Descartes Systems Group Inc/The reports 36.5% Net Income growth and 3.3 pp EBITDA Margin growth from 27.9% to 31.2%
03.03.2016 • About Descartes Systems Group Inc/The (
$DSG) • By InTwits
Descartes Systems Group Inc/The reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Descartes Systems Group Inc/The has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.5%. At the same time it's a lot of higher than industry average of 1.4%.
- CAPEX is quite volatile: 7.9 in FY2016, 3.0 in FY2015, 0.71 in FY2014, 1.3 in FY2013, 1.00 in FY2012
- The company has business model with low profitability: ROIC is at 7.2%
- It operates with high leverage: Net Debt/EBITDA is -0.6x while industry average is -6.3x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Descartes Systems Group Inc/The ($DSG) key annual financial indicators
| mln. $ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 114.0 | 126.9 | 151.3 | 170.9 | 185.0 | 8.3% |
| Gross Profit | 75.7 | 84.5 | 102.3 | 116.0 | 131.1 | 13.1% |
| SG&A | 27.3 | 29.5 | 37.2 | 40.7 | 44.0 | 8.1% |
| EBITDA | 29.7 | 34.3 | 36.1 | 47.6 | 57.7 | 21.2% |
| Net Income | 12.0 | 16.0 | 9.6 | 15.1 | 20.6 | 36.5% |
Balance Sheet
|
|---|
| Cash | 65.5 | 37.6 | 62.7 | 118.1 | 37.2 | -68.5% |
| Short Term Debt | 0.0 | 0.0 | 8.6 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 31.8 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 4.7 | 3.5 | 2.4 | 2.7 | 4.3 | 60.8% |
Ratios
|
|---|
| Revenue growth | 14.9% | 11.3% | 19.2% | 12.9% | 8.3% | |
| EBITDA growth | 37.2% | 15.4% | 5.2% | 31.9% | 21.2% | |
| Gross Margin | 66.4% | 66.6% | 67.6% | 67.9% | 70.9% | 3.0% |
| EBITDA Margin | 26.0% | 27.0% | 23.8% | 27.9% | 31.2% | 3.3% |
| Net Income Margin | 10.6% | 12.6% | 6.4% | 8.8% | 11.1% | 2.3% |
| SG&A, % of revenue | 23.9% | 23.2% | 24.6% | 23.8% | 23.8% | -0.0% |
| CAPEX, % of revenue | 4.2% | 2.8% | 1.6% | 1.6% | 2.3% | 0.8% |
| ROIC | 8.0% | 8.2% | 5.8% | 6.7% | 7.2% | 0.5% |
| ROE | 5.7% | 7.0% | 3.9% | 4.7% | 5.2% | 0.5% |
| Net Debt/EBITDA | -2.2x | -1.1x | -0.6x | -2.5x | -0.6x | 1.8x |
Descartes Systems Group Inc/The ($DSG) key quoterly financial indicators
| mln. $ | FY16Q1 | FY16Q2 | FY16Q3 | FY16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 44 | 45 | 47 | 48 | 8.8% | 5.8% | 10.0% | 8.5% |
| EBITDA | 14 | 14 | 15 | 15 | 19.4% | 18.7% | 18.9% | 28.0% |
| Net Income | 5 | 5 | 5 | 5 | 32.7% | 40.4% | 25.8% | 49.1% |
Balance Sheet
|
|---|
| Cash | 129 | 47 | 53 | 37 | 106.1% | -66.6% | -64.8% | -68.5% |
| Short Term Debt | 0 | 0 | 0 | 0 | -100.0% | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | -100.0% | | | |
Ratios
|
|---|
| Gross Margin | 69.9% | 70.1% | 71.7% | 71.7% | 2.3% | 2.5% | 3.9% | 3.2% |
| EBITDA Margin | 30.8% | 30.5% | 31.4% | 32.0% | 2.7% | 3.3% | 2.3% | 4.9% |
| Net Income Margin | 11.0% | 11.2% | 11.0% | 11.2% | 2.0% | 2.8% | 1.4% | 3.0% |
Revenue and profitability
Descartes Systems Group Inc/The's Revenue increased on 8.3%. Revenue growth showed acceleration in FY16Q4 - it increased 8.5% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.1 pp from 32.4% to 35.6% in 2016.
Gross Margin increased on 3.0 pp from 67.9% to 70.9% in FY2016. SG&A as a % of Revenue showed almost no change in FY2016.
Net Income marign increased on 2.3 pp from 8.8% to 11.1% in FY2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 2.3% in FY2016. The company's CAPEX/Revenue showed almost no change from FY2013 to FY2016. For the last three years the average CAPEX/Revenue was 1.8%.
Return on investment
The company operates at low ROIC (7.24%) and ROE (5.19%). ROIC increased slightly on 0.50 pp from 6.7% to 7.2% in FY2016. ROE showed almost no change in FY2016.
Leverage (Debt)
The company has no debt. Cash dropped on 68.5%.
Management team
Descartes Systems Group Inc/The's CEO is Edward J Ryan. Edward J Ryan is a founder and has 5 years tenure at the company. The company's CFO Allan J Brett has spent 4 years at the company.
Appendix 1: Peers in Technology
Below we provide Descartes Systems Group Inc/The benchmarking against other companies in Technology industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Smart Employee Benefits Inc ($SEB) | | | 97.2% | 151.5% | |
| ProntoForms Corp ($PFM) | 59.9% | 75.4% | 43.9% | 46.4% | |
| iLOOKABOUT Corp ($ILA) | 19.6% | 8.9% | 58.8% | 32.3% | |
| Kinaxis Inc ($KXS) | 22.7% | 30.3% | 15.2% | 30.3% | |
| Halogen Software Inc ($HGN) | | 22.6% | 10.1% | 28.0% | |
| |
|---|
| Median (21 companies) | 1.3% | 5.6% | 13.7% | 12.7% | |
|---|
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Constellation Software Inc/Canada ($CSU) | 86.2% | 85.5% | 86.1% | 86.2% | |
| ProntoForms Corp ($PFM) | 96.1% | 98.1% | 98.0% | 79.4% | |
| Espial Group Inc ($ESP) | 77.5% | 81.7% | 78.5% | 74.3% | |
| Halogen Software Inc ($HGN) | 72.0% | 74.8% | 71.8% | 73.8% | |
| Kinaxis Inc ($KXS) | 71.8% | 70.4% | 70.4% | 71.8% | |
| |
|---|
| Median (19 companies) | 53.8% | 45.8% | 52.2% | 51.9% | |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Wi-LAN Inc ($WIN) | 40.9% | 12.2% | 56.2% | 53.2% | |
| Kinaxis Inc ($KXS) | 18.7% | 23.0% | 19.2% | 28.0% | |
| Constellation Software Inc/Canada ($CSU) | 20.9% | 20.1% | 21.8% | 25.2% | |
| Quorum Information Technologies Inc ($QIS) | 4.4% | 8.1% | 14.8% | 14.4% | |
| Intrinsyc Technologies Corp ($ITC) | -10.5% | -38.8% | 2.2% | 10.8% | |
| |
|---|
| Median (21 companies) | 0.1% | 2.2% | 2.5% | -1.9% | |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Kinaxis Inc ($KXS) | 2.9% | 2.3% | 5.0% | 4.7% | |
| Halogen Software Inc ($HGN) | 4.9% | 9.0% | 8.4% | 2.9% | |
| Espial Group Inc ($ESP) | 1.6% | 0.2% | 1.9% | 2.1% | |
| Smart Employee Benefits Inc ($SEB) | | 3.8% | 1.6% | 2.0% | |
| ProntoForms Corp ($PFM) | 1.1% | 0.8% | 3.6% | 1.9% | |
| |
|---|
| Median (21 companies) | 1.0% | 0.9% | 1.2% | 1.1% | |
|---|
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Kinaxis Inc ($KXS) | | 61.8% | 63.6% | 44.0% | |
| Constellation Software Inc/Canada ($CSU) | 45.9% | 22.4% | 24.7% | 38.5% | |
| Pivot Technology Solutions Inc ($PTG) | | 92.9% | 42.9% | 14.5% | |
| Intrinsyc Technologies Corp ($ITC) | -7.5% | -22.7% | 0.9% | 12.3% | |
| Wi-LAN Inc ($WIN) | 2.6% | -7.6% | 8.9% | 7.4% | |
| |
|---|
| Median (21 companies) | -3.2% | -12.5% | -2.1% | -13.1% | |
|---|
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Mitel Networks Corp ($MNW) | 3.7x | 3.8x | 2.6x | 6.2x | |
| Pivot Technology Solutions Inc ($PTG) | | -0.4x | 1.1x | 4.8x | |
| Constellation Software Inc/Canada ($CSU) | 0.0x | 1.6x | 0.6x | 0.4x | |
| Wi-LAN Inc ($WIN) | -4.9x | -12.1x | -2.3x | -1.7x | |
| Quorum Information Technologies Inc ($QIS) | -0.4x | -0.6x | -1.0x | -3.1x | |
| |
|---|
| Median (9 companies) | 0.0x | -0.2x | -1.7x | -3.1x | |
|---|
