Descartes Reports Fiscal 2014 Third Quarter Financial Results

Descartes Reports Fiscal 2014 Third Quarter Financial Results

             Record Quarterly Revenues and Operating Performance

WATERLOO, Ontario, Dec. 4, 2013 (GLOBE NEWSWIRE) -- The Descartes Systems
Group Inc. (TSX:DSG) (Nasdaq:DSGX) announced financial results for its fiscal
2014 third quarter (Q3FY14) ended October 31, 2013. 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).

"We're pleased with the company's performance during the third quarter, which
led to record results and continued strong growth in revenues and cash flow,"
said Edward Ryan, Descartes' CEO. "Our success continues to be driven by
strong execution against our buy and build strategy, as well as our focus on
delivering business value to the members of the Global Logistics Network. Our
focus on customer success enables our business to thrive, and we remain
optimistic about Descartes' future as we continue to see strong demand for our
SaaS-based solutions that drive the largest collaborative logistics community
in the world."

Q3FY14 Financial Results

  *Revenues of $38.8 million, up 19% from $32.7 million in the third quarter
    of fiscal 2013 (Q3FY13) and up 2% from $38.2 million in the previous
    quarter (Q2FY14);
  *Services revenues of $35.6 million, up 20% from $29.7 million in Q3FY13
    and up slightly from $35.5 million in Q2FY14. Services revenues comprised
    92% of total revenues for the quarter;
  *Cash provided by operating activities of $9.2 million, up 77% from $5.2
    million in Q3FY13 and down from $11.2 million in Q2FY14;
  *Net income of $2.2 million, down from $3.1 million in Q3FY13 and up from
    $1.7 million in Q2FY14. Net income was impacted by $0.6 million in
    restructuring charges in Q3FY14 ($1.1 million in Q2FY14) related to
    Descartes' ongoing integration of its acquisition of KSD Software Norway
    AS ("KSD") on May 2, 2013, and $0.3 million of interest on the acquisition
    line of credit;
  *Earnings per share on a diluted basis of $0.03, down from $0.05 in Q3FY13
    and consistent with Q2FY14;
  *Adjusted EBITDA of $11.4 million, up 15% from $9.9 million in Q3FY13 and
    up 6% from $10.8 million in Q2FY14. Adjusted EBITDA as a percentage of
    revenues was 29%, down from 30% in Q3FY13 and up from 28% in Q2FY14;
  *Adjusted EBITDA per share on a diluted basis of $0.18, up 13% from $0.16
    in Q3FY13 and up 6% from $0.17 in Q2FY14; and
  *Days-sales-outstanding (DSO) for Q3FY14 were 47 days, down from 59 days in
    Q3FY13 and down from 49 days in Q2FY14.

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, amortization, stock-based compensation (for which we include
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):

                                      

                                                                        
                       Q3        Q2        Q1       Q4       Q3
                        FY14      FY14      FY14     FY13     FY13
Revenues                38.8      38.2      34.0     33.8     32.7
Services revenues       35.6      35.5      30.1     30.1     29.7
Gross Margin            67%       66%       69%      68%      68%
Net income*             2.2       1.7       2.8      7.8      3.1
Earnings per diluted    0.03      0.03      0.04     0.12     0.05
share*
Cash provided by        9.2       11.2      9.6      14.1     5.2
operating activities
Adjusted EBITDA         11.4      10.8      10.4     10.3     9.9
Adjusted EBITDA as a %  29%       28%       31%      30%      30%
of revenues
Adjusted EBITDA per     0.18      0.17      0.16     0.16     0.16
diluted share
DSOs (days)             47        49        52       55       59
                                                         
* Net income and earnings per diluted share were negatively impacted
by $0.6 million and $1.1 million in restructuring charges in Q3FY14
and Q2FY14, respectively, relating to the integration of KSD. Net
income and earnings per diluted share were positively impacted by the
release of valuation allowance for deferred tax assets of $5.3 million
in Q4FY13.

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

  *$17.3 million of revenues (45%) were generated in the US;
  *$8.7 million (22%) in Europe, Middle East and Africa ("EMEA"), excluding
    Belgium and Netherlands;
  *$3.8 million (10%) in Belgium;
  *$3.8 million (10%) in Netherlands;
  *$3.7 million (10%) in Canada;
  *$1.3 million (3%) in the Asia Pacific region; and
  *$0.2 million (0%) in the Americas, excluding the US and Canada.

Cash Position

At October 31, 2013, Descartes had $49.3 million in cash, comprised entirely
of cash and cash equivalents, and $17.2 million of debt outstanding on an
acquisition line of credit.

Cash and cash equivalents increased by $8.4 million from the end of last
quarter due primarily to cash generated from operations.

The table set forth below provides a summary of cash flows for the three and
nine-month periods ended October 31, 2013 in millions of dollars:

                                                                           
                                                    Three Months Nine Months
                                                   Ended        Ended
                                                    October 31,  October 31,
                                                    2013         2013
Cash provided by operating activities               9.2         30.0
Additions to capital assets                         (0.5)        (1.5)
Acquisition of subsidiaries, net of cash acquired   --           (32.4)
Proceeds from borrowing on debt facility            --           19.8
Payment of debt issuance costs                      --           (0.7)
Repayments of debt                                  (1.0)        (2.8)
Issuance of common shares                           0.2         0.4
Settlement of stock options                         --           (1.4)
Effect of foreign exchange rate on cash and cash    0.5          0.3
equivalents
Net change in cash and cash equivalents             8.4         11.7
Cash and cash equivalents, beginning of period      40.9        37.6
Cash and cash equivalents, end of period            49.3        49.3

Q3FY14 Business Events / Announcements

In line with Descartes' strategy to build leading product offerings and expand
its global network of customers and trading partners, Descartes made the
following announcements and/or participated in the following events since
September 5, 2013:

  *Identified as the leading provider of SaaS-Based Transportation Management
    Solutions by ARC Advisory Group Research;
  *Announced that Restoration Hardware, Sears Holdings Corporation, and other
    leading retailers around the world are adopting Descartes' updated
    Advanced Home Delivery Solution;
  *Announced new customer successes with Goto AZ Planning, Trans-Border
    Global Freight Systems and JVCKENWOOD;
  *Unveiled same-day delivery optimization technology to address retailers'
    and distributors' need to improve same-day delivery productivity and
    performance;
  *Signed an alliance agreement with InfoSky to streamline logistics
    messaging for the Chinese air cargo industry;
  *Hosted a Global User and Partner Conference, Evolution 2013, in Miami,
    Florida with record attendance; and
  *Hosted an Omni-Channel Retail and Home Delivery Summit in London, England.

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. ET on December 4, 2013.
Designated numbers are +1 866 551-3680 for North America or +1 212 401-6760
for international, using Participant PIN Code 49970739#.

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

Replays of the conference call will be available immediately afterwards, and
until December 11, 2013, by dialing +1 866 551-4520 or +1 212 401-6750 and
entering Conference Playback Reference 290718#, followed by Participant PIN
Code 49970739#. An archived replay of the webcast will be available at
www.descartes.com/descartes/investor-relations.

About Descartes

Descartes (TSX:DSG) (Nasdaq:DSGX) is the global leader in providing on-demand,
software-as-a-service solutions focused on improving the productivity,
performance and security of logistics-intensive businesses. Descartes has over
171,000 parties using its cloud based services. Customers use our modular,
software-as-a-service solutions to route, schedule, track and measure delivery
resources; plan, allocate and execute shipments; rate, audit and pay
transportation invoices; file customs and security documents for imports and
exports; and complete numerous other logistics processes by participating in
the world's largest, collaborative multi-modal logistics community. Our
headquarters are in Waterloo, Ontario, Canada and we have offices and partners
around the world. Learn more at www.descartes.com.

Safe Harbor Statement

This release contains forward-looking information within the meaning of
applicable securities laws ("forward-looking statements") that relates to
Descartes future and demand for its solutions; 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 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 attract and retain key personnel and the ability
to manage the departure of key personnel and the transition of our executive
management team; changes in trade or transportation regulations that currently
require customers to use services such as those offered by Descartes; the
impact on Descartes' business of the global economic downturn; departures of
key customers; the impact of foreign currency exchange rates; Descartes'
ability to retain or obtain sufficient capital in addition to the Debt
Facility to execute on its business strategy, including its acquisition
strategy; disruptions in the movement of freight; the potential for future
goodwill or intangible impairment as a result of other-than-temporary
decreases in Descartes' market capitalization; 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 FY13. 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 Measures - Adjusted EBITDA and Adjusted
EBITDA per Diluted Share

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 Adjusted EBITDA and Adjusted EBITDA per diluted share, in
making investment decisions about our company and measuring our operational
results.

The term "Adjusted EBITDA" refers to a financial measure that we define as
earnings before interest, taxes, depreciation, amortization, stock-based
compensation (for which we include related fees and taxes) and other charges
(for which we include acquisition-related expenses and restructuring charges).
Adjusted EBITDA per diluted share divides Adjusted EBITDA by the number of
diluted shares used in calculating the GAAP diluted earnings per share, or
diluted EPS, measure.

Management considers acquisition-related and restructuring activities to be
outside the scope of Descartes' ongoing operations and the related expenses
are not used by management to measure operations. Accordingly, these expenses
are excluded from Adjusted EBITDA, which we reference to both measure our
operations and as a basis of comparison of our operations from
period-to-period. Management believes that investors and financial analysts
measure our business on the same basis, and we are providing the Adjusted
EBITDA financial metric to assist in this evaluation and to provide a higher
level of transparency into how we measure our own business. However, Adjusted
EBITDA is a non-GAAP financial measure and may not be comparable to similarly
titled measures reported by other companies. Adjusted EBITDA should not be
construed as a substitute for net income determined in accordance with GAAP or
other non-GAAP measures that may be used by other companies, such as EBITDA.
The use of Adjusted EBITDA does have limitations. In particular, we have
completed seven acquisitions since the beginning of fiscal 2012, and may
complete additional acquisitions in the future that will result in
acquisition-related expenses and restructuring charges. As these
acquisition-related expenses and restructuring charges may continue as we
pursue our consolidation strategy, some investors may consider these charges
and expenses as a recurring part of operations rather than non-recurring
charges and expenses that are not part of operations.

The table below reconciles Adjusted EBITDA and Adjusted EBITDA per diluted
share to net income and diluted earnings per share, respectively, reported in
our unaudited Consolidated Statements of Operations for Q3FY14, Q2FY14,
Q1FY14, Q4FY13 and Q3FY13, which we believe are the most directly comparable
GAAP measures.

                                                                        
(US dollars in millions)        Q3FY14  Q2FY14  Q1FY14  Q4FY13  Q3FY13
Net income, as reported on
Consolidated Statements of      2.2     1.7     2.8     7.8     3.1
Operations
Adjustments to reconcile to                                 
Adjusted EBITDA:
Interest expense                0.3     0.3     --      --      --
Income tax expense (recovery)   2.1     1.5     2.0     (3.6)   1.6
Depreciation expense            0.9     0.8     0.8     1.1     0.7
Amortization of intangible      4.6     4.6     4.0     4.0     3.7
assets
Stock-based compensation and    0.5     0.6     0.5     0.5     0.6
related fees and taxes
Acquisition-related expenses    0.2     0.2     0.3     0.3     --
Restructuring charges           0.6     1.1     --      0.2     0.2
Adjusted EBITDA                 11.4    10.8    10.4    10.3    9.9
                                                           
Weighted average diluted shares 64,301 64,183 64,024 63,910 63,793
outstanding (thousands)
Diluted earnings per share      0.03    0.03    0.04    0.12    0.05
Adjusted EBITDA per diluted     0.18    0.17    0.16    0.16    0.16
share




THE DESCARTES SYSTEMS GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(US DOLLARS IN THOUSANDS; US GAAP; UNAUDITED)
                                                                                     
                                                                  October   January
                                                                   31,       31,
                                                                  2013      2013
ASSETS                                                                      As
                                                                             Revised*
CURRENT ASSETS                                                              
Cash and cash equivalents                                          49,266    37,638
Accounts receivable (net)                                                   
Trade                                                              20,111    20,640
Other                                                              9,045     5,655
Prepaid expenses and other                                         3,788     3,412
Inventory                                                         1,214     812
Deferred income taxes                                              13,341    12,978
                                                                  96,765    81,135
CAPITAL ASSETS                                                     9,186     10,236
DEFERRED INCOME TAXES                                              20,235    25,142
INTANGIBLE ASSETS                                                  83,132    71,297
GOODWILL                                                           100,086   88,297
                                                                  309,404   276,107
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
                                                                           
CURRENT LIABILITIES                                                         
Accounts payable                                                   5,964     6,113
Accrued liabilities                                                15,404    12,373
Income taxes payable                                               2,005     2,354
Current portion of debt                                            3,825     --
Deferred revenue                                                   7,895     7,638
                                                                  35,093    28,478
DEBT                                                               13,387    --
INCOME TAX LIABILITY                                               4,881     3,770
DEFERRED INCOME TAXES                                              11,031    5,620
                                                                  64,392    37,868
COMMITMENTS, CONTINGENCIES AND GUARANTEES                                   
SHAREHOLDERS' EQUITY                                                        
Common shares – unlimited shares authorized; Shares issued and
outstanding totaled 62,771,090 at October 31, 2013 (January 31,    93,251    92,472
2013 – 62,654,284)
Additional paid-in capital                                         451,475   451,434
Accumulated other comprehensive income                             1,092     1,869
Accumulated deficit                                                (300,806) (307,536)
                                                                  245,012   238,239
                                                                  309,404   276,107
                                                                           
          
*The condensed consolidated balance sheet, as at January 31, 2013, has been revised to
increase deferred tax assets and reduce the accumulated deficit by $1.2 million.




THE DESCARTES SYSTEMS GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(US DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND WEIGHTED AVERAGE SHARE AMOUNTS;
US GAAP;
UNAUDITED)
                                                     
                            Three Months Ended        Nine Months Ended
                            October 31,  October 31,  October 31, October 31,
                            2013         2012         2013        2012
                                                               
REVENUES                     38,763       32,685       110,989     93,084
COST OF REVENUES             12,748       10,432       36,255      31,598
GROSS MARGIN                 26,015       22,253       74,734      61,486
EXPENSES                                                        
Sales and marketing          4,142        3,695        12,181      9,941
Research and development     6,835        5,225        19,196      15,354
General and administrative   5,043        4,661        14,762      11,212
Other charges                784          225          2,401       1,831
Amortization of intangible   4,612        3,735        13,220      10,182
assets
                            21,416       17,541       61,760      48,520
INCOME FROM OPERATIONS       4,599        4,712        12,974      12,966
INTEREST EXPENSE             (283)        (1)          (649)       (32)
INVESTMENT INCOME            18           14           37          67
INCOME BEFORE INCOME TAXES   4,334        4,725        12,362      13,001
INCOME TAX EXPENSE                                              
Current                      732          441          1,782       1,695
Deferred                     1,419        1,169        3,850       3,098
                            2,151        1,610        5,632       4,793
NET INCOME                   2,183        3,115        6,730       8,208
EARNINGSPER SHARE                                              
Basic                        0.03         0.05         0.11        0.13
Diluted                      0.03         0.05         0.10        0.13
WEIGHTED AVERAGE SHARES                                         
OUTSTANDING (thousands)
Basic                        62,737       62,599       62,706      62,530
Diluted                      64,301       63,793       64,197      63,838




THE DESCARTES SYSTEMS GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(US DOLLARS IN THOUSANDS; US GAAP; UNAUDITED)
                                                     
                              Three Months Ended      Nine Months Ended
                              October 31, October 31, October 31, October 31,
                              2013        2012        2013        2012
OPERATING ACTIVITIES                                            
Net income                     2,183       3,115       6,730       8,208
Adjustments to reconcile net
income to cash provided by                                      
operating activities:
Depreciation                   861         699         2,423       1,815
Amortization of intangible     4,612       3,735       13,220      10,182
assets
Stock-based compensation       503         441         1,454       804
expense
Deferred tax expense           1,419       1,169       3,850       3,098
Changes in operating assets                                     
and liabilities:
Accounts receivable                                             
Trade                          645         (2,767)     3,014       (3,432)
Other                          155         (500)       1,858       (725)
Prepaid expenses and other     (28)        15          (36)        177
Inventory                      35          206         (402)       (511)
Accounts payable               8           (441)       (529)       (343)
Accrued liabilities            1,096       1,263       709         (1,516)
Income taxes payable           666         374         347         333
Deferred revenue               (2,920)     (2,069)     (2,638)     (1,885)
Cash provided by operating     9,235       5,240       30,000      16,205
activities
INVESTING ACTIVITIES                                            
Additions to capital assets    (547)       (869)       (1,567)     (2,536)
Settlement of acquisition      --          --          --          (590)
earn-out
Acquisition of subsidiaries,   --          --          (32,419)    (37,596)
net of cash acquired
Cash used in investing         (547)       (869)       (33,986)    (40,722)
activities
FINANCING ACTIVITIES                                            
Proceeds from borrowing on the --          --          19,795      --
debt facility
Payment of debt issuance costs --          --          (692)       --
Repayments of debt             (984)       (51)        (2,827)     (60)
Issuance of common shares for  192         113         418         546
cash
Settlement of stock options    --          --          (1,361)     (1,525)
Cash (used in) provided by     (792)       62          15,333      (1,039)
financing activities
Effect of foreign exchange
rate changes on cash and cash  452         434         281         396
equivalents
Increase (decrease) in cash    8,348       4,867       11,628      (25,160)
and cash equivalents
Cash and cash equivalents,     40,918      35,520      37,638      65,547
beginning of period
Cash and cash equivalents, end 49,266      40,387      49,266      40,387
of period

CONTACT: Descartes Investor Contact:
         Laurie McCauley (519) 746-6114 x202358
         investor@descartes.com

company logo
 
Press spacebar to pause and continue. Press esc to stop.