Descartes(DSGX) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q2 2020 was $80.5 million, up 20% from $67.1 million in Q2 2019 [11][36] - Adjusted EBITDA increased by 32% to $30.2 million, representing 37.5% of revenue compared to 34% in the same period last year [11][39] - Cash flow from operations was $26.9 million, or approximately 89% of adjusted EBITDA, up 48% from $18.2 million in Q2 2019 [12][40] - Net income was $8.6 million, or $0.10 per diluted share, slightly up from $8.5 million or $0.11 per diluted share in Q2 2019 [41] Business Line Data and Key Metrics Changes - Services revenue increased by 20% to $71.4 million, accounting for 89% of total revenue [37] - License revenue decreased slightly to $1.1 million, just over 1% of sales [37] - Professional service and other revenue rose to $8.0 million, up from $6.1 million in the same period last year [37] Market Data and Key Metrics Changes - The North American freight market is experiencing significant changes, with some carriers going out of business due to inability to adapt to rapid demand shifts [14][15] - The company is focusing on enhancing its Global Logistics Network to help supply chain participants operate efficiently [9][10] Company Strategy and Development Direction - The company continues to invest in acquisitions, having completed three in Q2: CORE, STEPcom, and BestTransport [13][19][23] - The strategy emphasizes building a trusted network for supply chain participants and enhancing technology solutions to improve operational efficiency [21][22] - The company aims for sustainable growth in adjusted EBITDA of 10% to 15%, with expectations of achieving mid to high 20s growth for the fiscal year due to recent acquisitions [55][56] Management's Comments on Operating Environment and Future Outlook - Management noted that global trade regulations are dynamic, creating both challenges and opportunities for agile companies [8][10] - The company is optimistic about its ability to leverage technology to help customers navigate complex market dynamics [9][10] - Management expressed confidence in the acquisition pipeline and the ability to deploy capital effectively for future growth [53][54] Other Important Information - The company raised $245 million through a public share offering, enhancing its capacity for further investments [13][43] - The balance sheet remains strong, with cash balances totaling $27.4 million and a net cash position of just under $5 million [42][45] Q&A Session Summary Question: Can you discuss the acquisition pipeline and the balance between reinvestment and acquisitions? - Management indicated that the market for acquisitions remains strong, but they are cautious about overpaying for targets [58][59] Question: What drove the impressive cash conversion rate this quarter? - The company noted that typical cash conversion rates range from 80% to 90%, with this quarter being at the higher end due to better collections [60][61] Question: How is MacroPoint gaining traction with shippers? - Management confirmed that while freight brokers are the primary customers, they are seeing increased interest from large shippers looking for tracking solutions [64][65] Question: What is the outlook for the e-commerce side of the business? - The company reported significant organic revenue growth driven by e-commerce solutions, indicating strong customer demand [69][70] Question: How is the company navigating trade volumes amid ongoing trade disputes? - Management stated that they have not seen a significant impact on their network, as shipments continue regardless of origin [73][74]