Mr. Edward Ryan reports

DESCARTES ANNOUNCES FISCAL 2024 THIRD QUARTER FINANCIAL RESULTS

The Descartes Systems Group Inc. has released its financial results for the third quarter (Q3) of fiscal year (FY) 2024. All financial results referenced are in United States currency and, unless otherwise indicated, are determined in accordance with U.S. generally accepted accounting principles (GAAP).

"Our network continues to grow as new customers join our community and existing customers trust us with more of their business," said Edward J. Ryan, Descartes's chief executive officer. "As a result, we delivered another strong quarter of financial results in a challenging market. We believe there's a lot more we can do to help shippers, carriers and logistics services providers manage the complete life cycle of shipments around the world. We have a strong financial position and the expertise to continue to invest in our business for the future."

Q3 FY 2024 financial results

As described in more detail below, key financial highlights for Descartes's Q3 FY 2024 included:

• Revenues of $144.7-million, up 19 per cent from $121.5-million in the third quarter of fiscal 2023 (Q3 FY 2023) and up 1 per cent from $143.4-million in the previous quarter (Q2 FY 2024);
• Revenues comprised services revenues of $130.4-million (90 per cent of total revenues), professional services and other revenues of $12.8-million (9 per cent of total revenues), and licence revenues of $1.5-million (1 per cent of total revenues). Services revenues were up 18 per cent from $110.1-million in Q3 FY 2023;
• Cash provided by operating activities of $56.1-million, up 10 per cent from $50.9-million in Q3 FY 2023 and up 8 per cent from $52.0-million in Q2 FY 2024;
• Income from operations of $32.4-million, down from $34.8-million in Q3 FY 2023 and down from $36.8-million in Q2 FY 2024. Q3 FY 2024 income from operations (as well as Q3 FY 2024 net income and earnings per share) was negatively impacted by an increase in other charges of $9.5-million as compared with Q3 FY 2023 and an increase of $7.2-million as compared to Q2 FY 2024, primarily related to contingent consideration incurred due to better-than-expected performance from recent acquisitions;
• Net income of $26.6-million, up from $26.5-million in Q3 FY 2023 and down from $28.1-million in Q2 FY 2024. Net income as a percentage of revenue was 18 per cent, compared with 22 per cent in Q3 FY 2023 and 20 per cent in Q2 FY 2024;
• Earnings per share on a diluted basis of 31 cents, consistent with 31 cents in Q3 FY 2023 and down from 32 cents in Q2 FY 2024, respectively;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $63.5-million, up 17 per cent from $54.5-million in Q3 FY 2023 and up 5 per cent from $60.6-million in Q2 FY 2024. Adjusted EBITDA as a percentage of revenues was 44 per cent, compared with 45 per cent and 42 per cent in Q3 FY 2023 and Q2 FY 2024, respectively.

Adjusted EBITDA and adjusted EBITDA as a percentage of revenues are non-GAAP financial measures provided as a complement to financial results presented in accordance with GAAP. The company defines adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, stock-based compensation (for which the company includes related fees and taxes) and other charges (for which the company includes restructuring charges, acquisition-related expenses and contingent consideration incurred due to better-than-expected performance from acquisitions). These items are considered by management to be outside Descartes's continuing operational results. The company defines adjusted EBITDA as a percentage of revenues as the quotient, expressed as a percentage, from dividing adjusted EBITDA for a period by revenues for the corresponding period.

An attached table summarizes Descartes's results in the categories specified over the past five fiscal quarters (unaudited; dollar amounts, other than per-share amounts, in millions).

Year-to-date financial results

As described in more detail below, key financial highlights for Descartes's nine-month period ended Oct. 31, 2023 (nine months of FY 22024) included:

• Revenues of $424.7-million, up 18 per cent from $360.9-million in the same period a year ago (nine months of FY 2023);
• Revenues comprise services revenues of $385.3-million (91 per cent of total revenues), professional services and other revenues of $35.6-million (8 per cent of total revenues), and licence revenues of $3.8-million (1 per cent of total revenues). Services revenues were up 20 per cent from $322.3-million in the nine months of 2023;
• Cash provided by operating activities of $156.9-million, up 11 per cent from $141.7-million in the nine months of FY 2023;
• Income from operations of $105.8-million, up 9 per cent from $96.8-million in the nine months of FY 2023;
• Net income of $84.1-million, up 16 per cent from $72.5-million in the nine months of 2023. Net income as a percentage of revenues was 20 per cent, consistent with 20 per cent in the nine months of FY 2023;
• Earnings per share on a diluted basis of 97 cents, up 15 per cent from 84 cents in the nine months of 2023;
• Adjusted EBITDA of $181.7-million, up 14 per cent from $159.8-million in the nine months of FY 2023. Adjusted EBITDA as a percentage of revenues was 43 per cent, compared with 44 per cent in the nine months of FY 2023.

An attached table summarizes Descartes's results in the categories specified over the nine months of FY 2024 and the nine months of FY 2023 (unaudited, dollar amounts in millions).

Cash position

At Oct. 31, 2023, Descartes had $279.6-million in cash. Cash increased by $52.2-million in Q3 FY 2024 and $3.2-million in the nine months of FY 2024. An attached table sets forth provides a summary of cash flows for Q3 FY 2024 and the nine months of FY 2024 (in millions of dollars).

Conference call

Members of Descartes's executive management team will host a conference call to discuss the company's financial results at 5:30 p.m. ET on Tuesday, Dec. 5. Designated numbers are 1-416-764-8658 for North America and 1-888-886-7786 for international, using conference ID 13014079 followed by the pound key.

The company will simultaneously conduct an audio webcast on the Descartes website. Phone conference dial-in or webcast log-in is required approximately 10 minutes beforehand.

Replays of the conference call will be available until Dec. 12, 2023, by dialling 1-416-764-8692 or toll-free for North America using 1-877-674-7070 with playback passcode 014079 followed by the pound key. An archived replay of the webcast will be available on the company's website.

About The Descartes Systems Group Inc.

Descartes is the global leader in providing on-demand, software-as-a-service solutions focused on improving the productivity, security and sustainability of logistics-intensive businesses. Customers use the company's modular, software-as-a-service solutions to: route, track and help improve the safety, performance and compliance of delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access global trade data; file customs and security documents for imports and exports; and complete numerous other logistics processes by participating in the world's largest, collaborative multimodal logistics community. The company's headquarters are in Waterloo, Ont., Canada, and the company has offices and partners around the world.

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