Descartes Systems Group Inc/The reports 56.7% Net Income growth and 4.0 pp EBITDA Margin growth from 23.8% to 27.9%
05.03.2015 • About Descartes Systems Group Inc/The (
$DSG) • By InTwits
Descartes Systems Group Inc/The reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Descartes Systems Group Inc/The has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.3%. At the same time it's a lot of higher than industry average of 1.9%.
- CAPEX is quite volatile: 2.7 in FY2015, 2.4 in FY2014, 3.5 in FY2013, 4.7 in FY2012, 1.7 in FY2011
- The company has potentially unprofitable business model: ROIC is at 6.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Descartes Systems Group Inc/The ($DSG) key annual financial indicators
| mln. $ | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 99.2 | 114.0 | 126.9 | 151.3 | 170.9 | 12.9% |
| Gross Profit | 65.3 | 75.7 | 84.5 | 102.3 | 116.0 | 13.4% |
| SG&A | 25.1 | 27.3 | 29.5 | 37.2 | 40.7 | 9.5% |
| EBITDA | 21.6 | 29.7 | 34.3 | 36.1 | 47.6 | 31.9% |
| Net Income | 11.5 | 12.0 | 16.0 | 9.6 | 15.1 | 56.7% |
Balance Sheet
|
|---|
| Cash | 69.6 | 65.5 | 37.6 | 62.7 | 118.1 | 88.3% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 8.6 | 0.0 | -100.0% |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 31.8 | 0.0 | -100.0% |
Cash flow
|
|---|
| Capex | 1.7 | 4.7 | 3.5 | 2.4 | 2.7 | 12.3% |
Ratios
|
|---|
| Revenue growth | 34.4% | 14.9% | 11.3% | 19.2% | 12.9% | |
| EBITDA growth | 42.2% | 37.2% | 15.4% | 5.2% | 31.9% | |
| Gross Margin | 65.8% | 66.4% | 66.6% | 67.6% | 67.9% | 0.3% |
| EBITDA Margin | 21.8% | 26.0% | 27.0% | 23.8% | 27.9% | 4.0% |
| Net Income Margin | 11.6% | 10.6% | 12.6% | 6.4% | 8.8% | 2.5% |
| SG&A, % of revenue | 25.3% | 23.9% | 23.2% | 24.6% | 23.8% | -0.7% |
| CAPEX, % of revenue | 1.7% | 4.2% | 2.8% | 1.6% | 1.6% | -0.0% |
| ROIC | 4.6% | 8.0% | 8.2% | 5.8% | 6.7% | 0.9% |
| ROE | 5.9% | 5.7% | 7.0% | 3.9% | 4.7% | 0.8% |
| Net Debt/EBITDA | -3.2x | -2.2x | -1.1x | -0.6x | -2.5x | -1.9x |
Revenue and profitability
The company's Revenue surged on 12.9% in FY2015. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 4.0 pp from 23.8% to 27.9% in FY2015.
Gross Margin showed almost no change in FY2015. SG&A as a % of Revenue decreased slightly on 0.74 pp from 24.6% to 23.8% in FY2015.
Net Income marign increased on 2.5 pp from 6.4% to 8.8% in FY2015.
Capital expenditures (CAPEX) and working capital investments
In FY2015 Descartes Systems Group Inc/The had CAPEX/Revenue of 1.6%. CAPEX/Revenue decreased on 2.6 pp from 4.2% in FY2012 to 1.6% in FY2015. It's average CAPEX/Revenue for the last three years was 2.0%.
Return on investment
The company operates at low ROIC (6.74%) and ROE (4.70%). ROIC increased slightly on 0.93 pp from 5.8% to 6.7% in FY2015. ROE increased slightly on 0.77 pp from 3.9% to 4.7% in FY2015.
Leverage (Debt)
The company paid down all the debt in FY2015. Cash surged on 88.3% in FY2015.
Management team
The company's CEO Edward J Ryan is a founder and has spent 4 years at the company. Allan J Brett is a The company's CFO. Allan J Brett has spent 4 years at the company.
Appendix 1: Peers in Technology
Below you can find Descartes Systems Group Inc/The benchmarking vs. other companies in Technology industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Mitel Networks Corp ($MNW) | -9.0% | 3.8% | -5.7% | 91.4% | |
| Redknee Solutions Inc ($RKN) | 25.9% | -4.5% | 151.6% | 81.4% | |
| Espial Group Inc ($ESP) | 10.2% | -9.5% | -5.5% | 59.4% | |
| Sylogist Ltd ($SYZ) | 1.5% | -5.8% | 25.7% | 50.5% | |
| Cortex Business Solutions Inc ($CBX) | -29.2% | 61.2% | 24.8% | 45.6% | |
| |
|---|
| Median (22 companies) | 12.5% | 3.8% | 12.7% | 13.3% | |
|---|
| Descartes Systems Group Inc/The ($DSG) | | 14.9% | 11.3% | 19.2% | 12.9% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Constellation Software Inc/Canada ($CSU) | 85.5% | 86.2% | 85.5% | 86.1% | |
| Espial Group Inc ($ESP) | 77.9% | 77.5% | 81.7% | 78.5% | |
| Absolute Software Corp ($ABT) | 71.6% | 73.6% | 76.3% | 78.4% | |
| Sandvine Corp ($SVC) | 74.3% | 67.5% | 74.1% | 76.8% | |
| Open Text Corp ($OTC) | 73.6% | 72.4% | 71.2% | 72.8% | |
| |
|---|
| Median (21 companies) | 52.2% | 60.7% | 55.6% | 51.1% | |
|---|
| Descartes Systems Group Inc/The ($DSG) | 65.8% | 66.4% | 66.6% | 67.6% | 67.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Wi-LAN Inc ($WIN) | 26.5% | 40.9% | 12.2% | 56.2% | |
| Computer Modelling Group Ltd ($CMG) | 51.5% | 53.8% | 52.2% | 51.5% | |
| Open Text Corp ($OTC) | 27.1% | 26.5% | 29.1% | 30.0% | |
| Sandvine Corp ($SVC) | 5.1% | 0.9% | 24.0% | 28.2% | |
| Enghouse Systems Ltd ($ESL) | 24.8% | 25.4% | 23.6% | 24.7% | |
| |
|---|
| Median (22 companies) | 12.3% | 11.3% | 9.1% | 13.8% | |
|---|
| Descartes Systems Group Inc/The ($DSG) | 21.8% | 26.0% | 27.0% | 23.8% | 27.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Halogen Software Inc ($HGN) | | 4.9% | 9.0% | 8.4% | |
| Kinaxis Inc ($KXS) | 2.2% | 2.9% | 2.3% | 5.0% | |
| BlackBerry Ltd ($BB) | 5.2% | 4.9% | 3.8% | 4.2% | |
| Sandvine Corp ($SVC) | 7.3% | 4.9% | 3.2% | 3.2% | |
| Open Text Corp ($OTC) | 3.5% | 2.1% | 1.7% | 2.6% | |
| |
|---|
| Median (22 companies) | 1.8% | 2.1% | 1.6% | 1.2% | |
|---|
| Descartes Systems Group Inc/The ($DSG) | 1.7% | 4.2% | 2.8% | 1.6% | 1.6% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Kinaxis Inc ($KXS) | | | 61.8% | 63.6% | |
| Computer Modelling Group Ltd ($CMG) | 75.5% | 74.2% | 68.6% | 62.9% | |
| SMART Technologies Inc ($SMA) | 43.2% | 21.4% | -18.9% | 28.1% | |
| Constellation Software Inc/Canada ($CSU) | 45.8% | 45.9% | 22.4% | 24.7% | |
| Sandvine Corp ($SVC) | -1.7% | -4.9% | 16.9% | 20.2% | |
| |
|---|
| Median (22 companies) | 7.7% | 8.8% | 7.3% | 9.3% | |
|---|
| Descartes Systems Group Inc/The ($DSG) | 4.6% | 8.0% | 8.2% | 5.8% | 6.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Data Group Ltd ($DGI) | 3.2x | 3.5x | 3.7x | 4.0x | |
| Mitel Networks Corp ($MNW) | 4.9x | 3.7x | 3.8x | 2.6x | |
| Open Text Corp ($OTC) | 0.0x | 0.1x | 0.2x | 1.8x | |
| CGI Group Inc ($GIB.A) | 1.3x | 6.0x | 2.4x | 1.3x | |
| SMART Technologies Inc ($SMA) | 1.4x | 2.1x | | 1.2x | |
| |
|---|
| Median (16 companies) | -0.3x | -0.2x | -0.2x | -1.3x | |
|---|
| Descartes Systems Group Inc/The ($DSG) | -3.2x | -2.2x | -1.1x | -0.6x | -2.5x |
