Beginning its second year with a new business model, Descartes Systems Group, Inc., a developer of logistics software, said that fiscal 2007 first-quarter earnings jumped a whopping 140% on a 3% gain in revenue.
For the first quarter ended April 30, Descartes reported net income of $1.2 million, compared with $500,000 in the comparable period last year. Revenues reached $11.7 million in the period, compared with $11.3 million in the like quarter of fiscal 2006. Earnings before interest and taxes (EBITDA) were $2.4 million, up 60% from the $1.5 million recorded in last year's first quarter.
"This is a very successful start to 2007," said Arthur Mesher, Descartes' chief executive, during a conference call today with financial analysts. "I'm very confident about the business as we go into the summer."
Descartes closed fiscal year 2006 in the black, its first full year of sustained profitability in seven years. The company reported a net profit of $3 million on revenues of $45.7 million in fiscal 2006, compared with a loss of $55.3 million on slightly higher revenues in the previous fiscal year. Fiscal 2006 was also the first year that Descartes offered its applications on a software-as-a-service basis, a major step in its transformation.
The Waterloo, Ontario-based company has two product lines. The Delivery Management Suite offers such capabilities as delivery planning, warehouse optimization, and transportation management. Descartes Global Logistics Network helps connect trading partners using a network of transportation and logistics services providers. The company sells its products to transportation and logistics, manufacturing, retail, distribution, and service provider companies.
Mesher today emphasized the velocity of the turnaround, saying that the company was ahead of schedule in achieving certain key metrics such as gross margin, which grew to 65% in the first quarter of fiscal 2007, compared with 57% in the year-prior quarter and 64% in the fourth quarter of fiscal 2006. "We are starting to see earnings leverage in our model," he said.
Today's first-quarter earnings announcement comes about a month after Descartes agreed to acquire Ottawa-based ViaSafe, a privately-held provider of secure electronic logistics services for global trade, for $8.9 million. ViaSafe's revenue of $3.6 million and unaudited net income of about $900,000 were included in Descartes' fiscal 2007 first-quarter report.
Asked about potential future acquisitions during the conference call, Mesher described the company's competitive landscape as highly fragmented with undercapitalized vendors, but said that Descartes would look for companies that perform activities similar to its own.
"We want to find people who gather the same information -- orders, shipments, bills of lading -- that we do but do other things with it," Mesher said. "We think customers would like a one-stop shop for these things. We are very active right now."
Major new contracts in the quarter included one with consumer lawn equipment manufacturer Country Home Products/DR Power Equipment, which will use Descartes' transportation manager product. Descartes also said that Wolseley (Group Services) Ltd. of the U.K., a distributor of plumbing and heating products and a supplier of building materials to professional contractors, has chosen its transportation and delivery management product.