Descartes Announces Fiscal 2026 Second Quarter Financial Results

Record Revenues and Income from Operations WATERLOO, Ontario and ATLANTA, Sept. 03, 2025 (GLOBE NEWSWIRE) -- The Descartes Systems Group Inc. (TSX:DSG) (Nasdaq:DSGX) announced its financial results for its fiscal 2026 second quarter (Q2FY26). All financial results referenced are in United States (US) currency and, unless otherwise indicated, are determined in accordance with US Generally Accepted Accounting Principles (GAAP). "Our business performed consistent with our plans in Q2FY26, despite very challenging market conditions for global trade," said Edward J. Ryan, Descartes' CEO. "Our customers continue to face uncertainty in the costs of sourcing and moving goods across borders. This has also impacted their ability to make pricing and investment decisions in an uncertain economic environment. For our customers, Descartes is a trusted provider to help them deal with the complexity of changes in trade relationships, tariffs, sanctions and modes of transportation. Descartes' Global Logistics Network of technology and connected parties continues to be relied on by shippers, carriers, and logistics services providers to keep goods moving.” Q2FY26 Financial ResultsAs described in more detail below, key financial highlights for Descartes’ Q2FY26 included: Revenues of $179.8 million, up 10% from $163.4 million in the second quarter of fiscal 2025 (Q2FY25) and up 7% from $168.7 million in the previous quarter (Q1FY26);Revenues were comprised of services revenues of $166.8 million (93% of total revenues), professional services and other revenues of $12.8 million (7% of total revenues) and license revenues of $0.2 million (less than 1% of total revenues). Services revenues were up 14% from $146.2 million in Q2FY25 and up 7% from $156.6 million in Q1FY26;Cash provided by operating activities of $63.3 million, up 82% from $34.7 million in Q2FY25 and up 18% from $53.6 million in Q1FY26. Cash provided by operating activities was impacted by the following: (i) in Q2FY26 by the payment of $5 million in personnel departure amounts; and (ii) in Q2FY25 by the payment of $25.0 million in contingent acquisition consideration for previously completed deals, which was not accrued for at the time of acquisition;Income from operations of $48.2 million, up 5% from $45.9 million in Q2FY25 and up 4% from $46.2 million in Q1FY26;Net income of $38.0 million, up 10% from $34.7 million in Q2FY25 and up 5% from $36.2 million in Q1FY26. Net income as a percentage of revenue was 21%, consistent with Q2FY25 and Q1FY26;Earnings per share on a diluted basis of $0.43, up 7% from $0.40 in Q2FY25 and up 5% from $0.41 in Q1FY26, respectively; andAdjusted EBITDA of $80.2 million, up 14% from $70.6 million in Q2FY25 and up 7% from $75.1 million in Q1FY26. Adjusted EBITDA as a percentage of revenues was 45%, compared to 43% and 45% in Q2FY25 and Q1FY26, respectively. Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues are non-GAAP financial measures provided as a complement to financial results presented in accordance with GAAP. We define Adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, stock-based compensation (for which we include related fees and taxes) and other charges (for which we include restructuring charges, acquisition-related expenses, and contingent consideration incurred due to better-than-expected performance from acquisitions). These items are considered by management to be outside Descartes' ongoing operational results. We define Adjusted EBITDA as a percentage of revenues as the quotient, expressed as a percentage, from dividing Adjusted EBITDA for a period by revenues for the corresponding period. A reconciliation of Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues to net income determined in accordance with GAAP is provided later in this release. The following table summarizes Descartes' results in the categories specified below over the past 5 fiscal quarters (unaudited; dollar amounts, other than per share amounts, in millions): Q2FY26Q1FY26Q4FY25Q3FY25Q2FY25Revenues179.8168.7167.5168.8163.4Services revenues166.8156.6156.5149.7146.2Gross margin77%76%76%74%75%Cash provided by operating activities*63.353.660.760.134.7Income from operations48.246.247.145.845.9Net income38.036.237.436.634.7Net income as a % of revenues21%21%22%22%21%Earnings per diluted share0.430.410.430.420.40Adjusted EBITDA80.275.175.072.170.6Adjusted EBITDA as a % of revenues45%45%45%43%43% (*) Cash provided by operating activities was impacted by the following: (i) in Q2FY26 by the payment of $5 million in personnel departure amounts; and (ii) in Q2FY25 by the payment of $25.0 million in contingent acquisition consideration for previously completed deals, which was not accrued for at the time of acquisitionYear-to-Date Financial ResultsAs described in more detail below, key financial highlights for Descartes’ six-month period ended July 31, 2025 (1HFY26) included: Revenues of $348.6 million, up 11% from $314.8 million in the same period a year ago (1HFY25);Revenues were comprised of services revenues of $323.4 million (93% of total revenues), professional services and other revenues of $24.6 million (7% of total revenues) and license revenues of $0.6 million (less than 1% of total revenues). Services revenues were up 14% from $284.1 million in 1HFY25;Cash provided by operating activities of $116.9 million, up 19% from $98.4 million in 1HFY25. Cash provided by operating activities was impacted by the following: (i) in 1HFY26 by the payment of $5 million in personnel departure amounts; and (ii) in 1HFY25 by the payment of $25.0 million in contingent acquisition consideration for previously completed deals, which was not accrued for at the time of acquisition;Income from operations of $94.4 million, up 7% from $88.2 million in 1HFY25;Net income of $74.3 million, up 7% from $69.3 million in 1HFY25. Net income as a percentage of revenues was 21%, compared to 22% in 1HFY25;Earnings per share on a diluted basis of $0.85, up 6% from $0.80 in 1HFY25; andAdjusted EBITDA of $155.3 million, up 13% from $137.6 million in 1HFY25. Adjusted EBITDA as a percentage of revenues was 45%, compared to 44% in 1HFY25. The following table summarizes Descartes’ results in the categories specified below over 1HFY26 and 1HFY25 (unaudited, dollar amounts in millions): 1HFY261HFY25Revenues348.6314.8Services revenues323.4284.1Gross margin77%76%Cash provided by operating activities*116.998.4Income from operations94.488.2Net income74.369.3Net income as a % of revenues21%22%Earnings per diluted share0.850.80Adjusted EBITDA155.3137.6Adjusted EBITDA as a % of revenues45%44% * Cash provided by operating activities was impacted by the following: (i) in 1HFY26 by the payment of $5 million in personnel departure amounts; and (ii) in 1HFY25 by the payment of $25.0 million in contingent acquisition consideration for previously completed deals, which was not accrued for at the time of acquisitionCash PositionAt July 31, 2025, Descartes had $240.6 million in cash. Cash increased by $64.2 million in Q2FY26 and increased by $4.5 million in 1HFY26. The table set forth below provides a summary of cash flows for Q2FY26 and 1HFY26 in millions of dollars: Q2FY261HFY26Cash provided by operating activities63.3116.9Additions to property and equipment(1.2)(3.1)Acquisitions of subsidiaries, net of cash acquired(2.3)(114.6)Issuances of common shares, net of issuance costs4.88.4Payment of withholding taxes on net share settlements-(6.5)Payment of contingent consideration(1.2)(1.2)Effect of foreign exchange rate on cash0.84.6Net change in cash64.24.5Cash, beginning of period176.4236.1Cash, end of period240.6240.6 Acquisition of PackageRouteOn June 18, 2025, Descartes acquired all of the shares of PackageRoute Holdco, Inc., a leading provider of final-mile carrier solutions. The purchase price for the acquisition was approximately $1.9 million, net of cash acquired, which was funded from cash on hand. Acquisition of FinaleOn August 1, 2025, Descartes acquired all of the shares of Finale, Inc., a U.S.-based provider of cloud-based inventory management solutions designed to support ecommerce businesses across their growth lifecycle. The purchase price for the acquisition was approximately $40.0 million, net of cash acquired, which was funded from cash on hand, plus potential performance-based contingent consideration of up to $15.0 million based on Finale achieving revenue-based targets over the first two years post-acquisition. Conference CallMembers of Descartes' executive management team will host a conference call to discuss the company's financial results at 5:30 p.m. ET on Wednesday, September 03, 2025. Designated numbers are +1 289 514 5100 for North America and +1 800 717 1738 for international, using conference ID 15589. The company will simultaneously conduct an audio webcast on the Descartes website at www.descartes.com/descartes/investor-relations. Phone conference dial-in or webcast login is required approximately 10 minutes beforehand. Replays of the conference call will be available until Wednesday, September 10, 2025, by dialing +1 289 819 1325 or Toll-Free for North America using +1 888 660 6264 with Playback Passcode: 15589#. An archived replay of the webcast will be available at www.descartes.com/descartes/investor-relations. About Descartes Descartes (Nasdaq:DSGX) (TSX:DSG) is the global leader in providing on-demand, software-as-a-service solutions focused on improving the productivity, security and sustainability of logistics-intensive businesses. Customers use our modular, software-as-a-service solutions to route, track and help improve the safety, performance and 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 numerous other logistics processes by participating in the world’s largest, collaborative multimodal logistics community. Our headquarters are in Waterloo, Ontario, Canada and we have offices and partners around the world. Learn more at www.descartes.com, and connect with us on LinkedIn and X (Twitter). Descartes Investor Contact Laurie McCauley (519) 746-2969investor@descartes.com Cautionary Statement Regarding Forward-Looking Statements This release may contain forward-looking information within the meaning of applicable securities laws ("forward-looking statements") that relates to Descartes' expectations concerning future revenues and earnings, and our projections for any future reductions in expenses or growth in margins and generation of cash; our assessment of the potential impact of geopolitical events, such as the ongoing conflict between Russia and Ukraine (the “Russia-Ukraine Conflict”), and between Israel and Hamas (“Israel-Hamas Conflict”), or other potentially catastrophic events, on our business, results of operations and financial condition; our assessment of the potential impact of tariffs, sanctions and other actions by individual countries on global trade and our business; continued growth and acquisitions including our assessment of any increased opportunity for our products and services as a result of trends in the logistics and supply chain industries; rate of profitable growth and Adjusted EBITDA margin operating range; demand for Descartes' solutions; growth of Descartes' Global Logistics Network (“GLN”); customer buying patterns; customer expectations of Descartes; development of the GLN and the benefits thereof to customers; and other matters. These forward-looking statements are based on certain assumptions including the following: global shipment volumes continuing at levels generally consistent with those experienced historically; the Russia-Ukraine Conflict and Israel-Hamas Conflict not having a material negative impact on shipment volumes or on the demand for the products and services of Descartes by its customers and the ability of those customers to continue to pay for those products and services; countries continuing to implement and enforce existing and additional customs and security regulations relating to the provision of electronic information for imports and exports; countries continuing to implement and enforce existing and additional trade restrictions and sanctioned party lists with respect to doing business with certain countries, organizations, entities and individuals; Descartes' continued operation of a secure and reliable business network; the stability of general economic and market conditions, currency exchange rates, and interest rates; equity and debt markets continuing to provide Descartes with access to capital; Descartes' continued ability to identify and source attractive and executable business combination opportunities; Descartes' ability to develop solutions that keep pace with the continuing changes in technology, and our continued compliance with third party intellectual property rights. These assumptions may prove to be inaccurate. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Descartes, or developments in Descartes' business or industry, to differ materially from the anticipated results, performance or achievements or developments expressed or implied by such forward-looking statements. Such factors include, but are not limited to, Descartes' ability to successfully identify and execute on acquisitions and to integrate acquired businesses and assets, and to predict expenses associated with and revenues from acquisitions; the impact of network failures, information security breaches or other cyber-security threats; disruptions in the movement of freight and a decline in shipment volumes including as a result of the impact of current and future trade barriers, including tariffs, further protectionist measures and reactive countermeasure or contagious illness outbreaks; a deterioration of general economic conditions or instability in the financial markets accompanied by a decrease in spending by our customers; the ability to attract and retain key personnel and the ability to manage the departure of key personnel and the transition of our executive management team; changes in trade or transportation regulations that currently require customers to use services such as those offered by Descartes; changes in customer behaviour and expectations; Descartes’ ability to successfully design and develop enhancements to our products and solutions; departures of key customers; the impact of foreign currency exchange rates; Descartes' ability to retain or obtain sufficient capital in addition to its debt facility to execute on its business strategy, including its acquisition strategy; disruptions in the movement of freight; the potential for future goodwill or intangible asset impairment as a result of other-than-temporary decreases in Descartes' market capitalization; and other factors and assumptions discussed in the section entitled, "Certain Factors That May Affect Future Results" in documents filed with the Securities and Exchange Commission, the Ontario Securities Commission and other securities regulatory authorities across Canada, including Descartes' most recently filed annual and subsequent interim Management's Discussion and Analysis which are available under Descartes’ profile through the EDGAR website at http://www.sec.gov or through the SEDAR+ website at http://www.sedarplus.com/. If any such risks actually occur, they could, among other consequences, 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. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. 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 or circumstances on which any such statement is based, except as required by law. Reconciliation of Non-GAAP Financial Measures - Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues We prepare and release quarterly unaudited and annual audited financial statements prepared in accordance with GAAP. We also disclose and discuss certain non-GAAP financial information, used to evaluate our performance, in this and other earnings releases and investor conference calls as a complement to results provided in accordance with GAAP. We believe that current shareholders and potential investors in our company use non-GAAP financial measures, such as Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues, in making investment decisions about our company and measuring our operational results. The term “Adjusted EBITDA” refers to a financial measure that we define as earnings before certain charges that management considers to be non-operating expenses and which consist of interest, taxes, depreciation, amortization, stock-based compensation (for which we include related fees and taxes) and other charges (for which we include restructuring charges, acquisition-related expenses, and contingent consideration incurred due to better-than-expected performance from acquisitions). Adjusted EBITDA as a percentage of revenues divides Adjusted EBITDA for a period by the revenues for the corresponding period and expresses the quotient as a percentage. Management considers these non-operating expenses to be outside the scope of Descartes’ ongoing operations and the related expenses are not used by management to measure operations. Accordingly, these expenses are excluded from Adjusted EBITDA, which we reference to both measure our operations and as a basis of comparison of our operations from period-to-period. Management believes that investors and financial analysts measure our business on the same basis, and we are providing the Adjusted EBITDA financial metric to assist in this evaluation and to provide a higher level of transparency into how we measure our own business. However, Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues are non-GAAP financial measures and may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues should not be construed as a substitute for net income determined in accordance with GAAP or other non-GAAP measures that may be used by other companies, such as EBITDA. The use of Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues does have limitations. In particular, we have completed eight acquisitions since the beginning of fiscal 2025 and may complete additional acquisitions in the future that will result in acquisition-related expenses and restructuring charges. As these acquisition-related expenses and restructuring charges may continue as we pursue our consolidation strategy, some investors may consider these charges and expenses as a recurring part of operations rather than expenses that are not part of operations. The table below reconciles Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues to net income reported in our unaudited Consolidated Statements of Operations for Q2FY26, Q1FY26, Q4FY25, Q3FY25, and Q2FY25, which we believe is the most directly comparable GAAP measure. Q2FY26Q1FY26Q4FY25Q3FY25Q2FY25Net income, as reported on Consolidated Statements of Operations38.036.237.436.634.7Adjustments to reconcile to Adjusted EBITDA: Interest expense0.20.20.20.20.2Investment income(1.5)(1.9)(1.9)(2.9)(2.7)Income tax expense11.511.711.411.913.6Depreciation expense1.51.51.51.41.4Amortization of intangible assets20.519.119.417.517.4Stock-based compensation and related taxes4.94.95.45.65.8Other charges5.13.41.61.80.2Adjusted EBITDA80.275.175.072.170.6 Revenues179.8168.7167.5168.8163.4Net income as % of revenues21%21%22%22%21%Adjusted EBITDA as % of revenues45%45%45%43%43% The Descartes Systems Group Inc.Condensed Consolidated Balance Sheets(US dollars in thousands; US GAAP; Unaudited) July 31,January 31, 20252025ASSETS CURRENT ASSETS Cash240,632236,138Accounts receivable (net) Trade61,34153,953Other19,10316,931Prepaid expenses and other39,61345,544 360,689352,566OTHER LONG-TERM ASSETS26,52624,887PROPERTY AND EQUIPMENT, NET13,10612,481RIGHT-OF-USE ASSETS7,8307,623DEFERRED INCOME TAXES5,3513,802INTANGIBLE ASSETS, NET349,998321,270GOODWILL992,524924,755 1,756,0241,647,384LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable16,12720,650Accrued liabilities68,09679,656Lease obligations3,3373,178Income taxes payable7,4639,313Deferred revenue116,870104,230 211,893217,027LEASE OBLIGATIONS4,6374,718DEFERRED REVENUE1,305978INCOME TAXES PAYABLE6,1295,531DEFERRED INCOME TAXES32,17434,127 256,138262,381 SHAREHOLDERS’ EQUITY Common shares – unlimited shares authorized; Shares issued and outstanding totaled 85,933,713 at July 31, 2025 (January 31, 2025 – 85,605,969)583,358568,339Additional paid-in capital498,811503,133Accumulated other comprehensive loss(20,575)(50,497)Retained earnings438,292364,028 1,499,8861,385,003 1,756,0241,647,384 The Descartes Systems Group Inc.Consolidated Statements of Operations(US dollars in thousands, except per share and weighted average share amounts; US GAAP; Unaudited) Three Months Ended Six Months Ended July 31,July 31, July 31,July 31, 20252024 20252024 REVENUES179,815163,425 348,554314,773COST OF REVENUES41,58840,548 81,33575,961GROSS MARGIN138,227122,877 267,219238,812EXPENSES Sales and marketing20,52219,031 39,37236,502Research and development26,75223,909 51,82146,100General and administrative17,14716,522 33,45931,470Other charges5,119150 8,5684,068Amortization of intangible assets20,50417,419 39,61832,443 90,04477,031 172,838150,583INCOME FROM OPERATIONS48,18345,846 94,38188,229INTEREST EXPENSE(243)(243) (479)(516)INVESTMENT INCOME1,5502,715 3,5126,774INCOME BEFORE INCOME TAXES49,49048,318 97,41494,487INCOME TAX EXPENSE Current5,67411,477 17,92523,795Deferred5,7962,160 5,2251,344 11,47013,637 23,15025,139NET INCOME38,02034,681 74,26469,348EARNINGS PER SHARE Basic0.440.41 0.870.81Diluted0.430.40 0.850.80WEIGHTED AVERAGE SHARES OUTSTANDING (thousands) Basic85,83385,430 85,75685,353Diluted87,59087,241 87,58887,176 The Descartes Systems Group Inc.Condensed Consolidated Statements of Cash Flows(US dollars in thousands; US GAAP; Unaudited) Three Months Ended Six Months Ended July 31,July 31, July 31,July 31, 2025202420252024OPERATING ACTIVITIES Net income38,02034,68174,26469,348Adjustments to reconcile net income to cash provided by operating activities: Depreciation1,5011,3862,9512,744Amortization of intangible assets20,50417,41939,61832,443Stock-based compensation expense4,4535,5088,8199,277Other non-cash operating activities162(55)12841Deferred tax expense5,7962,1605,2251,344Changes in operating assets and liabilities(7,100)(26,439)(14,066)(16,796)Cash provided by operating activities63,33634,660116,93998,401INVESTING ACTIVITIES Additions to property and equipment(1,240)(1,576)(3,102)(3,340)Acquisition of subsidiaries, net of cash acquired(2,277)(13,742)(114,604)(153,715)Cash used in investing activities(3,517)(15,318)(117,706)(157,055)FINANCING ACTIVITIES Payment of debt issuance costs--(38)(38)Issuance of common shares for cash, net of issuance costs4,8083,2838,3667,514Payment of withholding taxes on net share settlements--(6,487)(6,745)Payment of contingent consideration(1,170)(9,223)(1,170)(9,223)Cash provided by (used in) financing activities3,638(5,940)671(8,492)Effect of foreign exchange rate changes on cash7643294,590(1,153)Increase (decrease) in cash64,22113,7314,494(68,299)Cash, beginning of period176,411238,922236,138320,952Cash, end of period240,632252,653240,632252,653

Descartes Announces Fiscal 2026 Second Quarter Financial Results

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