Record Operating Performance Helps Increase Net Income Before Taxes
by 50 Percent and Net Income by 35 Percent From Last Year
WATERLOO, Ontario, Nov. 26, 2008 (GLOBE 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 2009 third quarter (Q3FY09) ended October 31, 2008. All financial results referenced are unaudited, in United States currency and, unless otherwise indicated, are determined in accordance with United States Generally Accepted Accounting Principles (GAAP).
Q3FY09 Financial Results
As described in more detail below, key financial highlights for Descartes in Q3FY09 included:
* Revenues of $17.0 million, up $1.5 million or 10% from
$15.5 million in the third quarter of fiscal 2008 (Q3FY08) and
compared to $17.1 million in the previous quarter (Q2FY09);
* Income before income taxes of $2.7 million, up 50% from
$1.8 million in Q3FY08 and up 35% from $2.0 million in Q2FY09;
* Net income of $2.3 million, up $0.6 million or 35% from net income
of $1.7 million in Q3FY08 and up $0.9 million or 64% from
$1.4 million in Q2FY09;
* Earnings per share on a diluted basis of $0.04, up from $0.03 in
both Q3FY08 and Q2FY09. Income before income taxes per share on a
diluted basis was $0.05 in Q3FY09, up from $0.03 in Q3FY08 and up
from $0.04 in Q2FY09;
* Days sales outstanding (DSOs) of 47 days, compared to 53 days in
Q3FY08 and 50 days in Q2FY09;
* Cash provided by operating activities was $5.9 million in Q3FY09,
up 18% from $5.0 million in Q3FY08 and up 28% from $4.6 million in
Q2FY09; and
* EBITDA of $4.4 million, up 19% from $3.7 million in Q3FY08 and up
7% from $4.1 million in Q2FY09. EBITDA as a percentage of revenues
was 26% this quarter, compared to 24% in each of Q3FY08 and Q2FY09.
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). 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 diluted earnings per share amounts, EBITDA as a % of revenues and DSOs):
--------------------------------------------------------------------
Q3 Q2 Q1 Q4 Q3
FY09 FY09 FY09 FY08 FY08
----------------------------------------
Revenues 17.0 17.1 16.3 16.0 15.5
Services revenues 15.7 16.0 14.9 14.4 14.5
Income before income taxes 2.7 2.0 1.6 2.0 1.8
Net income 2.3* 1.4* 1.1* 17.9* 1.7
Diluted EPS 0.04* 0.03* 0.02* 0.33* 0.03
EBITDA 4.4 4.1 3.8 3.8 3.7
EBITDA as a % of revenues 26% 24% 23% 24% 24%
DSOs (days) 47 50 57 59 53
--------------------------------------------------------------------
* Net income and earnings per share on a diluted basis were
positively impacted by non-cash, deferred income tax recoveries of
$16.0 million in Q4FY08 and $0.4 million in Q3FY09. Net income and
earnings per share on a diluted basis were also impacted by the
following: (1) non-cash deferred income tax expenses as tax losses
were applied to taxable income in the amounts of $0.8 million in
Q3FY09 and $0.5 million in each of Q2FY09 and Q1FY09; and (2)
contingent acquisition consideration expense of $0.3 million in
Q2FY09 and $0.5 million in each of Q1FY09, Q4FY08 and Q3FY08.
Total revenues of $17.0 million in Q3FY09 were comprised of $15.7 million in services revenues and $1.3 million in license revenues. As a percentage of total revenues, services revenues were 92%, with the balance of the revenues being license revenues.
Geographically, $10.4 million of revenues (61%) were generated in the Americas, excluding Canada, $4.4 million (26%) in Europe, Middle East and Africa ("EMEA"), $2.0 million (12%) in Canada, and $0.2 million (1%) in the Asia Pacific region.
Year-to-Date Financial Results
Key financial highlights for the nine-month period ended October 31, 2008 included the following:
* Revenues of $50.4 million, up $7.4 million or 17% from
$43.0 million in the same period a year ago;
* Income before income taxes of $6.4 million, up 36% from
$4.7 million in the first nine months of last year;
* Net income of $4.8 million, compared to net income of $4.5 million
in the first nine months of last year;
* Earnings per share on a diluted basis of $0.09, compared to $0.09
in the same period a year ago; and
* EBITDA of $12.3 million, up 23% from $10.0 million in the same
nine-month period last year. EBITDA as a percentage of revenues was
24% compared to 23% in the same period a year ago.
As at October 31, 2008, Descartes had $53.5 million in cash and cash equivalents and $2.4 million in available lines of credit. As at January 31, 2008, Descartes had $44.1 million in cash and cash equivalents and $2.9 million in available lines of credit.
"We've achieved solid operational performance in a difficult economic environment," said Stephanie Ratza, CFO at Descartes. "While our revenues and expenses were each reduced this quarter by approximately $0.7 million because of the dramatic fluctuations in foreign exchange rates over the quarter, we continued to focus on driving positive operating results. We've maintained a solid balance sheet, excellent DSOs and generated increased cash from operations to add to our healthy cash position. This has contributed to an excellent platform from which to continue to deliver value to our customers and shareholders."
"Our opportunity to make the world a better place through logistics has never been greater," said Arthur Mesher, CEO at Descartes. "Our solutions have a new and immediate relevance to our customers by dramatically reducing costs and enabling compliance and ensuring security. Our unbridled focus on making our customers' investments successful with tangible value has directly contributed to our record financial results."
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 26, 2008. Designated numbers are 800-950-1454 for North America or +1-212-231-2900 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 +1-416-626-4100 and using passcode number 21398203. An archived replay of the webcast will be available at www.descartes.com/company/investors.
Descartes and Delta Cargo
Separately today, Descartes announced that it has extended its relationship to provide Delta Cargo with technology underlying Delta Cargo's electronic air freight booking portal at deltacargo.com. Delta Cargo has selected Descartes' GF-X Private Label solution.
Importer Security Filing "10+2"
Yesterday, Descartes responded to the new U.S. Customs and Border Protection (CBP) Importer Security Filing (ISF) "10+2" rule by forming a Descartes "10+2" Workgroup. The Descartes "10+2" Workgroup is designed for leading importers, customs brokers, carriers, freight forwarders, non-vessel operating common carriers (NVOCCs), and shippers -- including representation from the top 5 integrators and leading international freight forwarders -- to standardize and develop best practices across this global logistics community for this new rule. Descartes previously announced the availability of its Importer Security Filing (ISF) "10+2" Service to address the CBP interim final rule.
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 more than 350 employees and is based in Waterloo, Ontario, with operations in Atlanta, Pittsburgh, Minneapolis, Ottawa, Washington DC, Derby, London, Brussels, Stockholm and Shanghai. For more information, visit www.descartes.com.
The Descartes Systems Group logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4065
Safe Harbour Statement
This release contains forward-looking information within the meaning of applicable securities laws ("forward-looking statements") that relate to Descartes' opportunity and positioning to provide value to customers and shareholders 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 severity and length of the current global economic downturn; the impact of foreign currency exchange rates; the impact of tax expenses on net income; Descartes' ability to successfully execute on acquisitions and to integrate acquired businesses and assets, and to predict expenses associated with and revenues from the acquisitions; the ability to raise capital to continue Descartes' acquisition strategy; 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 fiscal 2008. 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. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. 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, except as required by law.
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). 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 Q3FY09, Q2FY09, Q1FY09, Q4FY08 and Q3FY08, which we believe is the most directly comparable GAAP measure.
(US dollars in millions) Q3FY09 Q2FY09 Q1FY09 Q4FY08 Q3FY08
Net income, as reported on
Consolidated Statements of
Operations 2.3 1.4 1.1 17.9 1.7
Adjustments to reconcile to
EBITDA:
Investment income (0.3) (0.2) (0.3) (0.4) (0.5)
Income tax expense (recovery) 0.4 0.6 0.6 (15.9) 0.1
Depreciation expense 0.7 0.6 0.5 0.7 0.7
Amortization of intangible
assets and contingent
acquisition consideration 1.3 1.6 1.8 1.6 1.5
Amortization of deferred
compensation and stock-based
compensation expense 0.2 0.1 0.1 (0.1) 0.2
------------------------------------
EBITDA 4.4 4.1 3.8 3.8 3.7
------------------------------------
The table below reconciles EBITDA to net income reported in our unaudited Consolidated Statements of Operations for the first nine months of fiscal 2009 and the first nine months of fiscal 2008, which we believe is the most directly comparable GAAP measure.
(US dollars in millions) First 9 Months First 9 Months
of FY09 of FY08
Net income, as reported on
Consolidated Statements of
Operations 4.8 4.5
Adjustments to reconcile to EBITDA:
Investment income (0.8) (1.1)
Income tax expense 1.6 0.2
Depreciation expense 1.6 1.8
Amortization of intangible assets
and contingent acquisition
consideration 4.7 4.0
Amortization of deferred
compensation and stock-based
compensation expense 0.4 0.6
------------------------------
EBITDA 12.3 10.0
------------------------------
THE DESCARTES SYSTEMS GROUP INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(US DOLLARS IN THOUSANDS; US GAAP; UNAUDITED)
--------------------------------------------------------------------
-------- --------
Oct. 31, Jan. 31,
2008 2008
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 53,519 44,091
Accounts receivable
Trade 8,862 10,447
Other 700 1,288
Prepaid expenses and other 1,075 951
Deferred contingent acquisition consideration -- 833
Deferred income taxes 2,600 3,000
Deferred tax charge 197 115
-------- --------
66,953 60,725
CAPITAL ASSETS 5,193 6,722
GOODWILL 26,444 25,005
INTANGIBLE ASSETS 16,700 18,914
DEFERRED INCOME TAXES 14,180 14,570
DEFERRED TAX CHARGE 642 458
-------- --------
130,112 126,394
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 2,099 3,054
Accrued liabilities 5,468 4,514
Income taxes payable 298 783
Deferred revenue 3,442 3,750
-------- --------
11,307 12,101
INCOME TAX LIABILITY 2,145 1,570
-------- --------
13,452 13,671
SHAREHOLDERS' EQUITY
Common shares - unlimited shares
authorized; Shares issued and outstanding
totaled 52,974,727 at October 31, 2008
(January 31, 2008 - 52,929,977) 44,471 44,251
Additional paid-in capital 449,727 449,320
Accumulated other comprehensive income 552 2,006
Accumulated deficit (378,090) (382,854)
-------- --------
116,660 112,723
-------- --------
130,112 126,394
-------- --------
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 Nine Months
Ended Ended
---------------- ----------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
2008 2007 2008 2007
------- ------- ------- -------
REVENUES 16,965 15,463 50,364 43,014
COST OF REVENUES 5,580 5,468 17,359 14,895
------- ------- ------- -------
GROSS MARGIN 11,385 9,995 33,005 28,119
------- ------- ------- -------
EXPENSES
Sales and marketing 2,192 2,412 6,906 7,326
Research and development 2,934 2,823 8,740 7,798
General and administrative 2,550 1,936 7,138 5,347
Amortization of intangible assets 1,287 987 3,814 2,486
Contingent acquisition
consideration -- 500 833 1,500
------- ------- ------- -------
8,963 8,658 27,431 24,457
------- ------- ------- -------
INCOME FROM OPERATIONS 2,422 1,337 5,574 3,662
INVESTMENT INCOME 320 481 815 1,071
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 2,742 1,818 6,389 4,733
INCOME TAX EXPENSE
Current 49 121 260 226
Deferred 375 -- 1,365 --
------- ------- ------- -------
424 121 1,625 226
------- ------- ------- -------
NET INCOME 2,318 1,697 4,764 4,507
------- ------- ------- -------
EARNINGS PER SHARE
Basic and diluted 0.04 0.03 0.09 0.09
------- ------- ------- -------
WEIGHTED AVERAGE SHARES
OUTSTANDING
(thousands)
Basic 52,965 52,801 52,947 50,652
Diluted 53,697 53,715 53,686 51,821
------- ------- ------- -------
THE DESCARTES SYSTEMS GROUP INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(US DOLLARS IN THOUSANDS; US GAAP; UNAUDITED)
--------------------------------------------------------------------
---------------- ----------------
Three Months Nine Months
Ended Ended
---------------- ----------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
2008 2007 2008 2007
------- ------- ------- -------
OPERATING ACTIVITIES
Net income 2,318 1,697 4,764 4,507
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation 538 638 1,647 1,748
Amortization of intangible assets 1,287 987 3,814 2,486
Amortization of deferred
compensation 2 2 6 8
Stock-based compensation expense 134 192 383 576
Deferred income taxes 375 -- 1,365 --
Deferred tax charge (266) -- (266) --
Changes in operating assets and
liabilities:
Accounts receivable
Trade (94) 665 1,000 (756)
Other 351 (500) 590 (437)
Prepaid expenses and other 261 1,305 (266) 515
Deferred contingent acquisition
consideration -- 500 833 1,500
Accounts payable (473) 453 (530) (104)
Accrued liabilities 947 (237) 952 46
Income taxes payable 99 56 (472) (30)
Deferred revenue 397 (732) 88 (341)
------- ------- ------- -------
Cash provided by operating
activities 5,876 5,026 13,908 9,718
------- ------- ------- -------
INVESTING ACTIVITIES
Maturities of marketable
securities -- -- -- 2,820
Additions to capital assets (327) (214) (972) (670)
Acquisition of subsidiaries (1,541) (4,614) (1,911) (5,680)
Acquisition-related costs (134) (1,425) (915) (1,713)
------- ------- ------- -------
Cash used in investing activities (2,002) (6,253) (3,798) (5,243)
------- ------- ------- -------
FINANCING ACTIVITIES
Issuance of common shares for
cash, net of issue costs 74 (262) 98 23,160
------- ------- ------- -------
Cash provided by (used in)
financing activities 74 (262) 98 23,160
------- ------- ------- -------
Effect of foreign exchange rate on
cash and cash equivalents (962) 557 (780) 1,253
------- ------- ------- -------
Increase (decrease) in cash and
cash equivalents 2,986 (932) 9,428 28,888
Cash and cash equivalents at
beginning of period 50,533 49,190 44,091 19,370
------- ------- ------- -------
Cash and cash equivalents at end
of period 53,519 48,258 53,519 48,258
------- ------- ------- -------
CONTACT: Descartes Systems Group
Investor Contact:
Laurie McCauley
(519) 746-6114 x 2358
investor@descartes.com
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