Post on 30-Jun-2020
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Descartes – Uniting Business in Commerce
May 2013
“Helping customers deliver”
: DSGX : DSG
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Safe Harbor
Certain statements made today and in this presentation including, but not limited to, statements
addressing economic uncertainty; investment in areas of Descartes’ business with high strategic value
and growth potential; our future operating performance; software-as-a-service business model;
strategy, market opportunity and vision; Descartes’ position and opportunity to lead its industry with its
business model; solution functionality and benefits derived therefrom; network penetration; ability to
complete acquisitions and contribution of completed acquisitions to Descartes’ operations;
anticipated churn in revenues; and competition constitute forward-looking information for the
purposes of applicable securities laws (“forward-looking statements”). These forward-looking
statements are subject to risks, uncertainties and assumptions that may cause future results to differ
materially from those expected. Factors that may cause such differences include, but are not limited
to, departures of key customers; the ability to attract and retain key personnel and transition when
key personnel depart; variances in our revenues from quarter to quarter; Descartes’ ability to
integrate acquired companies and personnel; fluctuations in fuel prices or shipment volumes;
fluctuations in international currency exchange rates; exposure to greater than anticipated tax
liabilities; changes in electronic customs filing regulations; the factors discussed under the headings
“Risk Factors” or “Certain Factors That May Affect Future Results” in documents filed with applicable
securities commissions and the documents incorporated by reference into such documents. If any of
such risks actually occur, they could materially adversely affect our business, financial condition or
results of operations. In that case, the trading price of our common shares could decline, perhaps
materially. We provide forward-looking statements solely for the purpose of providing information
about management's current expectations and plans relating to the future. You are cautioned that
such information may not be appropriate for other purposes. Except as required by law, we do not
undertake or accept any obligation or undertaking to release publicly any updates or revisions to
any forward-looking statements to reflect any change in our expectations or any change in events,
conditions, assumptions or circumstances on which any such statement is based.
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P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Agenda – Uniting Business in Commerce
• Proven Record of Execution
• Defined Mission – Relevant Vision – Ingrained Culture
• A Defined Plan
• Defined Strategic Plan
• Defined Go-to-Market Strategy
• Key Metrics
3
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
FY11 FY12 FY13 FY14 FY15
Adju
ste
d E
BIT
DA p
er
Share
Second 5-Year Plan
Actual
Reset Plan
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
FY06 FY07 FY08 FY09 FY10
Adju
ste
d E
BIT
DA p
er
Share
First 5-Year Plan
Actual
Plan
Proven Record of Execution
Defined Adjusted EBITDA per Share metrics used for planning:
Target: 10-15% annual growth
Actual: 20% CAGR over 7-year period
>66%
Second 5-Year plan – reset baseline for growth planning. We’re more than one year ahead of plan at the end of FY13 - with an incremental 17% of Adjusted EBITDA/Share generated.
First 5-Year plan generated an incremental 66% of Adjusted EBITDA/Share
Re
set
Pla
n
4
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Proven Record of Execution
Thousands
5
“Adjusted EBITDA” is a non-GAAP financial measure provided as a complement to GAAP financial measures to help investors understand
operational trends in our business. However, Adjusted EBITDA should not be used in preference to or instead of any GAAP financial measure. For
a definition of Adjusted EBITDA and a reconciliation to Net Income as determined in accordance with GAAP, please see our May 30, 2013 press
release.
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Defined Mission – Unite Business in Commerce
Making the world a better place through
logistics by improving the productivity,
efficiency and security of commerce
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P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Relevant Vision – A State of Things United
A global community united in commerce
via a multi-party platform
>10,000 Customers
Over 4.5 billion messages processed each year
>146,000 Connected Parties
Thousands of logistics service providers (air, ocean, ground, rail, intermediaries)
Millions of potential users and mobile assets in customer base, with about half a
million users and mobile assets currently live
7
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Ingrained Cultural Framework
One Networked Enterprise
Listen Educate Articulate Research Network
Transparency Entrepreneurial Spirit Accountability Metrics-focused on results
ONE LEARNing TEAM
Shareholders – Customers – Employees – Partners
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P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
A Defined Plan
• Defined Strategic Plan
• Exploit Convergence
• Creating a new category - RiMMS
• Leverage Moore’s and Metcalfe’s Laws
• Buy & Build
• Defined Go-to-Market Strategy
• Customers
• Innovation
• Solution Delivery
• Partners
9
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Defined Strategic Plan – Exploit Convergence; Focus on Congruent Intersection
Time to Value
Technology Convergence
Hardware
Networks
Business Network &
Agility
Business Process Convergence
People, Technology &
Process
Delivery Model Convergence
Holistic Business Processes
Market Convergence
My
Processes Your
Processes
Third-Party
Processes
SaaS 2.0 Web 2.0
BPO
GTC SCE
MRM
Software
Congruent
Intersection
RiMMS
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P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Defined Strategic Plan – Creating a new category: RiMMS
Resources in Motion Management Systems RiMMS: the convergence of 3 markets
11
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Defined Strategic Plan – RiMMS – State of Things United
RiMMS: The Logistics Technology Platform
Network
Applications Community
12
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Defined Strategic Plan – RiMMS – Sub-Communities of Interest
RiMMS: Sub-Communities of Interest
Delivery Network
Logistics Network
Retail Network
Congruent Network
etc. Network
13
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Defined Strategic Plan: Focus on Congruent Intersections
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- Cargo security filings
- Declaration and fiscal compliance
- Ocean regulatory services
- Government solutions
GTC Solutions
- Route planning
- Route execution
- Mobile Applications
- Telematics
- Driver compliance
MRM Solutions
- Transportation management
- Forwarder and broker back office systems
- Logistics flow control
- B2B integration-as-a-service
SCE Solutions
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Descartes – Leveraging Moore’s and Metcalfe’s Laws
15
Content Management
Federated Networking
On Premise ERP &
Renting Software SaaS 1.0
Best of Breed Point to Point Exchanges D
egre
e o
f M
ulti-
Sta
ndard
Encapsula
tion
Dept. Enterprise Extra
Enterprise
Inter
Enterprise
Moore’s Law & Federated Networks:
The regular doubling of computer
capacity allows same services to be
delivered at a lower cost over time.
Metcalfe’s Law & Federated Networks:
The value of the network increases
exponentially for each node that you add
to the network.
Descartes & Federated Networks:
Network designed to leverage both laws,
by reducing prices for same services over
time while increasing revenues per unit
by buying, bundling and building
additional customers and services.
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Defined Strategic Plan: Buy & Build; Create New Category
Descartes has a defined plan to create a new industry category and business model focused on the congruence of 3 markets - RiMMS
Descartes’ solutions are delivered through its Logistics Technology Platform
Descartes is using a Buy & Build strategy to execute and bring solutions to market faster
3 Converging Markets Descartes Focuses on
Congruent Intersections
RiMMS
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Market Dynamics
Slow growth High profits
Negative/no growth Stable profits
High growth Profits elusive
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Defined Go-to-Market Strategy (Customers)
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P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Defined Go-to-Market Strategy – Lead with Innovation
Command of Operations
Time
Multi-modal Network
2004 2005 2006 2010 2011
Network Based Multi -Party Apps
Logistics + Customs
Real-time Routing, Mobile + Telematics
Logistics Technology Platform
Social Federation
2012
Community Cloud
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P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Defined Go-to-Market Strategy – Solution Delivery
The Fusion of:
1. The Global Logistics Network
2. The industry’s broadest array
of modular interoperable web
and wireless logistics
management solutions
3. The world’s most extensive
global multi-modal logistics
community
Descartes Logistics Technology Platform
Network
Applications Community
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P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Defined Go-to-Market Strategy - Partners
Hardware
Partners
Software
Partners
Network
Providers C.O.I.N.s
Service Partners
Technology
Partners
Academia
Channel Partners
* C.O.I.N.S = Community of Interest Networks
United by Design Ecosystem
• Partner with leading hardware providers, software providers and networks
• Descartes opens its federated network via Open SCIs (Standard Collaborative Interfaces)
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P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Uniting Business in Commerce – How are we Doing?
Financial Excellence
• 34 consecutive quarters of profitability
• 8 years of record operating results
• Adjusted EBITDA per Share CAGR - 20% (7-year period)
Scale
• 10,000+ customers
• 800+ employees globally
• World’s largest logistics messaging network
Metrics-Driven, Focused on Results
Over 146,000 connected parties
Over 4.5 billion messages processed each year
Inherent Infrastructure
Ocean
Carriers
Freight
Forwarders
Manufacturers
Distributors
Retailers
Air Carriers
Customs
Authorities
Trucking
Companies
Sea Ports Airports
3PLs
The Global Logistics Network
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P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Strong Quarterly Operating Results
(US$ millions)
$ ∆
Q/Q
%
∆ Q/Q
$ ∆
YoY
% ∆
YoY
Q1 Q4 Q1
2014 2013 2013
Revenue $34.0 $33.8 $0.2 1% $29.9 $4.1 14%
Service Revenue $30.1 $30.1 $0 0% $27.7 $2.4 9%
Service as a % of Rev. 89% 89% 93%
Gross Margin 69% 68% 65%
Net Income $2.8 $7.8 ($5.0) (64%) $2.6 $0.2 8%
Adjusted EBITDA $10.4 $10.3 $0.1 1% $8.7 $1.7 20%
Adjusted EBITDA as a % of Rev. 31% 30% 29%
Adjusted EBITDA per Share 0.16 0.16 - 0% 0.14 0.02 19%
Cash Generated from Ops $9.6 $14.1 ($4.5) (32%) $4.4 $5.2 118%
DSO 52 55 (3) 58 (6)
Summary of Unaudited Results
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Strong Annual Operating Results
(US$ millions) $ ∆
% ∆
2013
2012
Revenue $126.9 $114.0 $12.9 11%
Service Revenue $116.8 $105.7 $11.1 11%
Service as a % of Rev 92% 93%
Gross Margin 67% 66%
Net Income $16.0 $12.0 $4.0 33%
Adjusted EBITDA $38.2 $33.0 $5.2 16%
Adjusted EBITDA as a % of Revs. 30% 29%
Adjusted EBITDA per Share 0.60 0.52 0.08 15%
Cash Generated from Ops $30.3 $23.9 $6.4 27%
Summary of Audited Results
23
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
$0.00
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
$0.14
$0.16
$0.18
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
Q4FY05
Q1FY06
Q2FY06
Q3FY06
Q4FY06
Q1FY07
Q2FY07
Q3FY07
Q4FY07
Q1FY08
Q2FY08
Q3FY08
Q4FY08
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Ad
juste
d E
BIT
DA
per S
hare
Ad
juste
d E
BIT
DA
($
M)
Adjusted EBITDA Adjusted EBITDA per Share
Adjusted EBITDA per Share
24
7 Year CAGR
Adjusted EBITDA – 26%
Adjusted EBITDA per Share – 20%
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Strong Cash Generation
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
FY07 FY08 FY09 FY10 FY11 FY12 FY13
Adjusted EBITDA Cash Generated from Ops
25
Cash generated from operations in FY13 increased 27% over FY12 Generated $9.6 in cash from operations in Q1FY14 – up from $4.4 in Q1FY13
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Baseline Calibration – as of May 2 (post KSD)
Figures per Qtr
Beginning
of Q4 FY09
Beginning
of Q4 FY10
Beginning
of Q4 FY11
Beginning of Q4 FY12
Beginning
of Q4 FY13
Beginning
of Q1 FY14
Beginning
of Q2 FY14
Baseline Revenues
$15.5 $18.0 $25.0 $27.5 $31.6 $31.8 $35.5
Baseline Operating Costs
$12.2 $13.9 $19.2 $21.0 $24.0 $24.1 $27.7
Baseline Calibration
$3.3 $4.1 $5.8 $6.5 $7.6 $7.7 $7.8
Baseline Calibration as a % of Baseline Revenues
21% 23% 23% 24% 24% 24% 22%
• Baseline revenues = visible, contracted and recurring revenues. Baseline revenues is not a revenues
projection as it excludes sales concluded in the period
• Baseline operating costs = operating costs, less stock-based compensation, restructuring and acquisition-
related costs, depreciation and amortization. Baseline operating costs are not a cost projection as they
exclude expenses associated with new sales in the period.