Descartes sees February as cycle low point

Supply chain software-as-a-service provider Descartes said Wednesday that February was likely the low point for the cycle, noting demand trended up somewhat in March and April.

The corporate has seen ocean imports increase sequentially since February to a level that’s consistent with pre-pandemic levels as retailers have made progress selling through excess inventories. It also noted that China-originated orders increased in April but that it’s still too early to say if that is indicative of a brand new trend line.

“If I exploit April for example, I’m optimistic about what we see in May,” CEO Ed Ryan told analysts on a Wednesday evening call. Ryan tempered the remarks somewhat, noting it’s still a “mixed-news economy in the mean time.”

The Canada-based company reported earnings per share of 34 cents for the 2024 fiscal first quarter ended April 30 after the market closed, 7 cents higher 12 months over 12 months (y/y) and a penny ahead of the consensus estimate.

Descartes (NASDAQ: DSGX) reported revenue of $137 million, 17% higher y/y and higher than management’s guidance of $117 million. Two acquisitions within the period partially contributed to the expansion. A robust U.S. dollar resulted in a $2 million revenue headwind within the quarter.

Services revenue increased 21% y/y to $124 million, 9% higher on a same-store comparison.

Adjusted earnings before interest, taxes, depreciation and amortization got here in at $58 million, $15 million higher than the outlook provided 1 / 4 ago. A 13% EBITDA growth rate was consistent with management’s long-term guidance calling for growth of 10% to fifteen% annually.

Management expects fiscal second-quarter revenue of $120.5 million, with adjusted EBITDA of $44.5 million.

Ryan said customers that previously indicated they could slow project spending “continued to greenlight their logistics and provide chain investments” over the past six months.

“Most of our customers appear to be in pretty good condition,” he said. “Actually, the volumes on our network proceed to be strong, so we’re blissful about that.”

Descartes generated $49 million in operating money flow through the quarter, ending the period with $182 million in money and no debt, down from a money balance of $276 million at the top of the January quarter. The change was largely as a result of recent acquisitions of GroundCloud, a cloud-based final-mile solutions provider, and Localz, a cloud-based order management service.

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