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WATERLOO, Ontario - Descartes (NASDAQ:DSGX) Systems Group (TSX:DSG) (NASDAQ:DSGX), a provider of logistics and supply chain management software, has announced the acquisition of Sellercloud, a U.S.-based ecommerce solutions provider. The acquisition, valued at approximately $110 million with an additional performance-based earn-out of up to $20 million, aims to bolster Descartes' ecommerce suite with advanced inventory and order management capabilities.
Sellercloud specializes in assisting small to mid-market retailers, distributors, wholesalers, and manufacturers in managing multi-channel ecommerce operations. Its solutions are designed to help businesses synchronize inventory levels across various sales channels and streamline the fulfillment process, from order routing to warehouse management.
Mikel Richardson, General Manager of ecommerce at Descartes, stated that Sellercloud's addition responds to customer demands for enhanced inventory and order management within the Descartes suite. By integrating Sellercloud's capabilities with Descartes' existing shipping, fulfillment, and warehouse management solutions, the company expects to offer a comprehensive solution for managing the complete lifecycle of ecommerce shipments.
Edward J. Ryan, CEO of Descartes, expressed enthusiasm for the acquisition, highlighting Sellercloud's alignment with Descartes' investments in the Global Logistics Network and the anticipated synergies with other ecommerce properties such as XPS, ShipRush, pixi, and Peoplevox.
The acquisition was settled with cash on hand, and the performance-based earn-out is contingent on the combined business achieving specific revenue targets in the first two years post-acquisition. Any earn-out payments are expected to be made in fiscal years 2026 and 2027.
Descartes Systems Group , headquartered in Waterloo, Ontario, Canada, is recognized for its on-demand, software-as-a-service solutions that improve the productivity, security, and sustainability of logistics-intensive businesses worldwide.
The forward-looking statements in the press release reflect management's current expectations for the future performance of Sellercloud and the potential benefits of the acquisition. However, these statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected.
This news article is based on a press release statement from Descartes Systems Group.
In other recent news, Descartes Systems Group reported strong second-quarter results, with total revenues rising by 14% to $163.4 million and adjusted EBITDA growing by 17% to $70.6 million. This robust financial performance was attributed to both organic growth and recent acquisitions, including OCR, Thyme ASD, and BoxTop Technologies. Despite larger earn-out payments impacting cash flow, Descartes maintained a solid financial position with over $250 million in cash and no debt.
Descartes Systems also announced the acquisition of Assure Assist, Inc., which operates as MyCarrierPortal (MCP), for an upfront payment of $24 million. The purchase is set to enhance Descartes' Know-Your-Carrier capabilities, aiming to improve supply chain performance and reduce fraud risks. This strategic move is part of Descartes' ongoing efforts to expand its software-as-a-service offerings, which aim to improve productivity, security, and sustainability for logistics-intensive businesses.
National Bank Financial has initiated coverage on Descartes Systems Group, setting an Outperform rating based on a multi-stage discounted cash flow (DCF) analysis. The analysis anticipates a 10-15% EBITDA growth for Descartes Systems over a 10-year horizon, with a 3% terminal growth rate and a 7-8% discount rate. The Outperform rating reflects confidence in the company's continued success in expanding its market presence and financial achievements.
In other developments, Descartes plans to present new technology advancements at its 2024 Innovation Forum. The event aims to address current logistical challenges and opportunities by showcasing solutions for a variety of logistics sectors. The company plans to introduce enhancements across its suite of services, including transportation management, route planning, and solutions for brokers, forwarders, customs, and air cargo.
These are the latest developments in Descartes Systems Group's strategic growth.
InvestingPro Insights
Descartes Systems Group's acquisition of Sellercloud aligns well with its strong market position and financial performance. According to InvestingPro data, Descartes boasts a market capitalization of $9.03 billion, reflecting investor confidence in its growth strategy. The company's revenue growth of 15.4% over the last twelve months demonstrates its ability to expand its market share in the logistics software sector.
An InvestingPro Tip highlights Descartes' impressive gross profit margins, which stand at 75.91% for the last twelve months. This robust profitability could provide the financial flexibility needed to integrate Sellercloud and potentially realize synergies from the acquisition.
Another relevant InvestingPro Tip notes that Descartes operates with a moderate level of debt. This prudent financial management may have enabled the company to fund the $110 million acquisition with cash on hand, without significantly impacting its balance sheet strength.
Investors should note that Descartes is trading near its 52-week high, with a price-to-earnings ratio of 70.69. This valuation suggests that the market has high expectations for the company's future performance, including the potential benefits from the Sellercloud acquisition.
For readers interested in a more comprehensive analysis, InvestingPro offers 17 additional tips for Descartes Systems Group, providing deeper insights into the company's financial health and market position.
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