- THE MAGAZINE
The Descartes Systems Group Inc. announced financial results for its fiscal 2014 fourth quarter (Q4FY14) and year (FY14) ended January 31, 2014. All financial results referenced are in United States currency and unless otherwise indicated are determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
“We’re pleased with the company’s performance during this year, with continued strong growth in revenues, Adjusted EBITDA and cash flow,” said Edward Ryan, Descartes’ CEO. “Our strategy of focusing on recurring revenues, organic growth and complementary acquisitions continues to deliver consistent, predictable financial results. In addition to growing fourth quarter revenues by 19 percent more than the prior year, we also generated record quarterly Adjusted EBITDA of $11.9 million. As we look ahead to fiscal 2015, 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.”
FY14 Financial Results
• Revenues of $151.3 million, up 19 percent from $126.9 million in the fiscal year ended January 31, 2013 (FY13);
• Services revenues of $137.8 million, up 18 percent from $116.8 million in FY13. Services revenues comprised 91 percent of total revenues for the year;
• Cash provided by operating activities of $42.6 million, up 41 percent from $30.3 million in FY13;
• Net income of $9.6 million, down from $16 million in FY13. Net income was negatively impacted in FY14 by $3.3 million in one-time charges related to the retirement of Descartes’ former chairman and CEO (the Chairman and CEO Retirement Charges), $1.9 million in restructuring charges ($1 million in FY13) related to Descartes’ ongoing integration of its acquisition of KSD Software Norway AS (KSD), and $1 million of interest expense on its revolving debt facility. Net income in FY14 and FY13 was positively impacted by the release of valuation allowance for deferred tax assets of $2.8 million and $5.3 million, respectively;
• Earnings per share on a diluted basis of $0.15, down from $0.25 in FY13;
• Adjusted EBITDA of $44.5 million, up 16 percent from $38.2 million in FY13. Adjusted EBITDA as a percentage of revenues was 29 percent, down from 30 percent in FY13;
• Adjusted EBITDA per share on a diluted basis of $0.69, up 15 percent from $0.60 in FY13; and
• Days-sales-outstanding (DSO) for FY14 were 46 days, down from 55 days in FY13.
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 included chairman and CEO Retirement Charges, restructuring charges and acquisition-related expenses). 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 FY14 and FY13 (dollar amounts, other than per share amounts, in millions):
|Earnings per diluted share*||0.15||0.25|
|Cash provided by operating activities||42.6||30.3|
|Adjusted EBITDA as a % of revenues||29%||30%|
|Adjusted EBITDA per diluted share||0.69||0.60|
* Net income and earnings per diluted share were negatively impacted by $3.3 million of chairman and CEO Retirement Charges in FY14, and $1.9 million and $1.0 million in restructuring charges in FY14 and FY13, respectively. Net income and earnings per diluted share in FY14 and FY13 were positively impacted by the release of valuation allowance for deferred tax assets of $2.8 million and $5.3 million, respectively.
Q4FY14 Financial Results
• Revenues of $40.3 million, up 19 percent from $33.8 million in Q4FY13 and up 4 percent from $38.8 million in Q3FY14;
• Services revenues of $36.6 million, up 22 percent from $30.1 million in Q4FY13 and up 3 percent from $35.6 million in Q3FY14. Services revenues comprised 91 percent of total revenues for the quarter;
• Cash provided by operating activities of $12.6 million, down from a record $14.1 million in Q4FY13 and up 37 percent from $9.2 million in Q3FY14;
• Net income of $2.9 million, down from $7.8 million in Q4FY13 and up 32 percent from $2.2 million in Q3FY14. Q4FY14 net income was negatively impacted by $3.3 million in chairman and CEO Retirement Charges and positively impacted by the release of $2.8 million in valuation allowance for deferred tax assets ($5.3 million in Q4FY13);
• Earnings per share on a diluted basis of $0.04, down from $0.12 in Q4FY13 and up from $0.03 in Q3FY14;
• Adjusted EBITDA of $11.9 million, up 16 percent from $10.3 million in Q4FY13 and up 4 percent from $11.4 million in Q3FY14. Adjusted EBITDA as a percentage of revenues was 30 percent, consistent with Q4FY13 and up from 29 percent in Q3FY14; and
• Adjusted EBITDA per share on a diluted basis of $0.18, up 13 percent from $0.16 in Q4FY13 and consistent with Q3FY14.
The following table summarizes Descartes’ results in the categories specified below over the past five fiscal quarters (unaudited; dollar amounts, other than per share amounts, in millions):
|Earnings per diluted share||0.04||0.03||0.03||0.04||0.12|
|Cash provided by operating activites||12.6||9.2||11.2||9.6||14.1|
|Adjusted EBITDA as a % of revenues||30%||29%||28%||31%||30%|
|Adjusted EBITDA per diluted share||0.18||0.18||0.17||0.16||0.16|
* Net income and earnings per diluted share were negatively impacted by $3.3 million of chairman and CEO Retirement Charges in Q4FY14 as well as $0.6 million and $1.1 million in restructuring charges in Q3FY14 and Q2FY14, respectively. Net income and earnings per diluted share were positively impacted by the release of valuation allowance for deferred tax assets of $2.8 million and $5.3 million in Q4FY14 and Q4FY13, respectively.
Based on the location of Descartes’ customers, the geographic distribution of Q4FY14 revenues was as follows:
• $16.3 million of revenues (40 percent) were generated in the U.S.;
• $10.5 million (26 percent) in Europe, Middle East and Africa (EMEA), excluding Belgium and Netherlands;
• $4.2 million (10 percent) in Netherlands;
• $3.9 million (10 percent) in Belgium;
• $3.5 million (9 percent) in Canada;
• $1.4 million (4 percent) in the Asia Pacific region; and
• $0.5 million (1 percent) in the Americas, excluding the U.S. and Canada.
At January 31, 2014, Descartes had $62.7 million in cash, comprised entirely of cash and cash equivalents, and $40.4 million of debt outstanding on its revolving debt facility.
Cash and cash equivalents increased by $13.4 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 Q4FY14 and FY14, in millions of dollars:
|Cash provided by operating activities||12.6||42.6|
|Additions to capital assets||(0.9)||(2.4)|
|Acquisition of subsidiaries, net of cash required||(26.3)||(58.7)|
|Proceeds from borrowing on debt facility||26.5||46.3|
|Payments of debts issuance costs||-||(0.7)|
|Repayments of debt||(0.9)||(3.7)|
|Issuance of common shares||3.2||3.6|
|Settlement of stock options||-||(1.4)|
|Effect of foreign exchange rate on cash and cash equivalents||(0.8)||(0.5)|
|Net change in cash and cash equivalents||13.4||25.1|
|Cash and cash equivalents, beginning of period||49.3||37.6|
|Cash and cash equivalents, end of period||62.7||62.7|
Acquisition of Compudata
On December 23, 2013, Descartes announced its acquisition of Compudata, a leading provider of B2B supply chain integration and e-invoicing solutions in Switzerland. The all cash purchase price of $18.1 million, net of cash acquired, was funded by drawing on Descartes’ existing revolving debt facility.
Compudata brought more than 500 customers to Descartes' Global Logistic Network, with the majority of these in Switzerland. Compudata's wider community included a significant number of retailers and suppliers that joined Descartes' logistics community, presenting additional opportunities for trading partners to collect and share logistics data earlier in the business process—from purchase order to loading dock door.
Acquisition of Impatex
On December 23, 2013, Descartes announced its acquisition of Impatex Freight Software Limited, a provider of electronic customs filing and freight forwarding solutions in the U.K. The all cash purchase price of $8.2 million, net of cash acquired, was also funded by drawing on Descartes’ existing revolving debt facility.
Impatex brought more than 200 freight forwarder customers to Descartes' Global Logistic Network, with the majority of these in the U.K. By combining Impatex's leading U.K. customs and forwarding solutions with Descartes' global community of logistics participants and logistics management solutions, customers now have a single trusted partner to help them manage their shipments across the globe.
Other Q4FY14 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 since December 4, 2013:
• Leading ocean carriers and NVOCCs select Descartes’ Japan Advanced Filing Rule Compliance Solution, a new customs compliance initiative that went live in March 2014;
• Descartes was added to the S&P/TSX Composite Index;
• Descartes celebrated the 15th anniversary of our listing on NASDAQ on Monday, January 27, 2014; and
• New customer successes at Botlek Tank Terminal and U.S. Supply Company.