Q1 2023 Descartes Systems Group Inc Earnings Call

June 1, 2022

Operator: Good afternoon and welcome to the Descartes quarterly results call. My name is Brandon and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer segment, during which you may dial zero one if you have a question Please note, it is zero one, not star one. As a reminder, this conference is being recorded. I will now turn the call over to Scott Pagan, you may begin, sir.

Operator: Good afternoon and welcome to the Descartes quarterly results call. My name is Brandon and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer during which you may dial zero one if you have a question. Please note, it is zero one, not star one. As a reminder, this conference is being recorded. I will now turn the call over to Scott Pagan, you may begin sir.

John Scott Pagan: Thanks and good afternoon everyone. Joining me on the call today are Ed Ryan, CEO, and Allan Brett, CFO, and I trust that everyone has received a copy of our financial results press release that was issued earlier today.

John Scott Pagan: Thanks and good afternoon everyone. Joining me on the call today are Ed Ryan, CEO and Allan Bret, CFO, and I trust that everyone's received a copy of our financial results press release that was issued earlier today.

J. Scott Pagan: [inaudible] of today's call, other than historical performance, include statements and forward-looking information within the meaning and applicable securities laws. These statements are made under the safe harbor provisions of those laws.

John Scott Pagan: [inaudible ]of today's call, other than historical performance, include statements and forward-looking information within the meaning of applicable securities laws. These statements are made under the safe harbor provisions of those laws.

J. Scott Pagan: These forward-looking statements include statements related to our assessment of the current and future impact of the COVID-19 pandemic and the Russia-Ukraine conflict on our business and financial condition, our operating performance, financial resulting condition, gross margins and any growth in those gross margins, cash flow and use of the cash, our application to commence the normal course issuer bid, potential purchases pursued for such bid, our business outlook, baseline revenues, baseline operating expenses and baseline calibration, anticipated potential revenue losses and gains, anticipated recognition in expense and specific revenues and expenses, potential acquisition and acquisition strategy, cost reduction and integration initiatives, and other matters that may constitute forward-looking statements.

John Scott Pagan: These forward-looking statements include statements related to our assessment of the current and future impact of the COVID-19 pandemic, the Russia-Ukraine conflict on our business and financial condition. They [inaudible] operating performance, financial results condition, [inaudible] express margins and any growth in those gross margins, cash flow and use of the cash, our application to commence the normal course issuer bid and potential purchases pursuant to such bid, our business outlook, baseline revenues, baseline operating expenses and baseline calibration anticipated in potential revenue losses and gains, anticipated recognition and expense and specific revenues and expenses, potential acquisitions and acquisition strategy, cost reduction and integration initiatives and other matters that may constitute forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance, or achievement of Descartes to differ materially from the anticipated results, performance, or achievements implied by such forward-looking statements.

J. Scott Pagan: These forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results, performance, or achievement of Descartes to differ materially from the anticipated results, performance, or achievements implied by such forward-looking statements.

J. Scott Pagan: These factors are outlined in the press release and then in the section entitled certain factors that may affect future results in documents filed and furnished with the Securities and Exchange Commission, the OSA, and other securities commissions across Canada including our management's discussion on [inaudible] filed today.

John Scott Pagan: These factors are outlined in the press release and under the section entitled certain factors that may affect future results in documents, files, and furnished with the Securities and Exchange Commission, the OSA, and other securities commissions across Canada, including our management's discussion [inaudible] that was filed today.

J. Scott Pagan: We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans related to the future. You're cautioned that such information may not be appropriate for other purposes.

John Scott Pagan: We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future. You're cautioned that such information may not be appropriate for other purposes.

J. Scott Pagan: We don't undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions, or circumstances on which any such statements based, except as required by law. With that, let me turn the call over to Ed.

John Scott Pagan: We don't undertake or accept any the obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in or expectations or any changing events conditions, assumptions, or circumstances on which any such statements are based, except as required by law. With that, let me turn the call over to Ed.

Edward J. Ryan: Okay, great. Thanks, Scott. Welcome everyone on the call. We kicked off the new fiscal year right with record financial results. These were our best results ever across a host of different metrics. I'll hit some highlights for you, but first let me give you a roadmap for this call.

Edward J. Ryan: Okay, great. Thanks Scott, and welcome everyone of the call. We kicked off the new fiscal year right with record financial results. These were our best results ever across a host of different metrics. I'll hit some highlights for you, but first, let me give you a roadmap for this call.

Edward J. Ryan: I'll start with highlighting some aspects of our financial results, speak to current business conditions, and identify where we're making investments to grow our business.

Edward J. Ryan: I'll start with highlighting some aspects of our financial results, speak to current business conditions, and identify where we're making investments to grow our business. I'll then hand it over to Allan, who will go over the Q1 financial results and some corporate finance matters in more detail. I'll then come back and provide an update on some corporate matters and how our business is calibrated, and we'll then open it up to the operator to coordinate the Q&A portion of the call.

Edward J. Ryan: I'll then hand it over to Allan, who will go over the Q1 financial results and some corporate finance matters in more detail.

Edward J. Ryan: I'll then come back and provide an update on some corporate matters and how our business is calibrated, and we'll then open it up to the operator to coordinate the Q&A portion of the call.

Speaker 4: I'll then come back and provide an update on some corporate matters and how our business is calibrated, and we'll then open it up to the operator to coordinate the QA portion of the call.

Edward J. Ryan: So let's get started by looking at Q1. We had record high revenues of 116.4 million dollars, up 18% from a year ago. Net income was 23.1 million dollars, up 26% from a year ago. Adjusted EBITDA was a record high of 51.2 million dollars, up 23% from a year ago, and this was with a $500,000 drag compared to FX rates from a year ago, or $300,000 dollars from FX rates last quarter.

Edward J. Ryan: So let's get started by looking at Q1. We had record-high revenues of 116.4 million dollars, up 18% from a year ago. Net income was 23.1 million dollars, up 26% from a year ago. Adjusted EBITDA was a record high of $51.2 million, up 23% from a year ago, and this was with a $500,000 drag compared to FX rates from a year ago, or $300,000 from FX rates last quarter.

Edward J. Ryan: We generated 44 million dollars in cash from operations, or 87% of our adjusted EBITDA. Our adjusted EBITDA as a percentage of revenue was 44%. All of these metrics were ahead of our plans, saw a very strong financial quarter for us.

Edward J. Ryan: We generated 44 million dollars in cash from operations or 87% of our adjusted EBITDA. Our adjusted EBITDA as a percentage of revenue was 44%. All of these metrics were ahead of our plans, so a very strong financial quarter for us.

Edward J. Ryan: At the end of the quarter, we had $211 million in cash and we're debt free, with an undrawn $350 million line of credit. We remain well-capitalized, cash generating, debt-free, and ready to continue to invest in our business.

Edward J. Ryan: At the end of the quarter, we had $211 million in cash and we're debt-free, with an undrawn $350 million line of credit. We remain well capitalized, cash-generating, debt-free, and ready to continue to invest in our business.

Edward J. Ryan: I'd like to address three areas: one-why we did well this past quarter, two-what the market conditions are that we're operating in right now, and three- where we're making investments.

Edward J. Ryan: So then to address three areas: one, why we did well this past quarter, two, what the market conditions are that we're operating in right now, and three, where we're making investments.

Edward J. Ryan: On the first point, our focus at Descartes has been on building a consistent, predictable, and sustainable business that is resilient to changes in the market conditions. So as I described some key contributors to our performance last quarter, you're going to hear some comments from past conference calls and our previous successes and that's by design.

Edward J. Ryan: On the first point, our focus of the card has been on building a consistent, predictable, and sustainable business that is resilient to changes in the market conditions. So as I described some key contributors to our performance last quarter, you're going to hear some common themes from past conference calls and our previous successes and that's by design. Key things that helped us grow last quarter include past investments are paying off in sustained organic growth. We continue to see good organic growth in our business year-over-year. We see this as a payoff from the targeted investments we've made in sales and marketing over past quarters. Our biggest change in sales and marketing is growing. A group is now aligned by different pillars of our business and geographically.

Edward J. Ryan: Key things that helped us grow last quarter include: past investments are paying off in sustained organic growth. We continue to see good organic growth in our business year-over-year. We see this as a payoff from the targeted investments we've made in sales and marketing over past quarters. Our biggest change in sales and marketing was growing a group that's now aligned by different pillars of our business and geographically.

Speaker 4: past investments are paying off in sustained organic growth. We continue to see good organic growth in our business year-over-year. We see this as a payoff from the targeted investments we've made in sales and marketing over past quarters. Our biggest change in sales and marketing is growing. A group is now aligned by different pillars of our business and geographically.

Edward J. Ryan: In the past, we were purely organized and engaging with customers by geography, but as we've grown and matured and moved to our further solution specification to be able to focus on customer-centric engagement, it helps customers drive more value from our solutions.

Edward J. Ryan: In the past, we were purely organized and engaged customers by geography. But as we've grown and matured we moved to further solution specifications to be able to focus on customer-centric engagement that helps customers drive more value from our solutions.

Edward J. Ryan: Second is real-time visibility contribution. We've been in the visibility business for a long time. It's one of the foundations of the global logistics network. When we started we were providing purchase order line-up of visibility from EDI status messages. We've grown with the market to move to real-time visibility leveraging GPS and other technologies.

Speaker 8: We've been in the visibility business for a long time. It's one of the foundations of the global logistics network and we started we were providing purchase order line up of visibility from EDI status messages. We've grown with the market to move to real-time visibility leveraging GPS and other technologies.

Edward J. Ryan: The second is real-time visibility contribution. We've been in the visibility business for a long time. It's one of the foundations of the global logistics network. When we started we were providing purchase order line of visibility from EDI status messages. We've grown with the market to move to real-time visibility leveraging GPS and other technologies.

Speaker 4: We've been in the visibility business for a long time. It's one of the foundations of the global logistics network. Where we started we were providing purchase order line of visibility from EDI status messages. We've grown with the market to move to real-time visibility leveraging GPS and other technologies.

Edward J. Ryan: A few years ago, we joined with MacroPoint to become a leader in the space. Our real-time visibility business continues to grow. We're receiving and tracking more shipments than ever and our capabilities are expanding across all modes of transportation, including identifying available shipment capacity.

Edward J. Ryan: The third is strong demand for denied party and sanction party screening and tariff changes. We foreshadowed this last quarter and it happened as expected. With geopolitical conflicts escalating, in particular, with the war in the Ukraine, governments around the world have imposed sanctions on particular countries, parties, and commodities. There are enormous financial and economic consequences of violating these sanctions. Businesses need to be more diligent than ever with who they're doing business with, who they are employing, and who they're importing from or exporting to. A good portion of our content business is specifically focused on this: helping businesses sustain for compliance with the various sanctions around the world. Also, with all of the challenges and tariffs because of these geopolitical events, our databases of tariffs and duties have become even more vital for our customers.

Speaker 8: We foresshadowed this last quarter and it happened as expected. With geopolitical conflicts escalating, in particular, with the war in the Ukraine, governments around the world have imposed sanctions on particular countries, parties and commodities. There are enormous financial and economic consequences of violating these sanctions. Businesses need to be more diligent than ever, and who they're doing business with E are employing and who they're importing from or exporting to a good portion of our content businessesis specifically focused on this: helping businesses sustain for compliance. But the various sanction ists around the world also, with all of the challenges and tariffs because of these geopolitical events, our databases of tariffs and duties have become even more vital for our customers.

Edward J. Ryan: The third is strong demand for finance parties and sanctioned party screening and tariff changes. We foreshadowed this last quarter and it happened as expected. With geopolitical conflicts escalating, in particular with the war in Ukraine, governments around the world have imposed sanctions on particular countries, parties, and commodities. There are enormous financial and economic consequences of violating these sanctions. Businesses need to be more diligent than ever, in who they are doing business with, who they are employing, and who they're importing from or exporting to. A good portion of our content business is specifically focused on this: helping businesses stand for compliance, with the various sanction lists around the world. Also, with all of the challenges and tariffs because of these geopolitical events, our databases of tariffs and duties have become even more vital for our customers.

Speaker 4: We've foresshaateded this last quarter and happened as expected. With geopolitical conflicts escalating, in particular with the war in the Ukraine, governments around the world have imposed sanctions on particular countries, parties and commodities. There are enormous financial and economic consequences of violating these sanctions. Businesses need to be more diligent than ever, and who theytheir doing business with E are employing, and who they're importing from or exporting to a good portion of our content businessesis specifically focused on this: helping businesses sustandcan for compliance, but the various sanctionalists around the world also, with all of the challenges and tariffs. Because of these geopolitical events, our databases of tariffs and duties have become even more vital- or our customers.

Edward J. Ryan: And the fourth is past acquisitions have contributed well. Those who followed us for some time know that we've taken a consistent, measured approach to adding to our business by way of acquisitions. We generally are buying houses that are right in our neighborhood and complement our existing business. If we combine with the business that's not yet at our desired profit level, we take very quick steps to get it there, using Descartes' resources and experience to help the business thrive.

Edward J. Ryan: And the fourth, past acquisitions have contributed well. Those who followed us for some time know that we've taken a consistent, measured approach to adding to our business by way of acquisitions. We generally are buying houses that are right in our neighborhood and complement our existing business. If we combined with a business that's not yet at our desired profit level, we take very quick steps to get it there, using get carts, resources, and experience to help the business thrive. There's no surprise that the business positively contributes to our growth post-acquisition, that's our plan. This past quarter was our first quarter with net CHB in our business, a company I described to you in detail on our last call. They are a very good complement to our existence solutions for freight forwarder and customs brokers. The business has really hit the ground running and we've already had some combined successes that we're happy to see their contribution in the quarter.

Speaker 7: We generally are buying houses that are right in our neighborhood and complement our existing business. If we combine with the business that's not yet at our desired profit level, we take very quick steps to get it there, using Descartes' resources and experience to help the business thrive.

Edward J. Ryan: So it's no surprise that the business positively contributes to our group post-acquisition, that's our plan. This past quarter was our first quarter with net CHB and our business- a company I described to you in detail on our last call. They are a very good complement to our existing solutions for freight [inaudible] and customs brokers. The business has really hit the ground running and we've already had some combined successes so we're happy to see their contribution in the quarter.

Edward J. Ryan: So that's how last quarter went. It went very well. We performed well and bought some businesses. Things continue to change quickly in the global market though. We've built a resilient business that in the past has grown through some very challenging business environments. However, we need to be prudent and cautious when things are changing. Generally, the things impacting the supply chain and logistics markets right now fall under two categories. The first is conflict and geopolitical issues and the second is economic issues.

Edward J. Ryan: That's how last quarter went. It went very well. We performed well on thoughts and businesses. Things continue to change quickly in the global market though. We built a resilient business that in the past has grown through some very challenging business environments. However, we need to be prudent and cautious when things are changing. Generally, the things impacting the supply chain and logistics markets right now fall under two categories: the first is conflict in geopolitical issues and the second is economic issues. On the conflict of geopolitical front, there are three main things we're monitoring for their impact on logistics and supply chains: one- the war in Ukraine, two-Brexit, and 3- China's COVID lockdowns.

Edward J. Ryan: On the conflict of the geopolitical front, there are three main things we're monitoring for their impact on logistics and supply chains: one- the war in the Ukraine, two- Brexit, and three-China-COVID-19 lockdowns.

Speaker 8: There are three main things we're monitoring for their impact on logistics and supply chains: won- the war in the Ukraine, 2- breexit and three china- COVID-19 lockdowns.

Speaker 4: There are three main things we're monitoring for their impact on logistics and supply chains: won- the war in Ukraine, 2- breexit and 3- china-coed lockdowns.

Edward J. Ryan: The war in Ukraine has caused sanctions and retaliatory reactions from countries around the world, even those not directly involved in the conflict. As I mentioned, businesses in our space are having to be extra diligent to spring all relationship and shipments for compliance with a myriad of sanctions and restrictions. Also, changes in tariffs and duties have made sourcing from or shipping to Russia expensive and or prohibitive. Businesses have had to restructure critical supply relationships to continue operations. Shipments to and from ports in Ukraine and Russia have become very dangerous or blockaded, causing virtually all major carriers in all modes of transportation to travel alternative routes that are sometimes lengthier and more expensive.

Edward J. Ryan: The war in Ukraine has caused sanctions and retaliatory reactions from countries around the world, even those not directly involved in the conflict. As I mentioned, businesses in our space are having to be extra diligent to screen all relationships and shipments for compliance with a myriad of sanctions and restrictions out there. Also, changes in tariffs and duties have made sourcing from or shipping to Russia expensive and or prohibitive. Businesses have had to restructure critical supply relationships to continue operations. Shipments to and from ports in Ukraine and Russia have become very dangerous or blockaded, causing virtually all major carriers and all major transportation to travel alternative routes that are sometimes lengthier and more expensive. And recently we're seeing Russia shutting off supply in energy commodities to neighboring countries, causing disruptions in those supply chains. The war has had a wide-ranging impact on virtually everyone's supply chain.

Edward J. Ryan: And recently we're seeing Russia shutting off the supply of energy commodities to neighboring countries, causing disruptions in those supply chains. The war has had a wide range of impacts on virtually everyone's supply chain. The biggest overall impact has been on energy and commodity markets. These are generally supplied by cables, pipelines, or bulk commodity carriers, usually ocean vessels. Not much of Descartes' business in this supply and logistics space so we haven't seen a big impact on shipment volumes in our business. However, we've seen an impact from our customers increasing screening for sanctions and or using technology to look at alternative supply and logistic strategies that bypassed the region. Inside our own company, we have a limited number of individual contractors in the region helping us. We're fortunate that they're all safe and we've been trying to do what we can to support them in their families.

Speaker 4: And recently we're seeing Russia shuting off supply andenergy commodities to neighboring countries, causing disruptions in those supply chains. Wars had a wide-ranging impact on virtually everymon supply chain.

Speaker 8: Wars had a wide-rang impact on virtually every months supply chain.

Speaker 8: The biggest overall impact has been on energy and commodity markets. These are generally supplied by cables, pipelines or BK commodity carriers, usually ocean vessels. Not much of big cart's business ES in this supply an' logistics space.

Edward J. Ryan: The biggest overall impact has been on energy and commodity markets. These are generally supplied by cables, pipelines, or bulk commodity carriers, usually ocean vessels. Not much of Descartes' business is in this supply and logistics space so we haven't seen a big impact on shipment volumes in our business. However, we've seen an impact from our customers' increasing screening for sanctions and or using technology to look at alternative supply and logistic strategies that bypass the region. Inside our own company, we have a limited number of individual contractors in the region helping us. We're fortunate that they're all safe and we've been trying to do what we can to support them and their families.

Speaker 7: so we haven't seen a big impact on shipment volumes in our business. However, we've seen an impact from our customers increasing screening for sanctions and or using technology to look at alternative supply and logistic strategies that bypassed the region. Inside our own company, we have a limited number of individual contractors in the region helping us. We're fortunate that they're all safe and we've been trying to do what we can to support them in their families.

Speaker 4: So we haven't seen a big impact on shipment volumes in our business. However, we've seen an impact from our customers' increasing screening for sanctions and we're using technology to look at alternative supply and logistic strategies that bypass the region. Inside our own company, we have a limited number of individual contractors in the region helping us. We're fortunate that they're all safe and we've been trying to do what we can to support them in their families.

Edward J. Ryan: The second geopolitical item flagged was Brexit, specifically issues relating to Ireland. The island of Ireland is divided into the South, which is part of the EU, and the North, which is part of the UK and therefore not a part of the EU.

Speaker 8: Specifically issues relating to Ireland. The Ireland of Ireland is divided into the South, which is part of the EU, and the North, which is part of the U? K and therefore not a part of the EU.

Edward J. Ryan: The second geopolitical item I flagged was Brexit, specifically issues relating to Ireland. The island of Ireland is divided into the South, which is part of the EU, and the North, which is part of the UK and therefore not a part of the EU.

Speaker 4: Specifically issues relating to Ireland. The Ireland of Ireland is divided into the South, which is part of the EU, in the North, which is part of the U? K and therefore not a part of the EU.

Edward J. Ryan: The key part of the UK Brexit separation from the EU was established in a protocol that would avoid having to put an enforced land border between Northern Ireland and Ireland as that type of separation has been a source of prior trouble and conflict for many years, so residents have checks on goods going from Northern Ireland to Ireland. The Northern Ireland protocol established filings declarations tariffs, duties, and checks on goods entering Northern Ireland from Great Britain in accordance with EU standards.

Edward J. Ryan: The key part of the UK Brexit separation from the EU was established in a protocol that would avoid having to put an enforced land border between Northern Ireland and Ireland, as that type of separation has been a source of prior trouble and conflict for many years. So residents have checks on goods going from Northern Ireland to Ireland. The Northern Ireland protocol established filings, declarations, tariffs, duties, and checks on goods entering Northern Ireland from Great Britain in accordance with EU standards.

Speaker 7: as that type of separation has been a source of prior trouble and conflict for many years. So residents have checks on goods going from Northern Ireland to Ireland. The Northern Ireland protocol established filings declarations tariffs, duties, and checks on goods entering Northern Ireland from Great Britain in accordance with EU standards.

Speaker 4: As that type of separation has been a source of prior trouble and conflict for many years, So restherident have checks on goods going from Northern Ireland to Ireland. The Northern Ireland protocol established filings declarations tarfs, duties and checks on goods enter in Northern Ireland for great Britain in accordance with EU standards.

Edward J. Ryan: We've been helping many businesses with their filings and declarations for goods going into Northern Ireland, which has been a good business for us over the past year or so.

Edward J. Ryan: We've been helping many businesses with their filings and declarations for goods going into Northern Ireland. It's been a good business for us over the past year or so.

Edward J. Ryan: Recently elections were held in Northern Ireland where, for the first time in history, the political party with a focus on reunifying North and South Ireland, won the most seats in the Northern Ireland government.

Edward J. Ryan: Recently, elections were held in Northern Ireland where for the first time in history, the political party with a focus on reunifying North and South Ireland won the most seats in the Northern Ireland government. This party is supportive of the existing Northern Ireland protocol. However, some of the other political parties needed to form a government are not as supportive. All that's to say we will continue to monitor for our customers the continued viability of the Northern Ireland protocol and whether additional filing and documentation changes will be required by our customers as they continue to adapt to Brexit.

Edward J. Ryan: This party is supportive of the existing Northern Ireland protocol, however, some of the other political parties needed to form a government are not as supportive. All that's to say we'll be continuing to monitor for our customers the continued viability of the Northern Ireland protocol and whether additional filing and documentation changes will be required by our customers as they continue to adapt to Brexit.

Speaker 4: This party is supportive of the existing Northern Ireland protocol. However, some of the other political parties needed to form a government are not as supportive. All that's to say we will continue to monitor for our customers the continued viability of the Northern Ireland protocol and whether additional filing and documentation changes will be required by our customers as they continue to adapt to Brexit.

Edward J. Ryan: The third geopolitical item we're monitoring are the COVID lockdowns in China. China has taken an aggressive zero COVID approach which has resulted in many businesses in China being shut down while they deal with the outbreaks. This includes manufacturers, distributors, ports, and logistics operations.

Edward J. Ryan: The third geopolitical item we're monitoring are the further lockdowns in China. China has taken an aggressive zero COVID approach which has resulted in many businesses in China being shut down while they deal with the outbreaks. This includes manufacturers, distributors, ports, and logistics operations.

Speaker 4: andthis includes manufacturers distributors, ports and logistics operations.

Edward J. Ryan: With China being a major source of manufactured goods and components, this has had a big impact on the supply chains of Western companies. [inaudible] parts and component shortages in many industries, including the auto and electronics industry, resulted in manufacturing slowdown.

Speaker 4: This includes manufacturers distributors, ports and logistics operations.

Edward J. Ryan: With China being a major source of manufactured goods and components, this has had a big impact on the supply chains of Western companies. We've heard of parts and component shortages in many industries, including the auto and electronics industry, resulting in a manufacturing slowdown.

Edward J. Ryan: Over the past years, Western companies have had to be very agile to meet supply chain challenges. In response to these China COVID lockdowns, many have sought alternative suppliers in neighboring countries or in parts of China not impacted by the lockdowns. We've seen it to be a challenge for businesses, but not a fatal checkpoint.

Edward J. Ryan: Over the past years, Western companies have had to be very agile to meet supply chain challenges. In response to these China-COVID lockdowns, many of the alternative suppliers in neighboring countries or in parts of China are not impacted by the lockdowns. We've seen it to be a challenge for businesses, but not a fatal checkpoint.

Edward J. Ryan: On the logistics front, prior to the lockdowns, supports and carriers were dealing with backlogs and sparse capacity to move goods. With these China COVID lockdowns seeing many of the clogs in the logistics infrastructure work themselves out with wait times at US seaports coming way down and prices starting to come down with increased capacity. To date, we've continued to see steady shipment volumes from Asia-Pacific.

Edward J. Ryan: On the logistics front, prior to the lockdowns, supports and carriers were dealing with backlogs and sparse capacity to move goods. With these China- COVID-19 lockdowns, we're seeing many of the clogs in the logistics infrastructure work themselves out with wait times at USC ports coming way down and prices starting to come down with increased capacity. To date, we've continued to see steady shipment volumes for Asia, Pacific. Things seem to now be opening back up right now in China, and in the meantime we'll continue to monitor the situation for any potential impact on future shipment volumes.

Edward J. Ryan: Things seem to now be opening back up right now in China, and in the meantime, we'll continue to monitor the situation for any potential impact on future shipment volumes.

Speaker 4: Things team that now be opening back up right now in China, and in the meantime we'll continue to monitor the situation for any potential impact on future shipment volumes.

Edward J. Ryan: So those are some of the major conflicts and geopolitical issues impacting supply chain and logistics, but there are also some economic issues impacting our space, many of which are connected in some ways to these events.

Edward J. Ryan: So those are some of the major conflicts in geopolitical issues impacting supply chain and logistics, but there are also some economic issues impacting our space, many of which are connected in some ways to these events.

Edward J. Ryan: The first, inflation, we've seen very high inflation rates in various economies. This has caused price increases, which then has businesses looking at alternative sourcing within their supply chains. We've had to manage this in our own business by adjusting pricing to reflect supply costs that have been passed on to us.

Edward J. Ryan: The first, inflation, we're seeing very high inflation rates in various economies. This has caused price increases which then has businesses looking at alternative sourcing within their supply chains. We had to manage this in our own business by adjusting pricing to reflect supply costs that have been passed on to us.

Speaker 4: Which then has businesses booked at alternative sourcing within their supply chains, had to manage this, and our own business- by adjusting pricing to reflect supply costs that have been passed on to us.

Speaker 4: Which then has businesses bookting at alternative sourcing within their supply chains. That to manage this in our own business by adjusting pricing to reflect supply costs that have been passed on to us.

Edward J. Ryan: The second is interest rates. Higher interest rates put additional pressure on businesses with leverage, in particular, logistics businesses with hard assets. We're also aware of technology peers and predators with highly leveraged businesses. As I mentioned earlier, Descartes is debt-free, so this is a limited challenge to us right now and it's potentially an opportunity as highly leveraged private tech businesses could have the press valuations in the future.

Edward J. Ryan: The second is interest rates. Higher interest rates put additional pressure on businesses with leverage, in particular logistics businesses with hard assets. We're also aware of technology peers and predators with highly leveraged businesses. As I mentioned earlier, Descartes is debt-free, so this is of limited challenge to us right now and it's potentially an opportunity as highly leveraged private tech businesses could have the press valuations in the future. The third is currency movements. Global economic and political conflict has caused many currencies to move. For our customers, this can also be a driving force to looking for alternative sourcing strategies as low-cost offshore jurisdictions suddenly become much more expensive. As I detailed earlier, our own business faced some FX currency headwinds this quarter compared to a year ago. However, we have some natural hedges in our business that don't really have us too exposed to any one particular currency movement.

Edward J. Ryan: The third is currency movements. Global, economic, and political conflict has caused many currencies to move. For our customers, this can also be a driving force to looking for alternative sourcing strategies as low-cost offshore jurisdictions suddenly become much more expensive. As I detailed earlier, our own business faced some FX currency headwinds this quarter compared to a year ago. However, we have some natural hedges in our business that don't really have us too exposed to any one particular currency movement.

Edward J. Ryan: The fourth is fuel costs. Fuel costs are rising, diesel costs in particular are impacting the trucking industry. This puts pressure on companies to more efficiently use their vehicles and sometimes contributes to broader inflation as fuel costs are passed on. For our business, our [inaudible] and scheduling business and transportation management businesses are specifically designed to reduce miles driven, so fuel cost increases often also increase demand for our solutions in this space.

Speaker 7: Fuel costs are ising. Diesel costs in particular are impacting the trucking industry. That puts pressure on companies to more efficiently use their vehicles and sometimes contributes to broader inflation as fuel costs are passed on for our business. wring and scheduling business and transportation management business are specifically designed to reduce miles driven, So fuel cost increases often also increased demand for our solutions in this space.

Edward J. Ryan: The fourth is fuel costs. Fuel costs are rising. Diesel costs in particular are impacting the trucking industry. This puts pressure on companies to more efficiently use their vehicles and sometimes contributes to broader inflation as fuel costs are passed on. For our business, [inaudible] scheduling business and transportation management business are specifically designed to reduce miles driven, so fuel cost increases often also increased demand for our solutions in this space. With this labor availability, competition for logistics and supply chain workers remains fierce, with many companies exploring alternative sources for workers. More specifically, there are still ongoing negotiations for the west coast port workers contract, and while both sides seem committed to a resolution there, a labor disruption there could also contribute to more logistics backlogs and alternative logistics strategies.

Edward J. Ryan: With this labor availability, competition for logistics and supply chain workers remains fierce, with many companies exploring alternative sources for workers. More specifically, there are still ongoing negotiations for the west coast port workers' contract, And while both sides seem committed to a resolution there, a labor disruption there could also contribute to more logistics backlogs and alternative logistics strategies.

Edward J. Ryan: And the sixth is returns to stores and office workplaces. As the world begins to leave lockdowns, it remains to be seen whether the buying patterns of consumers will return to in-store, versus the boom that e-commerce purchases have seen over the pandemic. We strongly believe that e-commerce remains a growth area for the future, with probably more subdued growth rates than we've seen over the recent past. We continue to see e-commerce as an area of investment for us, and even more so evaluations for companies in this space come down.

Speaker 4: As the world begins to lelead lockdowns. It remains to be seen whether the buying patterns of consumers will return to in-store, versus the boom that e-commerce purchases have seen over the pandemic. We strongly believe that e-commerce remains a growth area for the future will, probably with more subdued growth rates than seen over the recent past. We continue to see e-commerce as an area of investment for us, and even more so evaluations for companies in this space come down.

Edward J. Ryan: And the sixth is returns to stores and office workplaces. As the world begins to leave lockdowns, it remains to be seen whether the buying patterns of consumers will return to in-store, versus the boom that e-commerce purchases have seen over the pandemic. We strongly believe that e-commerce remains a growth area for the future, but probably with more subdued growth rates than seen over the recent past. We continue to see e-commerce as an area of investment for us, and even more so, evaluations for companies in this space come down.

Edward J. Ryan: So that's the broader market environment we're in right now. That's certainly a lot going on and impacts supply chain and logistics. As I've said in the past, our business generally does well where things are changing. When our customers are changing sourcing and logistics strategies, they have generally benefitted from our technology to do so. But we, like every business out there, need to keep an eye on the broader market impact on global trade for the rest of the year. It's one thing if businesses are finding different ways or strategies to still do what they did before, it's entirely another if the world starts doing less overall.

Edward J. Ryan: So that's the broader market environment we're in right now. That's certainly a lot going on that impacts supply chain and logistics. As I've said in the past, our business generally does well where things are changing. When our customers are changing sourcing and logistics strategies, they're generally benefiting from our technology to do so. But we, like every business out there, need to keep an eye on the broader market impact on global trade for the rest of the years. It's one thing if businesses are finding different ways and strategies to still do what they did before, it's entirely another if the world starts doing less overall.

Edward J. Ryan: For us, especially coming off our financial performance in recent quarters, we remain committed to profitable growth in our business. Our strategy remains to grow our existing business and look for businesses to combine with. So let me speak to each of those.

Edward J. Ryan: We also specially coming off our financial performance in recent quarters and we remain committed to profitable growth in our business. Our strategy remains to grow our existing business and look for businesses to combine with. So let me speak to each of those.

Edward J. Ryan: We've got good recent success with organic growth driven by past investments in sales and marketing. We anticipate continuing those types of investments. Specifically, we'll be continuing investments in the following areas.

Speaker 8: Specifically we'll be continuing investments in the following areas.

Speaker 8: Our specific goals for this group are to increase customer satisfaction, decrease churn and expand product adoption in our existing customer base- a very large customer base of over two thousand customers. We think we can do great things for our business by serving them better. two years ago we didn't even have a dedicated customer success group, So we anticipate this group. That is something we'll continue to grow out, given our early successes.

Edward J. Ryan: The first is investing in our customer success group. Our specific goals for this group are to increase customer satisfaction, decrease churn, and expand product adoption in our existing customer base. We have a very large customer base of over 20,000 customers. We think we can do great things for our business by serving them better. Two years ago we didn't even have a dedicated customer success group, so we anticipate this group is something we'll continue to grow out given our early successes. The second is investing in our marketing technology. Our marketing activities used to be primarily events and trade shows. We've invested in various technologies to improve our search engine optimization, enable cap-based marketing, and otherwise provide customers and prospects with useful information that lets them know how we can help them with their specific challenges. We've also moved away from one big global in-person music group and have moved to several virtual innovation forms that are focused on our particular Descartes solution sets.

Speaker 4: Our specific goals for this group are to increase customer satisfaction, decrease churn and expand product adoption in our existing customer base. We have very large customer base of over two thousand customers. We think we can do great things for our business by serving them better. two years ago we didn't even have a dedicated customer success group, So we anticipate this group is something we'll continue to grow out, given our early successes. Second is invested in our marketing technology. Our marketing activities used to be primarily advents and trade shareres. We've invested in various technologies to improve our search engine optimization, enable cap-based marketing and otherwise provide customers and prospects with useful information that lets them know how we can help them with their specific challenges.

Edward J. Ryan: Second is invested in our marketing technology. Our marketing activities used to be primarily events and trade shows. We've invested in various technologies to improve our search engine optimization, enable cap-based marketing, and otherwise provide customers and prospects with useful information that lets them know how we can help them with their specific challenges.

Edward J. Ryan: We've also moved away from one big global in-person music group and have moved to several virtual innovation forms that are focused on our particular Descartes' solution sets.

Edward J. Ryan: We've also moved away from one big global in-person music group and have moved to several virtual innovation forms that are focused on our particular Descartes solution sets.

Edward J. Ryan: The third is investing in the build-out of our European team. Historically, this team is exclusively geographically structured. We moved to a structure that's both geographic and solution-focused. We've expanded the team and brought in broader solution experts, enabling customer center engagement across our various solution pillars.

Edward J. Ryan: The third is investing in the build-out of our European team. Historically, this team is exclusively geographically structured. We moved to a structure that is both geographic and solution focused. We've expanded the team and brought in broader solution experts, enabling customer-center engagement across our various solution pillars.

Edward J. Ryan: On the acquisition front, you can see that we remain active. We've completed two acquisitions already this fiscal year. Earlier in the year, we combined with net CHP, which I mentioned earlier, and went through in detail on our last results call. More recently, we've also combined with Fox trot

Edward J. Ryan: On the acquisition front, you can see that we remain active. We've completed two acquisitions, already discussed for the year. Earlier in the year, we combined with net CHP, which I mentioned earlier and went through the [inaudible] on our last results call. More recently, we've also combined with Box Drop. Box Drop is an investment to complement our existing routing scheduling technologies. Specifically, Box Drop has strength with machine learning capabilities that will help our customers with iterative improvements to the delivery route plan.

Edward J. Ryan: Foxtrot is an investment to complement our existing routing scheduling technologies. Specifically, Foxtrot has strength with machine learning capabilities that will help our customers with iterative improvements to the delivery route plan.

Edward J. Ryan: This was of particular interest to us, given Foxtrot and Descartes have some common customers. Also, Foxtrot's strength in retail food and beverage complements our other previous investments, such as Green Mile, making us, in our mind, the premier solution provider in the food and beverage distribution industry. Welcome to everyone from Foxtrot and we are excited to be working with you.

Edward J. Ryan: This was of particular interest to us, given Box Drop and Descartes have some common customers. Also, Box Drop strength in retail food and beverage complements our other previous investments, such as Green Mile, making us, in our mind, the premier solution provider in the food and beverage distribution industry.

Speaker 4: Welcome to everyone from Foxtrot and we are excited to be working with you.

Edward J. Ryan: We're committed to continuing to grow Descartes. These sales and marketing acquisition investments are designed to keep us on that path. We're very excited about where we are now and our future path.

Edward J. Ryan: Welcome to everyone from Box Drop and we are excited to be working with you. We're committed to continuing to grow Descartes. Our sales and marketing acquisition investments are designed to keep us on that path. We're very excited about where we are now and our future path.

Edward J. Ryan: To wrap up, we had great Q1 financial results. That was in part because of the past sales and marketing investments paying off, our solution leadership in certain markets, and the contribution of past acquisitions. In the current quarter, there are challenging and changing business conditions caused by geopolitical conflict and economic changes. While we're cautious about how these business conditions will impact the global economy and shipment volumes for the rest of the year, we remain committed to investing in profitable growth for our business through continued sales and marketing investments and business combinations. Once again, thanks to the entire Descartes team for their efforts this past quarter and for the work they're doing right now to help our customers deal with all the change and complexity in the world right now. And with that, I'll turn the call over to Allan to go through our Q1 financial results in more detail. Allan?

Allan J. Brett: Thanks, Ed. As indicated, I'm going to walk you through our financial highlights for our first quarter, which ended on April 30th.

Allan J. Brett: Thanks, Ed. As indicated, I'm going to walk you through our financial highlights for our first quarter, which ended on April 30th. As Ed mentioned, we're pleased to report record quarterly revenues of 116.4 million this quarter, an increase of 18% from revenues of 98.8 million in Q1 last year. While revenue from our recent acquisitions including net CHB and Box Drop contributed nicely to this growth.

Allan J. Brett: As Ed mentioned, we're pleased to report record quarterly revenues of 116.4 million this quarter, an increase of 18% from revenues of 98.8 million in Q1 last year.

Allan J. Brett: While revenue from our recent acquisitions, including net CHB and Foxtrot, contributed nicely to this growth, growth in revenues from new and existing customers was once again the main driver of growth this quarter when compared to the same quarter last year.

Speaker 5: While revenue from our recent acquisitions including net CHB and Box Drop contributed nicely to this growth.

Speaker 9: growth in revenues from new and existing customers was once again the main driver of growth this quarter when compared to the same quarter last year.

Allan J. Brett: Growth in revenues from new and existing customers was once again the main driver of growth this quarter when compared to the same quarter last year.

Allan J. Brett: In addition, we should mention that there is a decrease in revenue from FX this quarter as the US dollar was stronger compared to the euro, Canadian dollar, and British pound when compared to the same period last year. This resulted in almost a $2 million negative impact on revenue from Q1 when compared to Q1 of last year. Excluding FX, revenue growth would have been closer to 20% in Q1 over Q1 last year.

Allan J. Brett: In addition, we should mention that there was a decrease in revenue from FX this quarter as the US dollar was stronger compared to the Euro, Canadian dollar, and British pound when compared to the same period last year. This resulted in almost a $2 million negative impact on revenue from Q1 when compared to Q1 of last year. Excluding FX, revenue growth would have been closer to 20% in Q1 over Q1 last year.

Speaker 9: Excluding FX, revenue growth would have been closer to 20% in Q1 over Q1 last year.

Speaker 5: Excluding FX, revenue growth would have been closer to 20% in Q1 over Q1 last year.

Allan J. Brett: Consistent with past quarters, our revenue mix in the quarter continued to be very strong, with services revenue increasing 16% to 102.8 million, or 88% of total revenue, compared to 88.3 million in the same quarter last year.

Allan J. Brett: Service revenue was also up nicely, sequentially increasing over 3% from Q4 last year.

Allan J. Brett: Service revenue was also up nicely, sequentially increasing over 3% from Q4 last year. License revenues came in at 2.3 million, or 2% of revenue in the quarter, up from license revenues of 1.3 million in the first quarter last year, while professional services and other revenue came in at 11.3 million, or 10% of revenue, up 23% from 9.2 million in the same period last year as a result of increased professional service engagements.

Allan J. Brett: License revenues came in at 2.3 million, or 2% of revenue in the quarter, up from license revenues of 1.3 million in the first quarter of last year, while professional services and other revenue came in 11.3 million, or 10% of revenue, up 23% from 9.2 million in the same period last year as a result of increased professional service engagements.

Allan J. Brett: Gross margin for the first quarter was 76% of revenue, consistent with the first quarter of last year.

Allan J. Brett: Gross margin for the first quarter was 76% of revenue, consistent with the first quarter of last year. Operating expenses increased in the first quarter. This was primarily related to the impact of recent acquisitions, but also from additional labor-related costs, primarily in the sales and marketing areas, as we continue to invest in our business in those areas. As a result, we continue to see strong adjusted EBITDA growth of 23% to a record of $51.2 million or 44.0% of revenue for the quarter, up from $41.5 million or 42.0% of revenue in the first quarter of last year. From a GAAP earnings perspective, net income came in at $23.1 million, up 26% from net income of $18.4 million in the first quarter of last year. With these strong operating results, cash flow generated from operations came in at $44.4 million, or approximately 87% of adjusted EBITDA in the first quarter, up 9% from operating cash flow of $40.9 million in Q1 last year.

Allan J. Brett: Operating expenses increased in the first quarter. This was primarily related to the impact of recent acquisitions, but also from additional labor-related costs, primarily in the sales and marketing areas, as we continue to invest in our business in those areas.

Allan J. Brett: As a result, we continue to see strong adjusted EBITDA growth of 23% to a record of 51.2 million, or 44.0% of revenue for the quarter, up from 41.5 million or 42.0% of revenue in the first quarter last year.

Allan J. Brett: From a GAAP earnings perspective, net income came in at 23.1 million, up 26% from net income of 18.4 million in the first quarter last year.

Allan J. Brett: With these strong operating results, cash flow generated from operations came in at 44.4 million, or approximately 87% of adjusted EBITDA in the first quarter, up 9% from operating cash flow of 40.9 million in Q1 last year.

Allan J. Brett: As Ed mentioned, we are pleased with these operating results in the first quarter, as continued organic growth and solid performance from recent acquisitions resulted in an 18% growth in revenue and, more importantly, a 23% growth in adjusted EBITDA for the quarter.

Allan J. Brett: As Ed mentioned, we are pleased with these operating results in the first quarter as continued organic growth and solid performance from recent acquisitions resulted in an 18% growth in revenue and, more importantly, a 23% growth in adjusted EBITDA for the quarter.

Allan J. Brett: We turn our attention to the balance sheet. Our cash balances totaled approximately 212 million at the end of April, almost identical to the cash balances of 213 million we had at the end of January as we used our cash flow from operations to complete both the net CHB and Foxtrot acquisitions.

Speaker 9: as we used our cash flow from operations to complete both the net CHB and Foxtrot acquisitions.

Speaker 5: as we used our cash flow from operations to complete both the net CHB and Box Drop acquisitions.

Allan J. Brett: As a result, we still have over 200 million of cash available, as well as our $350 million operational credit facility to deploy Descartes' future acquisitions. So we continue to be well-capitalized to allow us to consider all acquisition opportunities in our market, consistent with our business plan.

Allan J. Brett: As a result, we still have over 200 million of cash available, as well as our $350 million operating credit facility to deploy towards future acquisitions. So we continue to be well-capitalized to allow us to consider all acquisition opportunities in a market consistent with our business plan.

Speaker 9: So we continue to be well capitalized to allow us to consider all acquisition opportunities in our market, consistent with our business plan.

Allan J. Brett: As part of our press release today, we announced that we have filed with the Toronto Stock Exchange, or TSX, a notice of our intention to commence a normal course issuer or bid or NCIB. Details of the application, which is subject to approval by the TSX, are included in today's financial results press release. If the NCIB application is accepted by the TSX, we expect to be permitted to repurchase for cancellation, at our discretion, during the next 12 months, up to 10% of the public float of Descartes issued and outstanding common shares. If the NCIB application is accepted by the TSX, any purchases under the NCIB will be conducted in the open market or as otherwise permitted, subject to the terms and limitations applicable to such normal course issuer bid. And they will be made through the facilities of TSX, the NASDAQ, other designated exchanges, or alternative trading systems.

Speaker 9: Details of the application, which is subject to approval by the tsx, are included in today's financial results press release.

Speaker 5: Details of the application, which is subject to approval by the TSX, are included in today's financial results press release. If the NCIB application is accepted by the TSX, we expect to be permitted to repurchase for cancellation, at our discretion, during the next 12 months, up to 10% of the public float of Descartes issued and outstanding common shares. If the NCIB application is accepted by the TSX, any purchases under the NCIB will be conducted in the open market or as otherwise permitted, subject to the terms and limitations applicable to such normal course issuer bid. And they will be made through the facilities of TSX, the NASDAQ, other designated exchanges, or alternative trading systems.

Allan J. Brett: If the NCIB application is accepted by the TSX, we expect to be permitted to repurchase for cancellation at our discretion during the next 12 months, up to 10% of the public float of Descartes' issued and outstanding common shares.

Allan J. Brett: If the NCIB application is accepted by the TSX, any purchases under the NCIB will be conducted in the open market or as otherwise permitted, subject to the terms and limitations applicable to such normal course issuer bid. And they will be made through the facilities of TSX, the NASDAQ, other designated exchanges, or alternative trading systems.

Speaker 9: And they will be made through the facilities of TSX, the NASDAQ, other designated exchanges, or alternative trading systems.

Speaker 5: And they will be made through the facilities of tsx, the NASDAQ, other designated exchanges or alternative tradating systems.

Allan J. Brett: If we do make any purchases under the NCIB, we don't know at which prices and what quantities they'll be. However, given the recent volatility that has existed in the public technology company valuations, we thought it prudent to have this type of option available to us if it was an effective use of capital at the time it is used.

Allan J. Brett: At the same time, we should be very clear that we are still very committed to the deployment of capital towards completing acquisitions that will enhance our business. We simply want to have an NCIB structure in place to also be able to explore the use of this capital as appropriate. So we should note the following as we look towards the balance of our fiscal 2023 year.

Speaker 9: So we should note the following as we look towards the balance of our fiscal 2023 year.

Allan J. Brett: So we should note the following as we look towards the balance of our fiscal 2023 year. After spending approximately 1.6 million in capital additions in the first quarter, we expect to incur approximately 3-4 million in additional capital expenditures for the balance of this year.

Allan J. Brett: After spending approximately 1.6 million in capital additions in the first quarter, we expect to incur approximately three to four million in additional capital expenditures for the balance of this year.

Speaker 5: After spending approximately one point six million in capital additions in the first quarter, we expect to incur approximately three ill to four million in additional capital expenditures for the balance of this year.

Allan J. Brett: After incurring amortization costs of 15 million in Q1, we expect amortization expenses will be approximately 42.2 million for the balance of the year, with this figure being subject to adjustment for FX changes and future acquisitions.

Allan J. Brett: Our tax rate came in in Q1 at 24.1% of pretax income, slightly lower than our statutory tax rate, and this was mainly as a result of a recovery of certain benefits in the United States.

Allan J. Brett: Our tax rate came in Q1 at 24.1% of pretax income, slightly lower than our statutory tax rate, and this was mainly as a result of a recovery of certain benefits in the United States. Looking to the balance of this year, we currently expect that our tax rate will trend closer to our statutory tax rate, so in the range of 25% to 30% of pretax income for the next three quarters. However, as always, we should add that our tax rate may fluctuate from quarter to quarter from one-time tax items that may arise if we operate internationally across multiple countries.

Allan J. Brett: Looking to the balance of this year, we currently expect that our tax rate will trend closer to our statutory tax rate, so in the range of 25% to 30% of pretax income for the next three quarters.

Speaker 5: Looking to the balance of this year, we currently expect that our tax rate will trend closer to our statutory tax rate, so in the range of 25% to 30% of pretax income for the next three quarters. However, as always, we should add that our tax rate may fluctuate from quarter to quarter from one-time tax items that may arise if we operate internationally across multiple countries.

Allan J. Brett: However, as always, we should add that our tax rate may fluctuate from quarter to quarter from one-time tax items that may arise as we operate internationally across multiple countries.

Speaker 5: However, as always, we should add that our tax rate may fluctuate from quarter to quarter from one-time tax items that may arise if we operate internationally across multiple countries.

Allan J. Brett: Next, after incurring stock-based compensation expense of 2.8 million in the past quarter, we currently expect stock-based compensation will be approximately 10.9 million for the balance of fiscal 2023, subject to any forfeitures of stock options or share units.

Allan J. Brett: And finally, going forward, subject to unusual dents and quarterly fluctuations, we expect to continue to see strong cash flow conversion and generally expect cash flow from operations to be between 85% to 95% of our adjusted EBITDA in the quarters ahead.

Allan J. Brett: And finally, going forward, subject to unusual events and quarterly fluctuations, we expect to continue to see strong cash flow conversion and generally expect cash flow from operations to be between 85 to 95% of our adjusted EBITDA in the quarters ahead.

Allan J. Brett: And with that, I'll now turn over to Ed, who will wrap up with some closing comments and our baseline calibrations.

Edward J. Ryan: Great thanks, Allan. Before I hit calibration, I just want to hit on some other areas of corporate development for Descartes.

Allan J. Brett: And with that, I'll now turn it over to Ed, who will wrap up with some closing comments and our baseline calibrations.

Edward J. Ryan: We were very pleased to release our first ever ESG report in early May. It's posted on our website and I'd encourage you all to read it and provide us with feedback as we look at our continued progress on ESG matters.

Edward J. Ryan: Great. Thanks, Allan. Before I hit calibration, I just want to hit on some other areas of corporate development for Descartes.

Edward J. Ryan: We are very pleased to release our first-ever ESG report in early May. It's posted on our website and I'd encourage you all to read it and provide us with feedback as we look at our continued progress on ESG matters.

Edward J. Ryan: The report identifies many areas where we've progressed so far, such as our positive environmental impact, including helping customers reduce carbon emissions, paper use, and fuel consumption, our role in helping customers meeting their own social and governance initiatives, including compliance with economic and trade sanctions, our commitment and investments in data privacy and security, our efforts in developing a diverse, capable employee team working in a healthy and rewarding work environment, and our commitment to admirable business conduct and ethics.

Edward J. Ryan: In addition, we'll be hosting our virtual annual general meeting of shareholders on June 16th at 10 am. The materials for the meeting are available on our website and have otherwise been provided to shareholders.

Edward J. Ryan: Among the matters being considered, we've nominated two additional Directors for election at the AGM, bringing the Board to 10 Directors. If all nominated Directors are elected, our Board will have diverse representation, with 60% of the Directors identifying as female or a visible minority, and 40% of the Board being female Directors.

Edward J. Ryan: So now on to calibration. Our business is designed to be predictable and consistent. We believe its stability and reliability are valuable to our customers, employees, and our broader stakeholders. To deliver this consistency we continue to operate from the following principles.

Speaker 8: Our business is designed to be predictable and consistent. We believe its stability and reliability are valuable to our customers', employees and our broader stakeholders.

Speaker 8: To deliver this consistency we continue to operate from the following principles.

Edward J. Ryan: Our long-term plan is for our business to grow adjusted EBITDA 10% to 15% annually. We grow through a combination of organic growth and acquisitions. We take a neutral party approach to building and operating solutions on our global logistics network. We don't favor any particular party. We run our business for all supply chain participants, connecting shippers, carriers, logistics service providers, and customs authorities.

Speaker 4: To deliver this consistency we continue to operate from the following principles.

Edward J. Ryan: Our long-term plan is for our business to grow adjusted EBITDA 10-15% annually. We grow through a combination of organic growth and acquisitions. We take a neutral party approach to building and operating solutions on our global logistics network. We don't favor any particular party. We run our business for all supply chain participants, connecting shippers, carriers, logistics service providers, and customs authorities.

Edward J. Ryan: When we overperform, we try to reinvest that overperformance back in our business. We focus on recurring revenues and establishing relationships with customers for life. We drive on operating a predictable business that allows us forward visibility to our revenues and investment paybacks. Nothing that happened in Q1, or that we're seeing right now, has had us change our financial and investment plans for this fiscal year, but we're going to be cautious in executing on those plans while we continue to monitor and evaluate the impact on our business and our customers' businesses from the market items identified earlier. That same caution was kept in mind as we calibrated our business for Q2.

Edward J. Ryan: When we overperform, we try to reinvest that overperformance back in our business. We focus on recurring revenues and establish some relationships with customers for life. We thrive on operating a predictable business that allows us for visibility to our revenues and investment paybacks. Nothing that's happening in Q1 or that we're seeing right now has had us change our financial and investment plans for this fiscal year, but we're going to be cautious in executing on those plans while we continue to monitor and evaluate the impact on our business and our customers' businesses from the market items identified earlier. That same caution was kept in mind as we calibrated our business for Q2. In our annual report, we provided a comprehensive description of baseline revenues based on calibration and their limitations.

Edward J. Ryan: In our annual report, we provided a comprehensive description of baseline revenues, baseline calibration, and their limitations. As of May 1st, 2022, using foreign exchange rates of 78 cents to the Canadian dollar, $1.05 five cents to the euro, and a $1.26 to the pound, we estimate that our baseline revenues for the second quarter of 2023 are approximately $103 million and our baseline operating expenses are approximately $64 million.

Speaker 7: As of may first twentthousand and 22, using foreign exchange rates of 78 cents to the Canadian dollar, a dollar a dollar five cent to the euro and a dollar 2, 26 to the pound, we estimate that our baseline revenues for the second quarter of 2020 -three are approximately $103 million and are baselon operating expenses are approximately sixty-four million.

Edward J. Ryan: As of May 1st, 2022, using foreign exchange rates of 78 cents to the Canadian dollar, a $1.05 to the Euro, and a $1.26 to the pound, we estimate that our baseline revenues for the second quarter of 2023 are approximately $103 million and our baseline operating expenses are approximately $64 million. We consider this to be our baseline calibration of approximately 39 million for the second quarter of 2023 or approximately 38% of our baseline revenues as at May 1st, 2022.

Edward J. Ryan: We consider this to be our baseline calibration of approximately 39 million for the second quarter of 2023 or approximately 38% of our baseline revenues as at May 1st, 2022.

Edward J. Ryan: Our targeted adjusted EBITDA operating range for our business remains at 38% to 43% for the fiscal 2023. In Q1, we were 44% above this range. However, in light of the broader uncertainty in the markets, including in the foreign exchange markets, we're not looking to change our targeted range, but we'll revisit that in future quarters if we continue to overperform and if the market stabilizes.

Edward J. Ryan: Our targeted adjusted EBITDA operating range for our business remains at 38% to 43% for fiscal 2023. In Q1, we were at 44% above this range. However, in light of the broader uncertainty in the markets, including in the foreign exchange markets, we're not looking at changing our targeted range but we will revisit that in future quarters if we continue to overperform and if the market stabilizes.

Edward J. Ryan: We're already very hard at work on helping our customers deal with these very complex times. We believe that if we focus on making our customers successful, it's our own best chance at achieving our own goal of being a strong and trusted business delivering superior results for customers and shareholders. Thanks to everyone for joining us on the call today. As always, we're available to talk to you about our business in whatever matter that is most convenient for you. And with that operator, I'll now turn it over to you for the Q&A portion of the call.

Multiple speakers: We're already very hard at work on helping our customers deal with these very complex times. We believe that if we focus on making our customers successful, it's our own best chance at achieving our own goal of being a strong and trusted business delivering superior results for customers and shareholders. Thanks to everyone for joining us on the call today. As always, we're available to talk to you about our business and whatever matters most convenient for you. And with that, operator, I'll now turn it over to you for the Q&A portion of the call. Thank you, sir. We'll now begin the question and answer session. If you have a question, please dial zero one on your phone keypad. If you'd like to be removed from the queue, please dial zero two. If you're on a speakerphone, please pick up your handset first before dialing. Once again, if you have a question, please dial zero one on your phone keypad. And from William Blair, we have Matt Pfau. Please go ahead.

Operator: Thank you, sir. We will now begin the question and answer segment. If you have a question, please dial zero one on your phone keypad. If you'd like to be removed from the queue, please dial zero two. If you're on a speaker phone, please pick up your handset first before dialing. Once again, if you have a question, please dial zero one on your phone keypad. And from William Blair, we have Matt Pfau, please go ahead.

Speaker 13: And from William Blair: we have met fooul. Please go ahead.

Matt Pfau: Hey guys, thanks for taking my questions and great quarter. Ed, I wanted to first ask on the acquisition strategy. So when you look at potential targets in your pipeline, have valuation expectations changed at all and are you seeing a more of a willingness to sell within those targets?

Speaker 15: Id one to first ask on the acquisition strategy. So when you look at potential targets in your pipeline, have valuation expectations changed at all and are you seeing a more of a willingness to sell within those targets?

Multiple speakers: Hey guys, thanks for taking my questions and great quarter. Ed, I wanted to first ask on the acquisition strategy. So when you look at potential targets in your pipeline have valuation expectations changed at all and are you seeing a more of a willingness to sell within those targets? I think with our smaller tuck-ins, it's business as usual. I don't think they're as impacted by the public markets as maybe the larger acquisition candidates that are maybe deals run by bankers with private equity firms involved. So business as usual for us for the normal course acquisitions that we were normally doing. Some of the larger ones, what we've seen so far is what I would expect to see when the public markets turn down which is that those deals get stalled. They come up with every excuse in the world as to why they're stalling the deal or delaying, or not getting to book out, or whatever they want to say. But I think at the end of the day, it boils down to: they see what's going on in the public markets and they're afraid if they go out them right now, that they're going to get a much lower valuation than they initially told their clients so I think there's why they're in a bit of a whole pattern. This is what we saw in past tech downturns as well. We'll see what happens in the coming months if it continues for any length of time. I'd expected some of those deals will come out and they'll come out at a much lower valuation. But there's a little bit of game going on right now for people to try figure out what's going to happen and the strategy as to whether they go out now or wait. It depends on how desperate they are.

Edward J. Ryan: I think with our smaller tuck-ins it's business as usual. I don't think they're as impacted by the public markets as maybe the larger acquisition candidates that are maybe deals won by bankers with private equity firms involved. So business as usual for us for the normal course acquisitions that we're normally doing. Some of the larger ones, what we've seen so far is what I would expect to see when the public markets turned down which is that those deals get stalled. They come up with every excuse in the world as to why they're stalling the deal or delaying or not getting to book out or whatever they want to say. But I think at the end of the day it boils down to they see what's going on in the public markets and they're afraid if they go at them right now that they're going to get a much lower valuation than they initially told their clients. So I think that's why they're in a bit of a hole pattern. This is is what we saw in past tech downturns as well. We'll see what happens in the coming months if it continues for any length of time. I'd expected that if some of those deals will come out then they'll come out in a much lower valuation. But there's a little bit of game going on right now for people to try and figure out what's going to happen and the strategies to whether they go out now or wait. It depends on how that's prepared.

Speaker 4: That those deals gets fault you know they they come up with every excuse in the world is to why they're stalling the deal or delaning or you know I'm not getting to look out or what I really want to say. But I think at the end of the day it was down to they seewhat's going on in the public markets and they're afraid if they go out them right now that they 're.

Speaker 4: that those deals get stalled. They come up with every excuse in the world as to why they're stalling the deal or delaying, or not getting to book out, or whatever they want to say. But I think at the end of the day, it boils down to: they see what's going on in the public markets and they're afraid if they go out them right now, that they're going to get a much lower valuation than they initially told their clients so I think there's why they're in a bit of a whole pattern. This is what we saw in past tech downturns as well. We'll see what happens in the coming months if it continues for any length of time. I'd expected some of those deals will come out and they'll come out at a much lower valuation. But there's a little bit of game going on right now for people to try figure out what's going to happen and the strategy as to whether they go out now or wait. It depends on how desperate they are.

Speaker 4: That they're going to get you much lower valuation than they initially told their cli. So I think is that's wetherthey'in a bit of a whole pattern. This is is what we saw, and it passed tech downturns as well. We'll see what happens in in the coming months. If it continues fringul like the time I'd expected, some of those deals come out. They'll come out in a much lower evaluation, but there's a little bit of know game going on right and off for people to try and figure out what's going to happen and the strateies to whether they go out. Hour or weight depends on how that's prepared itse.

Speaker 4: That they're going to get much lower valuation than they initially theircli, So I think there's why they're a bit of a whole pattern. This is is what we saw, and it passed tech downturns as well. We'll see what happensin in the coming months. If it continues formmeul like the time, I'd expected, some of those dealsthat out out and they'll come out in a much lower valuation. But there's a little bit of know game going on right, and for people to try figure out what's going to happenhappen and the strategy to whether they go out hour or weight depends on how desperate pare it ll.

Matt Pfau: Got it. And then just maybe it'd be helpful if you could sort of frame how you would think about the impact of a potential recession on Descartes' business. If we go back to the great recession, your business has evolved quite a bit since then and then during COVID-19 there was obviously a drop off in volumes which had some impact. But if we were to enter a softer macro here, how do you think about the impact on your business and your ability to manage through that?

Matt Pfau: Got it. And then just maybe it'd be helpful if you could sort of frame out you would think about the impact of a potential recession on Descartes' business. If we go back to the great recession, your business has evolved quite a bit since then and then during COVID-19 there was obviously a drop off in volumes which had some impact. But if we were to enter a softer macro here, how do you think about the impact on your business and your ability to manage through that?

Edward J. Ryan: I think we're pretty well-positioned for it. First of all, we're coming into it with a lot of tailwinds right now. The supply chains are still clogged up. China is just in the past couple of days, they open back up. That's going to put more shipments back into the pipeline and I think we're seeing that on our networks, which is good news. If the world turns into a longer global economy, global downturn, we'll probably start to see it at some point in the future in shipment volumes as well. We don't see it today, but maybe, I think continued for a long time, or happen and then continued for a long time, we'd certainly start to see it with everyone else. At the same time, last recession, that big recession in '08, we've probably fared a lot better than most and I'd expect that might happen even more so this time because we're a much more diverse company now with a lot more products and a lot of different reasons that people buy those products and on all driven by individual shipments.

Speaker 4: Supply cha are still clogged up. China is just in in the past ina couple of days they're opening back up. That's going to put more shipments back into the pipeline and you know, I think we're seeing that on our networks, which is which is good news. You know if, if the world turns into a longer global economy, global downturn, we'll probably start to see it at some point in the future andmore shipment volues as well. We don't see today, but maybe, maybe it continued for a long time, or happened and then continued for a long time. We certainly start to see what everyone else at the same time.

Speaker 4: Supply chains are still clogged up. China is just in the past. In acoupleof days they opening back up. That's going to put more shipments back into the pipeline and I think we're seeing that on our networks, which is, which is good news. If the world turns into a longer global economy, global downturn, we'll probably start to see it at some point in the future andmore shipment volumes as well. We don't see today, but maybe maybe, I think continued for a long time, or happen and then continued for a long time, we'd certainly start to see what everyone else at the same time. Last recession, in as big recession than 8, we've probably fared a lot better than most and I'd expect that might, might happen even more so this time because we're a much more diverse company out a lot more products and a lot of different reasons that people buy those products and on all driven by individual shipments.

Edward J. Ryan: At the same time, after the last big recession in '08, we've probably fared a lot better than most and I'd expect that might happen even more so this time because we're a much more diverse company now, a lot more products and a lot of different reasons that people buy those products and are all driven by individual shipments. So we'll see what happens. I don't know better than anyone else what's going to happen to the world's economy but I like our chances compared to our competitors and a lot of other companies out there.

Edward J. Ryan: So we'll see what happens. I don't know better than anyone else what's going to happen with the world economy, but I like our chances compared to our competitors and a lot of other companies out there. And maybe most important, if the world takes a downturn and every company's valuation gets hit, we're not acquired, so when I look back at '08 and '09 and I think how did that look for us? Well, it was painful when we were in it, but the end of the day we picked up some of the best acquisitions we've ever gotten and some of best valuations we've ever gotten during that couple of years while that recession was taking hold and people were coming out of it. So in a certain sense we look forward to that environment.

Edward J. Ryan: And maybe most important, if the world takes a downturn and every company's valuation gets hit, we're not acquired. When I look back at '08 and '09 and I think how did that look for us? I go, "Well, it was painful while we were in it but at the end of the day, we picked up some of the best acquisitions we've ever gotten and some of the best valuations we've ever gotten during that couple of years while that recession is was taking hold and people were coming out of it. So in a certain sense, we look forward to that environment.

Speaker 4: If if the world takes a downturn in, every company's valuation, gets it. You, we're not acquired. So when I look back at a eight and nine and I think how did that look for us? Our well was painful and we're in it, but the end of the day we picked up some of the best acquisitions we've ever gotten it, that some of best valuationitions we've ever gotten during that couple of years, while that recession was taking whole and people were coming out of it. So in a certain sense we'd look forward to that environment.

Matt Pfau: Great. Thanks a lot guys, I appreciate it.

Edward J. Ryan: Thank you, Matt.

Operator: From Stevens, we have Justin Long. Please go ahead.

Multiple speakers: Great. Thanks a lot guys, appreciate it. Thank you, Matt. From Steven's we have Justin Long. Please go ahead. Thanks. I wanted to start with the question on organic growth. Allan, any best estimate you can share on organic growth in the quarter when you adjust for acquisitions and maybe FX as well? And Ed, I think on the last call you talked about the budget baking in 4% to 6% organic growth for the full year. Is that still your expectation after what you've seen fiscal year today?

Justin Trennon Long: Thanks. I wanted to start with a question on organic growth. Allan, any best estimate you could share on organic growth in the quarter when you adjust for acquisitions and maybe FX as well? And Ed, I think on the last call you talked about the budget baking in 4% to 6% organic growth for the full year. Is that still your expectation after what you've seen fiscal year-to-date?

Multiple speakers: I'll take the first part then let Ed talk to the the way we build our business plan. Organic growth, as you know, we consolidate the operations of the acquisitions we make, so we don't have a specific number, a detailed number. But roughly speaking, if you look at those three financials with the pro forma disclosure with the acquisitions, if you take that note, if you consider the fact there's a currency headwind of just under $2 million, our organic growth, I'd estimate it's somewhere between 12 and 13% in Q1 over Q1 last year. So double-digit organic growth is what we're seeing. To your point on the 4% to 6%, the way we build our business plan, Ed, do you want to comment on that? Yes, thanks Justin. We always say around here, we plan for the worst and hope for the best. And when we say 4% to 6%, that's how we plan to operate our business and when it's higher than that like it is right now, we're happy about that. And the other thing that was here is that we're going to take the excess above the 10%- 15% growth in EBITDA every year and plough it back into our business to try and help grow future results.

Multiple speakers: I'll take the first part then let Ed talk to the way we build our business plan. Organic growth, as you know, we consolidate the operations of the acquisitions we make. So we don't have a specific number, a detailed number, but roughly speaking, if you look [inaudible] in the financials, with proposed forma disclosure with the acquisitions, if you take that note, if you consider the fact there's a currency headwind of just under $2 million, our orgic growth, I'd estimate that's somewhere between 12 and 13% in Q1 over Q1 last year. So double-digit organic growth is what we're seeing. To your point on the 4 to 6%, the way we build our business plan, Ed, do you want to comment that? Yeah, sure. Thanks, Justin. You know there's an old saying there that we plan for the worst and hope for the best, and when we say 4 to 6%, that's how we plan to operate our business and when it's higher than that like it is right now, we're happy about that and the thing that was here is that we're going to take the excess above the 10-15% growth and even bit every year to try and help grow future results.

Edward J. Ryan: I recognize right now we're well above that and that may continue, but if it does, you're going to see us continue to do the same thing, which is to plough it back into our business and try and make it a better place for the long run for our customers and our shareholders.

Justin Trennon Long: Okay, great. And I guess, building on that, you have over $200 million of net cash today, can you talk about your target for the balance sheet over the next few quarters? It's called over the remainder of the fiscal year-end, especially in the context of the potential for share buybacks. How are you thinking about targeted leverage by year-end?

Edward J. Ryan: Well, let's see what happens. We're requisitive with our companies, we never know what we're going to be able to get and we will operate as such. We plan on making a lot of money every quarter and continue to grow the amount of money that we make every quarter and we put in the bank and use it to make investments. Now, in most cases I think that investments going to be to buy companies as we always have done. We just have to see what happens and what companies come along. We don't know how big they are going to be and how much they are going to charge and whether we think that's a good deal we're evaluating everyone the best of our ability and trying to make the best decision we can. And I think that the same thing applies for the normal courses for issuer bids, right? We see what's going on in the tech market. We wanted to open up that option for ourselves in case the market took a down and [inaudible] that's the best place to put our money. We want to say that we're doing it or not doing it just to say that we have an option to move quickly if we want to.

Speaker 4: Case I think that investments's going to be to buy, to buy companies, as we always have done: exhave to see what what happens, know what companies come along they regoing to be, they GE ther they're to that de we're evaluating every one the best of our ability and trying to make you know the best decision we can, and I think that the same same thing applies for normal course issue B. right, you know we seewhatthat's going on the tech market. We want to open up that option for ourselves. You know, in case the market ticket downturnally over that, that's the bestplaceto put our want to say that we're doing, not to say we have an opt to ick if we want to.

Justin Trennon Long: Understood, I'll leave it there. Thanks for the time.

Edward J. Ryan: Thank you, Justin.

Operator: From Wolf Research, we have Scott Group. Please go ahead.

Speaker 7: Understood I'll leave it there. Thanks for the time. Thank you just for bl research. We have Scot group. Please go head. Thanks, good afternoon. So and and you were talking about maybe a little bit more of a conservative approach with the calibration and it's notlt like a pretty sort of normal sequential improvement in the calibration now the organic growth is so strong. I'm just want to make sure I'm understanding the sort of what you're seeing are. Are things actually starting to slow? Is as you see it in your business, or is it something that you just think may happen and you know? And if it's going to happen, which are the products you think are are most likely to? To see it, I see nothing in our business right now, that's it's slowing down. Read the newspapers and see what people are saying about what might happen in the economy, but we don't have any indication that in our business the moment. So you know, you T know what that you just going to bring, but I think, know we're pretty well positioned if things do take a downturn, and probably in a good positioned to.

Scott H. Group: Hey thanks, good afternoon. So Ed, you were talking about maybe a little bit more of a conservative approach with the calibration. It felt like a pretty sort of normal sequential improvement in the calibration now that the organic growth is so strong. So I just want to make sure I'm understanding sort of what you're seeing. Are things actually starting to slow as you see it in your business or is it something that you just think may happen and if it's going to happen, which of the products do you think are most likely to see it?

Edward J. Ryan: No, I see nothing in our business right now that's slowing down. I read the newspapers and see what people were saying about what might happen in the economy, but we don't have any indication of that in our business at the moment, so I don't know what [inaudible] is going to bring. But I think we're pretty well-positioned if things do take a downturn, and probably in a good position to get our cash and our ability to generate income going forward to take advantage of it if things do turn down, right, to pickup assets at lower prices than we've been asked to pay over the last five or six years-and we think a lot of these private companies are selling more than they're worth and that's been frustrating to us. If the economy takes a downturn, we're looking forward to that opportunity and at the same time, I don't see that right now in our business at all.

Speaker 4: Don't know what you'just going to bring. But I think.

Speaker 7: We're pretty well positioned, if things do take ad downturn, and probably in a good position to our cash and our ability to generate income going forward, to take advantage of it. If things do turn down right to pickup assetsat lower prices than we've been asked to pay over the last five or six years- and we think you know a lot of these private compiesare selling more than're worth and that's been frustrating us. The economy takes it downturn. We're looking forward to that opportunity and at the same time I don't see that right now in our business at all.

Scott H. Group: Okay. You guys are helpful with the currency headwind to revenue, is there a way to think about the currency impact of the bottom line to adjusted EBITDA?

Allan J. Brett: Yeah sure, Scott, it's Allan here. Ed mentioned in his notes that we are fairly naturally hedged in that area. We operate multiple currencies. When the US dollar is strong to the Canadian dollar, it actually benefits us. It hurts us against the euro and the pound. Those things, when I say that at the EBITDA level, so those things tend to offset each other a little bit. That said, we do watch currency. We had just under two million impact on the top line, a minor impact on EBITDA, it was a small negative. So we just continue to watch it and make sure that we don't go off that natural hedge too far. So think of it as fairly muted at the EBITDA level, not immune to it, but fairly muted.

Speaker 5: Currency we had just under two million impact on the top line. You know a minor impact on EBITDA was a small negative. So we just continue to watch it and make sure that we don't go off that natural pledge too far. So think of it as fairly muted at the EBITDA level, not immune to it, but fairly muted.

Scott H. Group: Okay. And then Ed, I know there's already been a couple of questions about M&A but, like as it stands today with where the stock is, what do you think is more likely, executing on the buyback or doing M&A?

Speaker 2: Okay and then- and I know there's already been a couple of questions about M but, like as you, as it stands today, with where the stock is, what do you think more likely: executing on the buyback or doing MNA?

Speaker 22: Executing on the buyback or doing EA.

Edward J. Ryan: I think we're always going to be acquisitive or at least for the foreseeable future, we believe the [inaudible] in our space is going to consolidate the space and put the assets together in the best way and we plan on being that guy and I don't have any thoughts at all that it would be a trade-off one versus the other. We're going to keep acquiring companies and we'll keep the [inaudible] out there if we see an opportunity to do some of that as well and like that investment, we'll do that too.

Speaker 8: Think we're always going to be acquisitive or ear least for the foreseeable future. We believe the winner our space is going to consolidate the space and put the assets together in the best way and we plan on being that guy and I don't have any lots of all that it will be a trade-off of one versus the other. We're going to keep acquiring companies and.

Speaker 4: We'll keep the ncb out there. We can, if we see an opportunity to do some of that as well and, like that investment, we'will be that too.

Speaker 4: We'll keep the NCIB out there if we can, if we see an opportunity to do some of that as well and, like that, investment will be that to make sense. Thank you guys.

Scott H. Group: Makes sense. Thank you guys.

Edward J. Ryan: Thank you.

Operator: From Barclays we have [inaudible]. Please go ahead.

Unknown Speaker: Great, thank you. This is Jeremy on for [inaudible]. So I want to ask about net CHP and, as you mentioned, it's the first quarter of contribution, could you just speak a bit to like how the integration is going overall and maybe some color on how the customs business is trending? Thank you.

Speaker 9: Thank you from Barclays. We have RHO lyn out. Please go ahead.

Speaker 10: Great Thank you. This is Jeremy on for immo, So I want to ask about net CHP and, as you mentioned, it's the first quarter of contribution. Could you just speak a bit to like how the integration is going overall and maybe some color on how the customs business is trendingthank you.

Edward J. Ryan: Yeah, certainly. Yeah, it's great, and it's easier than most for us because they're in the exact same business we're in with the type 86 filings and we're one and two in the market and we just came together and that's been great for us. We were able to go out and pick up even more customers just in a very short period of time here and we have maybe medium term plans to be able to consolidate some of the the data processing pools around type 86 filing and save ourselves some money in the long run. So we're real pleased with the acquisition. We thought we were going to be real pleased with it like a lot of acquisitions, we're pretty sure it's going to work and we were with this one for sure that it's going to work well before we pull the trigger on it, and so far it's proven out to be that and maybe even a little more, so we're happy about it.

Speaker 4: thats gener. Yes no, it's great and it's easier than most for us because they're the exact same business. We're in with the PPE 86 filings and we're one and two in the market and we just came together and it's been great for us. We were able to go out and pick up even more customers just in a very short period of time here and we have maybe medium-term plans to to be able to consolidate some of the data process and tools around type 86 filing and save ourselves some money in the long run. So we're real PLE pleaswith the acquisition. We we to pleased with, like a lot of acquisitions. We're pretty sure it's going to work and we were, with this one for sure that it's going to work well, before we pull the trigger on, and so far it's proven out to be that and maybe even a little more. So we're happ about us. Thank youabout, Thank you.

Unknown Speaker: Awesome, thank you.

Edward J. Ryan: Thank you.

Operator: From Lawrencian Bank, we have Nick Augustino. Please go ahead.

Nick Augustino: Yes, good evening everybody. I guess just one quick comment just to say thanks for the prepared remarks, it certainly provided a lot of color on the business, so I appreciate that. So my one question is there's lots of talk about onshoring production as a result of the pandemic, and I'm just wondering if that situation were to happen, should we see, I guess, a change in the mix as to how product is transported maybe say more rail and trucking versus shipping or ocean and air. If that were to happen, how does that impact your business, just maybe the different pricing for each mode of transportation? Would it be positive, negative, or neutral? Any color there would be appreciated, thanks.

Speaker 9: From la REN should think we have egustto. Please go aheadyes said weaveve everybody. I guess just one quick comments would just to say thanks for the prepared remarks. A certain provide a lot of color on the business, So appreciate that. So my one question is just: there's lots to talk about onshorn production as a result of the of the pandemic and I'm just wondering if, if that situation were to happen, should we see, I guess, a change in the mix as So how product is transported maybe say, more rail and trucking versus shipping our ocean and air. If that were happen, how does that impact your business? These are the just that. Maybe the different pricing each mode of transportation would be positive negative neutral, any color. That do be appreciate. Thanks, Nick of. First, I don't know that. I completely buy. I understand my. Have a you industry to understand it. Take it's the make interest thing to talk about on the news.

Edward J. Ryan: Thanks, Nick. First, I don't know that I completely buy--I understand that it happens in a few industries, I understand it's an interesting thing to talk about on the news, but compared to the world's shipping volume, I think that the products that are going to be near short so to to speak are a relatively small portion of that. At the same time, just understand that most products get shipped around world, the parts get shipped around the world multiple times to ultimately get manufactured somewhere, and so there's a lot of shipping that goes into making just about everything that we are looking at right now. I'm look at a bunch of desk chairs and the computers and stuff like that. You're probably all looking at some more stuff. There's a lot of manufacturing, a lot of shipping that goes into that, and once it's made it has to get shipped all over the world. So when I hear that concept of we're going to make stuff locally, first of all, I don't buy that that's going to be the bulk of the world's production. I think it's going to be a relatively small fraction of it. Second, I think there's still going to be a ton of shipping all over the world to do that and if you move the location of where it's made, you're going to still have the ship it all over the world just from a different location.

Speaker 4: But compared to the to the world shipping volume, I think, to the products that are going to be near short, So to, So to speakare ff relatively small portion of that. At the same time, just understand that most products get shipped around the world. The parts get shpped around the world multiple times to ultimately get manufactured somewhere, and so there's a lot of shipping that goes into making just about everything that we are all looking at right now. Look at a bunch of desest chairs and the computers and stuff like that I probably all looking at. It's a whole stuff. There's a lot of manufacturing, a lot of shipping that goes into that, and once it's made it has to get shipped all over the world. So when I hear that concept of we're going to make stuff locally to build OK, first of, I don't buy that that that's going to be the bulk in the world production and I think it's going to be a relatively small fraction of it. Second, I think there're still going to a ton of shipping all over the world to do that. And if you move the location?

Edward J. Ryan: Certainly, with stuff made closer to an ultimate customer, the shipping changes for it. There is more truck and there's less ocean and air. But most products aren't made that way. They're made somewhere then they are shipped all over the world. What I do see happening more and more and it's probably going to happen a lot more over the world's products, is that they're going to be produced in different locations around the world, and not because they're trying to any closer to the customers, but because they are trying to find cheaper locations to manufacturing. China is becoming more expensive right now and maybe, more importantly, they're going to try to have a more diverse production capability. If you have six plants in China right now and it's where you produce everything, and a bunch of them are shut down because of the COVID restrictions, where you think to build the next plant is probably not going to be in China. And maybe you're going to the Philippines or Vietnam or somewhere else, some other low-cost jurisdiction, not because you want to get close to the consumer because you're probably still not going to get close to the consumer. You may to find a lower-cost jurisdiction to produce in and maybe, even more importantly, you want to find a more diverse location to produce in so that if there's a problem in one part of the world or in one country, you're not stuck with your entire production getting shut down. I think that's maybe something that people would put focus on more and I think some that's a little closer to reality of what we see in our customer base.

Speaker 4: Of where it's made, you're going to still have to shipping over the world just from a different location. Certainly, stuff made closer to you know an ultimate- you know customer is that the shipping changes for it's more truck and there's less ocean and air. But most products are made that way: they're made somewhere and then they're Shi all over the world. What I do see having more and more- and it's probably going to happen with a lot more of the world's you know- products is that they're going to be produced in different locations around the world and not because theyre trying to get any closer to the customers, both because they are trying to find cheaper locations around to manufacture any. China is become more expensive right now and maybe, more importantly, they're going to have a trying to have a more diverse production capability. I think if you have six PL in China right now and it's where you're produce everything and a bunch of them are shut down because the covert restrictionswhere you think the ability next PL proly notgoing be in China.

Speaker 7: They're going to be produced in different locations around the world, and not because they're trying to any close to the customers, But because they are trying to find cheaper locations to manufacture. Any of China is becoming more expensive right now and maybe, more importantly, they're going to of try to have a more diverse production capability. If you have six plants in China right now and it's where you're produce everything, and a bunch of them are shut down because the cot restrictions.

Speaker 7: Where you think the buildility next plant's probably not going to be in chaina and, you know, maybe you're going to the Philippines of Vietnam or somewhere else, some other roworldbcoust jurisdiction, not because uh, you know, you want to get close to the consumer. Because I'm still not going to get close to the consumer. You may to F find a, a lower cost jurisdiction to producing and maybe, even more importantly, you want to find a more diverse location of produc So that if there's a problem in one part of the the world or in one country, you're not stuck with your entire production getting shut down. Not that that's maybe a a.

Speaker 4: And you know, maybe you're going in the Philippines of Vietnam or somewhere else, some other world cost jurisdiction- not because you know you want to get close to the consumer, because per's still not going to get close to the consumer. You may to find a lower cost jurisdiction to produce and maybe, even more importantly, you may to find a more diverse location of produc So that if there's a problem in one part of the world or in one country, you're not stuck with your entire production getting shut down. Not that that's maybe a.

Speaker 7: Maybe something that people would put focus on more and I think some that's a little closer to reality of what we see in our customer base.

Speaker 8: Maybe something that people would put focus on more and I think it's a little closer to reality of what we see in our customer base.

Nick Augustino: Okay, I appreciate that color. I will say that to your comment there, I think we saw today Apple announcing production, I think, out of Vietnam trying to move away a little bit from China. So I think they're already echoing your views, so I appreciate that and I'll pass the line.

Speaker 11: Okay I appreciate that color and I will say that to your comment. There I think we saw today Apple and announcingin production, I think, out of Vietnam to ING to move away a little bit from China. So I think they're already equity your views. So appreciate that and I'll pass line.

Edward J. Ryan: Yeah, my pleasure. In fact, I'll just comment on that because that's the start of this, right? And it used to be in fact if you listen to the past calls when I talk about YoYo's just to pick a silly product example, that's what started in China 20-25 years ago, right? The manufacturing that went there first was the simple stuff and then people started to get more sophisticated in production in China and they started to move more and more sophisticated stuff up to the point where they were manufacturing iPhones there and computer chips and things of that nature. And now with that Apple move you're starting to see they're doing that in Vietnam and they're probably going to start to do it in other jurisdictions as well, and as China becomes more expensive and they try to diversify their production capabilities. I'm sorry, I just wanted to add to that. Operator, I can take the next question.

Speaker 4: Yeah my PLE in fact going to just comment on that because you know you that's the start of this right and it used to be infact be listen to past calls and I I talk about YoYo just to pick it just to pick a the silly product example. That's what started in China you know two 20 20 five years ago. Right you started the manufacturing that that went there first was the simple stuff and then people started to to get more sophisticated in in production in cha and they started to move more and more sophisicated stuff over there to the point where they were manufacturing. I phones there and computer chips and things of that nature and now you're you know that Apple movie ING to see you know theyre doing that in Vietnam and and probably going to start to do another jurisdictions as well as China becomes more expensive and they try to diversify their production capabilities. They just added to that operator I can take the next question OK from the candaccourt from caccourt uity. We have rever Y Please go ahead. I get T mean I was coping that a little bit about the the China shutdowns and there you know a couple penglones and sh and Shanghai kind of across the the two quarters and then.

Speaker 7: That's what started in China, you know, 2025 years ago. Right, you started the manufacturing that that went there. First was the simple stuff and then people started to to get more sophisticated in in production in China and they started to move more and more sohisticated stuff up to the point where they were manufacturing iPhones there and computer chips and things of that nature. And now you'-re you know that Apple movie startstarted to see. You know they're doing Vietnam and and probably going to start to do another jurisdictions as well, as China becomes more expensive and they try to diversify their production capabilities.

Speaker 7: I'm sorry, I just wanted to add to that. Operator, I can take the next question.

Operator: Thank you. From [inaudible] Court Annuity, we have Robert Young. Please go ahead.

Robert Young: Hi, good evening. I was hoping to ask a little bit about the China shutdowns and their couple of big ones in Shanghai, kind of across the two quarters. I'm sure you're considering part of it in the calibration, but I was wondering if you could maybe summarize the positive and negative of puts and takes around that type of an event, I'm sure there are a lot of companies, your customers are looking at alternate strategies, but then there's volume impact. I'm just trying to get a sense of as that progresses how does it impact you.

Speaker 27: Across the two quarters and then.

Speaker 28: I'm sure you're considering part of it in in the calibration, but I was wonderingif.

Speaker 28: Is maybe summarize the positive and negative of puts and takes around that type of a of an event. I'm sure there's a lot of companies, your customers, are looking at alternate strategies. But then there's volume, imp and I'm just trying to get a Sen of you know as that progressive how impact you.

Speaker 12: I'm sure you're considering part of it in the calibration. But I was wondering. Maybe summare the positive and negative of puts. Some takes around that type of a of an event. I'm sure there's a lot of companies. Your customers are looking at ultern strategies but thentheres volume impact. I'm just trying to get a sense of you know as that progressive howous impact to I think an impacted our customers because they some of the products that they wanted to produce you. Know got shut down in China you notice in the paper and then last there too's they're opening back up right now. So think you other they're still going to a zero curve approach but they're opening open things back up and if think you'regoing to start to see in the coming days and weeks as clients start to open back up. We did not see in our network. You can see the results that we just turn down their excellent as as as we could have hoped for and I think you know we didn't see the impact of China having some problems and some shutdown one because it didn't go on for that long and to you know even more importantly.

Edward J. Ryan: I think it impacted our customers because some of the products that they wanted to produce got shut down in China. If you noticed in the paper in the last day or two's they are opening back up right now. So I think they're still going to a zero COVID approach but they're opening things back up and I think you're going to start to see in the coming days and weeks those plants start to open back up. We did not see it on our network. You can see the results that we just turned in, excellent, as good as we could have hoped for and I think we didn't see the impact of China having some problems and some shutdowns, one because it didn't go on for that long and two, maybe even more importantly, there was such a backlog coming into it that the carriers--remember we get paid by the shipment for stuff carriers carry and they were already full. So what it did was probably helped buy down some of that backlog that we had out there for months. But I think you're going to see it go right back up right now. That's what I think. The backlogs will increase if what I'm reading in the newspaper is true. We're trying to open it up, and there's still a backlog right now and with those plants opening back soon, there are a lot more orders going into to fulfill shipments that didn't get ordered three, four, or five weeks ago because the plants were shutdown. So it's going to be an interesting dynamic. I don't know exactly what's going to happen, but you just heard my guess and we'll just have to see.

Speaker 4: and two, maybe even more importantly, there was such a backlog coming into it that the carriers--remember we get paid by the shipment for stuff carriers carry and they were already full. So what it did was probably helped buy down some of that backlog that we had out there for months. But I think you're going to see it go right back up right now. That's what I think. The backlogs will increase if what I'm reading in the newspaper is true. We're trying to open it up, and there's still a backlog right now and with those plants opening back soon, there are a lot more orders going into to fulfill shipments that didn't get ordered three, four, or five weeks ago because the plants were shutdown. So it's going to be an interesting dynamic. I don't know exactly what's going to happen, but you just heard my guess and we'll just have to see.

Speaker 8: There was such a backlog coming into it that you know the carriers can remember we could paid by the shipment for stuff carriers, ff carry and they were already full. So you know what it did was probably helpped buy down some of that backlog that we had out there for months. But I think you're going to see their right back up right now and that's I there's going to be the backlogs will increase if what I'm going do the newspapers true, we trying to open up- and you know that there's still a backlog right and those plans opening back up going a more orders going to fulfill shipments that didn't get ordered 3, four or five weeks ago because the plans were shut down to mention dynam. I don't know exactly what's going to happen, but you heard my Gus and set to same.

Robert Young: Okay, that's really helpful. And then, just maybe a quick summary of what you're seeing out there in the pricing environment with your logistics customers that you've seen in the past. I mean they're doing really well, the pricing environment is very strong for them. Are they still enjoying that environment or is that changing? And then I'll pass it on.

Speaker 28: Just maybe I'm a quick summary of what you're seeing out there in the pricing environment with.

Speaker 12: Okay that's really helpful. And then that just maybe I M a quick summary of what you're seeing out there in the pricing environment with your logistics customers. If you said in the past that I mean they're doing really well the pricing environment, very strong for them, are you still? You know they still enjoying that environment is a changing mean that ll passful, I think so. I mean, the days you'were here and now was like November , December last year. You're hearing a 4, for I think it's come down from there.

Speaker 28: Your logistics customers that you'vesent in the past. That I mean they're doing really well. The pricing environment very strong for them. Are you still? They still enjoying that environment is a changing and I'll pass, I think so. I mean, the days you were here and now was like November , December last year. You're hearing a four times OCE for it. I think it's come down from there.

Edward J. Ryan: I think so. I mean, the days you were hearing like November, December last year, you're hearing of four times ocean rates, I think it's come down from there but it's still elevated for sure in all modes, certainly air and truck. We don't charge based on their prices, so it doesn't matter to us so much. It's helpful for us when they run healthy and profitable businesses and I think they continue to do that right now. They're all having a pretty good time of it at the moment because there's only so much capacity and it lets them raise their prices up and when they're in a good position that usually is helpful to us.

Speaker 8: But it's still elevated for sure in all modes, certainly errorish and truck. We don't charge based on their prices, So doesn't matter to us so much. It's helpful for us when they run not healthy and profitable businesses and I think they continue to do that right now. They're all having a pretty good time of it at the moment because there's only so much capacity and that lets them raise their prices up and when they're in a good position, that usually is helpful to us. More technology budget.

Robert Young: Right, a more technology budget.

Edward J. Ryan: I think so. I think when people get more money in their pockets they go, "What should I do with that?" And it's one of the things you can hear us talking about it our business. One the things you do with that is say, "Let me invest it to make this a better business in the long run." And one of the main places people make investments is in technology. And there's not a supply chain in world right now that's not able to walk into a CEO and say, "I want to spend more money to improve our supply chain. That question used to be answered with: "Get out of my office." And here we are five years later and it's, "Sure, whatever you want to spend." It's a huge problem and we need to do something about it. And so that really helps guys like us that sell technology which is one of the most cost-effective ways to make an investment in your supply chain.

Speaker 4: I think so. I think what people will people get more money in their pockets. They go what should I do with that and make you know one of the things you can hear us talking about better business? Know one the things you do with that and say: letme invest it to make this a better business in the long run. And one of the main places people make investments is in technology. Know theres there not a of PP chain in world right now? That' that's, it's not able to walk into a CE o and say I want to spend more money to improve our supply chain. You know that question used to. You know know was answered with: get out of my office and know here we are five years later and it's, it's sureort, whatever you want to spend it'it's, you know it's it's, it's a huge problem when we need to do somethingu about in, and so you, you know that really helps guys like us that that sell technology then, which you see is one of the most cost effective ways to make an investment in your supply chain. All right well, thanks. Taking the questions.

Robert Young: Alright well, thanks for taking the questions.

Edward J. Ryan: Great, thank you, Robert.

Operator: We have no further questions at this time.

Speaker 13: Great Thank you Robert, and we have to no further questions at this time. Great thanks, operator. Thanks everyone. We look forward to reporting back to you on Q2 and September and otherwise have a great night.

Edward J. Ryan: Great. Thanks operator, thanks everyone. We look forward to reporting back to you on Q2 in September and otherwise, have a great night.

Operator: Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.

Speaker 9: Thank you, Ladies and gentlemen. This concludes today's conference. Thank you for joining. You may now disconnect.

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