THE DESCARTES SYSTEMS GROUP INC.

In the first quarter of 2011, our net income was impacted by $0.9 million of acquisition-related costs related to our
acquisitions of Porthus and Imanet. The first quarter of 2011 also included $0.6 million in restructuring charges
related to integration of previously completed acquisitions and other cost reduction activities. As well, income tax
expense of $0.7 million was recorded in the first quarter of 2011 resulting primarily from $1.2 million of deferred
income tax expense and $0.3 million of current income tax expense related to amendments to be made to priorperiod
US tax returns and $0.5 million of deferred income tax expense due to an adjustment to the calculation of
the US tax loss carryforward amounts. These income tax expenses were partially offset by the release of $1.7
million of the deferred tax asset valuation allowance related to our Netherlands operations.
In the second quarter of 2011, our revenues and expenses increased as a result of including a full quarter of
revenues and expenses from our acquisitions of Porthus and Imanet, as well as a partial quarter of revenues and
expenses from our acquisition of Routing International. The increased revenues were partially offset by $0.5
million of acquisition-related costs and $0.3 million of restructuring charges. As well, an overall income tax
recovery of $0.1 million was recorded resulting primarily from a recovery of $0.7 million relating to the taxation
of unrealized foreign exchange losses in Sweden, partially offset by deferred income tax expense related to the
treatment of non-deductible acquisition-related costs and income that is sheltered by loss carryforwards.
In the third quarter of 2011, our revenues and expenses increased as a result of including a full quarter of revenues
and expenses from our acquisition of Routing International. Net income was negatively impacted by $0.2 million
of restructuring charges as we continued to integrate previously completed acquisitions and $0.4 million related to
the write-off of certain computer software assets acquired as part of the Porthus acquisition. These assets were
made redundant during the period as we continued to integrate Porthus into our operations.
In the fourth quarter of 2011, our revenues increased primarily as a result of increased license revenues. Operating
expenses were positively impacted in the fourth quarter of 2011 as we continued to re-calibrate our business
through the implementation of cost reduction initiatives and to further accelerate integration activity for acquired
companies. Net income was positively impacted by an income tax recovery of $5.2 million resulting primarily
from a $6.9 million reduction in the valuation allowance for deferred tax assets in our Netherlands and United
Kingdom operations, partially offset by the recognition of additional valuation allowance for deferred tax assets in
our Dexx and Australia operations. This recovery was partially offset by $1.1 million of other charges, including
$0.9 million of restructuring charges and $0.2 million of acquisition-related costs.
Our weighted average shares outstanding has increased since the first quarter of 2010, principally as a result of the
issuance of 7.9 million common shares pursuant to our October 2009 bought deal share offering, and periodic
employee stock option exercises.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have financed our operations and met our capital expenditure requirements primarily through
cash flows provided from operations and sales of debt and equity securities. As at January 31, 2011, we had $69.6
million in cash and cash equivalents and short-term investments and $3.0 million in unused available lines of
credit. As at January 31, 2010, prior to our acquisitions of Porthus, Imanet and Routing International, we had
$94.6 million in cash, cash equivalents and short-term investments and $2.8 million in available lines of credit.
On October 20, 2009, we completed a bought-deal public share offering in Canada which raised gross proceeds of
CAD 40,002,300 (equivalent to approximately $38.4 million at the time of the transaction) from a sale of
6,838,000 common shares at a price of CAD 5.85 per share. The underwriters also exercised an over-allotment
option on October 20, 2009 to purchase an additional 1,025,700 common shares (in aggregate, 15% of the
offering) at CAD 5.85 per share comprised of 332,404 common shares from Descartes and 693,296 common
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