Descartes(US:DSGX)2022-09-08 00:56Financial Data and Key Metrics Changes - The company reported record high revenues of $123 million, an increase of 18% from $104.6 million in Q2 of the previous year [10][38] - Net income was $22.9 million, consistent with the previous year's net income of $23.2 million [52] - Adjusted EBITDA reached a record high of $54 million, up 18% from $45.9 million in the same quarter last year [10][46] - Cash generated from operations was $46.4 million, representing 86% of adjusted EBITDA [10][48] - Gross margin for the quarter was 77%, slightly up from 76% in the same quarter last year [43] Business Line Data and Key Metrics Changes - Services revenue increased by 70% to $109.4 million, accounting for 89% of total revenue [40] - License revenue rose to $3.3 million, up from $1.2 million in the same quarter last year [41] - Professional services and other revenue was $10.3 million, or 8% of total revenue [42] Market Data and Key Metrics Changes - The company experienced strong shipping volumes across all modes of transportation, with record ocean imports into the U.S. [62] - There is an increase in shipping capacity, leading to softening freight rates, although logistics infrastructure is struggling to keep up with shipment volumes [63][66] Company Strategy and Development Direction - The company aims to build a consistent, predictable, and sustainable business that is resilient to market changes [13] - Focus areas include customer retention, growth, and advocacy, with investments in customer success and infrastructure [24][26] - Acquisitions remain a core strategy, with three completed in the fiscal year, including the acquisition of XPS, a multi-carrier shipping platform [31][35] Management's Comments on Operating Environment and Future Outlook - The management noted strong demand for logistics solutions despite economic uncertainties, emphasizing the importance of supply chain investments [83] - The geopolitical landscape, including the war in Ukraine and COVID-19 lockdowns in China, continues to create challenges for supply chains [71][72][73] - The company expects to maintain strong cash flow conversion and aims for adjusted EBITDA growth of 10% to 15% annually [77][80] Other Important Information - The company remains debt-free with $189 million in cash and a $350 million undrawn line of credit [12][56] - The income tax expense for the quarter was $8.8 million, or 28% of pre-tax income, significantly higher than the previous year's tax expense [51] Q&A Session Summary Question: Changes in demand and sales cycles - Management indicated that there has been no significant change in demand or lengthening of sales cycles, with strong support from the customer base [83] Question: Sustainability of shipping volumes - Management expressed confidence in the sustainability of shipping volumes, noting that 40% of recurring revenues are tied to transportation transactions [84] Question: Organic growth estimate - The estimated organic growth rate for the quarter was around 12% to 13%, consistent with the previous quarter [89] Question: Impact of potential recession on transaction volumes - Management acknowledged that a recession would impact transaction volumes, but emphasized that the business is well-positioned to grow even in challenging environments [92] Question: Acquisition environment and earnouts - Management noted that while earnouts are being used to bridge price gaps in acquisitions, this is not seen as a new trend [95]