Descartes(US:DSGX)2022-06-02 05:02Financial Data and Key Metrics Changes - The company reported record revenues of $108.9 million for Q3 2022, a 24% increase from $87.5 million in Q3 2021 [37] - Net income reached $25.5 million, up 92% from $13.3 million in the same quarter last year [43] - Adjusted EBITDA was $48.2 million, representing a 32% growth compared to $36.4 million in Q3 2021, with an adjusted EBITDA margin of 44% [41][43] - Cash flow from operations was $43.3 million, or 90% of adjusted EBITDA, up 31% from $33.1 million in Q3 2021 [42] Business Line Data and Key Metrics Changes - Service revenue increased by 25% to $97.2 million, consistent at 89% of total revenue [37] - Professional services and other revenue rose to $10.3 million, up almost 11% from $9.3 million in Q3 2021 [38] - Licensed revenue remained less than 1% of total revenue in both periods [38] Market Data and Key Metrics Changes - The company benefited from a favorable foreign exchange impact of just under $1 million due to a weaker U.S. dollar against the Euro, Canadian dollar, and British pound [37] - The logistics and supply chain markets are experiencing unprecedented challenges, with increased demand and supply chain disruptions impacting operations [10][21] Company Strategy and Development Direction - The company plans to grow adjusted EBITDA by 10% to 15% annually through organic growth and acquisitions [48] - Continued investment in technology solutions is emphasized to help customers navigate supply chain challenges [20][52] - The company has completed three acquisitions in the fiscal year and expects to remain active in the acquisition market [52] Management's Comments on Operating Environment and Future Outlook - Management noted that supply chain and logistics challenges are expected to persist, driven by labor shortages and inventory management complexities [31][32] - The company is well-positioned to assist customers in overcoming these challenges, leveraging its technology and expertise [20][21] - The economic recovery is ongoing, but uncertainties remain regarding the pandemic's impact, including new variants [53] Other Important Information - The company reported a gross margin of 76.5%, up from 74.3% in Q3 2021, benefiting from strong customer growth [39] - Cash balances totaled $171 million at the end of October, with an additional $350 million available under the credit facility for future acquisitions [43] Q&A Session Summary Question: Lessons learned from the Delta variant outbreak - Management expressed confidence in the company's ability to navigate future uncertainties, citing strong performance during the pandemic [56][58] Question: Impact of supply-demand balance normalization - Management believes the importance of supply chain logistics will remain high even after the crisis, with continued demand expected [60][61] Question: Opportunities related to labor shortages - Management acknowledged the ongoing labor shortages and indicated interest in expanding solutions in this area through acquisitions or organic investments [63] Question: Organic growth estimates - Organic growth for the quarter was estimated in the mid-teens range, with potential for increased sales and marketing investment if growth continues [65][66] Question: Cash balance and investment opportunities - Management indicated a balanced approach between organic growth and acquisitions, with a preference for acquisitions for entirely new product segments [68][70] Question: Air channel volume and pricing - Air volumes have returned to and exceeded pre-pandemic levels, with increased demand for air shipping due to supply chain pressures [82] Question: E-commerce business outlook - The e-commerce segment remains strong, with retailers increasingly recognizing the need for robust online operations alongside physical stores [86][88]