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Acquisitions

12 Months Ended

Jan. 31, 2023

Acquisitions

Note 3 – Acquisitions

Fiscal 2023 Acquisitions

On February 9, 2022, Descartes acquired all of the shares of NetCHB, LLC (“NetCHB”), a provider of customs filing solutions in the US. The purchase price for the acquisition was approximately $38.7 million, net of cash acquired, which was funded from cash on hand, plus potential performance-based contingent consideration of up to $60.0 million based on NetCHB achieving revenue-based targets over the first two years post-acquisition. The fair value of the contingent considerations was valued at $13.9 million at the acquisition date. The gross contractual amount of trade receivables acquired was $0.1 million with a fair value of $0.1 million at the date of acquisition. Our acquisition date estimate of contractual cash flows not expected to be collected was nominal. The purchase price was finalized in the three month period ended January 31, 2023 with no adjustments.

On April 21, 2022, Descartes acquired substantially all of the assets of Foxtrot, Inc. (“Foxtrot”), a provider of machine learning-based mobile route execution solutions. The purchase price for the acquisition was approximately $4.2 million, net of cash acquired, which was funded from cash on hand. The gross contractual amount of trade receivables acquired was $0.7 million with a fair value of $0.7 million at the date of acquisition. Our acquisition date estimate of contractual cash flows not expected to be collected was nominal. The completion of the initial purchase price allocation is pending the finalization of the fair value for trade receivables, accrued liability balances as well as potential unrecorded liabilities. We expect to finalize the purchase price allocation on or before April 21, 2023.

On June 3, 2022, Descartes acquired all of the shares of XPS Technologies, LLC (“XPS”), a provider of ecommerce multi-carrier parcel shipping solutions. The purchase price for the acquisition was approximately $61.1 million, net of cash acquired, which was funded from cash on hand, plus potential performance-based contingent consideration of up to $75.0 million based on XPS achieving revenue-based targets over the first two years post-acquisition. The fair value of the contingent consideration was valued at $9.4 million at the acquisition date. The gross contractual amount of trade receivables acquired was $1.5 million with a fair value of $1.5 million at the date of acquisition. Our acquisition date estimate of contractual cash flows not expected to be collected was nominal. The completion of the initial purchase price allocation is pending the finalization of the fair value for trade receivables, accrued liability balances as well as potential unrecorded liabilities. We expect to finalize the purchase price allocation on or before June 3, 2023.

On January 5, 2023, Descartes acquired all of the shares of Tran-Soft, LLC, doing business as Supply Vision (“Supply Vision”), a provider of shipment management solutions for North American Logistics Services Providers. The purchase price for the acquisition was approximately $12.0 million, net of cash acquired, which was funded from cash on hand, plus potential performance-based contingent consideration of up to $3.0 million based on Supply Vision achieving revenue-based targets over the first two years post-acquisition. The fair value of the contingent consideration was valued at $2.7 million at the acquisition date. The gross contractual amount of trade receivables acquired was $0.3 million with a fair value of $0.3 million at the date of acquisition. Our acquisition date estimate of contractual cash flows not expected to be collected was nominal. The completion of the initial purchase price allocation is pending the finalization of the fair value for trade receivables, accrued liability balances, deferred revenue as well as potential unrecorded liabilities. We expect to finalize the purchase price allocation on or before January 5, 2024.

For the businesses acquired during fiscal 2023, we incurred acquisition-related costs of $1.9 million for the year ended January 31, 2023. The acquisition-related costs were primarily for advisory services and are included in other charges in our consolidated statements of operations.For the year ended January 31, 2023, we have recognized revenues of $20.8 million, and net income of $6.6 million, respectively, from NetCHB, Foxtrot, XPS and Supply Vision since the date of acquisition in our consolidated statements of operations.

The final purchase price allocation for NetCHB and the preliminary purchase price allocations for Foxtrot, XPS and Supply Vision, which have not been finalized, are as follows:


								Supply
		NetCHB		Foxtrot		XPS		Vision		Total
Purchase price consideration:
Cash, less cash acquired related to NetCHB ($658), Foxtrot (Nil), XPS ($3,932) and Supply Vision ($413)		38,664		4,228		61,096		11,573		115,561
Contingent consideration		13,948		—		9,425		2,670		26,043
Net working capital adjustments payable (receivable)		51		66		978		(137)		958
		52,663		4,294		71,499		14,106		142,562
Allocated to:
Current assets, excluding cash acquired		469		835		2,449		703		4,456
Current liabilities		(367)		(22)		(1,483)		(658)		(2,530)
Deferred revenue		—		(336)		(2,196)		(132)		(2,664)
Net tangible assets (liabilities) assumed		102		477		(1,230)		(87)		(738)

Finite life intangible assets acquired:
Customer agreements and relationships		10,900		650		8,100		2,500		22,150
Existing technology		14,100		1,640		20,000		4,700		40,440
Trade names		64		—		100		30		194
Non-compete covenants		700		—		1,000		200		1,900
Goodwill		26,797		1,527		43,529		6,763		78,616
		52,663		4,294		71,499		14,106		142,562

The above transactions were accounted for using the acquisition method in accordance with ASC Topic 805, “Business Combinations”. The purchase price allocations in the table above represents our estimates of the allocation of the purchase price and the fair value of net assets acquired. The preliminary purchase price allocations may differ from the final purchase price allocation, and these differences may be material. Revisions to the allocations will occur as additional information about the fair value of assets and liabilities becomes available. The final purchase price allocations will be completed within one year from the acquisition dates.

The acquired intangible assets are being amortized over their estimated useful lives as follows:


								Supply
		NetCHB		Foxtrot		XPS		Vision
Customer agreements and relationships		13 years		13 years		11 years		11 years
Existing technology		6 years		6 years		6 years		6 years
Trade names		2 years		N/A		2 years		9 years
Non-compete covenants		5 years		N/A		5 years		5 years

The goodwill on the NetCHB, Foxtrot, XPS and Supply Vision acquisitions arose as a result of the combined strategic value to our growth plan. The goodwill arising from the NetCHB, Foxtrot, XPS and Supply Vision acquisitions are deductible for tax purposes.

Fiscal 2022 Acquisitions

On February 26, 2021, Descartes acquired all of the shares of VitaDex Solutions, LLC, doing business as QuestaWeb (“QuestaWeb”), a US-based provider of foreign trade zone and customs compliance solutions. The purchase price for the acquisition was approximately $35.9 million, net of cash acquired, which was funded from cash on hand. The gross contractual amount of trade receivables acquired was $0.6 million with a fair value of $0.5 million at the date of acquisition. Our acquisition date estimate of contractual cash

flows not expected to be collected was $0.1 million. The purchase price was finalized in the three month period ended January 31, 2022 with no adjustments.

On May 7, 2021, Descartes acquired all of the shares of Portrix Logistics Software GmbH (“Portrix”), a provider of multimodal rate management solutions for logistics services providers. The purchase price for the acquisition was approximately $25.2 million (EUR 20.7 million), net of cash acquired, which was funded from cash on hand. The gross contractual amount of trade receivables acquired was $0.7 million with a fair value of $0.7 million at the date of acquisition. Our acquisition date estimate of contractual cash flows not expected to be collected was nominal. The purchase price was finalized in the three month period ended April 30, 2022 with no adjustments.

On July 8, 2021, Descartes acquired all of the shares of GreenMile, LLC (“GreenMile”), a provider of cloud-based mobile route execution solutions for food, beverage, and broader distribution verticals. The purchase price for the acquisition was approximately $29.2 million, net of cash acquired, which was funded from cash on hand. Additional contingent consideration of up to $10.0 million in cash is payable if certain revenue performance targets are met by GreenMile in the two years following the acquisition. The fair value of the contingent consideration was valued at $3.3 million at the acquisition date. The gross contractual amount of trade receivables acquired was $1.1 million with a fair value of $1.0 million at the date of acquisition. Our acquisition date estimate of contractual cash flows not expected to be collected was $0.1 million. The purchase price was finalized in the three month period ended July 31, 2022 with no adjustments.

The final purchase price allocations for businesses we acquired during 2022 are as follows:


						Green
		QuestaWeb		Portrix		Mile		Total
Purchase price consideration:
Cash, less cash acquired related to QuestaWeb ($2,097), Portrix ($200) and GreenMile ($1,552)		35,860		25,188		29,230		90,278
Contingent consideration		—		—		3,339		3,339
Net working capital adjustments payable / (receivable)		17		(54)		(308)		(345)
		35,877		25,134		32,261		93,272
Allocated to:
Current assets, excluding cash acquired		714		810		2,186		3,710
Property and equipment		78		—		89		167
Right-of-use assets		123		374		—		497
Other long-term assets		—		—		242		242
Current liabilities		(170)		(871)		(1,498)		(2,539)
Deferred revenue		(736)		(499)		(909)		(2,144)
Lease obligations		(123)		(374)		—		(497)
Deferred income tax liability		—		(5,185)		(752)		(5,937)
Long-term income taxes payable		—		—		(365)		(365)
Debt		—		(1,062)		—		(1,062)
Net tangible assets (liabilities) assumed		(114)		(6,807)		(1,007)		(7,928)

Finite life intangible assets acquired:
Customer agreements and relationships		4,800		4,014		5,700		14,514
Existing technology		8,900		12,286		14,000		35,186
Trade names		100		122		100		322
Non-compete covenants		500		487		500		1,487
Goodwill		21,691		15,032		12,968		49,691
		35,877		25,134		32,261		93,272

The acquired intangible assets are being amortized over their estimated useful lives as follows:


		QuestaWeb		Portrix		GreenMile
Customer agreements and relationships		13 years		13 years		13 years
Existing technology		6 years		6 years		6 years
Trade names		3 years		3 years		3 years
Non-compete covenants		5 years		2 years		5 years

The goodwill on the QuestaWeb, Portrix and GreenMile acquisitions arose as a result of the combined strategic value to our growth plan. The goodwill arising from the QuestaWeb and GreenMile acquisition is deductible for tax purposes. The goodwill arising from the Portrix acquisition is not deductible for tax purposes.

Fiscal 2021 Acquisitions

On February 21, 2020, Descartes acquired all of the shares of Peoplevox Limited (“Peoplevox”), a UK-based provider of cloud-based ecommerce warehouse management solutions. The purchase price for the acquisition was approximately $24.1 million, net of cash acquired, which was funded from a combination of cash on hand and drawing on Descartes’ existing credit facility. The gross contractual amount of trade receivables acquired was $0.4 million with a fair value of $0.4 million at the date of acquisition. Our acquisition date estimate of contractual cash flows not expected to be collected was nominal. The purchase price was finalized in the three month period ended January 31, 2021 with no adjustments.

On June 10, 2020 Descartes acquired all of the shares of Cracking Logistics Limited (“Kontainers”), a UK-based provider of client-facing digital freight execution platforms. The purchase price for the acquisition was approximately $5.2 million, net of cash acquired, which was funded from cash on hand. Additional contingent consideration of up to $6.0 million in cash is payable if certain revenue performance targets are met by Kontainers in the two years following the acquisition. The fair value of the contingent consideration was valued at $1.4 million at the acquisition date. The gross contractual amount of trade receivables acquired was $0.2 million with a fair value of $0.2 million at the date of acquisition. Our acquisition date estimate of contractual cash flows not expected to be collected was nominal. The purchase price was finalized in the three month period ended July 31, 2021 with no adjustments.

On November 6, 2020, Descartes acquired all of the shares of ShipTrack Inc. (“ShipTrack”), a provider of cloud-based mobile resource management and shipment tracking solutions. The purchase price for the acquisition was approximately $19.0 million, net of cash acquired, which was funded from cash on hand. Additional contingent consideration of up to CAD 25.0 million in cash is payable if certain revenue performance targets are met by ShipTrack in the two years following the acquisition. The fair value of the contingent consideration was valued at $2.8 million at the acquisition date. The gross contractual amount of trade receivables acquired was $1.7 million with a fair value of $1.7 million at the date of acquisition. Our acquisition date estimate of contractual cash flows not expected to be collected was nominal. The purchase price was finalized in the three month period ended October 31, 2021 with no adjustments.

The final purchase price allocations for businesses we acquired during 2021 are as follows:


		Peoplevox		Kontainers		ShipTrack		Total
Purchase price consideration:
Cash, less cash acquired related to Peoplevox ($1,634), Kontainers (overdraft of $13) and ShipTrack ($529)		24,137		5,237		19,029		48,403
Consideration payable		—		100		—		100
Contingent consideration		—		1,414		2,825		4,239
Net working capital adjustments (receivable) / payable		(42)		(87)		64		(65)

		24,095		6,664		21,918		52,677
Allocated to:
Current assets, excluding cash acquired		485		469		1,853		2,807
Right-of-use assets		—		—		151		151
Current liabilities		(776)		(1,074)		(693)		(2,543)
Deferred revenue		(748)		(102)		(204)		(1,054)
Lease obligations		—		—		(151)		(151)
Deferred income tax liability		(1,615)		—		(4,012)		(5,627)
Debt		—		—		(728)		(728)
Net tangible assets (liabilities) assumed		(2,654)		(707)		(3,784)		(7,145)

Finite life intangible assets acquired:
Customer agreements and relationships		3,631		800		3,905		8,336
Existing technology		7,651		3,000		11,102		21,753
Trade names		—		30		77		107
Non-compete covenants		285		80		291		656
Goodwill		15,182		3,461		10,327		28,970
		24,095		6,664		21,918		52,677

The acquired intangible assets are being amortized over their estimated useful lives as follows:


		Peoplevox		Kontainers		ShipTrack
Customer agreements and relationships		10 years		12 years		13 years
Existing technology		6 years		5 years		6 years
Trade names		N/A		3 years		3 years
Non-compete covenants		5 years		5 years		5 years

The goodwill on the Peoplevox, Kontainers and ShipTrack acquisitions arose as a result of the combined strategic value to our growth plan. The goodwill arising from the Peoplevox, Kontainers and ShipTrack acquisitions are not deductible for tax purposes.

Pro Forma Results of Operations (Unaudited)

The financial information in the table below summarizes selected results of operations on a pro forma basis as if we had acquired Supply Vision, XPS, Foxtrot, NetCHB, GreenMile, Portrix and QuestaWeb as of February 1, 2020.

This pro forma information is for information purposes only and does not purport to represent what our actual results of operations for the periods presented would have been had the acquisitions of Supply Vision,

XPS, Foxtrot, NetCHB, GreenMile, Portrix and QuestaWeb occurred at February 1, 2020, or to project our results of operations for any future period.


		January 31,		January 31,		January 31,
Year Ended		2023		2022		2021

Revenues		495,874		461,864		393,322
Net income		103,700		91,398		49,315
Earnings per share
Basic		1.22		1.08		0.58
Diluted		1.20		1.06		0.58