Descartes Reports Fiscal 2008 Second Quarter Financial Results



                  Descartes Reports Record Net Income

  11 Percent Quarter-Over-Quarter Increase in Services Revenues Drives
                   55 Percent Increase in Net Income

WATERLOO, Ontario, Sept. 6, 2007 (PRIME NEWSWIRE) -- Descartes Systems Group (TSX:DSG) (Nasdaq:DSGX), a global on-demand software-as-a-service (SaaS) logistics solutions provider, announced financial results for its fiscal 2008 second quarter (Q2FY08) ended July 31, 2007. All financial results referenced are in United States currency and, unless otherwise indicated, are determined in accordance with United States Generally Accepted Accounting Principles (GAAP).

Q2FY08 Financial Results

As described in more detail below, key financial highlights for Descartes in Q2FY08 included:


 * Revenues of $14.3 million, up $1.0 million or 8% from $13.3 million
   in both the previous quarter (Q1FY08) and the second quarter of last
   fiscal year (Q2FY07). Services revenues in the quarter were $13.5
   million, up $1.3 million or 11% from $12.2 million in Q1FY08;
 * Net income of $1.7 million, up $0.6 million or 55% from $1.1 million
   in both Q1FY08 and Q2FY07. Total expenses for Q2FY08 included $0.5
   million in contingent acquisition consideration (described further
   below) with $0.5 million and $0.3 million of such expense included
   in Q1FY08 and Q2FY07, respectively;
 * Earnings per share of $0.03, up from $0.02 in each of Q1FY08 and
   Q2FY07; and
 * Record EBITDA of $3.4 million, up 13% from $3.0 million in Q1FY08
   and up 21% from $2.8 million in Q2FY07. EBITDA as a percentage of
   revenues was 24% this quarter, compared to 23% in Q1FY08 and 21% in
   Q2FY07. This quarter is the sixth consecutive quarter that EBITDA,
   as a percentage of revenues, has been greater than 20%.

   EBITDA is a non-GAAP financial measure provided as a complement to 
   financial results presented in accordance with GAAP that we calculate 
   as net income before interest, taxes, depreciation and amortization 
   (for which we include amortization of intangible assets, contingent 
   acquisition consideration, deferred compensation and stock-based 
   compensation, and the impairment of goodwill). These items are 
   considered by management to be outside Descartes' ongoing operational 
   results. A reconciliation of EBITDA to net income determined in 
   accordance with GAAP 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 in millions, except per share amounts):


 ---------------------------------------------------------------------
                               Q2FY08  Q1FY08  Q4FY07  Q3FY07  Q2FY07
                               ---------------------------------------
 Revenues                       14.3    13.3    13.6    13.4    13.3
 Services revenues              13.5    12.2    11.6    12.4    12.1
 Gross margin (% of revenues)     66%     66%     66%     68%     67%
 Net income                      1.7*    1.1*    1.2*    0.4*    1.1*
 Earnings per share             0.03    0.02    0.03    0.01    0.02
 EBITDA                          3.4     3.0     3.3     3.0     2.8
 EBITDA % of revenues             24%     23%     24%     22%     21%
 ---------------------------------------------------------------------
 * Total expenses include contingent acquisition consideration from
 Descartes' FY07 acquisitions of Flagship Customs Services and ViaSafe
 (Q2FY08 $0.5 million; Q1FY08 $0.5 million; Q4FY07 $0.5 million;
 Q3FY07 $1.2 million; and Q2FY07 $0.3 million).

Total revenues of $14.3 million were comprised of $13.5 million in services revenues and $0.8 million in license revenues. As a percentage of total revenues, services revenues were 94%, compared to 92% in Q1FY08 and 91% in Q2FY07, with the balance of the revenues in each period being license revenues.

Geographically, $8.9 million of revenues (62%) were generated in the Americas, excluding Canada, with $2.8 million (20%) in Europe, Middle East and Africa ("EMEA"), $2.1 million (15%) in Canada and $0.5 million (3%) in the Asia Pacific region. In Q2FY07, 63% of revenues were from the Americas, excluding Canada, 22% were from EMEA, 13% were from Canada and 2% from the Asia Pacific region.

Gross margin in Q2FY08 was 66% of revenues, unchanged from 66% in Q1FY08 and compared to 67% in Q2FY07.

Cash provided by operating activities was $3.7 million for Q2FY08, compared to $2.4 million in Q1FY08. As at July 31, 2007, Descartes had $49.2 million in cash and cash equivalents. Days sales outstanding were 54 days for Q2FY08, compared to 54 days in Q1FY08 and Q2FY07.

"Our results this quarter illustrate that our acquisitions and combined organic growth are delivering significant results to our customers and our bottom line," said Stephanie Ratza, Descartes' CFO. "The Global Logistics Network, fuelled by our compliance services, continued to perform well and generate cash. Our consistent operational results and our solid, debt-free balance sheet, create an excellent platform for continuing to deliver value to our customers and shareholders."

"Our focus is to improve the productivity and performance of our customers," said Arthur Mesher, CEO at Descartes. "Our phased, results-based methodology of selling and implementing in a software-as-a-service business model has proven effective. Our customer-focused operations and consolidation strategy are competitive differentiators as we strive to improve the business world through logistics."

Fiscal 2008 Year-to-Date Financial Results

As described in more detail below, key financial highlights for Descartes in the first half of fiscal 2008 included the following:


 * Revenues of $27.6 million, increased $2.6 million or 10% from $25.0
   million in the first half of fiscal 2007;
 * Gross margin of 66%, consistent with 66% in the first half of fiscal
   2007;
 * Net income of $2.8 million, improved $0.5 million or 22% from $2.3
   million in the first half of fiscal 2007;
 * Earnings per share of $0.06, improved by $0.01 or 20% from $0.05 per
   share in fiscal 2007; and
 * EBITDA of $6.4 million, increased by $1.2 million or 23% from EBITDA
   of $5.2 million in the first half of fiscal 2007. EBITDA as a
   percentage of revenues was 23% in the first half of fiscal 2008
   compared to 21% for the first half of fiscal 2007.

The following table summarizes Descartes' results in the categories specified below over the past two fiscal years (unaudited, dollar amounts in millions, except per share amounts):


 -------------------------------------------------------------------
                                     1st Half of     1st Half of
                                     Fiscal 2008     Fiscal 2007
 -------------------------------------------------------------------
 Revenues                               27.6            25.0
 -------------------------------------------------------------------
 Services revenues                      25.7            22.8
 -------------------------------------------------------------------
 Gross margin (% of revenues)             66%             66%
 -------------------------------------------------------------------
 Net income                              2.8*            2.3*
 -------------------------------------------------------------------
 Earnings per share                     0.06            0.05
 -------------------------------------------------------------------
 EBITDA                                  6.4             5.2
 -------------------------------------------------------------------
 EBITDA % of revenues                     23%             21%
 -------------------------------------------------------------------
 * Total expenses in the first half of fiscal 2008 included $1.0
 million of contingent acquisition consideration compared to $0.3
 million in the first half of fiscal 2007.

In the first half of fiscal 2008, total revenues of $27.6 million were comprised of $25.7 million in services revenues, or 93%, and $1.9 million in license revenues. In the first half of fiscal 2007, total revenues of $25.0 million were comprised of $22.8 million in services revenues, or 91%, and $2.2 million in license revenues.

Recent Acquisition

On August 17, 2007, Descartes announced that it had acquired Global Freight Exchange Limited (GF-X), a global leader for electronic freight booking in the air cargo industry. The acquisition of U.K-based GF-X added electronic air freight booking capability to Descartes' Global Logistics Network (GLN), creating a global network capable of managing the entire air cargo shipment lifecycle. GF-X's offering includes a comprehensive, on-line cargo reservation system where air carriers and freight forwarders can complete electronic air cargo bookings. Many of the world's leading carriers and forwarders use GF-X's products in major airfreight markets worldwide, including American Airlines, Air France, British Airways, Delta Air Lines, DHL, Kuehne + Nagel, Lufthansa, and Panalpina. In support of the acquisition, several key air cargo carriers and freight forwarders extended their customer commitments to use GF-X's products and services.

The purchase price for the acquisition included approximately $5.4 million in cash; approximately 0.5 million Descartes common shares that were issued to strategic airlines and freight forwarders, each of whom agreed to maintain their investment in Descartes for a minimum period ranging between 11 and 18 months; and up to an additional $5.2 million in cash if certain sales and other performance targets are met by GF-X over the next 4 years. In addition, Descartes anticipates that the final purchase price will include transaction and integration-related costs/liabilities that are currently estimated at approximately $2.5 million. In negotiating the initial purchase price and planning the ongoing integration activities, Descartes assumed that GF-X would contribute at least $4.0 million in revenues and $0.8 million in EBITDA to Descartes' financial results for the 2009 fiscal year.

Conference Call

Members of Descartes' executive management team will host a conference call to discuss the company's financial results and business outlook at 8:00 a.m. EST on September 6. Designated numbers are (888) 214-7566 for North America or (415) 537- 1900 for International. 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.

Replays of the conference call will be available in two formats and accessible for 24 hours after the call's completion by dialing (800) 558-5253 or (416) 626-4100 and using passcode number 21345678. An archived replay of the webcast will be available at www.descartes.com/company/investors.

About Descartes

Descartes (TSX:DSG) (Nasdaq:DSGX), a leading provider of software-as-a-service (SaaS) logistics solutions, is delivering results across the globe today for organizations that operate logistics-intensive businesses. Descartes' logistics management solutions combine a multi-modal network, the Descartes Global Logistics Network, with component-based 'nano' sized applications to provide messaging services between logistics trading partners, "book-to-bill" services for contract carriers and private fleet management services for organizations of all sizes. These solutions and services help Descartes' customers reduce administrative costs, billing cycles, fleet size, contract carrier costs, and mileage driven and improve pick up and delivery reliability. Our hosted, transactional and packaged solutions deliver repeatable, measurable results and fast time-to-value. Descartes customers include an estimated 1,600 ground carriers and more than 90 airlines, 30 ocean carriers, 900 freight forwarders and third-party providers of logistics services, and hundreds of manufacturers, retailers, distributors, private fleet owners and regulatory agencies. The company has over 300 employees and is based in Waterloo, Ontario, with offices in Atlanta, Pittsburgh, Ottawa, Washington DC, Derby, Stockholm, Shanghai, Singapore and Melbourne. For more information, visit www.descartes.com.

The Descartes Systems Group logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=4065

Safe Harbor Statement

This release contains forward-looking information within the meaning of applicable securities laws ("forward-looking statements") that relate to the positioning of Descartes to deliver results to customers and shareholders and to improve its market position and to explore and execute on acquisitions; customers driving value from Descartes solutions; goals and contribution of, and expenses from, the GF-X acquisition and other matters. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements of Descartes, or developments in Descartes' business or industry, to differ materially from the anticipated results, performance or achievements or developments expressed or implied by such forward-looking statements. Such factors include, but are not limited to, Descartes' ability to continue to align operating expenses to visible and recurring revenues; Descartes' ability to successfully execute on acquisitions and to integrate acquired business and assets, including the GF-X acquisition, and to predict expenses associated with and revenues from the acquisition; the ability to attract and retain key personnel and the ability to manage the departure of key personnel; variances in our revenues from quarter to quarter; departures of key customers; disruptions in the movement of freight; and other factors and assumptions discussed in the section entitled, "Certain Factors That May Affect Future Results" in documents filed with the Securities and Exchange Commission, the Ontario Securities Commission and other securities commissions across Canada, including Descartes' Annual Report on Form 40-F for the fiscal year ended January 31, 2007. If any such risks actually occur, they could materially adversely affect our business, financial condition or results of operations. In that case, the trading price of our common shares could decline, perhaps materially. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based.

Reconciliation of Non-GAAP Financial Measure -- EBITDA

We prepare and release quarterly unaudited and annual audited financial statements prepared in accordance with GAAP. We also disclose and discuss certain non-GAAP financial information, used to evaluate our performance, in this and other earnings releases and investor conference calls as a complement to results provided in accordance with GAAP. We believe that current shareholders and potential investors in our company use non-GAAP financial measures, such as EBITDA, in making investment decisions about our company and measuring our operational results. The term "EBITDA" refers to a financial measure that we define as earnings before interest, taxes, depreciation and amortization (for which we include amortization of intangible assets, contingent acquisition consideration, deferred compensation and stock-based compensation, and impairment of goodwill). Since EBITDA is not a measure determined under GAAP it may not be comparable to similarly titled measures reported by other companies. EBITDA should not be construed as a substitute for net income determined in accordance with GAAP. We have presented EBITDA to show Descartes' baseline performance before certain non-cash and acquisition-related expenses and other items that are considered by management to be outside Descartes' ongoing operational results. We believe that financial analysts, current investors and potential investors use EBITDA to understand Descartes' financial results and that EBITDA will help investors' overall understanding of our results by providing a higher level of transparency for certain expenses and by providing a level of disclosure that will help investors understand how we plan and measure our business. The table below reconciles EBITDA to net income reported in our unaudited Consolidated Statements of Operations for Q2FY08; Q1FY08, Q4FY07, Q3FY07, and Q2FY07, which we believe is the most directly comparable GAAP measure.


 (US dollars in millions)      Q2FY08  Q1FY08  Q4FY07  Q3FY07  Q2FY07

 Net income, as reported on
  Consolidated Statements
  of Operations                  1.7     1.1     1.2     0.4     1.1
 Adjustments to reconcile
  to EBITDA:
   Investment income            (0.5)   (0.1)   (0.1)   (0.1)   (0.2)
   Income tax expense
    (recovery)                   0.1      --     0.1    (0.1)     --
   Depreciation expense          0.6     0.5     0.6     0.6     0.6
   Impairment of goodwill,
    amortization of
    intangible assets and
    contingent acquisition
    consideration                1.3     1.3     1.3     2.0     1.2
   Amortization of deferred
    compensation and
    stock-based compensation
    expense                      0.2     0.2     0.2     0.2     0.1
                            ------------------------------------------
 EBITDA                          3.4     3.0     3.3     3.0     2.8
                            ==========================================

The table below reconciles EBITDA to net income reported in our unaudited Consolidated Statements of Operations for the first half of fiscal 2008 and the first half of fiscal 2007, which we believe is the most directly comparable GAAP measure.


 (US dollars in millions)           First Half of   First Half of
                                     Fiscal 2008     Fiscal 2007

 Net income, as reported on
  Consolidated Statements of
  Operations                             2.8             2.3
 Adjustments to reconcile to EBITDA:
   Investment income                    (0.6)           (0.4)
   Income tax expense (recovery)         0.1             0.2
   Depreciation expense                  1.1             1.0
   Impairment of goodwill,
    amortization of intangible
    assets and contingent
    acquisition consideration            2.6             1.7
   Amortization of deferred
    compensation and stock-based
    compensation expense                 0.4             0.4
                                    -----------------------------
 EBITDA                                  6.4             5.2
                                    =============================


 THE DESCARTES SYSTEMS GROUP INC.
 INTERIM CONSOLIDATED BALANCE SHEETS
 (US DOLLARS IN THOUSANDS; US GAAP; UNAUDITED)
 ---------------------------------------------------------------------

                                                  -------   ----------
                                                  July 31,  January 31,
                                                   2007       2007
                                                  -------   ----------
 ASSETS
 CURRENT ASSETS
   Cash and cash equivalents                       49,190     19,370
   Marketable securities                               --      2,551
   Accounts receivable
     Trade                                          8,631      6,905
     Other                                            572        611
   Prepaid expenses and other                       1,777        919
   Deferred contingent acquisition
    consideration                                   1,833      2,000
                                                  -------    -------
                                                   62,003     32,356
 CAPITAL ASSETS                                     6,673      6,766
 GOODWILL                                          21,306     20,426
 INTANGIBLE ASSETS                                  9,838     10,953
 DEFERRED CONTINGENT ACQUISITION
  CONSIDERATION                                        --        833
 DEFERRED INCOME TAXES                                895         --
                                                  -------    -------
                                                  100,715     71,334
                                                  =======    =======

 LIABILITIES AND SHAREHOLDERS' EQUITY
 CURRENT LIABILITIES
   Accounts payable                                 3,108      3,391
   Accrued liabilities                              3,237      2,820
   Deferred revenue                                 2,994      2,374
                                                  -------    -------
                                                    9,339      8,585
 INCOME TAX LIABILITY                                 895         --
                                                  -------    -------
                                                   10,234      8,585

 SHAREHOLDERS' EQUITY
   Common shares - unlimited shares authorized;
    Shares issued and outstanding totaled
    52,399,596 at July 31, 2007 (January 31,
    2007 - 46,361,500)                             42,388     19,319
   Additional paid-in capital                     449,241    448,850
   Accumulated other comprehensive income (loss)    1,340       (123)
   Accumulated deficit                           (402,488)  (405,297)
                                                  -------    -------
                                                   90,481     62,749
                                                  -------    -------
                                                  100,715     71,334
                                                  =======    =======


 THE DESCARTES SYSTEMS GROUP INC.
 INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
 (US DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND SHARE DATA;
 US GAAP; UNAUDITED)
 -------------------------------------------------------------------

                            ------------------    ------------------
                            Three Months Ended     Six Months Ended
                            ------------------    ------------------
                            July 31,   July 31,   July 31,   July 31,
                             2007       2006       2007       2006
                            -------    -------    -------    -------
 REVENUES                    14,263     13,293     27,551     24,985
 COST OF REVENUES             4,855      4,399      9,427      8,521
                            -------    -------    -------    -------
 GROSS MARGIN                 9,408      8,894     18,124     16,464
                            -------    -------    -------    -------
 EXPENSES
   Sales and marketing        2,442      2,763      4,914      5,185
   Research and development   2,569      2,237      4,975      4,084
   General and
    administrative            1,821      1,820      3,411      3,443
   Amortization of
    intangible assets           753        693      1,499      1,190
   Contingent acquisition
    consideration               500        349      1,000        349
   Impairment of goodwill        --        100         --        100
                            -------    -------    -------    -------
                              8,085      7,962     15,799     14,351
                            -------    -------    -------    -------
 INCOME FROM OPERATIONS       1,323        932      2,325      2,113
 INVESTMENT INCOME              470        191        590        413
                            -------    -------    -------    -------
 INCOME BEFORE INCOME TAXES   1,793      1,123      2,915      2,526
 INCOME TAX EXPENSE             111         38        105        202
                            -------    -------    -------    -------
 NET INCOME                   1,682      1,085      2,810      2,324
                            =======    =======    =======    =======
 EARNINGS PER SHARE
   Basic and diluted           0.03       0.02       0.06       0.05
                            =======    =======    =======    =======
 WEIGHTED AVERAGE SHARES
  OUTSTANDING (thousands)
   Basic                     52,354     45,549     49,560     44,108
   Diluted                   53,401     47,122     50,877     45,640
                            =======    =======    =======    =======


 THE DESCARTES SYSTEMS GROUP INC.
 INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
 (US DOLLARS IN THOUSANDS; US GAAP; UNAUDITED)
 -------------------------------------------------------------------

                            ------------------    ------------------
                            Three Months Ended     Six Months Ended
                            ------------------    ------------------
                            July 31,   July 31,   July 31,   July 31,
                             2007       2006       2007       2006
                            -------    -------    -------    -------
 OPERATING ACTIVITIES
 Net income                   1,682      1,085      2,810      2,324
 Adjustments to reconcile
  net income to cash
  provided by operating
  activities:
   Depreciation                 580        557      1,110      1,014
   Amortization of
    intangible assets           753        693      1,499      1,190
   Contingent acquisition
    consideration                --        182         --        182
   Impairment of goodwill        --        100         --        100
   Amortization of
    deferred compensation         3         29          6         67
   Stock-based
    compensation expense        191        114        384        351
   Changes in operating
    assets and liabilities:
     Accounts receivable
       Trade                   (611)      (484)    (1,652)    (1,370)
       Other                    185        376         39        268
     Prepaid expenses and
      other                    (833)      (454)      (858)      (457)
     Deferred contingent
      acquisition
      consideration             500     (3,833)     1,000     (3,833)
     Accounts payable           465        243       (545)       731
     Accrued liabilities        779       (214)     1,848       (354)
     Deferred revenue            54       (518)       490       (345)
                            -------    -------    -------    -------
 Cash provided by (used
  in) operating activities    3,748     (2,124)     6,131       (132)
                            -------    -------    -------    -------
 INVESTING ACTIVITIES
   Maturities of
    marketable securities     2,730         --      2,551      5,334
   Sale of marketable
    securities                   --      5,092         --      5,092
   Purchase of marketable
    securities                   --     (2,733)        --     (7,734)
   Additions to capital
    assets                     (529)      (664)    (1,017)    (1,030)
   Acquisition of
    subsidiaries, net of
    bank indebtedness
    assumed                      --    (20,108)    (1,066)   (27,772)
   Acquisition-related
    costs                      (270)      (404)      (250)      (504)
                            -------    -------    -------    -------
 Cash provided by (used
  in) investing activities    1,931    (18,817)       218    (26,614)
                            -------    -------    -------    -------
 FINANCING ACTIVITIES
   Issuance of common
    shares for cash, net
    of issue costs              (24)      (356)    23,471     13,665
                            -------    -------    -------    -------
 Cash provided by (used
  in) financing activities      (24)      (356)    23,471     13,665
                            -------    -------    -------    -------
 Increase (decrease) in
  cash and cash equivalents   5,655    (21,297)    29,820    (13,081)
 Cash and cash equivalents
  at beginning of period     43,535     35,850     19,370     27,634
                            -------    -------    -------    -------
 Cash and cash equivalents
  at end of period           49,190     14,553     49,190     14,553
                            =======    =======    =======    =======


            

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