The Descartes Systems Group, Inc. :DSGX-US: Earnings Analysis: Q3, 2018 By the Numbers : December 1, 2017

The Descartes Systems Group, Inc. reports financial results for the quarter ended October 31, 2017.

We analyze the earnings along side the following peers of The Descartes Systems Group, Inc. – Manhattan Associates, Inc., SAP SE Sponsored ADR and Amber Road, Inc. (MANH-US, SAP-US and AMBR-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 62.00 million, Net Earnings of USD 6.17 million.
  • Gross margins narrowed from 58.52% to 58.48% compared to the same period last year, operating (EBITDA) margins now 30.15% from 33.11%.
  • Year-on-year change in operating cash flow of 2.05% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-10-31 2017-07-31 2017-04-30 2017-01-31 2016-10-31
Relevant Numbers (Quarterly)
Revenues (mil) 62 57.29 54.51 52.82 51.54
Revenue Growth (%YOY) 20.31 13.42 11.46 9.95 8.82
Earnings (mil) 6.17 7.16 6.89 6.09 5.93
Earnings Growth (%YOY) 4.03 23.88 14.03 13.62 13.43
Net Margin (%) 9.95 12.5 12.63 11.53 11.51
EPS 0.08 0.09 0.09 0.08 0.08
Return on Equity (%) 1.32 1.6 1.58 1.43 1.41
Return on Assets (%) 4.14 5.29 5.45 4.94 4.89

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Market Share Versus Profits

Revenues History
Earnings History

DSGX-US’s change in revenue this period compared to the same period last year of 20.31% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that DSGX-US is holding onto its market share. Also, for comparison purposes, revenues changed by 8.22% and earnings by -13.81% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 58.48% to 58.52% for the same period last year, while operating margins (EBITDA margins) went from 30.15% to 33.11% over the same time frame.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

DSGX-US’s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days are now 55.89 days from 109.35 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

DSGX-US’s change in operating cash flow of 2.05% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for The Descartes Systems Group, Inc.

Company Profile

The Descartes Systems Group, Inc. is an information technology company, which provides logistics technology solutions. It specializes in cloud-based solutions including modular and software-as-a-service to route, schedule, track, and measure delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access and leverage global trade and restricted party data; file customers and security documents for imports and exports; research and perform trade tariff and duty calculations and to complete numerous other logistics processes. It primarily supports transportation industry, logistics service providers, third-party logistics providers, freight forwarders, and custom brokers. The company was founded on May 22, 1981 and is headquartered in Waterloo, Canada.

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