Descartes stands by annual growth target amid tariff uncertainty

Supply chain software provider Descartes said it expects to continue to grow the business in the new year but that broad uncertainty on the global trade front could produce lumpy results from quarter to quarter.

“We don’t know what’s going to happen next, and we don’t think anyone else does either,” said CEO Ed Ryan on a quarterly call with analysts Wednesday after the market closed.

The Canada-based company is seeing more inquiries for its global trade intelligence offering given the fast-changing tariff landscape. The added inbound activity complements extant demand from customers for help navigating growing sanctioned-party lists and increasing export licensing complexity.

Descartes (NASDAQ: DSGX) reported earnings per share of 43 cents for the fiscal quarter ended Jan. 31, 16% higher year over year but short of Yahoo Finance’s 55-cent consensus estimate.

Consolidated revenue of $168 million was 13% higher y/y as services revenue increased 15%. It reported some freight pull forward ahead of looming tariffs in the quarter, specifically for airfreight and ocean transportation, but it quantified the impact as not significant.

Adjusted earnings before interest, taxes, depreciation and amortization of $75 million was 14% higher y/y, with the adjusted EBITDA margin improving 40 basis points to 44.8%.

“Businesses have been somewhat paralyzed as they consider decisions for the short and long term,” Ryan said. “They’ve got to consider how to restructure their supply chains and logistics operations.”

The company said it had undertaken a restructuring plan in the quarter resulting in a less than 2% reduction in workforce, or 45 people. The cuts are expected to result in cost savings of $4 million annually.

Descartes generated $61 million in cash flow from operations in the quarter, a 20% y/y increase.

It ended the period with $236 million in cash and an untapped $350 million line of credit, which it will use to fund future growth and acquisitions.

Descartes completed five acquisitions in its recent fiscal year (ended Jan. 31). It said the M&A market hasn’t seen any notable changes given tariff implementations. It said any tariff-related demand destruction that impacts the overall economy would likely produce lower valuation multiples on acquisition targets.

The company reiterated an annual goal of 10% to 15% adjusted EBITDA growth.

More FreightWaves articles by Todd Maiden:

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