Logistics and delivery management software provider Descartes Systems Group yesterday announced sizable revenue and earnings improvements for its recently closed fourth quarter and fiscal 2007.
In its final quarter, which closed on Jan. 31, 2007, Descartes saw revenues surge 18% year over year to $13.6 million, while earnings spiked 20% to $1.2 million. For the fiscal year, total revenue was up 14% to $52 million compared to 2006's $45.7 million. Net income fared even better, up 33% to $4 million in 2007, from $3 million the previous year.
On a conference call to announce the results, Descartes' Arthur Mesher called it "a very proud moment for me as a CEO." The company's performance over the past couple of years has improved following the implementation of a restructuring plan in 2005. But for a number of years at the beginning of this decade, Descartes lost money despite larger revenue levels.
The fulcrum of its turnaround involved the realignment of its product lines. First, in 2006, Descartes shifted its products from the traditional on-premise model to an SaaS, or software as a service, format. Next, the company repackaged its offerings based on its target markets. For manufacturers, retail companies, and distributors, Descartes now markets the Delivery Management Suite, which includes software for delivery planning and transportation management, warehouse optimization, supply chain visibility, KPI analysis, and connectivity and messaging, among other functions. The intent was to deliver a multifaceted suite of products that would serve a company's full supply chain needs.
For transportation and logistics service providers, Descartes offers its Global Logistics Network, which allows companies to exchange electronic shipping, customs, and other information to expedite the distribution of products across the global supply chain.
The product realignment has paved the way for a revitalized sales effort. The company has yet to return to the $70 million sales level it enjoyed in 2003. But it has also avoided bottom line disappointments like the loss of $139 million that it incurred in that same year.
Descartes has been busy in the last year integrating the products of three companies it acquired in fiscal 2006. ViaSafe, which Descartes purchased in April 2007, brought it the ViaTrade product for managing the electronic exchange of documents for logistics providers and shippers. In June, Descartes bought out Flagship Customs Services, Inc. (FCS) to make use of its software for managing electronic customs filings. Both companies' technologies found a home in Descartes' Global Logistics Network product as value-added services.
A third acquisition, announced at the start of fiscal 2006, brought Descartes the assets of Cube Route, including SaaS-based logistics management technology for management and analysis of delivery routes and driver and vehicle tracking.
In diligently tending to its bottom line — the company has graded its turnaround against the non-GAAP measure of EBITDA, or earning before interest, tax, depreciation, and amortization — Descartes has raised concern in some sectors that revenue growth would be ignored. The 14% revenue jump in fiscal 2007 may have allayed some of those fears.
As to Descartes' prospects going forward, Mesher said he expects continued improvements in the bottom line, and noted that demand in China could play a larger role in sales in the years to come. More acquisitions could also be in the offing, he noted. Descartes ended fiscal 2007 with cash and equivalents of a little more than $19 million, down from the $27.6 million on hand at the end of the prior year.
Yesterday's announcement was also the last Descartes earnings call for CFO Brandon Nussey, who revealed that he would be resigning effective April 1 after seven years with the company. Descartes this morning announced that Stephanie Ratza will take over the CFO position. Ratza joins Descartes after stints at a number of other technology companies, including RFID developer IPICO Inc., application management vendor MKS Inc., and Open Text Corp., a specialist in content management systems.