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Descartes Bucks Seasonality with Record Quarter Sign Up to receive Daily News Alerts in your E-mail Inbox
Posted on Friday, March 07, 2008 3:44:00 PM |
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In a repeat of its fiscal 2007 fourth-quarter performance, trade and logistics management specialist Descartes Systems Group on Thursday reported an 18% increase in revenue for its recently closed fiscal 2008 fourth quarter. For the period ended Jan. 31, 2008, Descartes logged $16 million in revenue, up from $13.6 million in the comparable period in fiscal 2007. For the year, revenue totaled $59 million, a 13% improvement over the prior year's $52 million. At $17.9 million, net income in the period actually outstripped sales, as Descartes benefited from a non-cash, deferred income tax recovery of $16 million. Discounting that one-time infusion, the company still managed to increase income 58% year over year, to $1.9 million. Founded in 1981, Descartes provides services to companies that move goods worldwide, utilizing its Global Logistics Network to help manufacturers and transportation companies manage the transit of goods across national borders and modes of transport, including ocean freight, air transport, and trucking services.Its geographic revenue mix favors the Americas, which accounted for 54% of Descartes' sales in the fourth quarter. Revenue from Europe, the Middle East, and Africa contributed 26% of the total, while Canada kicked in 16%, and Asia Pacific, 3%. The company has spent the past few years in transition mode, porting its transportation management offerings from the traditional software license model to the popular software-as-a-service (SaaS) format. At the close of fiscal 2008, the transition appears nearly complete — software licenses now account for less than 10% of Descartes' sales. In the wake of this quarter's strong performance, CEO Arthur Mesher declared Descartes a "real company, generating real cash flows."On a conference call yesterday to discuss the results, Mesher responded to one analyst's question about how the mix of license versus service revenue will play out in the future, saying, "We're not going to tell customers how to buy. We have a preference to sell one way over another. There are still some customers that are telling us that they would like to buy licenses, and there are a lot of customers who are telling us they really like the new way that were selling. ... We're not going to argue with them, but I think everyone knows that we have a preference" for the service-based model, he said. Through fiscal 2008, the company managed to buck its traditional seasonality, growing revenue in each successive quarter, from $13.3 million in Q1, to $14.3 million in Q2, to $15.5 million in Q3, to $16 million in the closing period. The sequential growth prompted Mesher to label Descartes "countercyclical," saying that against a backdrop of "very difficult economic times" the company has yet managed to increase revenue. He credited the ballooning transportation costs faced by companies that own their own transit fleets, saying, "If they've got 4,000 trucks, they want to find out how to have 3,500 as soon as possible." For that, they tend to turn to companies like Descartes, perhaps even more so than in better economic times, he noted. The company continued its acquisitive streak in late fiscal 2008, executing three "tuck-in" acquisitions in the fourth quarter with a collective price tag of approximately $6 million. Plans call for a continuation of the buying trend, officials said on the conference call. Descartes ended the year with cash and equivalents of $44.1 million to fund that effort. Looking ahead, Mesher said he sees interesting opportunities for new technologies to assist companies moving their own goods. "For our private fleet operators, there is a whole new convergence of wireless capabilities with route optimization," which will spur growth opportunities around real-time location-based services, traffic information, and routing and scheduling services, he predicted.
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