. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the appendix to the investor presentation and press release issued this morning, both of which are available on the Investors tab of the Daseke website, www.daseke.com.

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

Chris Easter

Thank you, Joe and good morning everyone.

I'll kick off the call by providing a few high-level details on our performance and execution against our strategic priorities during the fourth quarter. I'll also walk you through a quick recap of the transformative journey that we began in mid-2019 to reposition Daseke for more profitable growth in the future. John will then provide additional details and a financial review of the fourth quarter and fiscal 2019 financial results.

I’ll conclude the prepared remarks with a review of our 2020 outlook and then we'll take your questions. This is my first earnings call as the permanent CEO of Daseke. While I took over the Interim CEO position last August, I hope it's clear to all of our stakeholders that neither I nor my team approach the work we needed to do with an interim mentality.

We were decisive and acted with a clear sense of purpose to transform this company into a profitable enterprise. A company that we look forward to growing as a team for many years to come and we are indeed just getting started. I'd like to thank the Board for their guidance over the last few months and for the trust they put in me to lead this great organization.

Please turn to Slide 3, which provides a quick overview of Daseke’s 2019 year-end review. During the fourth quarter, we delivered $403 million of revenue and $38 million in adjusted EBITDA. For the year, we had revenue of $1.74 billion and adjusted EBITDA of $171 million, both of which were at the upper end of our prior annual outlook ranges.

The transformative actions we took during the last five months of 2019 helped us in part overcome softer freight markets, which were exacerbated by excess capacity in the market. Our relentless focus on reducing cost and eliminating inefficiencies helped us identify a number of underutilized assets and unprofitable business, which led to a reduction in company-owned trucks and trailers as well as non-driver staff.

This in turn allowed us to deliver $114 million in cash from operations and $130 million in free cash flow for 2019. And this stronger cash flow allowed us to reduce our net debt by $48 million during the year. While Phase 1 of our operational improvement plan has been a significant success, we have a lot more work to do.

Our operating ratio at the midpoint of last year sat at 99.4% and the market headwinds were pushing us on a pace to exceed 100% for 2019 in total. At that critical inflection point in August, our team rapidly mobilized and aligned around Phase 1 of our transformation. We resisted the temptation to fix every opportunity we saw and there were many to consider, but instead we prioritized on the actions we believe would drive the most immediate and lasting improvements to our business.

We changed our performance trajectory in a positive direction and delivered an adjusted OR of 97% for the year. While that was a healthy improvement, this is still unacceptable for us as an annual OR. We are excited to build upon our positive momentum entering 2020, and I will walk through Phase 2 of our operational improvement plan in a few minutes, which we're officially announcing today.

And for those of you not reading ahead, the box on the bottom right of this slide is not a typo. The number 10 is a preview of where we are headed in our Phase 2 of our transformation. Before we do that, let’s quickly review how we got here.

Please turn to Slide 4. As many of you know, I joined the company as COO in early 2019 and was brought on Board specifically to help this company address its lagging operating performance. Through the first half of the year, my team and I analyzed the business from top to bottom with a 99% plus OR through the first half of 2019. It was clear organization, was not yet positioned to convert our size and a stronger profitability.

We focused on topline growth for years with great success, but our failure to deliver earnings presented a mandate for change. With our second quarter earnings call last August, we announced a modest plan to begin execution against Phase 1 of our operational improvement plan. However, a few short weeks later, Don Daseke, our founder and the original visionary for the company announced his retirement and the Board asked me to step in as our Interim CEO.

The Board also gave me and my team the power to make more substantial changes, changes that again were critical to build a stronger Daseke. At that point, we accelerated and enhanced our Phase 1 plan to deliver results within two quarters. Another key observation from my first several months of the company was the strength of our operational leadership within our platform companies.

These leaders are only not great operators but are also fantastic business builders. We reshaped our team tapping on several of these leaders to take on broader roles and driving our business performance. Empowering this team of business builders has been a critical component of our operational performance turnaround over the past two quarters.

As we enter 2020, we are further enabling our team of business builders to continue this positive trajectory. We’re delivering on Phase 1 and will drive improved earnings quality through our next actions in Phase 2.

Slide 5 provides a more detailed review of our Phase 1 operational improvement plan. As you know, we integrated three of our lower performing operating companies into three of our higher performing ones to achieve synergistic value as well as drive improved performance. We also restructured our organization to create a new leadership structure, to include greater contribution from our operating company leaders, and identified numerous other areas for business improvement.

As part of the process, we identified underutilized assets and reduced our company owned trucks by 326 or 8%, we reduced company owned trailers by 993 or 8%, and lastly reduced our non-driver staff by 8% as of year-end 2019. In summary, all these actions have delivered, and we will realize our $30 million improvement as we exit the first quarter in a few short weeks. While, many of the cost to implement the plan impacted us in the second half of 2019, the initial contribution of our efforts was clear and our outperformance against expectations in Q4.

Let's now turn to Slide 6 where we will review - Phase 2 of our operational improvement plan. Again building on the success and learnings of Phase 1, we have identified three core work streams for Phase 2. In total we expect Phase 2 to deliver an additional $15 million in operational improvements as we exit fiscal 2020. Our first component in this phase is further integrations.

We will integrate three additional operating companies effectively reducing our operating companies from 16 when we started last August to 10 when we complete our work later this year. These integrations include J. Grady Randolph, who's joining with Bulldog Hiway Express, Big Freight Systems who will join with E.W. Wylie and Steelman Motor Transport who will join with Lone Star.

Unlike our Phase 1 integrations, where the companies were chosen primarily due to lagging performance, the Phase 2 companies are in some cases the combination of top performers. Phase 2 integrations are helping to build a more resilient business across market cycles, solidify our bench strength, better serve our customers, and simplify our operations.

The second component of our Phase 2 actions are the execution of further business improvement opportunities within several individual operating companies, as we continue to improve our capability to share best practices and develop a continuous improvement mindset. And the third component of Phase 2 is what we refer to as cross platform network optimization. One example of this - type of optimization actions we are tackling is simply running our truck network better.

Within our operating companies, we generally run our fleets effectively with a focus on efficient routing and low empty miles. However, if you look at more broadly across our complete network of companies, we have several opportunities to improve our overall efficiency in the future.

Our transformation office is working with our operational leaders to capture this and other untapped sources of value. With the addition of Phase 2 actions, we will deliver a combined $45 million of operating - annual operating income improvement on a run rate basis as we exit 2020. Again, this is compared to our exit run rate of Q2 2019. Most importantly, this work will significantly improve our quality of earnings on a go forward basis, allow us to capitalize on our scale and position us to grow both top and bottom line in the future.

I'd like to conclude by highlighting a critical feature of the discipline we are building across the organization by our commitment to operational excellence. The process and execution that we have demonstrated through this transformation has provided us a playbook to consider broader strategic options in the future. We see more clearly than ever the long-term organic growth opportunity there in front of us as we better leverage our reshape business platform.

Further we are building new tools and capabilities demonstrated through simultaneous integrations of existing operating companies which now includes both lagging and strong performers. These new capabilities and experiences are providing us with an expanded target profile for future bolt-on or tuck-in acquisition targets. I do want to be clear our focus is still laser sharp and executed against our transformation plan and strengthening our balance sheet. But our long-term growth opportunities have clearly been enhanced by our strategic transformation. We are indeed just getting started.

With that, I’ll now turn the call over to John Michell to review our financial performance last quarter. John?

John Michell

Thanks Chris.

Our Q4 and fiscal 2019 financial details are presented on Slide 7. In the fourth quarter revenue was $403 million compared to $447 million in the year ago quarter. The decline was driven by both lower freight rates and lower miles driven in both of our operating segment. Net loss for the quarter was $18.4 million or $0.31 per share and included a non-cash impairment charge of $6 million. Adjusted EBITDA was $37.9 million down 5% compared to $39.9 million in the year ago quarter.

The year-over-year decline in the adjusted EBITDA was driven by softness and freight rates and higher driver pay which is only partially offset by productivity gains from operational improvements realized beginning in the quarter. For the full year revenue was $1.74 billion compared to $1.61 billion in 2018. The increase was driven primarily by the full benefit of the acquisitions completed in 2018.

Net loss for 2019 was $307.4 million or $4.86 per share which included non-cash impairment charges we took this year. As we mentioned last quarter, the decline in our stock price and an updated look at our historical acquisitions given the market conditions prompted an impairment review. When coupled with the small fourth quarter item I just mentioned the total impact was $312.8 million non-cash impairment charge to our asset carrying values for the year.

Adjusted EBITDA was $170.9 million in 2019, down 2% compared to $174.3 million in the prior year. This marginal year-over-year decline in adjusted EBITDA was driven by the softer rate environment, lower freight volumes, higher driver pay which was partially offset by lower salaries in our corporate segment. Productivity gains from operational improvements and a gain on sale is from the company's equipment.

Before I leave the slide I'd like to briefly highlight our corporate segment adjusted EBITDA which is not an operating segment and includes corporate salaries and other corporate administrative expenses as well as intersegment eliminations. The 4% decline in the fourth quarter was the direct result of the rightsizing of our executive team and streamlining of costs in general and we expect to see further reductions as we progress through 2020.

Moving onto a more detailed look at our specialized segment results on Slide 8. Specialized revenue in Q4 decreased 7% year-over-year to $257.4 million, adjusted EBITDA for the fourth quarter decreased just over 14% to $31.4 million driven primarily by weakness in our oil and gas related end markets. This headwind to our adjusted EBITDA results was offset by continued strength in the renewable energy end markets in particular wind energy.

With some further supplemental health from a gain on sales from underutilized assets released to the integration. Our adjusted operating ratio is 94.5% compared to 93% in the fourth quarter of 2018. Specialized rate per mile decreased 4.7% to $3.43 for the quarter and revenue per tractor decreased 5.1% to $59,800 driven by similar factors that negatively impacted our adjusted EBITDA as well as the mix shift from very high rate per mile rig move, although rates are holding decent in other industrial markets.

The takeaway here is that since the PMI went below 50 in August of last year coupled with trade impacts you’re seeing general industrial softness with the sustained weakness in the oil and gas end markets having a material impact on our results. For the full year 2019 specialized revenue increased roughly 13% to $1.1 billion. Adjusted EBITDA for the year increased 3% to $138.8 million driven by the full impact of the 2018 acquisitions.

Slide 9 shows our Flatbed segment. Flatbed revenue in Q4 decreased 13% to $150.3 million, while adjusted EBITDA in the quarter increased 17% to $17.8 million. This improvement to adjusted EBITDA was a result of a shift to more owner operator freight and with spot rates below contract rates for the year resulting in higher margins on purchase freight.

Given lower industry demand in 2019 we also had some brokerage shift to company assets to higher margins. These impacts were partially offset by softness in the manufacturing and construction end markets. The fourth quarter adjusted operating ratio for Flatbed segment was 93.8% which showed a 200 basis point improvement compared to 95.8% in the year ago quarter.

The Flatbed rate per mile in the fourth quarter decreased 4.6% to $1.87 and flatbed revenue per tractor decreased 7.9% to $38,500. For the full year, flatbed revenue of $663 million was flat compared to 2018. Adjusted EBITDA in 2019 increased 9% to $76.9 million, driven by the similar trends I just discussed related to Q4.

Now, turning to our balance sheet free cash flow. As indicated on the Slide 10 at December 31, we had $95.7 million in cash and liquidity of a $182.5 million, including the availability on the revolver. Net debt was down $48 million year-over-year to $608.4 million and our leverage as defined in our debt agreements was 3.18, well below our 4.0 times. For the full year 2019, net cash provided by operating activities was $114.1 million. Cash CapEx was $22 million, and cash proceeds from the sale of equipment was $37.8 million for free cash flow of $129.9 million for the year.

CapEx financed with debt or capital leases totaled $72.3 billion during the year, leaving you with a net of $57.6 million after finance CapEx. As Chris mentioned, our teams did a great job of driving improved efficiency of our equipment and looked to exit unprofitable businesses, which allowed us to sell off some older unrealized assets. The key takeaway here is that our decisive second half actions allowed us to drive strong free cash flow, lower our debt and protect our balance sheet.

Lastly, I want to update our investors on the closing process of the Aveda Transportation and Energy Services acquisition we completed in June 2018, which includes a potential earn out associated with it. As we said last quarter, and in accordance with this agreement we submitted our earn out calculations to the Aveda shareholder representative and are in a communication related to earn our calculations. We'll not comment any further on the Aveda earn out till we have completed our discussions with the Aveda shareholder representative.

With that, I’ll now hand the call back over to Chris.

Chris Easter

Thank you, John.

Slide 11 outlines our key assumptions and outlook for 2020. Like many of our peers we are anticipating softer conditions and rate pressures to continue through the first half of the year. We are indeed seeing even softer conditions in the first quarter than we experienced in Q4. We still expect the path to be tightened and in our key markets as we enter the second half, which start to firm up second half rates. So we're forecasting our volumes to remain flat in 2020 compared to 2019 which would result in a low single digit decline in revenue at the midpoint of our $1.61 billion to $1.69 billion range.

As we start to realize the full benefits of our Phase 1 operational improvement plans as well as some initial Phase 2 contribution later in the year, we expect to overcome most if not all of that market headwinds and delivered solid profitability. So for the year we are seeing a challenging Q1 followed by gradual improvements delivered by our actions as the demand and supply side of the market shift in our favor later in the year. Thus we are providing outlook ranges of $74 million to $82 million for adjusted operating income and $170 million to $180 million for adjusted EBITDA for fiscal 2020.

Lastly, we are providing an outlook for CapEx of $75 million to $80 million in 2020. We expect 75% to 80% of this spend to occur in the first half of the year given the capital need in spending in the first half we want to caution that it’s highly likely that our leverage ratio will trend higher before decreasing in the second half of 2019. Strengthen our balance sheet is a clear requirement for our team and we’ll continue to prioritize debt reduction as part of our capital allocation priorities moving forward. We expect to remain comfortably below our debt covenants based on the outlook we provided.

Slide 12 provides a more visual look at our profitability guidance for 2020. We expect continued headwinds from three areas. One, market-based pricing and volume declines as I've just outlined and two significantly lower US rig counts and lower oil and gas activity which began in the second half of last year and has accelerated into 2020.

And lastly three, and higher insurance cost. Using the midpoint of the ranges I've just provided for our 2020 outlook we're forecasting adjusted EBITDA growth of 2.4% and adjusted operating income growth of over 50% in 2020. And remember that growth is built on a single-digit top-line decline and this shows the power of our organization to drive earnings growth in a down market.

In anticipation of the question is likely on many of your minds, we have not factored in any potential impact from the rapidly developing coronavirus situation beyond some limited impact in the first quarter. The situation obviously remains fluid and our hearts go out to those affected around the globe. So far we've seen no direct personal impact to our staff, whose safety will remain our number one priority.

We’re primarily a domestically focused business but many of our customers supply chains rely on global partners whose businesses have been interrupted. So, we do expect to see varying degrees of impact as we progress through 2020.

To the extent of these impact is very difficult to gauge, we’re communicating those with our employees, as well as our business partners to place ourselves in the best preventative position possible, while also preparing contingency plans for varying degrees of potential business interruption.

I’ll end our prepared remarks on Slide 13. The work esteemed as accomplished in the last two quarters is exceptional. On the surface the changes we’ve implemented may seem straightforward and simple, that is by design. In order to successfully execute within the accelerated timeframe needed we had to keep our focus simple with a limited number of priorities in our initial work. The shift to a collective performance based culture has repositioned this business to drive additional earnings improvement in the face of a soft market backdrop.

It's also helping us drive improved cash flows which in turn is providing the fuel to strengthen our balance sheet and building more profitable platform for growth as we move forward. We will enter 2021 with $45 million in operational and cost improvements in place which will facilitate solid bottom line expansion when our markets return to top line growth in the future. We have a lot of hard work ahead of us this year but we have the right team in place to get it done. We have just gotten started, I'm looking forward to updating all of you as we execute, deliver against our goals.

That concludes our prepared remarks and I'm excited to turn the call over for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Jason Seidl with Cowen & Company. Please proceed with your question.

Jason Seidl

Couple of quick ones from me here, Chris, can you talk a little bit about sort of your Phase 2 and how it's going to help the topline. Can you give us a couple examples?

Chris Easter

I wouldn't say we’re as much focused on Phase 2 helping the topline as much as continue to drive bottom line performance. So really, we’re not - that’s not where our focus is in this market or in this phase.

Jason Seidl

Okay sorry, I thought you said before that it was going to hold both top and bottom lines so that’s what - that was kind of my question, I wasn't sure how it would help the top line?

Chris Easter

I’ll say in the longer term, yes it's always. If we’re reducing our cost basis over the long term, it certainly is going to position us for topline both growth because we’re more competitive from a price perspective and can command more business as we move forward. But that’s not - as much an immediate focus right now, just driving the bottom line actions.

Jason Seidl

Okay. You mentioned the outlook for the oil and gas based on the rig count sort of having an impact on the guidance you just gave. One, could you tell us what your projection is for sort of that rig count to go down and what's the current oil and gas exposure?

Chris Easter

In fact, we know -- I don't want to try to get into forecasting where the rig counts are going to go. I know they’re down hard and it’s moving quickly. I think if I’m not mistaken, I’m looking over John as I say this, I think our oil and gas exposure, was it 13%?

John Michell

13%.

Jason Seidl

13%.

Chris Easter

On the - I think it was at - actually 2018, if we compiled it for 2019.

John Michell

Yes, 2019.

Chris Easter

2019. So it’s 2019 about 13% in the oil and gas sector. Fortunately for us, that was the diversification of our business. The wind energy sector which has been really strong has largely offset that, but it's a tough situation in the oil and gas sector needless to say.

Jason Seidl

Okay, sounds fair. Once you get through Phase 2 of your plan, how should we look at maintenance CapEx, should we look at that - is that's probably going to shrink a little bit, would you guys consider maintenance CapEx once you combine down to 10 companies?

John Michell

Yes hey, Jason. This is John, I think when you look at.

Jason Seidl

Hi John.

John Michell

The CapEx guide, that’s a pretty good barometer for what the maintenance needs of this company are going to be on a go-forward basis. We are reducing that fleet a little bit this year, but I think from a CapEx perspective, it’s going to stay within that range.

Jason Seidl

Okay. And two more questions, and then I'll turn it over to somebody else. I think you guys said there was a gain on sale of underutilized assets in the quarter. John, could you tell us how much that was?

John Michell

It’s a couple of million dollars is related to those integrations that we had.

Jason Seidl

Fantastic, last question, I know it's not the current focus, but you did leave the door open for future acquisitions, Chris. Could you tell us a little bit of sort of what you guys learned from the prior acquisitions and some of the steps. I guess you were forced to make - to make them more profitable and how was that going to change when you look at companies in the future to acquire?

Chris Easter

Well, and thank you for asking that - and I'll restate just to be clear. We're not – look, we're not out looking in the market right now. We are focused on that.

Jason Seidl

Yes.

Chris Easter

Bottom line performance and strengthening the balance sheet. But as we're going through - the integration aspect again with some - performers that weren't strong as well as some that are really strong, it’s really I guess flexing our muscles and demonstrating our capabilities to look at integrations in the future that kind of run the gamut. We'll have - as we move forward, we'll have a much broader net we could cast in terms of integrations.

Looking back at -- we weren't perfect. I mean it is hard to - acquiring and running through an acquisition-type process and integrating companies well, isn't always a perfect science for sure. So obviously we had some that we're not near as strong as we would have liked. We think we've addressed that now. I mean, as we're going forward, I think the lessons we've learned will help our team focus much more on making sure we're making the right acquisitions, but at the same time but that net is going to be much broader. We're not looking for platform companies per se as we're moving forward because we've got what will be a strong platform already to build upon.

Operator

And our next question comes from Greg Gibas with Northland Securities. Please proceed with your question.

Greg Gibas

I think you said something about there being minor effects from the virus in Q1. So just to clarify, have you noticed any negative impact from the virus at all yet?

Chris Easter

Yes, there has been some minor impacts, I mean we don’t have a lot of container volume business that we move in and out of the ports, but we do have some. So, we’ve certainly seen that drop off - start to drop off already. And then we’ve had a - I know we’ve had - there was one project I know of where some components were coming in from Asia, from China and that project has been delayed.

And we’re starting to hear potential impacts again with some of our suppliers in the side -- supply chain. So really the only real impacts have been some of the port volumes and a little bit of some delay in a project, and some other small initial impacts, but nothing dramatic yet.

Greg Gibas

And then sorry if I missed this on the call, but what was the primary reason for the delta between what you realized in Q4 than your previous guidance? Was it - some of those maybe cost savings coming in a little bit sooner than expected?

John Michell

No, it was really that $6 million impairment related to the third quarter write-downs, it was the difference between that preliminary results.

Greg Gibas

And then do you have like maybe a total amount of the one-time costs that’s associated with that restructuring that was made, maybe how much of that would be allocated in 2019 versus 2020?

John Michell

Yes if you look at - for 2019 year-to-date which is that third quarter, fourth quarter is $18.1 million between restructuring and the business transformation costs, about 4.5 of that was in the fourth quarter.

Greg Gibas

And then just last one from me, as we think about Phase 2 improvement efforts taking full effect as we exit this year, when do you expect to start to see some of those benefits being recognized?

Chris Easter

Yes I definitely see I mean, we’re going to see it as the year progresses. But I’d certainly push it more toward the back half of the year.

Operator

And our next question comes from Ryan Sigdahl with Craig-Hallum. Please proceed with your question.

Ryan Sigdahl

So given your only including an impact from coronavirus in Q1 and nothing the rest of the year I know touched on a several different ways. But is that because you don’t have visibility to the magnitude potentially in Q2, Q3, Q4, or is it because you're not expecting anything right now?

Chris Easter

I'd say it's more the magnitude. But at the same time I'd also say there's a lot more unknowns and knowns at this point. I feel that we will see impacts, but at the same time dependent upon the severity and the length. We could see recovery in the back half of the year that could offset a fair chunk of it as capacity might tighten further depending upon how far and deep this - any declines are.

And we’re on a strong position to withstand it, from a liquidity position. And I think - therefore that’s why I have it. Right now, we don't know what that impact is going to be, but there could be very well some offsets in the back half of the year that help us rebound.

Ryan Sigdahl

And then, how much in one-time costs do you expect from the additional business unit consolidations in 2020? And then, secondly, from a GAAP free cash flow perspective do you think you can grow on the $57 million you reported in 2019?

John Michell

Yes.

Chris Easter

I was going to say on the one-time cost I think right now we're factoring about $4 million that we're expecting tied to Phase 2. John, did you want to take that other part of the question.

John Michell

Yes Ryan, can you say that again on the free cash flow, what was that?

Ryan Sigdahl

Yes you reported $57 million of GAAP free cash flow in 2019 directionally do you think you can grow on that in 2020?

John Michell

Yes so, when you look at that $57 million and that’s our free cash flow which is cash from operation, plus cash CapEx, plus finance CapEx. When you look at our guide this year, our CapEx is going to be a bit higher between $75 million to $80 million whereas we came in from the year in 2019 at about $56.5 million in CapEx. So, it'll be a little bit lower than that because of our incremental CapEx.

Operator

[Operator Instructions] And I'm not showing any further questions at this time. I will now turn the call over to Chris Easter, CEO for any further remarks.

Chris Easter

Thank you, Sydney. Thanks again everyone for joining us today. I'm very excited about the path we’re on in the future of Daseke. We're looking forward to the hard work ahead and thank all of you for your support. Have a great day.

Operator

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