The Descartes Systems Group Inc (NASDAQ:DSGX) Q3 2020 Earnings Conference Call - Final Transcript

Dec 04, 2019 • 05:00 pm ET

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The Descartes Systems Group Inc (NASDAQ:DSGX) Q3 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Edward J. Ryan

to market more effectively with established global companies like SAP and Oracle, NetSuite as well as emerging companies like Geotab.

Our credibility as an acquirer in logistics and supply chain market helps open doors for new opportunities, and is an important factor when founders are contemplating where the best home for their business is. Our credibility as a neutral party and good steward of data has been instrumental in helping us develop and maintain good access to updated trading data content from governments and institutions.

Our credibility as an employer helps us attract and retain some of the smartest logistics and supply chain minds in the planet, and our credibility with the investor community underpins our long-term strategy as we continue our journey to become a leader in logistics and supply chain technology. As we've said before, we believe this is a long-term game, and we believe that we have the right strategy, operating plan and credibility to be the winner in this market.

On today's call, I'll talk a little bit about that strategy and our long-term operating plans. I'll also talk about some of the trends we're seeing in the market and how we believe our network-based approach gives our customers an edge on their competitors. After my market update, Alan will then provide a detailed overview of our financial results, and then I'll finish up the call talking about our calibration for Q4 and our operating plans moving forward. First, let's start by going over some of the key financial highlights for the third quarter of fiscal 2020. We had another outstanding quarter of operating results and we're very happy with our key metrics, fueled by our continued organic growth and our ability to successfully integrate acquisitions. Revenue for the quarter was up 19% from Q3 last year, coming in at $83 million. Our adjusted EBITDA continues to grow nicely.

For the quarter, we generated $31.5 million of adjusted EBITDA, an increase of 31% over Q3 of last year. Digital compliance continues to contribute nicely to this growth, growth that remains ahead of our plans of the mid to high 20s and adjusted EBITDA growth for this fiscal year compared to the previous fiscal year.

We continue to convert our EBITDA into cash, converting 87% of EBITDA into cash and generating a record $27.5 million of cash in the quarter. And consistent with our long-term operating plans, we've been investing cash back into our business to focused research and development investments and by combining with complementary businesses.

We combined with four businesses so far in FY '20. You'll hear some updates on some of those investments in just a few minutes. All-in-all, another great quarter here at Descartes, continuing the momentum from Q1 and Q2. We have a predictable cash generating business and we have a solid balance sheet with financial capacity to continue to acquire businesses, and we're well positioned to continue our growth.

So, let's talk a little bit about Descartes' strategy and how our