- Record Revenue Growth Quarterly revenue reached $187.7M, up 11% YoY, with services revenue at $173.7M (93% of total) rising 16%.
- Strong Profitability Adjusted EBITDA hit $85.5M (45.6% margin), up 19% YoY; net income rose 20% to $43.9M ($0.50/share).
- Cash Flow & Liquidity Generated $73.4M in cash from operations (+22% YoY) and ended with $279M in cash, no debt.
- EBITDA Growth Target Management reaffirmed 10-15% annual EBITDA growth, driven by cross-selling (60-70% of customers use multiple services) and AI-enabled solutions.
- Acquisition & Expansion Completed acquisition of Finale Inventory, contributing to e-commerce revenue (12% of total) and cross-selling synergies.
Financial Performance
The company's gross margin was 77% of revenue, up from 74% in Q3 last year. The company generated $73.4 million in cash flow from operations, up from $60.1 million in Q3 last year. For the first 9 months of the year, revenue was $536 million, up 11% from the same period last year, with adjusted EBITDA increasing 15% to $241 million.
Growth Drivers
The company's growth drivers included global trade data and intelligence, foreign trade zones, e-commerce customs clearance, and real-time shipment visibility. Artificial intelligence had a positive impact on the business, increasing demand for data and decision-making tools, and allowing for new solutions and services. As CEO Ed Ryan noted, "Descartes is well-positioned to help customers manage tariffs and trade tensions, and the company's diversified global presence and extensive track record of acquisition activities will help drive growth."
Valuation
With a P/E Ratio of 53.66 and an EV/EBITDA of 27.75, the market is pricing in high expectations for the company's future growth. The company's ROE of 10.44% and ROIC of 9.19% indicate a strong ability to generate returns on equity and invested capital. Analysts estimate next year's revenue growth at 8.4%, which may be challenging to achieve given the company's current valuation multiples.
Business Outlook
The company remains optimistic about its long-term financial plans despite uncertainty in public market conditions. The e-commerce segment is a beneficiary of organic growth, with a growing business that now represents around 12% of the company's revenue. The company's transportation management solutions (TMS) business is performing well, with a leadership position in the market.
Capital Allocation
The company sees opportunities for acquisitions and has put in place a Normal Course Issuer Bid (NCIB) to repurchase shares. The priority is to make acquisitions that can be integrated into their network, but they will also consider buying back shares if the valuation is low.