Descartes Systems Group

Descartes Reports Fiscal 2013 First Quarter Financial Results

Record Revenues and Operating Performance Drives 18% Year-over-Year Increase in Net Income

Descartes Systems Group announced financial results for its fiscal 2013 first quarter (Q1FY13) ended April 30, 2012. All financial results referenced are in United States (US) currency and, unless otherwise indicated, are determined in accordance with US Generally Accepted Accounting Principles (GAAP). 

Q1FY13 Financial Results

As described in more detail below, key financial highlights for Descartes in Q1FY13 included:

• Revenues of $29.9 million, up 10% from $27.1 million in the first quarter of fiscal 2012 (Q1FY12) and up from $29.6 million in the previous quarter (Q4FY12);
• Services revenues of $27.7 million, up 7% from $25.9 million in Q1FY12 and up from $26.9 million in Q4FY12. Services revenues comprised 93% of total revenues for the quarter;
• Income before income taxes of $4.4 million, up 26% from $3.5 million in Q1FY12 and up 38% from $3.2 million in Q4FY12;
• Net income of $2.6 million, up 18% from $2.2 million in Q1FY12 and down from $4.5 million in Q4FY12. Q4FY12 net income (and earnings per share on a diluted basis) was positively impacted by a net deferred income tax recovery of $1.9 million, whereas Q1FY13 and Q1FY12 were negatively impacted by a deferred income tax expense of $1.3 million and $1.0 million, respectively;
• Earnings per share on a diluted basis of $0.04, up 33% from $0.03 in Q1FY12 and down from $0.07 in Q4FY12;
• Adjusted EBITDA of $8.7 million, up 12% from $7.8 million in Q1FY12 and up from $8.5 million in Q4FY12. Adjusted EBITDA as a percentage of revenues was 29%, consistent with Q1FY12 and Q4FY12;
• Adjusted EBITDA per share on a diluted basis of $0.14, up 11% from $0.12 in Q1FY12 and up from $0.13 in Q4FY12;
• Days-sales-outstanding (DSO) for Q1FY13 were 58 days, up from 53 days in Q1FY12 and 52 days in Q4FY12; and
• Cash provided by operating activities of $4.4 million, down from $5.3 million in Q1FY12 and $7.5 million in Q4FY12. 

Adjusted EBITDA and Adjusted EBITDA per diluted share are non-GAAP financial measures provided as a complement to financial results presented in accordance with GAAP. We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization (for which we include amortization of intangible assets, deferred compensation, stock-based compensation and related fees and taxes) and other charges (for which we include acquisition-related expenses and restructuring charges). These items are considered by management to be outside Descartes’ ongoing operational results. We define Adjusted EBITDA per diluted share as Adjusted EBITDA divided by the number of diluted shares used to calculate the GAAP measure of earnings per share. A reconciliation of Adjusted EBITDA and Adjusted EBITDA per diluted share to net income and earnings per share determined in accordance with GAAP, respectively, is provided later in this release.

The following table summarizes Descartes’ results in the categories specified below over the past 5 fiscal quarters (unaudited; dollar amounts, other than per share amounts, in millions): 

* Net income and earnings per diluted share in Q4FY12 were positively impacted by the recovery of net deferred income taxes of $1.9 million.   

Based on the location of Descartes’ customers, the geographic distribution of revenues was as follows:

• $13.2 million of revenues (44%) were generated in the US;
• $6.6 million (22%) in Europe, Middle East and Africa (“EMEA”), excluding Belgium;
• $4.3 million (14%) in Belgium;
• $3.6 million (12%) in Canada;
• $1.9 million (6%) in the Asia Pacific region; and 
• $0.3 million (2%) in the Americas, excluding the US and Canada.  

“We continue to work with category leaders with a single-minded focus on improving the productivity, performance and security of their logistics operations,” said Art Mesher, Descartes’ Chairman and CEO. “It is this focus on delivering results to customers through our Logistics Technology Platform that has fuelled financial results that are ahead of our plans.” 

Cash Position

As at April 30, 2012, Descartes had $69.5 million in cash comprised entirely of cash and cash equivalents. Cash and cash equivalents have increased since year-end by $4.0 million and decreased $6.7 million since April 30, 2011. The company has invested $21.6 million since April 30, 2011 to complete the acquisition of Telargo (June 2011), the acquisition of InterCommIT (November 2011) and the acquisition of GeoMicro (January 2012).  

The table set forth below provides a summary of cash flows for Q1FY13 in millions of dollars:  

“Our record operating results show a company focused on superior performance that, together with its balance sheet, remains well-positioned to continue to execute on the consolidation landscape in front of it,” said Stephanie Ratza, CFO at Descartes. 

Q1FY13 Business Events / Announcements

In line with Descartes’ strategy to work with category-leading customers, Descartes announced today that Brink’s, Incorporated, a global leader in security-related services for banks, retailers and a variety of other commercial and governmental customers, has selected Descartes' integrated Routing, Mobile and Telematics suite to improve its vehicle routing efficiency and provide improved real-time visibility to customer shipments. 

In addition, the company made the following announcements and/or participated in the following events since March 8, 2012

• Leen Bakker, a leading home furnishing retailer in the Netherlands and Belgium, implemented Descartes’ routing technology to optimize its retail distribution operations;
• Ferguson Enterprises, a wholesale distributor of residential and commercial plumbing supplies and part of the Wolseley Group, is using Descartes’ mobile-enabled route planning solution to eliminate paperwork and improve customer service;
• John Lewis Partnership, a UK department store and supermarket operator, is using Descartes’ route planning and delivery scheduling solutions to improve the efficiencies of home deliveries;
• Manuport, a Belgium freight forwarder, is using Descartes’ ocean freight booking solution;
• F.H. Kaysing, a U.S. customs broker, is using Descartes’ customs solutions to participate in the U.S. Customs & Border Protection’s Simplified Entry Pilot, designed to enable freight to more securely and efficiently enter the United States;
• Salient, a U.S. provider of performance management technology, is using Descartes’ geographic information systems as part of its own service offering;
• Unveiled new cloud-based security filing solutions for air forwarders;
• Unveiled a new release of its cloud-based transportation management suite;
• Unveiled a new android-based mobile solution; 
• Showcased Descartes’ Global Logistics Network at SAP’s SAPPHIRE NOW conference; and
• Descartes was recognized as #1 ranked Canadian SaaS company by Branham Group in the Branham300 technology rankings. 

Conference Call

Members of Descartes' executive management team will host a conference call to discuss the company's financial results at 8:00 a.m. EDT on May 31, 2012. Designated numbers are 888-812-2278 for North America or +1-706-679-7394 for international, using conference ID number 77430514. 

The company simultaneously will conduct an audio webcast on the Descartes Web site at www.descartes.com/company/investors.  Phone conference dial-in or webcast log-in is required approximately 10 minutes beforehand.