Descartes Systems Group Inc T.DSG

Alternate Symbol(s): DSGX

Technology Software - Application

The Descartes Systems Group Inc. is focused on logistics and supply chain management business processes. It provides on-demand, software-as-a-service (SaaS) solutions focused on improving the security and sustainability of logistics-intensive businesses. The Company allows customers to use its modular, SaaS solutions to route, track and help improve the safety, compliance of delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access global trade data; file customs and security documents for imports and exports; and complete other logistics processes by participating in the multimodal logistics community. Its solutions include cloud-based and consist of B2B service connectivity and messaging, broker and forwarder enterprise systems, global trade intelligence, regulatory compliance, e-commerce shipping, transportation management and routing. It also provides customs declaration software for logistics services providers and shippers.

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Descartes Systems Group Inc

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Post by retiredcfon Sep 19, 2024 8:52am

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Post# 36230635

RBC

September 18, 2024

The Descartes Systems Group Inc.
Makes its fourth acquisition of FY25

NASDAQ: DSGX | USD 99.09 | Outperform | Price Target USD 115.00

Sentiment: Neutral

Descartes acquires MyCarrierPortal for $24MM. Descartes announced this morning the acquisition of U.S.-based MyCarrierPortal, a trucking carrier onboarding and risk monitoring solutions provider. Descrates is paying $24MM (cash) along with a maximum earn-out of $6MM (cash, to be paid in FY26 and FY27) based on the achievement of revenue targets in the first two years post- acquisition. Other financial metrics were not disclosed in the release. We estimate takeout at ~4x EV/S (implying revenues of ~ $6MM), which is in line with Descartes' average takeout multiple over the last 10 years. It is our understanding that MyCarrierPortal is profitable (likely EBITDA margins in the 25% range). Post-acquisition, we expect profitability to expand in line to Descartes' corporate average (~43% EBITDA margins).

Acquisition complements Descartes' MacroPoint. MyCarrierPortal screens for legitimacy, insurance compliance, and an acceptable safety record and monitors carriers on an ongoing basis through an onboarding platform, helping Descartes' hundreds of thousands of freight brokers and shippers address carrier fraud and cargo theft. The acquisition complements Descartes' MacroPoint allowing for customers to onboard carriers with visibility and compliance, reducing fraud risk.

Descartes’ fourth acquisition of FY25. Descartes has now deployed $188MM capital on four acquisitions (OCR, ASD, BoxTop, MyCarrierPortal) 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 $245MM net cash as of Q2 and a $350MM untapped credit facility, while we forecast the company will generate $283MM FCF over the next 12 months. We estimate every $200MM deployed on acquisitions is ~8% accretive to EPS.