WATERLOO, Ontario, Nov. 29, 2007 (PRIME NEWSWIRE) -- Descartes Systems Group (Nasdaq:DSGX) (TSX:DSG), a global on-demand software-as-a-service (SaaS) logistics solutions provider, announced financial results for its fiscal 2008 third quarter (Q3FY08) ended October 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).
Q3FY08 Financial Results
As described in more detail below, key financial highlights for Descartes in Q3FY08 included:
* Revenues of $15.5 million, up $2.1 million or 16% from the
third quarter of last fiscal year (Q3FY07) and up $1.2 million
or 8% from $14.3 million in the previous quarter (Q2FY08).
Services revenues in the quarter were $14.5 million, up $2.1
million or 17% from $12.4 million in Q3FY07 and up $1.0
million or 7% from $13.5 million in Q2FY08. Revenues in the
quarter benefited from Descartes' August 2007 acquisition of
Global Freight Exchange Limited ("GF-X");
* Net income of $1.7 million, up $1.3 million or 325% from $0.4
million in Q3FY07 and unchanged from $1.7 million in Q2FY08;
* Earnings per share of $0.03, up from $0.01 in Q3FY07 and
unchanged from Q2FY08;
* Record EBITDA of $3.7 million, up 23% from $3.0 million in
Q3FY07 and up 9% from $3.4 million in Q2FY08. EBITDA as a
percentage of revenues was 24% this quarter, compared to 22%
in Q3FY07 and 24% in Q2FY08. Q3FY08 is the eighth consecutive
quarter where EBITDA grew by more than 20% over the same
quarter in the previous year. Q3FY08 is also the seventh
consecutive quarter that EBITDA, as a percentage of revenues,
has exceeded 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):
----------------------------------------------------------------
Q3 Q2 Q1 Q4 Q3
FY08 FY08 FY08 FY07 FY07
------------------------------------------------
Revenues 15.5 14.3 13.3 13.6 13.4
Services
revenues 14.5 13.5 12.2 11.6 12.4
Net income 1.7* 1.7* 1.1* 1.2* 0.4*
Earnings per
share 0.03 0.03 0.02 0.03 0.01
EBITDA 3.7 3.4 3.0 3.3 3.0
EBITDA % of
revenues 24% 24% 23% 24% 22%
-----------------------------------------------------------------
* Total expenses include contingent acquisition consideration
from Descartes' FY07 acquisitions of Flagship Customs Services
and ViaSafe (Q3FY08 $0.5 million; Q2FY08 $0.5 million; Q1FY08
$0.5 million; Q4FY07 $0.5 million; and Q3FY07 $1.2 million).
Q3FY08 expenses also included a $0.2 million one-time expense
related to the termination of a third-party hosting agreement.
Total revenues of $15.5 million in Q3FY08 were comprised of $14.5 million in services revenues and $1.0 million in license revenues. As a percentage of total revenues, services revenues were 94%, compared to 93% in Q3FY07 and 94% in Q2FY08, with the balance of the revenues in each period being license revenues.
Geographically, $8.8 million of revenues (57%) were generated in the Americas, excluding Canada, $4.0 million (26%) in Europe, Middle East and Africa ("EMEA"), $2.3 million (15%) in Canada, and $0.4 million (2%) in the Asia Pacific region.
Revenues recognized in Canadian dollars in Q3FY08 were approximately CAD$2.2 million, and expenses incurred in Canadian dollars in that same period were approximately CAD$4.9 million. Q3FY08 expenses included a $0.2 million one-time expense related to the termination of a third-party hosting agreement.
Cash provided by operating activities was $5.0 million for Q3FY08, compared to $4.1 million in Q3FY07 and $3.4 million in Q2FY08. As at October 31, 2007, Descartes had $48.3 million in cash and cash equivalents. Days-sales-outstanding was 53 days in Q3FY08, compared to 54 days for Q2FY08 and 45 days for Q3FY07.
"Our consistent attention to our operating model, and focused acquisition integration, has had a positive impact on our bottom line," said Stephanie Ratza, Descartes' CFO. "Our core business is performing well, we continue to have a solid balance sheet with a healthy cash position, and we are generating cash from operations. This creates an excellent platform to continue to provide value for our customers and shareholders."
"Our customers are achieving results at an accelerating rate using the Descartes Global Logistics Network. Our metrics-driven, focused-on-results implementation methodology and software-as-a-service business model are delivering higher impact, lower risk and faster results for our customers. This, in turn, is contributing to positive financial results for Descartes," said Arthur Mesher, CEO at Descartes. "Our logistics solutions enable our customers to use government systems more effectively, and comply with the industry standards and regulations that make our borders more safe and secure. We also help our customers automate delivery processes to drive economic efficiencies; and reduce the number of miles traveled by vehicles, thereby reducing their carbon footprint and leading to more environmentally responsible logistics processes."
Fiscal 2008 Year-to-Date Financial Results
As described in more detail below, key financial highlights for Descartes in the first nine months of fiscal 2008 included the following:
* Revenues of $43.0 million, increased $4.6 million or 12%
from $38.4 million in the first nine months of fiscal 2007;
* Services revenues of $40.1 million, increased by $4.9 million
or 14% from $35.2 million in the first nine months of
fiscal 2007;
* Net income of $4.5 million, improved $1.7 million or 61%
from $2.8 million in the first nine months of fiscal 2007;
* Earnings per share of $0.09, improved by $0.03 or 50% from
$0.06 per share in the first nine months of fiscal 2007; and
* EBITDA of $10.0 million, increased by $1.8 million or 22% from
EBITDA of $8.2 million in the first nine months of fiscal
2007. EBITDA as a percentage of revenues was 23% in the
first nine months of fiscal 2008 compared to 21% for the
first nine months of fiscal 2007. EBITDA is a non-GAAP
financial measure provided as a complement to the GAAP
financial measures in this release. A reconciliation of
EBITDA to net income determined in accordance with GAAP
is provided later in this release.
Revenues recognized in Canadian dollars in the first nine months of fiscal 2008 were approximately CAD$6.6 million, and expenses incurred in Canadian dollars in that same period were approximately CAD$14.4 million.
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):
------------------------------------------------------------
First Nine Months First Nine Months
of Fiscal 2008 of Fiscal 2007
------------------------------------------------------------
Revenues 43.0 38.4
------------------------------------------------------------
Services revenues 40.1 35.2
------------------------------------------------------------
Net income 4.5* 2.8
------------------------------------------------------------
Earnings per share 0.09 0.06
------------------------------------------------------------
EBITDA 10.0 8.2
------------------------------------------------------------
EBITDA % of revenues 23% 21%
------------------------------------------------------------
* Expenses for the first nine months of fiscal 2008 also
included a $0.2 million one-time expense related to the
termination of a third-party hosting agreement.
GF-X Acquisition
On August 17, 2007, Descartes announced that it had acquired U.K.-based Global Freight Exchange Limited (GF-X), a global leader for electronic freight booking in the air cargo industry. 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, Kuhne + 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.
In negotiating the initial purchase price for the acquisition and planning the ongoing integration activities, Descartes assumed that GF-X would be neutral to Descartes' EBITDA in fiscal 2008 and 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 November 29. Designated numbers are (800) 950-1454 for North America or (212) 231- 2900 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 21354365. An archived replay of the webcast will be available at www.descartes.com/company/investors.
About Descartes
Descartes (Nasdaq:DSGX) (TSX:DSG), 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, shipment management services to help manage third party 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 operations in Atlanta, Pittsburgh, Ottawa, Washington DC, Derby, London, 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 provide value to customers and shareholders; revenues, expenses, goals and contribution of 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; the impact of foreign currency exchange rates; Descartes' ability to successfully execute on acquisitions and to integrate acquired businesses 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; 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 Q3FY08, Q2FY08, Q1FY08, Q4FY07, and Q3FY07, which we believe is the most directly comparable GAAP measure.
(US dollars
in millions) Q3FY08 Q2FY08 Q1FY08 Q4FY07 Q3FY07
Net income, as reported
on Consolidated
Statements of Operations 1.7 1.7 1.1 1.2 0.4
Adjustments to reconcile
to EBITDA:
Investment income (0.5) (0.5) (0.1) (0.1) (0.1)
Income tax expense
(recovery) 0.1 0.1 -- 0.1 (0.1)
Depreciation expense 0.7 0.6 0.5 0.6 0.6
Impairment of goodwill,
amortization of
intangible assets and
contingent acquisition
consideration 1.5 1.3 1.3 1.3 2.0
Amortization of
deferred compensation
and stock-based
compensation expense 0.2 0.2 0.2 0.2 0.2
------------------------------------
EBITDA 3.7 3.4 3.0 3.3 3.0
====================================
The table below reconciles EBITDA to net income reported in our unaudited Consolidated Statements of Operations for the first nine months of fiscal 2008 and the first nine months of fiscal 2007, which we believe is the most directly comparable GAAP measure.
(US dollars in millions) First Nine First Nine
Months of Months of
Fiscal 2008 Fiscal 2007
Net income, as reported
on Consolidated Statements
of Operations 4.5 2.8
Adjustments to reconcile to
EBITDA:
Investment income (1.1) (0.5)
Income tax expense 0.2 0.1
Depreciation expense 1.8 1.6
Impairment of goodwill,
amortization of intangible
assets and contingent
acquisition consideration 4.0 3.6
Amortization of deferred
compensation and
stock-based compensation
expense 0.6 0.6
------------ -----------
EBITDA 10.0 8.2
============ ===========
The Descartes Systems Group Inc.
Interim Consolidated Balance Sheets
(US dollars in thousands; US GAAP; unaudited)
---------------------------------------------------------------------
------------ -----------
October 31, January 31,
2007 2007
------------ -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 48,258 19,370
Marketable securities -- 2,551
Accounts receivable
Trade 9,127 6,905
Other 1,223 611
Prepaid expenses and other 1,048 919
Deferred contingent
acquisition consideration 1,333 2,000
-------- --------
60,989 32,356
CAPITAL ASSETS 7,166 6,766
GOODWILL 22,277 20,426
INTANGIBLE ASSETS 16,922 10,953
DEFERRED CONTINGENT
ACQUISITION CONSIDERATION -- 833
DEFERRED INCOME TAXES 1,268 --
-------- --------
108,622 71,334
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 3,681 3,391
Accrued liabilities 5,510 2,820
Deferred revenue 2,976 2,374
-------- --------
12,167 8,585
INCOME TAX LIABILITY 1,268 --
-------- --------
13,435 8,585
SHAREHOLDERS' EQUITY
Common shares - unlimited shares
authorized; Shares issued and
outstanding totalled
52,899,227 at October 31, 2007
(January 31, 2007 -
46,361,500) 44,132 19,319
Additional paid-in capital 449,435 448,850
Accumulated other comprehensive
income (loss) 2,410 (123)
Accumulated deficit (400,790) (405,297)
-------- --------
95,187 62,749
-------- --------
108,622 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 Nine Months Ended
---------------------- ---------------------
October 31, October 31,
2007 2006 2007 2006
-------- -------- -------- --------
REVENUES 15,463 13,445 43,014 38,430
COST OF REVENUES 5,468 4,366 14,895 12,887
-------- -------- -------- --------
GROSS MARGIN 9,995 9,079 28,119 25,543
-------- -------- -------- --------
EXPENSES
Sales and
marketing 2,412 2,450 7,326 7,635
Research and
development 2,823 2,485 7,798 6,569
General and
administrative 1,936 1,935 5,347 5,378
Amortization of
intangible assets 987 801 2,486 1,991
Contingent
acquisition
consideration 500 1,156 1,500 1,505
Impairment of
goodwill -- -- -- 100
-------- -------- -------- --------
8,658 8,827 24,457 23,178
-------- -------- -------- --------
INCOME FROM
OPERATIONS 1,337 252 3,662 2,365
INVESTMENT INCOME 481 82 1,071 495
-------- -------- -------- --------
INCOME BEFORE INCOME
TAXES 1,818 334 4,733 2,860
INCOME TAX EXPENSE
(RECOVERY) 121 (115) 226 87
-------- -------- -------- --------
NET INCOME 1,697 449 4,507 2,773
======== ======== ======== ========
EARNINGS PER SHARE
Basic and diluted 0.03 0.01 0.09 0.06
======== ======== ======== ========
WEIGHTED AVERAGE
SHARES OUTSTANDING
(thousands)
Basic 52,801 46,304 50,652 44,848
Diluted 53,715 47,548 51,821 46,088
======== ======== ======== ========
THE DESCARTES SYSTEMS GROUP INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(US DOLLARS IN THOUSANDS; US GAAP; UNAUDITED)
----------------------------------------------------------------------
------------------ ------------------
Three Months Ended Nine Months Ended
------------------ ------------------
October 31, October 31,
2007 2006 2007 2006
------- ------- ------- -------
OPERATING ACTIVITIES
Net income 1,697 449 4,507 2,773
Adjustments to reconcile
net income to cash
provided by operating
activities:
Depreciation 638 568 1,748 1,582
Amortization of
intangible assets 987 801 2,486 1,991
Contingent acquisition
consideration -- 656 -- 838
Impairment of
goodwill -- -- -- 100
Amortization of
deferred
compensation 2 (1) 8 66
Stock-based
compensation
expense 192 181 576 532
Changes in operating
assets and
liabilities:
Accounts receivable
Trade 665 1,253 (756) 27
Other (500) 280 (437) 575
Prepaid expenses and
other 1,305 294 515 (157)
Deferred contingent
acquisition
consideration 500 500 1,500 (3,333)
Accounts payable 509 (552) (134) 145
Accrued liabilities (237) (15) 46 (121)
Deferred revenue (732) (302) (341) (735)
------- ------- ------- -------
Cash provided by
operating activities 5,026 4,112 9,718 4,283
------- ------- ------- -------
INVESTING ACTIVITIES
Maturities of
marketable securities -- (32) 2,820 5,302
Sale of marketable
securities -- -- -- 5,092
Purchase of marketable
securities -- -- -- (7,641)
Additions to capital
assets (214) (178) (670) (1,134)
Acquisition of
subsidiaries, net
of cash acquired and
bank indebtedness
assumed (4,614) -- (5,680) (27,772)
Acquisition-related
costs (1,425) (427) (1,713) (915)
------- ------- ------- -------
Cash used in investing
activities (6,253) (637) (5,243) (27,068)
------- ------- ------- -------
FINANCING ACTIVITIES
Issuance of common
shares for cash, net
of issue costs (262) 86 23,160 13,751
------- ------- ------- -------
Cash provided by
(used in) financing
activities (262) 86 23,160 13,751
------- ------- ------- -------
Effect of foreign
exchange rate on cash
and cash equivalents 557 (8) 1,253 (496)
------- ------- ------- -------
Increase (decrease) in
cash and cash
equivalents (932) 3,553 28,888 (9,528)
Cash and cash
equivalents at
beginning of period 49,190 14,553 19,370 27,634
------- ------- ------- -------
Cash and cash
equivalents at end
of period 48,258 18,106 48,258 18,106
======= ======= ======= =======