Descartes' acquisition of Apterra gets thumbs up at Cantor Fitzgerald

Descartes Systems Group’s (TSX:DSG) tuck-in acquisition of Apterra is a solid pickup, says Cantor Fitzgerald Canada analyst Ralph Garcea.
This morning, Descartes announced it had acquired the U.S.-based Apterra, a provider of cloud-based business-to-business supply chain integration solutions for (U.S.) $5.8-million. An earn out based on revenue target could hike the price by as much as $1.6 million.
“Our Global Logistics Network helps isolate customers from the complexities of different protocols, semantics and end-user requirements for managing and transmitting electronic supply chain data and documents,” said CEO Ed Ryan. “By adding Appterra’s technology and services to our business, our customers will have access to broader data integration capabilities for standardizing and automating buy-side and sell-side processes. Equally, Appterra’s customers will now join Descartes’ logistics community, presenting additional opportunities for trading partners to collect and share logistics data earlier in the business process.”
Garcea estimates that Apterra does more than $3-million annually in revenue and has more than 40 employees. He says he views the acquisition as very complementary and immediately scalable.
“We remind investors Descartes’ Global Logistics Network (GLN) has 13,500+ customers worldwide, processes 4.5B+ messages/yr and manages 30M+ routes/yr,” says the analyst. “We believe Appterra will be directly integrated into the GLN and synergies realised immediately. Appterra’s SaaS model is also complimentary to Descartes’ revenue model and will add to its recurring revenue stream.”
In a research update to clients today, Garcea maintained his “Buy” rating and one year price target of US$26.00/C$32.50 on Descartes Systems Group, implying a return of 28 per cent at the time of publication.
Garcea thinks Descartes will post Adjusted EBIDA of $71.2-million on revenue of $202-5-million in fiscal 2017, numbers he expects will climb to EBITDA of $88.2-million on a topline of $241.9-million the following year.