Descartes Systems Group Inc (NASDAQ: DSGX) stock falls despite decent results

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Descartes Systems Group Inc (NASDAQ: DSGX) stock fell over 0.3% on 4th September, 2019 (Source: Google finance) despite decent results for the second quarter of FY 20. Gross margin was solid at 74% of revenue for the quarter, which is up slightly from gross margin of 73% in the second quarter last year. This increase is mainly due to the addition of the Visual Compliance business acquired in mid-February, as well as from continued growth in revenue from new and existing customers.  The cash flow generated from operations came in at $26.9 million, or approximately 89% of adjusted EBITDA in the second quarter this year up 48%, compared to operating cash flow of $18.2 million, or 80% of adjusted EBITDA in Q2 last year.

DSGX in the second quarter of FY 20 has reported the adjusted earnings per share of 10 cents, beating the analysts’ estimates for the adjusted earnings per share of 9 cents. The company had reported the adjusted revenue growth of 20 percent to $80.54 million in the second quarter of FY 20, beating the analysts’ estimates for revenue by 0.42%. This revenue growth was achieved from solid organic growth as well as from the recent acquisitions, and as well was achieved despite a negative impact from foreign exchange of approximately $900,000 over Q2 of last year.

The revenue mix continues to be very strong with services revenue increasing 20% to $71.4 million, or 89% of total revenue in the second quarter, compared to $59.7 million in the same period last year and consistent at 89% of revenue. License revenue came in at $1.1 million, or just over 1% of sales in the quarter, down slightly from license revenue of $1.3 million, or 2% of revenue in Q2 last year, while professional service and other revenue came in at $8.0 million or 10% of revenue, up from $6.1 million, or 9% of revenue in the second quarter last year. The adjusted EBITDA grew approximately 32% to $30.2 million, or 37.5% of revenue, compared to $22.8 million, or 34% of revenue in the same period last year.

Descartes Systems Group Inc (NASDAQ: DSGX) stock falls despite decent results

Meanwhile, On May 10, 2019, Descartes acquired Core Transport Technologies NZ Limited at the purchase price of approximately $21.8 million, net of cash acquired, which was funded from drawing on Descartes’ existing credit facility. On June 27, 2019, Descartes acquired Tegmento AG and Contentis AG (collectively, “STEPcom”), at the purchase price of approximately $18.6 million. On August 20, 2019, Descartes acquired all the shares of BestTransport.com, InSet featured imagec. for the purchase price of approximately $11.7 million.

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