PowerPoint Presentation

Descartes – Uniting

Business in Commerce

September 2021

Safe Harbor Statement

Certain statements to be made today and in this presentation, and that may be made in response to questions, constitute forward-looking information for the purposes of applicable securities laws (“forward-looking statements”), including, but not limited to: statements using the words “believe,” “plan,” “expect,” “anticipate,” “intend,” “continue,” “may,” “will,” “should” or the negative of such terms and similar expressions; or statements in relation to any of the following topics: our assessment of the current and future potential impact of the COVID-19 pandemic on our business, results of operations and financial condition; addressing economic uncertainty; investment in areas of our business with high strategic value and growth potential; our future operating performance; software-as-a-service business model; strategy, market opportunity and vision; our position and opportunity to lead our industry with our business model; solution functionality and benefits derived therefrom; network penetration; ability to complete acquisitions and contribution of completed acquisitions to our operations; anticipated churn in revenues; competition; and forecasted environmental benefits of our products and solutions.

The material assumptions made in making these forward-looking statements include, but are not limited to, the following: global shipment volumes continuing to increase at levels consistent with those experienced historically; the current COVID-19 pandemic not having a material impact on shipment volumes or on the demand for the products and services of Descartes by its customers and the ability of those customers to continue to pay for those products and services; countries continuing to implement and enforce existing and additional customs and security regulations relating to the provision of electronic information for imports and exports; countries continuing to implement and enforce existing and additional trade restrictions and sanctioned party lists with respect to doing business with certain countries, organizations, entities and individuals; our continued operation of a secure and reliable business network; the stability of general economic and market conditions, currency exchange rates, and interest rates; equity and debt markets continuing to provide us with access to capital; our continued ability to identify and source attractive and executable business combination opportunities; our ability to develop solutions that keep pace with the continuing changes in technology, and our continued compliance with third party intellectual property rights. While management believes these assumptions to be reasonable under the circumstances, they may prove to be inaccurate. In addition, the forecasted environmental benefits of our products and services are based on projections, reductions and savings derived from various third party modeling tools identified on our website and which rely on various assumptions in their calculations.

These forward-looking statements are also subject to risks, uncertainties and assumptions that may cause future results to differ materially from those expected. Factors that may cause such differences include, but are not limited to: our ability to identify and successfully integrate acquired businesses; the impact of network failures, information security breaches or other cyber-security threats, disruptions in the movement of freight and a decline in shipment volumes including as a result of contagious illness outbreaks such as the current COVID-19 pandemic, a deterioration of general economic conditions or instability in the financial markets accompanied by a decrease in spending by our customers; departures of key customers; the ability to attract and retain key personnel and transition when key personnel depart; variances in our revenues from quarter to quarter; fluctuations in international currency exchange rates; exposure to greater than anticipated tax liabilities; changes in electronic customs filing regulations and other factors discussed under the headings “Risk Factors” or “Certain Factors That May Affect Future Results” in documents filed with applicable securities regulatory authorities. If any of such risks actually occur, they could materially adversely affect our business, financial condition or results of operations. In that case, the trading price of our common shares could decline, perhaps materially.

Investment Highlights

World’s Largest Multi-Modal and Neutral Logistics Network
Cloud-Based Software Applications and Data Content
Automating and Optimizing the Increasingly Complex Logistics Market
Strong Market Position with Significant Competitive Barriers
Industry-Leading Solutions Help Customers Reduce Environmental Footprint
Disciplined M&A Strategy

Highly-Experienced Management Team

Proven Record of Financial Success

Descartes at a Glance

Net Income & Adj. EBITDA (US$ millions) (1)

Revenues (US$ millions)

40 million +
Routes

Managed / Year

18.6 billion +
Messages

Processed / Year

(1)
Net Income & Adj. EBITDA (US$ millions)

GLOBAL LOGISTICS NETWORK

CARRIERS

GOVERNMENTS

Associations

SHIPPERS

INTERMEDIARIES

SOLUTIONS

DESCARTES GLN™

Industry-Leading Customers

AIR NEW ZEALAND
OCEAN
TRUCK
XPOLogistics
INTERMEDIARIES
KUEHNE+NAGEL
RETAILERS
Crate&Barrel
DISTRIBUTORS

Customer Case Studies

Leverages Descartes’ Advanced Home Delivery solution for:

Leverages many Descartes solutions across multiple DHL operating groups:

Descartes’ solutions help Delta Airlines meet a growing number of logistic challenges across the globe:

Why We Win

Pure play logistics technology provider with compelling combination of network, applications and data content

Market Drivers and Opportunities

Descartes solutions help retailers and logistics service providers respond to the threat of Amazon, Google, eBay with real-time delivery route optimization and execution solutions

Logistics and supply chain software markets remain highly fragmented, presenting a large consolidation opportunity

M&A is a Core Competency for Descartes

Descartes’ acquisition strategy is a key enabler of its ‘Total Growth’ model

Recent Acquisition Success

Acquired Portrix May 2021 for ~$25m and Kontainers June 2020 for ~$6m + up to ~$6m earn-out

Acquired July 2021 for ~$30mm + up to ~$10mm earn-out

Acquired February 2019 for ~$250mm

Cloud-based global trade data content provider

Network, creates a truly differentiated end-to-

Industry-Leading Solutions Help Customers Reduce Environmental Footprint

Descartes’ FY2021 Environmental Impact – We Helped our Customers Save

>552,000 >1.86 billion >727 million tons of CO sheets of paper liters of fuel

*INFOGRAPHIC CALCULATIONS WERE MADE USING THE PAPER CALCULATOR FROM ENVIRONMENTAL PAPER NETWORK, THE VEHICLE CO2 EMISSIONS CALCULATOR FROM COMMERCIAL FLEET, FUEL ECONOMY DATA FROM THE U.S. DEPARTMENT OF ENERGY, AND IDLING EMISSIONS DATA FROM DIESELNET AND FROST & SULLIVAN. SEE FULL DISCLAIMER @ Environmental Impact | Descartes $$ \mathrm{C O}_{2} $$

Financial Overview

Financial Highlights

Continued margin expansion through cost control and operating efficiency

Strong and Consistent Growth

Revenue

Net Income and Net Income as a % of Revenues

Cash Flow from Operations

(1) See Reconciliation of Non-GAAP Financial Measures on slides 21 and 22 for a reconciliation of adjusted EBITDA and adjusted EBITDA as a percentage of revenues to net income.

(1)
Adjusted EBITDA and Adjusted EBITDA as a %
(1)
of Revenues

Efficient and Disciplined Operating Model

Gross Margin Sales and Marketing

FY19 FY20 FY21 Q1-22 Q2-22
73% 74% 74% 76% 76%
13% 12% 11% 11% 11%
FY19 FY20 FY21 Q1-22 Q2-22
--- --- --- --- ---
17% 16% 16% 15% 15%
FY19 FY20 FY21 Q1-22 Q2-22
--- --- --- --- ---
11% 11% 10% 11% 10%
FY19 FY20 FY21 Q1-22 Q2-22

Research and Development General and Administrative

Capital Structure – July 31, 2021

Baseline Calibration

Figures per Quarter Baseline Actual Actual % of Baseline
Q3'21 Revenue $80.5 $87.5 109%
Q3'21 Net Income $13.3
Q3'21 Net Income as a % of Revenues 15.2%
Q3'21 Adj. EBITDA $27.5 $36.4 132%
Q3'21 Adj. EBITDA % of Revenues 34.2% 41.6%
Q4'21 Revenue $83.0 $93.4 113%
Q4'21 Net Income $17.2
Q4'21 Net Income as a % of Revenues 18.4%
Q4'21 Adj. EBITDA $29.5 $38.6 131%
Q4'21 Adj. EBITDA % of Revenues 35.5% 41.3%
Q1'22 Revenue $86.8 $98.8 114%
Q1'22 Net Income
Q1'22 Net Income as a % of Revenues
Q1'22 Adj. EBITDA $30.8 $41.5 135%
Q1'22 Adj. EBITDA % of Revenues 35.5% 42.0%
Q2'22 Revenue $92.0 $104.6 114%
Q2'22 Net Income
Q2'22 Net Income as a % of Revenues
Q2'22 Adj. EBITDA $33.0 $45.9 139%
Q2'22 Adj. EBITDA % of Revenues 35.9% 43.9%
Q3'22 Revenue $95.0
Q3'22 Net Income
Q3'22 Net Income as a % of Revenues
Q3'22 Adj. EBITDA $35.5
Q3'22 Adj. EBITDA % of Revenues 37.4%

Reconciliation of Non-GAAP Financial Measures - Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues – Q2-22

We prepare and release quarterly unaudited and annual audited financial statements prepared in accordance with GAAP. We also disclose and discuss certain non-GAAP financial information, used to evaluate our performance, in this and other earnings releases and investor conference calls as a complement to results provided in accordance with GAAP. We believe that current shareholders and potential investors in our company use non-GAAP financial measures, such as Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues, in making investment decisions about our company and measuring our operational results.

The term “Adjusted EBITDA” refers to a financial measure that we define as earnings before certain charges that management considers to be non-operating expenses and which consist of interest, taxes, depreciation, amortization, stock-based compensation (for which we include related fees and taxes) and other charges (for which we include restructuring charges and acquisition-related expenses). Adjusted EBITDA as a percentage of revenues divides Adjusted EBITDA for a period by the revenues for the corresponding period and expresses the quotient as a percentage.

Management considers these non-operating expenses to be outside the scope of Descartes’ ongoing operations and the related expenses are not used by management to measure operations. Accordingly, these expenses are excluded from Adjusted EBITDA, which we reference to both measure our operations and as a basis of comparison of our operations from period-to-period.
Management believes that investors and financial analysts measure our business on the same basis, and we are providing the Adjusted EBITDA financial metric to assist in this evaluation and to provide a higher level of transparency into how we measure our own business. However, Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues are non-GAAP financial measures and may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues should not be construed as a substitute for net income determined in accordance with GAAP or other non-GAAP measures that may be used by other companies, such as EBITDA.
The use of Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues does have limitations. In particular, we have completed ten acquisitions since the beginning of fiscal 2020 and may complete additional acquisitions in the future that will result in acquisition-related expenses and restructuring charges. As these acquisition-related expenses and restructuring charges may continue as we pursue our consolidation strategy, some investors may consider these charges and expenses as a recurring part of operations rather than expenses that are not part of operations.

The table below reconciles Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues to net income reported in our unaudited Consolidated Statements of Operations for Q2FY22, Q1FY22, Q4FY21, Q3FY21, and Q2FY21, which we believe is the most directly comparable GAAP measure.

(US dollars in millions) Q2FY22 Q1FY22 Q4FY21 Q3FY21 Q2FY21
Net income,as reported on Consolidated Statements of Operations 23.2 18.4 17.2 13.3 10.5
Adjustments to reconcile to Adjusted EBITDA:
Interest expense 0.3 0.3 0.3 0.2 0.3
Investment income (0.1) (0.1) (0.1) - -
Income tax expense 2.7 4.8 4.5 5.2 4.2
Depreciation expense 1.3 1.2 1.3 1.5 1.4
Amortization of intangible assets 14.9 13.8 14.1 14.0 14.1
Stock-based compensation and related taxes 3.1 2.6 1.9 1.7 1.8
Other charges(recoveries) 0.5 0.5 (0.6) 0.5 1.7
AdjustedEBITDA 45.9 41.5 38.6 36.4 34.0
Revenues 104.6 98.8 93.4 87.5 84.0
Net income as % of revenues 22% 19% 18% 15% 13%
AdjustedEBITDA as % of revenues 44% 42% 41% 42% 40%

Reconciliation of Non-GAAP Financial Measures - Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues – FY21

The table below reconciles Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues to net income reported in our audited Consolidated Statements of Operations for FY21 and FY20, which we believe is the most directly comparable GAAP measure.

| (US dollars in millions) | FY21 | FY20 | | --- | --- | | Net income,as reported on Consolidated Statements of Operations | 52.1 | 37.0 | | Adjustments to reconcile to Adjusted EBITDA: | | | | Interest expense | 1.2 | 4.4 | | Investment income | (0.2) | (0.2) | | Income tax expense | 18.3 | 11.1 | | Depreciation expense | 5.8 | 6.0 | | Amortization of intangible assets | 55.9 | 55.5 | | Stock-based compensation and related taxes | 6.6 | 5.0 | | Other charges | 2.3 | 3.8 | | Adjusted EBITDA | 142.0 | 122.6 | | | | | | Revenues | 348.7 | 325.8 | | Net income as % of revenues | 15% | 11% | | Adjusted EBITDA as % of revenues | 41% | 38% |

For more information on the reconciliation of Non-GAAP financial measures for FY21, please refer to our press release dated March 3, 2021: https://www.descartes.com/who-we-are/news-events/financialnews. For more information on the reconciliation of Non-GAAP financial measures for previous periods please refer to: https://www.descartes.com/who-we-are/investor-relations/financial-information.