Descartes cutting 7% of workforce after earnings miss
Supply chain software provider Descartes announced Wednesday that it is cutting its workforce by 7%, or roughly 200 people. The action is in response to “uncertain times for customers” as a rapidly changing trade landscape weighs on the freight industry.
“This is a challenging and uncertain economic and trade environment for shippers, carriers and logistics services providers,” CEO Ed Ryan said in a news release announcing fiscal first-quarter results. “They face challenges on how, when, or if, to react to changes in global trade relationships, tariffs, sanctions and economic forecasts.”
The head count reductions were an expansion of a restructuring plan announced a quarter ago, which involved trimming just 2% of the workforce. The recent actions along with other initiatives are expected to generate $15 million in annual cost savings.
Descartes (NASDAQ: DSGX) reported earnings per share of 41 cents for its fiscal first quarter ended April 30. The result was 1 cent higher y/y but 19 cents light of the consensus estimate.
Consolidated revenue increased 12% y/y to $169 million, largely due to prior acquisitions. The company said it’s seeing “strong interest” for global trade intelligence services given the quickly changing tariff environment.
None of its customers are tripping minimum volume commitments, which are set at 85% to 90% of average volumes.
Adjusted earnings before interest, taxes, depreciation and amortization of $75 million was 12% higher y/y, with the adjusted EBITDA margin improving 20 basis points to 44.5%.
The company generated $54 million in cash flow from operations in the quarter, a 16% y/y decline. It ended the period with $176 million in cash and an untapped line of credit of $350 million. It plans to use capital to continue to make accretive acquisitions as valuation multiples are coming down.
During the recent quarter, it acquired cloud-based transportation management solutions provider 3GTMS for $112.7 million.
Ryan said the belt tightening has put the company “in a position to live to fight another day.” He believes Descartes will be in a strong position to step in and make acquisitions if its peers become distressed.
Shares of DSGX were off 0.5% in after-hours trading on Wednesday.
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