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.

TSX:DSG - Post by User

Descartes Systems Group Inc

<< Previous

Bullboard Posts

Next >>

Post by retiredcfon Nov 20, 2024 9:00am

28 Views

Post# 36321360

RBC

November 19, 2024

The Descartes Systems Group Inc. Highlights from the RBC Global TIMT Conference

NASDAQ: DSGX | USD 113.61 | Outperform | Price Target USD 115.00

Sentiment: Neutral

We hosted Ed Ryan, CEO of Descartes, at the 2024 RBC Capital Markets Global Technology, Internet, Media and Telecommunications (TIMT) Conference today. We remain Outperform.

Key takeaway: Descartes' shift toward faster growing segments of the market has lifted organic growth above historical averages. Volatility in the global trade environment, such as changing tariffs, increases demand for supply chain management software and is a long-term tailwind for Descartes' business. The company's disciplined capital allocation combined with increased organic growth position Descartes for continued compounding of capital at high rates.

Shift to faster growing market segments has lifted organic growth above historical averages. As a result of a mix-shift to faster growing segments (freight visibility, trade content, e-commerce) and strong cross-selling/up-selling, Descartes has moved from averaging low-to-mid single-digit organic growth pre-COVID to high-single digits today. Mr. Ryan believes high-single digits organic growth is sustainable going forward. Acquisitions, such as Descartes' recent acquisition of Sellercloud, complement Descartes’ existing product portfolio and help strengthen organic growth through new cross-sell opportunities.
Potential tariff changes are a tailwind for Descartes. Descartes' global trade intelligence solutions account for ~20% of revenue and have been a consistent driver of organic growth. Descartes' tariff databases help businesses accurately calculate landing costs and pay the correct duties. Potential changes to tariffs under the Trump administration are likely to increase demand for Descartes' global trade intelligence solutions. Additionally, near-shoring and on-shoring is also a positive for Descartes, given the likelihood of increased global trade of raw materials and components.
Supply chain investments remain a priority. Recurring revenue is currently >90% of Descartes’ total revenue, up from low 80s 10 years ago. The company’s high mix of recurring revenue helps insulate Descartes from cyclicality in global trade volumes. While trade volumes have slowed, customers are prioritizing investments in supply chain and logistics software, in order to help mitigate the impacts from supply disruptions, reduce costs, improve customer visibility, and streamline logistics. Mr. Ryan noted that the company has been selling more value added services over the last 3-4 years, which has more than offset reduced trade volumes.
Favourable M&A environment. Descartes operates a disciplined M&A model, and is focused on buying high quality assets (i.e. profitable and growing) where there is a clear path to value creation (cross-selling, market share gains, operational improvements). In the current higher interest rate environment, Descartes has benefitted as there are fewer potential buyers and valuations have declined.