Net Income Doubles Year-over-Year On Record Operating Performance

WATERLOO - Descartes Systems Group, a global on-demand software-as-a-service (SaaS) logistics solutions provider, announced financial results for its fiscal 2010 first quarter (Q1FY10) ended April 30, 2009. All financial results referenced are unaudited, in United States (U.S.) currency and, unless otherwise indicated, are determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP).

Q1FY10 Financial Results

As described in more detail below, key financial highlights for Descartes in Q1FY10 included:

* Revenues of $17.4 million, up $1.1 million or 7% from $16.3 million in the first quarter of last fiscal year (Q1FY09) and up $1.7 million or 11% from $15.7 million in the previous quarter (Q4FY09). Services revenues were $16.8 million or 97% of total revenues, up 13% from $14.9 million in Q1FY09 and up 17% from $14.4 million in Q4FY09;

* Gross margin of 70%, up from 65% in Q1FY09 and up from 68% in Q4FY09;

* Income before income taxes of $1.8 million, up 13% from $1.6 million in Q1FY09 and compared to $2.6 million in Q4FY09. Commencing with Descartes' Q1FY10, GAAP has changed to require that acquisition-related costs (including legal, accounting, investment banking and valuation specialist fees) be expensed in the period incurred. Previously, GAAP required that these expenses be capitalized as part of the purchase price for a completed business combination and were generally recorded as part of goodwill. Because of this change, Q1FY10 includes an additional $0.3 million in acquisition-related costs compared to prior quarters where Descartes was not required to expense such costs in the period incurred;

* Net income of $2.2 million, up 100% from $1.1 million in Q1FY09 and compared to $15.7 million in Q4FY09. Net income in Q1FY10 and Q4FY09 included non-cash, net deferred income tax recoveries of $0.7 million and $13.1 million, respectively, as Descartes recorded a deferred tax asset for prior period tax losses anticipated to be applied against taxable income earned in future periods;

* Earnings per share on a diluted basis of $0.04, up 100% from $0.02 in Q1FY09 and compared to $0.29 in Q4FY09. Income before income taxes, per share on a diluted basis for Q1FY10 was $0.03, compared to $0.03 in Q1FY09 and $0.05 in Q4FY09;

* Days sales outstanding of 49 days, down 8 days from 57 days in Q1FY09, and compared to 50 days last quarter;

* Adjusted Net Income of $4.7 million, up 24% from $3.8 million in Q1FY09 and up 2% from $4.6 million in Q4FY09. Adjusted Net Income as a percentage of revenues was 27% this quarter, up from 23% in Q1FY09 and compared to 29% in Q4FY09. Adjusted Net Income per share on a diluted basis for Q1FY10 was $0.09, up from $0.07 in Q1FY09 and compared to $0.09 in Q4FY09.

Adjusted Net Income is a non-GAAP financial measure provided as a complement to financial results presented in accordance with GAAP that we define as earnings before interest, taxes, depreciation and amortization (for which we include amortization of intangible assets, contingent acquisition consideration, deferred compensation and stock-based compensation), acquisition-related expenses and restructuring charges. These items are considered by management to be outside Descartes' ongoing operational results. A reconciliation of Adjusted Net Income to net income determined in accordance with GAAP is provided later in this release.