Descartes Systems Group Inc (USA)(NASDAQ: DSGX) reported a decent fourth quarter of 2018 with Revenue rising 20% to $63.6 million. The group converted 92% of their adjusted EBITDA into cash, generating $19.6 million of cash in the quarter and consistent with their long term operating plans. They have been investing cash back into their business through focused R&D investments and by combining with complementary businesses.

The group continued to add customers and solutions to Global Logistics Network and started 2019 on a positive note. They have acquired Aljex, which complements their ongoing investment and MacroPoint business. The Service revenue rose 20% yoy to $61.1 million, also up 20% while consistent at 97% of total revenue. Gross margin is 73% of revenue for the fourth quarter, rising slightly from 72% in the fourth quarter of last year.

Adjusted EBITDA growth was 16% to $21.4 million or 34% of revenue in the fourth quarter against $18.5 million or 35% of revenue in the same period last year. The adjusted EBITDA continues to grow in-line with their plans of 10% to 15% per year. For the last quarter the group generated $21.4 million of adjusted EBITDA, which is a rise from 16% against fourth quarter of last year. The GAAP net income rose 10% to  $6.7 million or $0.09 per diluted common share in the fourth quarter, an increase of 10% from net income of $6.1 million or $0.08 per diluted common share in the fourth quarter last year. For full year of 2018, the revenue rose 16% yoy to $237.4 million against $203.8 million in pcp. The Adjusted EBITDA rose to $80.8 million from $70.1 million in fiscal 2017.

Going forward to fiscal 2019, the group finished their planning process as we do every year around this time. They continue to target 10% to 15% annual adjusted EBITDA and adjusted EBITDA per share growth. This growth is planned to come through a combination of organic and inorganic activities and as always acquisitions are not incremental to this plan. The group continues to focus on recurring revenue and deemphasize one-time license sales. The planned operating margin range remains in the 32% to 37% range, given the current performance of the business and mindful of the FX environment that remains in their target range, even as they integrate MacroPoint in their business.