Descartes makes $13MM tuck-in acquisition, brings YTD capital deployed on acquisitions to $164MM
NASDAQ: DSGX | USD 92.18 | Outperform | Price Target USD 115.00
Sentiment: Neutral
Descartes acquires BoxTop Technologies for $13MM. Descartes announced this morning the acquisition of U.K.-based BoxTop Technologies, a provider of shipment management solutions for small- to mid-sized logistics services providers. Descartes is paying approximately $13MM (£10.25MM) in cash. Other financial metrics were not disclosed. According to Companies House, BoxTop has 17 employees, which based on Descartes’ revenue per employee ($263k), implies BoxTop generates $4.5MM revenue per annum. This suggests that Descartes paid 2.9x sales for BoxTop, which is below its average takeout multiple over the last 5 years (4.4x sales). Additionally, according to Companies House, BoxTop averaged £0.9MM ($1.1MM) net income per annum over the last two fiscal years ended March 31, 2023. This implies 25% net margins on our assumption of $4.5MM annual revenue. The company paid out effectively all of its net income as dividends to shareholders in the last two years; as of March 31, 2023, BoxTop had shareholders’ equity of £0.6MM ($0.8MM).
BoxTop Technologies strengthens Descartes’ positioning with small- and mid-sized LSPs. BoxTop Technologies helps small- to mid-sized logistics service providers ("LSPs") digitize their operations and manage the lifecycle of shipments. BoxTop is an existing Descartes partner, leveraging Descartes’ Global Logistics Network (“GLN”) to help their clients gain visibility into shipments across multiple modes of transportation and complete electronic customs filings.
Descartes’ third acquisition of FY25. Descartes has now deployed $164MM capital on three acquisitions (OCR, ASD, BoxTop) in FY25, compared to $144MM on acquisitions in all of FY24. Looking ahead, we believe that Descartes is well-positioned to sustain a strong pace of acquisitions. Descartes is well capitalized with $232MM net cash as of Q1 and a $350MM untapped credit facility, while we forecast the company will generate $250MM FCF over the next 12 months. We estimate every $200MM deployed on acquisitions is ~8% accretive to EPS.