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Daseke, Inc. (NASDAQ:DSKE)
Q4 2019 Earnings Call
Mar 10, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

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 -- Investor Relations

Thanks, Sidney. Please turn to Slide 2 for a review of our Safe Harbor and non-GAAP statements. 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 to not place undue reliance on any forward-looking statements. We undertake no obligation to revise our forward-looking statements to reflect events or circumstances occurring after today, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

During the call, there will also be a discussion of some items that do not conform to the US generally accepted accounting principles or GAAP, including adjusted EBITDA, adjusted operating ratio, adjusted operating income, adjusted net income or loss, and free cash flow. Reconciliations of these non-GAAP measures to 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 -- Chief Executive Officer

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 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 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 I 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 I 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 you through Phase II of our Operational Improvement Plan in a few minutes, which we're officially announcing today. And for those of you not reading ahead, a 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 II 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. It was brought on Board specifically to help this company address it's lagging operating performance. Through the first half of the year, my team and I analyze the business from top to bottom, with a 99% plus OR through the first half 2019. It was clear organization, was not yet positioned to convert our size and a stronger profitability. We focused on top line 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 I of our Operational Improvement plan. However, a few short weeks later, Don Daseke, our founder and the original visionary for the company announces 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 I 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 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 are delivering on Phase I and will drive improved earnings quality through our next actions in Phase II.

Slide 5 provides a more detailed review of our Phase I 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, 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 -- review Phase II of our Operational Improvement plan. Again building on the success and learnings of Phase 1, we have identified three core work streams for Phase II. In total, we expect Phase II 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 is 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 I integrations, where the companies were chosen primarily due to lagging performance. The Phase II companies are in some cases, a combination of top performers. Phase II integrations are helping us 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 II 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 II 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 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 II 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 opportunities that are in front of us, as we better leverage reshaped business platform.

Further, we are building new tools and capabilities demonstrated through simultaneous integrations of existing operating companies, which now include 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 on executing 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 P. Michell -- Vice President, Operations Strategy

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 segments. 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 adjusted EBITDA was driven by softness and freight rates and higher driver pay, which was 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 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 of some of 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 the intersegment eliminations. The 4% decline here in the fourth quarter was a 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 on to 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 help from a gain on sale of some underutilized assets related to the integrations.

Our adjusted operating ratio was 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 moves, although rates are holding decent in other industrial markets. The takeaway here is that since the PMI went below 50 August of last year, coupled with trade impacts. You are seeing general industrial softness with the sustained weakness in the oil and gas end market 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-operated freight and with spot rates below contract rates for the year resulted in higher margins on purchase freight. Given lower industry demand in 2019, we also had some brokered shift to company assets at higher margins. These impacts were partially offset by softness in manufacturing and construction end markets.

The fourth quarter adjusted operating ratio for the 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 Slide 10, at December 31, we had $95.7 million in cash and liquidity of $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 times, well below our 4.0 times covenant. For the full year 2019, net cash provided by operating activities was $114.1 million.

Cash capex was $22 million. 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 million 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 look to exit unprofitable businesses, which allowed us to sell off some older underutilized 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've submitted our earn-out calculations to the Aveda shareholder representative and are in a communication related to earn-out calculations. We'll not comment any further on the Aveda earn-out until we have completed our discussions with the Aveda shareholder representative.

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

Chris Easter -- Chief Executive Officer

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 capacity to tighten in our key markets, as we enter the second half, which stood start to firm up second half rates. So we're forecasting our volumes to remain flat in 2020 compared to 2019, which will result in a low-single digit decline in revenue at the mid-point of our $1.61 billion to $1.69 billion range.

As we start to realize the full benefits of our Phase I Operational Improvement plans as well as some initial Phase II contribution later in the year, we expect to overcome most, if not all of that market headwind and delivered solid profitability. So for the year, we are seeing a challenging Q1, followed by the gradual improvements delivered by our actions, is 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 is 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 will 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 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 is accelerated into 2020. And lastly three, in higher insurance costs. Using the midpoint of the range, as 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 topline decline and thus 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 customer 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. The extent of these impacts is very difficult to gauge. We are communicating both 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 this team has accomplished in the last two quarters is exceptional. On the surface, the changes we've implemented may seeing straightforward and simple, that is by design. In order to successfully execute within the accelerated timeframe needed, we have to keep our focus simple with a limited number of priorities in our initial work. The shift to a collective performance based culture has reposition this business to drive additional earnings improvement and 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 build a 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 and looking forward to updating all of you as we execute and deliver against our goals.

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

Questions and Answers:

Operator

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

Jason Seidl -- Cowen and Company -- Analyst

Thank you, operator. Hi, Chris. Hi, team. Couple of quick ones for me here. Chris, can you talk a little bit about sort of your Phase II and how it's going to help the top line? Can you give us a couple of examples?

Chris Easter -- Chief Executive Officer

I wouldn't say we're as much focused on Phase II, helping the top line 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 space.

Jason Seidl -- Cowen and Company -- Analyst

Okay. So, I thought you said -- I thought you said before there was going to help both top and bottom line. So that's what that was kind of well, my question, I wasn't sure how it would help the top line.

Chris Easter -- Chief Executive Officer

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

Jason Seidl -- Cowen and Company -- Analyst

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 -- Chief Executive Officer

In fact we know, -- I don't want to try to get into forecasting where the rig counts are going to, 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% on the -- I think was at actually 2018, if we compiled it for 2019, about 13% of the oil and gas sector. Fortunately for us, that was the diversification of our business, the wind energy sector, which has been real strong has largely offset that, but it's a tough situation in the oil and gas sector needless to say.

Jason Seidl -- Cowen and Company -- Analyst

Okay. Sounds fair. Once you get through Phase II 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 what you guys consider maintenance capex went to combined down to 10 companies?

John P. Michell -- Vice President, Operations Strategy

Hey, Jason. This is John. I think when you look at 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 -- Cowen and Company -- Analyst

Okay. Two more questions, 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 P. Michell -- Vice President, Operations Strategy

Just a couple of million dollars is related those integrations that we had.

Jason Seidl -- Cowen and Company -- Analyst

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 is that going to change when you look at companies in the future to acquire?

Chris Easter -- Chief Executive Officer

Well, and thank you for asking that and I'll restate, just to be clear, we're not looking in the market right now. We are focused on that bottomline performance and strengthened 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'd 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 were 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 that nets 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.

Jason Seidl -- Cowen and Company -- Analyst

Okay, fantastic. I appreciate the time as always, gentlemen.

Chris Easter -- Chief Executive Officer

Thank you.

Operator

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

Greg Gibas -- Northland Securities -- Analyst

Great. Good morning, guys. Thank you for taking my questions. 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 -- Chief Executive Officer

Yeah. 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 a 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 -- Northland Securities -- Analyst

Got it. That's very helpful. 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 just some of those may be cost savings coming in a little bit sooner than expected.?

John P. Michell -- Vice President, Operations Strategy

Yeah. It was really that $6 million impairment related to the third quarter writedowns was the difference between those preliminary results.

Greg Gibas -- Northland Securities -- Analyst

Okay. Sure. And then do you have like a maybe a total amount of the one-time cost that's associated with that restructuring that was made, maybe how much of that would be allocated to 2019 versus 2020?

Chris Easter -- Chief Executive Officer

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

Greg Gibas -- Northland Securities -- Analyst

Okay. Perfect. And then just last one from me, as we think about Phase II 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 -- Chief Executive Officer

Yeah. 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.

Greg Gibas -- Northland Securities -- Analyst

Got it. Thanks, guys.

Chris Easter -- Chief Executive Officer

You're welcome.

Operator

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

Ryan Sigdahl -- Craig-Hallum -- Analyst

Good morning, guys. So, given you're only including an impact from coronavirus in Q1 and nothing the rest of the year. I know you touched on it 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 -- Chief Executive Officer

I'd say, it's more the magnitude, but at the same time, I'd also say, there is 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 in the linked, we could see recovery in the back half of the year that could offset a fair chunk of it, as capacity might tighten further dependent upon how far and deep this any declines are. And we're in a strong position to withstand it from a liquidity position. And I think therefore that's why I have a -- 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 -- Craig-Hallum -- Analyst

And then how much in one-time cost, do you expect from the additional business unit consolidations in 2020? I mean, then secondly from a GAAP free cash flow perspective, do you think you can grow on the $7 million you reported in 2019?

Chris Easter -- Chief Executive Officer

Yeah. 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 II. John, do you want to take that other part of the question?

John P. Michell -- Vice President, Operations Strategy

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

Ryan Sigdahl -- Craig-Hallum -- Analyst

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

Jason Seidl -- Cowen and Company -- Analyst

Yes. So when you look at that $57 million that's our free cash flow, which is cash from operations less cash capex plus financed capex. When you look at our guide this year, our capex is going to be a bit higher, between $75 million and $80 million, whereas we came in for the year in '19 at about $56.5 million of capex. So there'll be a little bit lower than that because of our incremental capex.

Ryan Sigdahl -- Craig-Hallum -- Analyst

Great. Thanks, guys. That's it for me.

Chris Easter -- Chief Executive Officer

Thank you.

John P. Michell -- Vice President, Operations Strategy

Thanks, Ryan.

Operator

Thank you. [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 -- Chief Executive Officer

Thank you, Sydney. Thanks again everyone for joining us today. I'm very excited about the path we are on and 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

[Operator Closing Remarks]

Duration: 35 minutes

Call participants:

Brooks Hamilton -- Investor Relations

Chris Easter -- Chief Executive Officer

John P. Michell -- Vice President, Operations Strategy

Jason Seidl -- Cowen and Company -- Analyst

Greg Gibas -- Northland Securities -- Analyst

Ryan Sigdahl -- Craig-Hallum -- Analyst

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