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Descartes Reports Fiscal 2012 Fourth Quarter and Annual Financial Results(GlobeNewswire - Canada Via Acquire Media NewsEdge) Record Quarterly and Annual Operating Performance WATERLOO, Ontario, March 8, 2012 (GLOBE NEWSWIRE) -- Descartes Systems Group (TSX:DSG) (Nasdaq:DSGX) announced financial results for its fiscal 2012 fourth quarter (Q4FY12) and year (FY12) ended January 31, 2012. 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). FY12 Financial Results As described in more detail below, key financial highlights for FY12 included: Revenues of $114.0 million, up 15% from $99.2 million in the year ended January 31, 2011 (FY11); Services revenues of $105.7 million, up 13% from $93.7 million in FY11. Services revenues comprised 93% and 94% of total revenues for years ended FY12 and FY11, respectively; Gross margin of 66%, consistent with FY11; Cash provided by operating activities of $23.9 million, up 20% from $19.9 million in FY11; Income before income taxes of $15.4 million, up 95% from $7.9 million in FY11; Net income of $12.0 million, up 4% from $11.5 million in FY11; Earnings per share on a diluted basis of $0.19, up 6% from $0.18 in FY11; Adjusted EBITDA of $33.0 million, up 24% from $26.7 million in FY11. Adjusted EBITDA as a percentage of revenues was 29% in FY12 and 27% in FY11; and Adjusted EBITDA per diluted share was $0.52, up 24% from $0.42 in FY11. The following table summarizes Descartes' results in the categories specified below over FY12 and FY11 (dollar amounts, other than per share amounts, in millions): FY12 FY11 Revenues114.0 99.2 Services revenues105.7 93.7 Gross margin66% 66% Cash provided by operating activities23.9 19.9 Income before income taxes15.4 7.9 Net income12.0 11.5 Adjusted EBITDA33.0 26.7 Adjusted EBITDA as a % of revenues29% 27% Adjusted EBITDA per diluted share0.52 0.42 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 and amortization (for which we include amortization of intangible assets, deferred compensation, stock-based compensation and related 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. Q4FY12 Financial Results As described in more detail below, key financial highlights for Descartes in Q4FY12 (unaudited) included: Revenues of $29.6 million, up 10% from $26.9 million in the fourth quarter of fiscal 2011 (Q4FY11) and up 4% from $28.5 million in the previous quarter ended October 31, 2011 (Q3FY12); Services revenues of $26.9 million, up 8% from $25.0 million in Q4FY11 and up 3% from $26.2 million in Q3FY12; Gross margin of 66%, compared to 65% in Q4FY11 and 67% in Q3FY12; Cash provided by operating activities of $7.5 million, up 3% from $7.3 million in Q4FY11 and up 14% from $6.6 million in Q3FY12; Income before income taxes of $3.2 million, up 23% from $2.6 million in Q4FY11 and down from $4.5 million in Q3FY12; Net income of $4.5 million, down from $7.7 million in Q4FY11 and up 67% from $2.7 million in Q3FY12; Earnings per share on a diluted basis of $0.07, down from $0.12 in Q4FY11 and up 75% from $0.04 in Q3FY12; Days-sales-outstanding (DSO) for Q4FY12 were 52 days, up from 48 days in Q4FY11 and down from 53 days in Q3FY12. DSOs in the quarter included approximately 4 days from acquisitions completed in the quarter; Adjusted EBITDA of $8.5 million, up 10% from $7.7 million in Q4FY11 and compared to $8.5 million in Q3FY12. Adjusted EBITDA as a percentage of revenues was 29% in Q4FY12, compared to 29% in Q4FY11 and 30% in Q3FY12; and Adjusted EBITDA per diluted share for Q4FY12 was $0.13, up from $0.12 in Q4FY11 and compared to $0.13 in Q3FY12. 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): Q4FY12 Q3 FY12 Q2 FY12 Q1 FY12 Q4 FY11 Revenues29.6 28.5 28.8 27.1 26.9 Services revenues26.9 26.2 26.7 25.9 25.0 Gross margin66% 67% 66% 67% 65% Cash provided by operating activities7.5 6.6 4.6 5.5 7.3 Income before income taxes3.2 4.5 4.2 3.5 2.6 Net income*4.5 2.7 2.6 2.2 7.7 Earnings per diluted share*0.07 0.04 0.04 0.03 0.12 Adjusted EBITDA8.5 8.5 8.3 7.8 7.7 Adjusted EBITDA as a % of revenues29% 30% 29% 29% 29% Adjusted EBITDA per diluted share0.13 0.13 0.13 0.12 0.12 DSOs (days)52 53 53 53 48 * Net income and earnings per diluted share were positively impacted by the release of valuation allowance of $0.7 million and $7.2 million in Q4FY12 and Q4FY11, respectively. Based on the location of Descartes' customers, the quarterly geographic distribution of revenues was as follows: $12.3 million of revenues (42%) were generated in the US; $6.8 million (23%) in Europe, Middle East and Africa, excluding Belgium; $4.6 million (16%) in Belgium; $3.9 million (13%) in Canada; $1.6 million (5%) in the Asia Pacific region; and $0.4 million (1%) in the Americas, excluding the US and Canada. "Logistics is the backbone of commerce. Uniting business in commerce has never been more important, to improving the productivity, performance and security of logistics operations," said Art Mesher, Descartes' CEO. "Our focus on delivering results to customers through our cloud-based Logistics Technology Platform continues to fuel financial performance that is ahead of our plans." Cash Position As at January 31, 2012, Descartes had $65.5 million in cash comprised entirely of cash and cash equivalents. The primary use of cash in FY12 was $25.6 million to complete three acquisitions Telargo in June 2011; InterCommIT in November 2011; and GeoMicro, Inc. in January 2012. As at January 31, 2011, Descartes had $69.6 million in cash and cash equivalents. The table set forth below provides a summary of cash flows for Q4FY12 and FY12, in millions of dollars (quarterly amounts unaudited; dollar amounts, other than per share amounts, in millions): Q4FY12FY12 Cash provided by operating activities 7.5 23.9 Additions to capital assets (1.5) (4.7) Business acquisitions, net of cash acquired (16.3) (21.3) Issuance of common shares 0.1 1.7 Repayment of other liabilities -- (4.3) Effect of foreign exchange rate on cash and cash equivalents (0.5) 0.6 Net change in cash and cash equivalents (10.7) (4.1) Cash and cash equivalents, beginning of period 76.2 69.6 Cash and cash equivalents, end of period 65.5 65.5 "Our results reflect Descartes' focus on consistent, sustainable operational performance. We've grown profitably and maintained a strong balance sheet while integrating new businesses in to our Logistics Technology Platform," said Stephanie Ratza, CFO at Descartes. Q4FY12 Business Events / Announcements In line with Descartes' strategy to build leading product offerings and expand its global network of customers and trading partners, in Q4FY12 the company made the following announcements and/or participated in the following events: Announced its acquisition of InterCommIT, a Netherlands-based provider of business-to-business integration services; Announced that Descartes was awarded the 2011 Intermec ISV Innovator of the Year Award for the United States; Unveiled major extensions of its Logistics Flow Control Solution for retailers; Announced that Chris Jones, Descartes' Executive Vice President Marketing & Services, had been named a 2012 Provider 'Pro to Know' by Supply & Demand Chain Executive magazine; and Announced its acquisition of GeoMicro, Inc., a California-based provider of advanced geographic information systems and commercial turn-by-turn navigation.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. Toronto time on March 8, 2012. Designated numbers are 888-812-2278 for North America or +1-706-679-7394 for international, using conference ID number 49453023. 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 in two formats and accessible from March 8, 11:15 a.m. EST until March 15, 23:59 p.m. EST by dialing 855-859-2056 or +1-404-537-3406 and using conference ID number 49453023. 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' B2B network, the Global Logistics Network, integrates more than 35,000 trading partners to our cloud-based Logistics Technology Platform to unite their businesses in commerce. 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. The Descartes Systems Group logo is available at //www.globenewswire.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 relates to the positioning of Descartes to provide value to customers and shareholders; delivery of results to customers and financial performance ahead of plans; 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; 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 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 FY12. 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 and amortization (for which we include amortization of intangible assets, deferred compensation, stock-based compensation and related 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 as a measure of our operations and as a basis for comparison of our operations from period-to-period. Management believes that investors and financial analysts also use Adjusted EBITDA as a measure of our operations, 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 nine acquisitions within the past four fiscal years, 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 Q4FY12, Q3FY12, Q2FY12, Q1FY12 and Q4FY11, which we believe are the most directly comparable GAAP measures (unaudited; dollar amounts, other than per share amounts, in millions). Q4FY12 Q3FY12 Q2FY12 Q1FY12 Q4FY11Net income, as reported on Consolidated Statements of Operations4.5 2.7 2.6 2.2 7.7 Adjustments to reconcile to Adjusted EBITDA: Income tax expense (recovery)(1.3) 1.7 1.6 1.3 (5.2) Depreciation expense0.7 0.6 0.6 0.6 0.7 Amortization of intangible assets3.0 2.9 2.9 3.1 3.1 Amortization of deferred compensation, stock-based compensation and related taxes0.5 0.2 0.2 0.3 0.3 Acquisition-related expenses0.7 0.4 0.3 0.3 0.2 Restructuring charges0.4 -- 0.1 -- 0.9Adjusted EBITDA8.5 8.5 8.3 7.8 7.7 Weighted average diluted shares outstanding (thousands) 63,629 63,408 63,358 63,194 63,181Diluted earnings per share0.07 0.04 0.04 0.03 0.12Adjusted EBITDA per diluted share0.13 0.13 0.13 0.12 0.12 The table below reconciles Adjusted EBITDA and Adjusted EBITDA per diluted share to net income and diluted earnings per share, respectively, reported in our audited Consolidated Statements of Operations for the years ended January 31, 2012 and 2011, which we believe are the most directly comparable GAAP measures (unaudited; dollar amounts, other than per share amounts, in millions). FY12 FY11Net income, as reported on Consolidated Statements of Operations12.0 11.5 Adjustments to reconcile to Adjusted EBITDA: Investment income(0.2) (0.2) Income tax expense (recovery)3.4 (3.6) Depreciation expense2.5 2.4 Amortization of intangible assets12.0 11.5 Amortization of deferred compensation, stock-based compensation and related taxes1.2 1.1 Acquisition-related expenses1.6 1.5 Restructuring charges0.5 2.5Adjusted EBITDA33.0 26.7 Weighted average diluted shares outstanding (thousands)63,400 62,888Diluted earnings per share0.19 0.18Adjusted EBITDA per diluted share0.52 0.42 The Descartes Systems Group Inc.Consolidated Balance Sheets (US dollars in thousands; US GAAP) January 31, January 31, 2012 2011ASSETS CURRENT ASSETS Cash and cash equivalents65,547 69,644 Accounts receivable Trade17,154 14,417 Other5,324 3,967 Prepaid expenses and other2,814 1,968 Inventory413 -- Deferred income taxes12,420 11,654 103,672 101,650 CAPITAL ASSETS9,287 7,309 GOODWILL68,005 56,742 INTANGIBLE ASSETS46,681 40,703 DEFERRED INCOME TAXES31,279 34,865 258,924 241,269LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable5,250 4,992 Accrued liabilities12,247 11,342 Income taxes payable1,318 471 Deferred revenue6,636 6,310 Other liabilities70 67 25,521 23,182 DEFERRED REVENUE1,718 1,665 INCOME TAX LIABILITY3,277 2,468 DEFERRED INCOME TAX LIABILITY9,754 8,267 OTHER LIABILITIES98 172 40,368 35,754 SHAREHOLDERS' EQUITY Common shares – unlimited shares authorized; Shares issued and outstanding totaled 62,432,727 at January 31, 2012 (January 31, 2011 – 61,741,702)90,924 88,148 Additional paid-in capital452,424 452,300 Accumulated other comprehensive (loss) income(63) 1,822 Accumulated deficit(324,729) (336,755) 218,556 205,515 258,924 241,269 The Descartes Systems Group Inc.Consolidated Statements of Operations (US dollars in thousands, except per share and weighted average share amounts; US GAAP; Quarterly Amounts Unaudited) Three Months EndedYears Ended January 31, January 31,January 31, January 31, 2012 20112012 2011 REVENUES29,571 26,853113,990 99,175COST OF REVENUES10,121 9,35638,313 33,875GROSS MARGIN19,450 17,49775,677 65,300EXPENSES Sales and marketing3,297 2,73113,009 11,492 Research and development5,132 4,54019,044 16,971 General and administrative3,636 3,48914,272 13,633 Other charges1,119 1,0982,131 3,995 Amortization of intangible assets3,098 3,12911,996 11,471 16,282 14,98760,452 57,562INCOME FROM OPERATIONS3,168 2,51015,225 7,738INTEREST EXPENSE(2) (8)(9) (14)INVESTMENT INCOME34 48174 209INCOME BEFORE INCOME TAXES3,200 2,55015,390 7,933INCOME TAX EXPENSE (RECOVERY) Current640 (790)1,438 277 Deferred(1,950) (4,368)1,926 (3,883) (1,310) (5,158)3,364 (3,606)NET INCOME4,510 7,70812,026 11,539EARNINGS PER SHARE Basic0.07 0.130.19 0.19 Diluted0.07 0.120.19 0.18WEIGHTED AVERAGE SHARES OUTSTANDING (thousands) Basic62,410 61,65162,218 61,523 Diluted63,629 63,18163,400 62,888 The Descartes Systems Group Inc.Consolidated Statements of Cash Flows (US dollars in thousands; US GAAP; Quarterly Amounts Unaudited) Three Months EndedYears Ended January 31, January 31,January 31, January 31, 2012 20112012 2011OPERATING ACTIVITIES Net income 4,510 7,70812,026 11,539 Adjustments to reconcile net income to cash provided by operating activities: Depreciation665 6792,462 2,420 Amortization of intangible assets3,098 3,12911,996 11,471 Write-off redundant assets-- ---- 417 Amortization of deferred compensation-- 111 8 Stock-based compensation expense472 2681,213 1,076 Gain on sale of investment in affiliate-- ---- (20) Loss from investment in affiliate-- ---- 19 Deferred tax expense (recovery)(1,950) (4,368)1,926 (3,883) Deferred tax charge49 49196 196 Changes in operating assets and liabilities: Accounts receivable Trade587 757(460) 2,748 Other(60) 202(822) 106 Prepaid expenses and other(253) 96(619) 51 Inventory58 --75 -- Accounts payable789 (582)(1,065) (275) Accrued liabilities(868) (333)(1,682) (3,088) Income taxes payable183 (936)99 (1,733) Deferred revenue189 588(1,430) (1,163) Cash provided by operating activities7,469 7,25823,926 19,889INVESTING ACTIVITIES Maturities of short-term investments-- ---- 5,071 Additions to capital assets(1,473) (428)(4,734) (1,656) Proceeds from the sale of investment in affiliate-- ---- 487 Acquisition of subsidiaries, net of cash acquired and bank indebtedness assumed(16,279) --(21,281) (44,989) Cash used in investing activities(17,752) (428)(26,015) (41,087)FINANCING ACTIVITIES Issuance of common shares for cash140 5701,775 1,133 Repayment of other liabilities(18) (24)(4,342) (358) Cash provided by (used in) financing activities122 546(2,567) 775 Effect of foreign exchange rate changes on cash and cash equivalents(523) (532)559 513Increase (decrease) in cash and cash equivalents(10,684) 6,844(4,097) (19,910)Cash and cash equivalents, beginning of period76,231 62,80069,644 89,554Cash and cash equivalents, end of period65,547 69,64465,547 69,644CONTACT: Descartes Investor Contact: Laurie McCauley (519) 746-6114 x 2358 [email protected] Source: Descartes Systems Group 2012 GlobeNewswire, Inc. |