Q1FY09 Financial Results
As described in more detail below, key financial highlights for Descartes in Q1FY09 included:
* Revenues of $16.3 million, up $3.0 million or 23% from $13.3 million in the first quarter of fiscal 2008 (Q1FY08) and up 2% from $16.0 million in the previous quarter (Q4FY08);
* Gross margin of 65% of revenues, unchanged from 65% in Q1FY08 and increased from 64% in Q4FY08;
* Income before income taxes of $1.6 million, up 45% from $1.1 million in Q1FY08 and compared to $2.0 million in Q4FY08;
* Net income of $1.1 million, compared to net income of $1.1 million in Q1FY08 and $17.9 million in Q4FY08. Net income in Q4FY08 included a non-cash, deferred income tax recovery of $16.0 million as Descartes recorded a deferred tax asset for prior period tax losses that were anticipated to be applied against taxable income earned in future periods. Descartes recorded a $0.5 million deferred income tax expense in Q1FY09 as such tax losses were applied to taxable income;
* Earnings per share on a diluted basis of $0.02, compared to $0.02 in Q1FY08 and $0.33 in Q4FY08. Income before income taxes per share on a diluted basis was $0.03 in Q1FY09, compared to $0.02 in Q1FY08 and $0.04 in Q4FY08;
* EBITDA of $3.8 million, up 27% from $3.0 million in Q1FY08 and compared to $3.8 million in Q4FY08. EBITDA as a percentage of revenues was 23% this quarter, compared to 23% in Q1FY08 and 24% in Q4FY08.
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;
* Days sales outstanding (DSOs) of 57 days, compared to 54 days in Q1FY08 and 59 days in Q4FY08; and
* Cash provided by operating activities was $3.4 million in Q1FY09, up 162% from $1.3 million in Q1FY08 and up 55% from $2.2 million in Q4FY08.
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):
Q1
FY09
Q4
FY08
Q3
FY08
Q2
FY08
Q1
FY08
Revenues
16.3
16.0
15.5
14.3
13.3
Services revenues
14.9
14.4
14.5
13.5
12.2
Income before income taxes
1.6
2.0
1.8
1.8
1.1
Net income
1.1*
17.9*
1.7
1.7
1.1
Diluted EPS
0.02*
0.33*
0.03
0.03
0.02
EBITDA
3.8
3.8
3.7
3.4
3.0
EBITDA % of revenues
23%
24%
24%
24%
23%
* Net income and earnings per share on a diluted basis in Q4FY08 were positively impacted by the $16.0 million non-cash, deferred income tax recovery. Net income and earnings per share on a diluted basis in Q1FY09 were impacted by a $0.5 million non-cash deferred income tax expense as such tax losses were applied to taxable income.
Total revenues of $16.3 million in Q1FY09 were comprised of $14.9 million in services revenues and $1.4 million in license revenues. As a percentage of total revenues, services revenues were 91%, compared to 92% in Q1FY08 and 90% in Q4FY08, with the balance of the revenues in each period being license revenues.
Geographically, $9.4 million of revenues (58%) were generated in the Americas, excluding Canada, $4.2 million (26%) in Europe, Middle East and Africa ("EMEA"), $2.3 million (14%) in Canada, and $0.4 million (2%) in the Asia Pacific region.
"Our results this quarter are consistent with how our business is calibrated. With successful execution on revenue growth opportunities and prudent expense management as we integrate acquisitions, we have driven superior operating performance," said Stephanie Ratza, CFO at Descartes. "We believe that we have an excellent platform to continue to execute on our consolidation strategy. We have a solid balance sheet with a healthy cash position, and have consistently generated cash from operations."
"Factors such as increasing fuel prices, increased compliance regulations and global sourcing costs are making efficiency critical for the success of logistics-intensive organizations," said Arthur Mesher, CEO at Descartes. "Our on-demand, software-as-a-service, pay-for-performance business model for logistics technology presents an even more relevant and compelling solution in these market conditions."
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. EDT on May 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
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 21382174. An archived replay of the webcast will be available at www.descartes.com/company/investors
Annual Meeting of Shareholders
Descartes' annual meeting of shareholders will take place on Thursday, May 29, 2008 at 11:00 a.m. EDT at the offices of Blake, Cassels & Graydon LLP, 199 Bay Street, Suite 2300, Commerce Court West, Toronto, Ontario, Canada.
The agenda for the meeting includes the election of directors. The Company announced that Olivier Sermet, one of its current directors, will not be standing for re-election at the meeting. Mr. Sermet and his family will be re-locating to the Asia Pacific region next month, and accordingly he will not be in a position to continue to perform his duties as a director of the Company following the meeting. Descartes thanks Mr. Sermet for the contributions he has made to Descartes as a director, and wishes him the best in his future endeavours. The Company will now elect six directors at the meeting rather than seven.
In addition to the election of directors, shareholders will be asked to re-appoint auditors and to consider and, if thought advisable, approve the continuance, amendment and restatement of Descartes' shareholder rights plan. Details regarding these matters, as well as information for registered and non-registered shareholders on voting at the meeting, may be found in Descartes' management information circular, which has been mailed to Descartes' shareholders and a copy of which is available at the Canadian Securities Administrators' website at www.sedar.com
About Descartes
Descartes Systems Group (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, 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 300 employees and is based in Waterloo, Ontario, with operations in Atlanta, Pittsburgh, Minneapolis, Ottawa, Washington DC, Derby, London, Stockholm, Shanghai and Melbourne. For more information, visit www.descartes.com.
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Descartes Investor Contact:
Laurie McCauley
investor@descartes.com
(519) 746-6114 x 2358
