Descartes Reports Fiscal 2010 Third Quarter Financial Results

15% Increase in Quarterly Services Revenues Helps Drive Record Operating Results

WATERLOO - Descartes Systems Group, announced financial results for its fiscal 2010 third quarter (Q3FY10) ended October 31, 2009. Highlights.

Q3FY10 Financial Results

As described in more detail below, key financial highlights for Descartes in Q3FY10 included:

* Revenues of $18.9 million, up $1.9 million or 11% from $17.0 million in the third quarter of last fiscal year (Q3FY09) and up $0.3 million or 2% from $18.6 million in the previous quarter (Q2FY10);

* Services revenues of $18.0 million, or 95% of total revenues. Q3FY10 services revenues were up 15% from $15.7 million in Q3FY09 and up 5% from $17.1 million in Q2FY10;

* Gross margin of 69%, up from 67% in Q3FY09 and up from 68% in Q2FY10;

* Income before income taxes of $2.8 million, up 4% from $2.7 million in both Q3FY09 and Q2FY10. Q3FY10 included $0.2 million in expense from marking-to-market certain liabilities to reflect the increase in the trading price of Descartes' common shares;

* Net income of $1.0 million, compared to $2.3 million in Q3FY09 and up from $0.8 million in Q2FY10;

* Earnings per share on a diluted basis of $0.02, compared to $0.04 in Q3FY09 and $0.02 in Q2FY10. Income before income taxes, per share on a diluted basis for Q3FY10 was $0.05, consistent with $0.05 in Q3FY09 and Q2FY10;

* Days sales outstanding of 48 days, up from 47 days in Q3FY09 and unchanged from Q2FY10; and

* Adjusted Net Income of $5.2 million, up 13% from $4.6 million in Q3FY09 and consistent with $5.2 million in Q2FY10. Adjusted Net Income as a percentage of revenues was 28% in Q3FY10, up from 27% in Q3FY09 and consistent with 28% in Q2FY10. Adjusted Net Income per share on a diluted basis for Q3FY10 was $0.09, consistent with $0.09 in Q3FY09 and compared to $0.10 in Q2FY10.

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

All financial results referenced are unaudited, in United States (US) currency and, unless otherwise indicated, are determined in accordance with US Generally Accepted Accounting Principles (GAAP).