Q4 2023 Descartes Systems Group Inc Earnings Call

Speaker 1: and on the uncertainty on our business and financial condition. They cart the operating performance, financial results and condition. They cart gross and operating margins and any variation in those margins.

Speaker 1: cash flow and use of cash, business outlook, baseline revenues, baseline operating expenses, and baseline calibration.

Speaker 1: To.

Speaker 1: anticipated and potential revenue losses and gains.

Speaker 1: and anticipated recognition and the expense of specific revenues and expenses, potential acquisitions and acquisition strategy, cost reduction and integration initiatives and other matters that they constitute for the looking statements. These four looking statements involve known and unknown risks and certain assumptions and other factors that make how the actual results performance or achievements of day cards are different materially from the anticipated results performance or achievements implied by the first floor of the looking statements.

Speaker 1: These factors are outlined in the press release and section entitled certain factors that affects future results in documents filed and furnished with the SEC, the OXE, and other securities commissions across Canada, including our management's discussion and analysis filed today.

Speaker 2: Good afternoon, Ladies and gentlemen, and welcome to the day C system group quarterly assaultts conference call. At this time, all lines are in listen only mode. Following the presentation, the will conduct question and answer session. If, at any time during this call, you require imimaged assistance, please press start zero for the operator. This call is being recorded on Wednesday, March one 2020, three.

Speaker 1: We provide for looking at statements solely for the purpose of providing information about management's current expectations and plans relating to the future. Your caution that such information may not be appropriate for other purposes. We don't undertake or accept any obligation or undertaking to release publicly in the updates or opinions to any political statements or reflections.

Speaker 3: I would now like to turn the clarferen over to Scot bgon. Please go ahead. Thanks and good afternoon. Everyone joining me remotely on the call today and Ryan CEO and allinbret CEO , and I trust that everyone has received a copy of our financial results press release that is issued earlier today.

Speaker 2: and year with record financial results. We've also made some significant investments in business. We're excited to go over those with you and give you some perspective about the business environment we see right now. But first, let me give you a roadmap for this call.

Speaker 3: Portions of today's call. Other historical performance include statements of forward-looking information within the meaning of apchepical securities laws.

Speaker 3: These statements are made under the safe harbor provisions of those lawsthese forward-looking statements include statements related to our assessment of the current and future impact of geopolitical and economic uncertainty on our business and financial condition. dcards, operating performance, financial results and condition D ARD's gross and operating margins and any variation in those margins.

Speaker 2: I'll start with highlighting some aspects of our financial results, how our business performed in the last quarter and some investments we've made. I'll then hand the call over to Alan who will go over to Q4 and annual financial results in word of tail. I'll then come back and provide an update on the current business environment and how our business is calibrated.

Speaker 2: and we'll then open it up to the operator to coordinate the Q&A portion of the call. So let's get started by looking at our year. Team metrics we monitor include revenues, profits, cash flow from operations, and return on investment.

Speaker 3: Cash flow and use of cash. Business outlook, baseline revenues, baseline operating expenses and baseline calibration anticipated in potential revenue losses and gains.

Speaker 3: anticipated recognition and expensing of specific revenues and expenses, potential acquisitions and acquisition strategy, cost reduction and integration initiatives and other matters that may constitute poor looking statements.

Speaker 2: For this past year, we had record performance in each of those areas. Total revenues were up 14% in the year with services revenues up 15%.

Speaker 2: Income and earnings per share were both up 18%, while adjusted EBITDA was up 16%.

Speaker 3: These forward-looking statements involve known and unknown risks uncertainties, assumptions and other factors that be cause the actual results, performance or achievements of dakard to differ materially from the anticipated results, performance or achievements implied by such forward-looking statements.

Speaker 2: We generated almost $200 million in cash from operations representing 89% of adjusted EBITDA. 92% if you exclude the acquisition or not payments you made during the year that went through cash from operations. A good headwind to have considering how well the acquisitions performed and contributed to our businesses. And the year ended strongly for us as well. We had record Q4 quarterly revenues with services revenues up 14%.

Speaker 3: These factors are outlined in the press release and section entitled certain factors that mayay EF execfuture results in documents filed and furnished with the SEC, OC and other securities commissions across Canada, including our management's discussion and analysis filed today.

Speaker 2: We had record profits of almost $30 million in net income and $55 million of adjusted EBITDA. We generated more than $50 million in cash from operations representing 91% of our adjusted EBITDA. And we used that cash flow and our balance sheet to make further investments in our business. So a very strong financial quarter and year for us. These results happened in a very challenging foreign exchange environment. Our annual revenues would have been $14 million higher if we'd used last year's FX rates.

Speaker 3: We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future.

Speaker 3: You are, caution that such information may not be appropriate for other purposes. We don't undertake, or except in the obligation or undertaking, to release publicly any updates or revens to any forward-looking statements to reflect any change in our expectations or change events condition, assumptions or circumstances one any such statement is based except as required by law, and with that let'me turn the call over tohead.

Speaker 2: and our quarterly revenues would have been $3 million tire. While we're fairly naturally heads, we still face some foreign exchange headwinds to adjust the EBITDA. Allen will go into this in more detail later. However, strong results that might have been even stronger in a different foreign exchange environment. At the end of the year, we had $276 million in cash and would get freight with an under-owned $350 million line of credit that we just extended the term on. We used some of that cash after the year to buy ground cloud, which I'll discuss in a few minutes. However, we remain well-capitalized, cash-generating, debt-free, and ready to continue to invest in our business.

Speaker 3: A great thanks Scot, and welcome everyone to the call. We had an excellent fourth quarter and year with record financial results. We've also made some significant investments in business. We're excited to go over those with you and give you some perspective about the business environment. We see you right now. At first, let me give you a roadmap for this call.

Speaker 3: I'll start with highlighting some aspects of our financial results: how our business performed in the last quarter and some investments we've made. I'll then hand the call over to Allan, who will go over to Q4 and annual financial results in more detail. I'll then come back and provide an update on the current business environment 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 2: We believe a company like ours is well positioned to continue to thrive in market conditions like these. There are some areas in our business that were very strong in fourth quarter. Our data content businesses continue to have high demand, particularly in the night party screening, as companies continue to deal with complying with the myriad of new sanctions that have come out relating to the conflict in the Ukraine.

Speaker 3: Let's get started by looking at our year. Key metrics we monitor include revenues to profits to cash flow from operations and return on investment.

Speaker 3: For this past year. We had record performance in each of those areas. Total revenues were up 14% in the year, with services revenues up 15%.

Speaker 2: Our transportation management businesses sell strong growth with demand for macro points real-time visibility, commitments across all modes, leading the way. And we saw a good seasonal bump in e-commerce volumes to end the year. Transportation volumes were otherwise as we would expect in our business to end the year given seasonality. The cart was able to deliver superior financial performance last year while continuing to invest in our business. We continued our approach of making both organic and acquisition investments.

Speaker 4: Net income and earnings per share were both up 18%, while adjusted EBITDA was up 16%.

Speaker 4: We generated almost $200 million in cash from operations, representing 89% of adjusted EBITDA, 92% if you exclude the acquisition or not payments we made during the year that went through cash from operations.

Speaker 4: A good headwind to having to have considering how well the acquisitions performed and contributed to our businesses.

Speaker 2: On the organic side, the improvement we saw this past fiscal year in organic growth was helped by the customer-facing investments we made in our business in the year and in the prior fiscal years. We expanded our sales and marketing groups. We created a pillar focused on internal management oversight structure. We established and expanded a customer success group designed to improve the customer experience and identify additional ways our customers can get value from using our solutions.

Speaker 4: And the year ended strongly for us as well. We had record Q4 quarterly revenues with services revenues up 14%. We had record profits of almost $30 million in net income and $55 million of adjusted EBITDA.

Speaker 4: We generated more than $5 million in cash from operations, representing 91% of our adjusted EBITDA, and we use that cash flow and our balance sheet to make further investments in our business. So a very strong financial quarter and year for us.

Speaker 2: and consequently improve our revenue and customer retention. These investments were made while balancing achieving our immediate financial targets and positioning the company even better for the future. This fiscal year was no exception to that organic investment. We organically added more than 150 people to our business this year. Many of those roles were designed to help us with future organic growth, the sales, customer success, and development continue to be a focus area for hires. We believe we've built a resilient business that our customers can rely on for their needs today and tomorrow.

Speaker 4: These results happened in a very challenging foreign exchange environment. Our annual revenues would have been $14 million higher if we use last year's FX rates, and our quarterly revenues would have been $3 million higher.

Speaker 4: While the fairly naturally heads, we still face some foreign exchange headwinds to adjusted EBITDA. Alan will go into this in more detail later. However strong results that might have been even stronger in a different foreign exchange environment.

Speaker 4: At the end of the year we had $276 million in cash and would Deb free with an undrawn $35 million line of credit that we just extended, the tmmot.

Speaker 2: And that's a key reason we continue to invest for not just the business we have today, but the business we'll have in the near future. We take that same customer-centric approach to considering acquisition investments in our business. Last fiscal year, we brought four new businesses into Descartes, with our customers continuing to see e-commerce as a growth and focus area.

Speaker 4: We use some of that cash after the year to buy ground cloud, which I'll discuss in a few minutes. However, we remain well capitalized cash-generating, debt-free and ready to continue to invest in our business.

Speaker 4: We believe a company like ours is well positioned to continue to thrive in market market conditions like these. We are some areas in our business that were very strong in fourth quarter. Our data content. Businesses continue to have high demand.

Speaker 2: We combine with Metthi HB in February 2022 to strengthen our e-commerce customs filing capabilities. As our customers express interest and enhanced routing and scheduling solutions that leveraged artificial intelligence and machine learning, we combine with FOXTRAP in April . With our customers moving more and more small parcel goods, particularly in e-commerce.

Speaker 4: Particularly in dennine-party screening, as companies continue to deal with complying with the myriad of new sanctions that have come out relating to the conflict in the Ukraine.

Speaker 4: Our transportation management businesses sell strong growth with demand for macro points, and we have a real-time visibility to shipments across all modes leading the way.

Speaker 2: We teamed up with XPS in June of 2022. Our last deal of the fiscal year was in January when we combined with supply vision. Our logistics service provider customers are in the midst of a big push to digitize their operations, both internal and customer facing.

Speaker 4: When we saw a good seasonal bump in e-commerce volumes to end the year, transportation volumes were otherwise as we would expect in our business to end the year, given seasonality. The cart was able to deliver superior financial performance last year. While continuing to invest in our business, we continued our approach of making both organic and acquisition investments.

Speaker 2: We've made several historical investments to help them out, including containers, portraits and quest-a-web. With supply vision, we're adding to that arsenal of tools to help logistics service providers better manage the lifecycle of shipments for their customers. It's a comprehensive digital system that helps them quote, route, and book shipments through to final delivery.

Speaker 4: On the organic side, the improvement we saw this past fiscal year in organic growth was helped by the customer-facing investments we made in our business in the year and in the prior fiscal yearswe expanded our sales and marketing groups. We created a pillar focused on internal management oversight structure.

Speaker 2: And when combined with our real-time shipment visibility solutions like MacroPoint, it provides comprehensive end-to-end solution for them. We can also link supply vision into the Global Logistics Network, giving supply vision customers broad access to a community of training partners and services that can enhance their own business.

Speaker 4: We established and expanded a customer success group designed to improve the customer experience and identify additional ways our customers can get value from using our solutions and consequently improve our revenue and customer retention.

Speaker 2: While there was less than a month of supply vision in our Q-POL results, we're thrilled with the early returns and excited to have the supply vision team on board. Welcome to them all. Following the end of the fiscal year, we ended up closing one of the larger acquisitions we've done. Like the previous acquisitions I've described, this one was very much guided by customer demand and input. We're thrilled with the early returns and excited to have the early returns and input.

Speaker 4: These investments were made while balancing achieving our immediate financial targets and posing the company even better for the future. This fiscal year was no exception to that organic investment. We organically added more than 150 people to our business this year. Many of those roles were designed to help us with future organic growth. The sales, customer success and development continuue to be a focus area for hires.

Speaker 2: Starting from even before the pandemic, Final Mile delivery to homes and businesses has become a critical part of the logistics cycle. There are tens of thousands of independent Final Mile delivery specialists and carriers in North America alone. Before you even consider all the private fleets also making these deliveries. With the increased delivery volumes, our customers have been eager for more help to make these delivery operations more efficient, reliable, and safe. Grand Cloud is the perfect fit for this market. It provides a robust solution that helps independent Final Mile delivery companies manage their operations with particular specialization for service providers who are performing the bulk of their deliveries for large transportation brands.

Speaker 4: We believe we built a resilient business that our customers can rely on for their needs today and toammorrow, and that's a key reason we continue to invest for not just a business we have today but the business will have in the near future.

Speaker 4: We takes that same custommer-centic approach to considering acquisition investments in our business. Last fiscal year we brought four new businesses into dickcarart. With our customers continuing to see e-commerce as a growth and focus area, we combined with netcb in February 2022 to strengthen our e-commerce customms filing capabilities.

Speaker 4: As our customers expressed interest in enhanced routing and scheduling solutions that leveraged artificial intelligence and machine learning, we combined with Foxtrot in April . And with our customers moving more and more small partial goods, particularly in e-commerce, we teamed up with XPS in June of 2022.

Speaker 2: such as FedEx, Amazon, or Frontdoor Collective. The platform lets them receive delivery orders, plan, and execute the routes, train and monitor driver performance, manage their assets and resources, and analyze their operating efficiency. Groundcloud has also integrated to video-telematic solutions to provide driving, event, detection, and verification, combining with reactive coaching solutions to improve driver safety. It's a great solution for the market and an excellent complement to our investment and ship track for the carrier market. Groundcloud is a well-run and profitable business with lots of room for future growth.

Speaker 4: Our last deal of the fiscal year was in January , when we combined with supply vision. Our logistic service provider customers are in the midst of a big push to digitize their operations, both internal and customer facingwe've made several historical investments to help them out, including containers portraits in questestoweb. With supply vision, we're adding to that arsenal of tools to help logistics service providers better manage the life cycle of shipments for their customers.

Speaker 4: It's a comprehensive digital system that helps them quote, route, and book shipments through to final delivery. And when combined with our real-time shipment visibility solutions like MacroPoint, it provides comprehensive end-to-end solution for them. We can also link SupplyVision into the global logistics network.

Speaker 4: Giving supply vision, customers brought access to a community of trading partners and services that can enhance their own business. While there was less than a month of supply vision in our Q4 results, we're thrilled with the early returns and excited to have the supply vision team on board. Welcome to them all. Finally, the end of the fiscal year. We ended up closing one of the.

Speaker 2: resulting insurance impact. We believe that ground cloud safety and driver training solutions can be very helpful to our private fleet clients in having safer businesses and a meaningful impact on their communities. We're very excited to have ground cloud as part of Descartes. Welcome to the whole team. We look forward to being able to report back on what we've been able to accomplish together in the near future.

Speaker 4: lar acquisitions we've done and, like the previous acquisitions I've described, this one was very much guided by customer demand and input, starting from even before the pandemic. Final mile delivery to homes and businesses has become a critical part of the logistics cycle. There are tens of thousands of independent final mile delivery specialists and carriers in North America alone.

Speaker 2: With that, let me just summarize with a hand over to Alan to give the full financial details on the year and quarter. We had record financial results. The business performed well. We believe that's a good reflection of the value that our customers continue to get from our solutions and the hard work that our team continues to put in for our customers.

Speaker 4: before you even consider all the private fleets also making these deliveries. With the increased delivery volumes, our customers have been eager for more help to make these delivery operations more efficient, reliable, and safe.

Speaker 2: Even with broader economic challenges last year, including big foreign exchange headwinds, we were able to achieve our targets. And we did it while continuing to invest in our business to drive our longer term growth. We continued to make internal investments in customer facing roles to drive future organic growth. We also invested in four acquisitions to address areas where our customers continue to see growth. We ended the year in a great financial shape with a large customer roster and a high percentage of recurring revenues.

Speaker 4: grantcloud is the perfect fit for this market. It provides a robust solution that helps independent final mile delivery companies manage their operations, with particular specialization for service providers who are performing the bulk of their deliveries for large transportation brands such as FedEx and azon, or front door collective.

Speaker 4: The platform lets them receive delivery orders, plan and execute the routes, train and monitor driver performance, manage their assets and resources, and analyze their operating efficiency.

Speaker 2: We ended the year with $276 million in cash, $350 million in available credit, and a market opportunity where we can continue to grow the business for our customers both organically and through acquisition. And following the year, we used some of that cash to complete one of the largest acquisitions to date. We remained focused on profitable growth so that we can continue to ensure that our customers have a secure, stable, and growing technology partner that can help them with their challenges well into the future. My thanks to all the part team members for everything they've done to contribute to a great year.

Speaker 4: GrandPod is also integrated to video telematics solutions to provide driving, event detection, and verification, combining with reactive coaching solutions to improve driver safety. It's a great solution for the market and an excellent complement to our investment and shift track for the carrier market.

Speaker 4: Grand cloud. Grand cloud is a well-run and profitable business with lot of room for future growth with independent last mile delivery companies.

Speaker 4: What really distinguishes groundcloud is its specialization and attention to driver safety. They've done an excellent job of creating and providing easily digestible driver training video content to deliverable to drivers's mobile devices. We've seen increased attention to driver and worker safety through our broader customer base, particularly in private fleet. This is often driven by environmental, social and governance views of having safer roads for our community.

Speaker 1: and continuing to have our business in an end-bable position for future success. I'm not turning the caller over to Alan DeGroot, who are annual and chief for financial results in more detail. Okay, thanks, Ed. As indicated, I'm going to walk you through our financial highlights for our fourth quarter and year-end at January 31st. We are pleased to report record quarterly revenues of 125.1 million this quarter and increase of 11 percent from revenues of 112.4 million can queue for of last year. This revenue with growth was achieved despite.

Speaker 1: the continued headwind from FX resulting from a strong US dollar. On an FX neutral basis, our revenue growth would have been over 3 million higher in Q4, meaning that our revenue growth year over year would have been over 14% for Q4. Our revenue mix in the quarter continued to be very strong with services revenue increasing 14% to 113.4 million up from 99.5 million in the fourth quarter last year. With services revenue increasing to 91% of total revenue this quarter up from 89% of total revenue in Q4 last year.

Speaker 4: Welcome to the whole team. We look forward to being able to report back on what we've been able to accomplish together in the near future. With that, let me just summarize with a hand over to Alan to give the full financial details on the year and quarter. We had record financial results. The business performed well. We believe that's a good reflection of the value that our customers continue to get from our solutions and the hard work that our team continues to put in for our customers.

Speaker 4: Even with broader economic challenges last year, including big foreign exchange headwinds, we were able to achieve our targets. And we did it while continuing to invest in our business to drive our longer term growth. We continue to make internal investments in customer facing roles to drive future organic growth. We also invest in four acquisitions to address areas where our customers continue to see growth.

Speaker 1: Removing the impact of both the recent acquisitions as well as the negative impacts from F-FACs that we have mentioned. On a like for like basis, we would estimate that our growth in services revenue from new and existing customers would have been approximately 9.5% at quarter when compared to the same quarter last year.

Speaker 4: The ended of the year in a great financial shape with a large customer roster and a high percentage of recurring revenues.

Speaker 1: Professional services and other revenue, including hardware revenue, came in at 10.0 million or 8% of revenue, down slightly from 11.7 million or 10% of revenue, as a result of lower hardware revenue, as well as a decrease in professional service as more of our solution sales require less implementation or configuration work.

Speaker 4: We ended the year with $276 million in cash, $35 million in available credit and a market opportunity where we can continue to grow the business for our customers, both organically and through acquisition.

Speaker 4: And following the year we used on a B cast to complete one of the largest acquisitions to date. We remain focused on profitable growth so that we can continue to ensure that our customers have a secure, stable and growing technology partner that can help them with their challenges well into the future.

Speaker 1: which is certainly consistent with our long-term plans. In addition, license revenue came in at 1.7 million compared to 1.2 million last year in the fourth quarter consistent at just 1% of revenue. For the year, revenue was a record 486.0 million, up 14.4% from revenue, 424.7 million in the previous year.

Speaker 4: Now thanks to all big part team members for everything they've done to contribute to a great year and continuing to have our business in an enviable position for future success. 'll now turn the call over to Alan to go through our annual and Q4 financial results in more detail. taalei okay thanks, Ed.

Speaker 1: Again, the foreign exchange headwinds on revenue were significant all of last year, with a negative impact on revenue of 14 million from FX. As a result, revenue growth was closer to 18% on a currency neutral basis.

Speaker 3: As indicated, I'm going to walk you through our financial highlights for our fourth quarter and year ended January thirty-first. We are pleased to report record quarterly revenues of 125.1 million this quarter, an increase of 11% from revenues of 112.4 million in Q4 of last year.

Speaker 1: For the year, services revenue came in at 435.7 million, up 15% from 378.7 million in Q4 last year. Gross margin increased to 77% of revenues for the fourth quarter and the year up from gross margin of 76% for the fourth quarter and the entire period last year.

Speaker 3: This revenue growth was achieved despite the continued headwind from FX, resulting from a strong US dollar. On an FX neutral basis, our revenue growth would have been over 3M higher in Q4, meaning that our revenue growth year over year would have been over 14% for Q4.

Speaker 1: The slight improvement in gross margin is consistent with the offering leverage that we would expect to achieve as a result of the continued growth in our business.

Speaker 3: Our revenue mix in the quarter continued to be very strong, with services revenue increasing 14% to 113.4 million, up from 99.5 million in our fourth quarter last year, with services revenue increasing to 91% of total revenue this quarter, up from 89% of total revenue in Q4 last year.

Speaker 1: Operating expenses in the fourth quarter and the year and the January 31st increased primarily related to the impact of recent acquisitions, but also as a result of additional investments that we've made in our business over the past year. Primarily as Ed said in the areas of marketing, sales, product development, and network security.

Speaker 1: Ajusted EBITDA came in as a record 55.4 million in the fourth quarter, up 11% from a justed EBITDA of 50.1 million in the fourth quarter last year. And while we continue to be fairly naturally hedged to foreign exchange rates, our justed EBITDA would have also been higher if it were not for the negative impact from FX this quarter.

Speaker 3: Removing the impact of both the recent acquisitions as well as the negative impacts from FX that we have mentioned. On a like-for-like basis, we would estimate that our growth in services revenue from new and existing customers would have been approximately 10% in the quarter when compared to the same quarter last year.

Speaker 3: Professional services and other revenue, including hardware revenue, came in at one million or 8% of revenue, down slightly from 11.7 million or 10% of revenue as a result of lower hardware revenue, as well as a decrease in professional service, as more of our solution sales require less implementation or configuration work, which is certainly consistent with our long-term plans.

Speaker 1: Simply put, the euro in British pound will weaker to the US dollar than the Canadian dollar in this period, resulting in this loss on the Adjusted EBITDA line. Looking at the annual results, as a result of the revenue growth and gross margin expansion from continued leverage that we described earlier, we continue to see strong Adjusted EBITDA growth to a record 215.2 million or 44.3% of revenue for the year.

Speaker 3: In addition, license revenue came in at one point seven million, compared to one point two million last year in the fourth quarter, consistent at just 1% of revenue.

Speaker 1: up 15.9% from 185.7 million or 43.7% of revenue last year. We should note that for the 50-year in a row, as a percentage of revenue are adjusted EBITDA, continue to increase as we benefit from the offering margin as the offering leverage as we grow the business.

Speaker 3: For the year. Revenue was a record 486 million, up 14% from revenue to 424.7 million in the previous year.

Speaker 3: Again the foreign exchange headwinds on revenue were significant all of last year, with a negative impact on revenue of 14 million from FX.

Speaker 1: With these solid operating results, cashflow generated from operations came in at 50.6 million or 91% of adjusted EBITDA in the fourth quarter this year, up 11% from offering cashflow at 45.

Speaker 3: As a result, revenue growth was closer to 18% on a currency neutral basisfor the year. Services revenue came in at 435.7 million, up 15% from 378.7 million in Q4 last yeargross margin increased to 77% of revenue for the fourth.

Speaker 1: 0.5 million or 91% of adjusted EBITDA in Q4 last year.

Speaker 1: For the year, cash flow from operations was 192.4 million or 98% of adjusted EBITDA, up from 176.1 million or 95% of adjusted EBITDA last year.

Speaker 1: In addition, we should note that a result of a stronger than expected results on past acquisitions of both ship track and containers, we ended up paying an additional 5.6 million in urnodes compared to our original estimates were made at the time of those acquisitions. And as a result, those additional cash payments went through our cash flow from operations this year.

Speaker 3: Operating expenses in the 4th quarter and the year end of January 31st increased primarily related to the impact of recent acquisitions, but also as a result of additional investments that we've made in our business over the past year. Primarily, as I said, in the areas of marketing sales, product development and network security. Adjusted even came in as a record 55.

Speaker 1: Excluding the impact of those additional or no payments, cash flow from operations would have been approximately 92% of a justative adopt for the year.

Speaker 1: Going forward, we expect to continue to see strong operating cash flow conversion in the range of 85 to 90% of our just-a-divida for the years ahead. Of course, subject to unusual events and quarterly fluctuations. From a gap earnings perspective, net income for the fourth quarter came in at 29.8 million, up 55% from net income of 19.2 million in the fourth quarter last year.

Speaker 3: Put the euro in British pound were weaker to the U's dollar that the Canadian dollar in this in this period, resulting in this loss on the adjusted EBITDA line.

Speaker 3: Looking at the annual results as a result of the revenue growth and gross margin expansion from continued leverage. That we described earlier, we continue to see strong adjusted EBITDA growth to a record. 215.2 million or 44.3% of revenue for the year.

Speaker 1: For the year, net income was 102.2 million, or $1.18 per diluted common share, up 18.4 percent, from 86.3 million, or $1 per diluted common share last year. Overall, as Ed mentioned earlier, we're certainly pleased with our operating results for this call 2023. As our—

Speaker 3: Up 16% from 185.7 million or 44% of revenue last year. We should note that for the 50 year in a row has a percentage of revenue. Our adjusted EBITDA continue to increase as we benefit from the offperating margin as left or the offerating leverage. As we grow the.

Speaker 1: Our cash balances totaled 276.4 million at the end of January , and we did not have any borrowings under our credit facility at the end of the year.

Speaker 3: Or 91% of adjusted EBITDA. In Q4 last yearfor the year, cash flow from operations was one hundred ninety two point four million, or 98% of adjusted EBITDA.

Speaker 1: we still have approximately 138 million in cash balances, as well as 350 million available to us to draw under our credit facility for future acquisitions.

Speaker 3: Up from 107: 76.1 million, or 95% of adjusted EBITDA last year.

Speaker 3: In addition, we should note that, a result of the stronger than-expected results on path, the past acquisitions of both ship track and containers, we ended up paying in additional five point six million in earningouts compared to our original estimates were made at the time of those acquisitions and, as a result of additional cash payments, went through our cash flow from operations. This yearexcluding the impact of those additional earno payments, cash flow from operations would have been approximately 92 percentand.

Speaker 1: So clearly we continue to be well capitalized to allow us to consider all acquisition opportunities in our market consistent with our business plan. As we look to the current year, our physical 2024, we should note the following. After incurring approximately 6.1 million in additional capital additions, in a capital additions that passed.

Speaker 3: Adjusted EBITDA for the yeargoing forward. We expect to continue to see strong operating cash flow conversion in the range of 85 percentto 90% of our adjusted EBITDA for the years ahead, of course, subject to unusual events and quarterly fluctuationsfrom a GAAP earnings perspective, net income for the fourth quarter came in at twenty nine point.

Speaker 1: Foreign exchange rate changes in a future of acquisitions.

Speaker 1: Our income tax rate in the fourth quarter came in at approximately 17.5% of free tax income, resulting in a tax rate for the year of approximately 24%. Which is slightly lower than our statutory tax rate, mainly as a result of the reversal of certain un-certain tax positions that we recorded in Q4 of this year.

Speaker 1: Looking at FY24, we would currently expect that our tax rate could be low slightly lower than our statutory tax rate if certain other uncertain tax positions are released.

Speaker 3: 6.3 million or $1 per diluted common share last year.

Speaker 3: Overall, as Ed mentioned earlier, we're certainly pleased with our operating results for fiscal 2023 as our continued revenue growth allowed us to invest in several areas of our business while still allowing us to achieve 15.9% growth and adjusted EBITDA. Expand our adjusted EBITDA margin to 44.3% of revenue.

Speaker 1: As a result, we are expecting the tax rate to be in the range of 22 to 27% of our pre-tax income in our fiscal 2024.

Speaker 1: Although, 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. And finally, we currently expect stock compensation to be approximately 10 to 11 million for physical 2024, subject to any future equity grants, as well as any future portfatures of stock options or share you.

Speaker 3: And achieved growth in our cash flow from operations for the year. If we look at the balance sheet, our cash balances will total 276.4 million at the end of January and we did not have any borrowings under our credit facility at the end of the year.

Speaker 3: As that mentioned subsequent to year-end on February fourteenth we announced we used approximately 138 million of our existing cash balances to complete the ground cloud acquisition which had described in detail a little earlier as a result we still have approximately 138 million cash balances as well as 35 million available to us to draw under our credit facility for future acquisitions So clearly we continue to be well capitalized to allow us to consider all acquisition opportunities in our.

Speaker 2: And with that, I'll turn it back over to Ed to wrap up with our baseline calibration. Hey, thanks Alan. We're already a month into our new fiscal year in quarter. We've already been busy by completing the acquisition at Grand Cloud. We're excited about the upcoming year and our business. However, we remain cautious about the broader economic circumstances that are out there.

Speaker 2: There's high interest rates, higher inflation, a pervasive conflict in the Ukraine that into its second year and the various recessionary pressures and economic discussion. We've seen some companies taking actions to read their business for what may come, so for us we will be cautious in the face of uncertainty. The supply chain in logistics continues to be a critical business function.

Speaker 2: for our customers regardless of the economic circumstances. I wanted to share some areas that our customers are monitoring and to shape the market that we're currently operating in. The first is US Ocean Container imports are at pre-pandemic levels.

Speaker 3: 15 million for fiscal 2024, with this figure being subject to adjustment for foreign exchange rates.

Speaker 3: foreign rate foreign exchange rate changes in any future acquisitions. Our income tax rate in the 4th quarter came in at approximately 17.5% of free tax income. Resulting in a tax rate for the year of approximately 24%.

Speaker 2: Based on public data available through our data mine service, it's clear that there was a pullback in ocean imports over the past six months starting in August . Current volumes are 15 to 20 percent lower than the pandemic highs, but are consistent with the levels we saw in 2019 and 2020. There's less impact from COVID delays in China.

Speaker 3: Which is slightly lower than our statutory tax rate, mainly as a result of the reversal of certain uncertain tax positions that we recorded in Q4 of this year.

Speaker 2: Part of the reason for the pullback in ocean imports was China's approach to zero COVID, with many businesses critical to the international logistics and supply chains, either shuttered or severely understaffed. Recently, China has eased up on that policy, and so our customers anticipate goods may start to flow more freely.

Speaker 3: Now looking at FY' 24, we currently we we currently expect that our tax ratewould could be low, slightly lower than our statutory tax rate.

Speaker 3: If certain other uncertain tax positions are released as a result we are expecting the tax rate will be in the range of 22% to 27% of our pretax income in our fiscal 2020 -four and.

Speaker 2: The next is port transit delays. Port transit delays have improved. As volumes came off a bit, the backlog that had been seen that many ports has begun to work through. We're no longer seeing ocean ports with long lines of ships offshore and containers that are otherwise starting to move through the ground system more efficiently. The next is US ocean imports of shifted to East Coast ports. It's been a recent trend where volumes have shifted to East Coast ports.

Speaker 3: Although as always, we we should add that our tax rate may fluctuate from quarter to-quarter, from onetime tax items that may arise as we operate internationally across multiple countries. And finally, we currently expect stock compensation to be approximately 10 to 11 million for fiscal 2020 -four.

Speaker 3: subject to any future equity grants, as well as any future forfeitures of stock options or share units. And with that, I'll turn it back over to Ed to wrap up with our baseline calibration. Hey, thanks, Alan. We're already a month into our new fiscal year in quarter.

Speaker 2: That's likely in part due to continued labor challenges on the West Coast. There still isn't a contract in place for dock workers and new regulations impacting truck drivers being classified as employees rather than independent contractors in California. Our customers are mindful of this import flow change when making their decisions.

Speaker 4: We've already been busy by completing the acquisition of groundcloud. We're excited about the upcoming year and our business. However, we remain cautious about the broader economic circumstances that are out there.

Speaker 4: There's high interest rates, higher inflation, a pervasive conflict in the Ukraine, that into its second year, and the various recessionary press lease and economic discussion. We've seen some companies taking acions to regular their business for what may come. So for us, we will be cautious in the face of uncertainty.

Speaker 4: Supply chain in logistics continues to be a critical business function for our customers, regardless of the economic circumstances. I wanted to share some areas that our customers are monitoring and that shaped the market that we're currently operating in. The first U's ocean, container imports are at prepandemic levels.

Speaker 2: inventory, and accordingly didn't order or shape as much to replenish inventory.

Speaker 2: Now that we're through the holiday period, we're hearing retailers mindful of the broader economic circumstances, but are cautiously looking to repunish inventories.

Speaker 2: That may have retailer driven shipment volumes increased as the year progresses. Next final mile, the delivery is still key. During the pandemic, e-commerce volumes grew at unprecedented rates. We're still seeing growth in e-commerce, just not as strong as during the pandemic. e-commerce growth has, in part, contributed to a continued focus on the importance of last mile of the delivery.

Speaker 4: Based on public data available through our data line service. It's clear that there was a pullback in ocean imports over the past six months, starting in August .

Speaker 4: Current volumes are 15 to 20 percent lower than the pandemic highs, but are consistent with the levels we saw in 2019 and 2020.

Speaker 4: There's less impact from coa delays in China. Part of the reason for the pullback in ocean imports was China's approach to zero COVID-19, with many businesses critical to the international logistics and supply chains either shuttered or severely St. recently China has eased up on that policy, and so our customers anticipate goods may start to flow more freely.

Speaker 2: broader the days of a home delivery of anything being a novelty. Recently, Tartan announced that it was investing $100 million into its network to improve next-day Panama delivery, and Amazon just announced its enhancing its delivery options. To find a mile is still a big topic for retailers and our recent acquisition investments reflect that feedback.

Speaker 4: The Nexus port transits. delaysptransit delays have improved as volumes came off a bit. The backlog that had been seen at many ports has begun to work through. We're no longer seen ocean ports of long lines of ships offshore and containers that are otherwise starting to move through the ground system more efficiently.

Speaker 2: The next is ESG focus impacts supply chain and logistics. Environmental, social and governance discussions in boardrooms are having a meaningful impact on supply chain and logistics decisions. Our customers are looking for detailed information from the trading partners so they can meet and report on their own ESG goals. Also, our customers need this information to show their compliance with existing pending regulations addressed in such issues as use of forced labor, environmental impact of operations.

Speaker 4: The next is US ocean imports have shifted to East Coast ports. There's been a recent trend where volumes have shifted to East Coast ports. That's likely in part due to continued labor challenges on the West Coast. There still isn't a contract in place with the dock workers and new regulations impacting truck drivers being classified as employees rather than independent contractors in California. Our customers are mindful of this import flow change when making their decisions.

Speaker 2: and trading with restricted parties. We've recently seen several countries roll out additional sanctions on entities and people connected with the Ukraine conflict. So we anticipate compliant and ESD reporting solutions will continue to get in mind share with our customers.

Speaker 4: Ocean freight rates are expected to come down. During the pandemic, ocean rates surged almost $2 thousand a container from pre-pandemic two to $3 thousand levels. The spring period is when many shippers and carriers negotiate their freight rates for the upcoming year. Our customers are expecting that rates will come down and that may be a catalyst for volumes to increase over time.

Speaker 2: So those are some of the things we're hearing from our customers and seeing in our business. Things that also inform our calibration for the quarter. Our business is designed to be predictable and consistent. We believe that stability and reliability are valuable to our customers and employees and our broader stakeholders.

Speaker 2: To deliver this consistency, we continue to operate from the following principles. Our long-term plan is for our business to grow a justity with a 10 to 15 percent 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.

Speaker 4: Next, our customers anticipate that shipment volumes may increase as the year progresses. Prior to this past holiday season, many retailers had excess inventory and accordingly didn't order or ship as much to replace inventory.

Speaker 4: Now they were through the holiday period. We're hearing retailers and mindful of the broader economic circumstances.

Speaker 4: but are cautiously looking to replenish inventories.

Speaker 2: connecting shippers, carriers, logistics service providers, and customs authorities. When we ever perform, we try to reinvest that over performance back into our business. We focus on recurring revenues and establishing relationships with customers for life. And finally, we thrive on operating a predictable business that allows us forward visibility to our revenues and investment paybacks. In our annual report, we've provided a comprehensive description of baseline revenues, baseline calibration, and their limitations. We typically provide calibration as of the first day of the fiscal period.

Speaker 4: That may have retailer-driven shipment volumes increased as the year progresses. Next final mile delivery is still key. During the pandemic, e-commerce volumes grew at unprecedented rates.

Speaker 4: We're still seeing growth in e-commerce, just not as strong as during the pandemic. E-commerce growth has in part contributed to a continued focus on the importance of last mile delivery done the days of a home delivery of anything being analty. Recently, target announced that it was investing $1 million into its network to improve next day upon a mile delivery.

Speaker 2: However, with the ground cloud acquisition happening on February 14th, we've updated calibration to that date and included those aspects of ground cloud for which we feel we have sufficient visibility to at this point. As of February 14th, 2023, using a foreign exchange rate of 75 cents to the Canadian dollar, 107 to the euro and 1.21 to the Great Britain pound, we estimate that our baseline revenues for the first quarter of 2024 are approximately $117 million and our baseline operating expenses are approximately $74 million. We consider this to be our baseline adjusted per prob and by equal example, SUBSCRIBE!

Speaker 4: An Amazon just announced its' enhancing its delivery o ion options. To find a mile is still a big topic for retailers and our recent acquisition investments reflect that feedback. The next is ES focus impacts: supply chain and logistics. Environmental, social and governance. Discussions in Board rooms are having a meaningful impact on supply chain and logistics decisions.

Speaker 4: Our customers are looking for detailed information from their trading partners so they can meet and report on their own ESG goals. Also, our customers need this information to show their compliance with existingly pending regulations addressed in such issues as use of force labor, environmental impact of operations and trading with restricted parties.

Speaker 2: calibration of approximately $43 million for the first quarter of 2024, or approximately 37% of our baseline revenues as at February 14th, 2023. Last quarter we indicated that our targeted adjusted even to operating margin range is 40 to 45%. Last year in Q1 and Q2 we were at 44%, in Q3 we were at 45%, and in Q4 we were at 44%.

Speaker 4: We've recently seen several countries roll out additional sanctions on entities and people connected with the Ukraine conflict, So we anticipate compliant ES two reporting solutions will continue to get mind share with our customers. So those are some of the things we're hearing from our customers and seeing in our business, things that also inform our calibration for the quarter. Our business is designed to be predictable and consistent.

Speaker 2: We're maintaining that same 40 to 45% for this fiscal year. As we've indicated in the past, we anticipate that our margin will vary in that range, given such things as far in exchange movements, and completing larger acquisitions that are operating below our aggregate margin at the time of acquisition. Ground cloud is a profitable cash generating business, and one of the larger acquisitions we've ever done. However, ground cloud currently operates at a lower margin than the DeCARC's target aggregate, adjusted even to margin.

Speaker 4: We believe that 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: our long-term plan is for our business to grow adjusted EBITDA tenpercent to 15% annually. We grow through a combination of organic growth and acquisitions.

Speaker 4: We take a neutral party approach to building 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. When we overperform, we try to reinvest that our performance back into our business. We focus on returnring revenues and establishing relationships with customers for life.

Speaker 2: Primarily as a result of its revenue mix with higher professional services from in-person safety training courses that complement the software platform. So we anticipate that for Q1, our adjusted unit to operating margin could be lower than Q4 by between 1 and 2 percentage points as we work on integrating this business into the car. We've included that margin impact into our consideration in providing our Q1 calibration. We've got lots of exciting things planned for our business this year. We've already completed some exciting acquisitions and other investments that we believe will be a big benefit to our customers.

Speaker 4: And finally, we thrive on operating a predictable business that allows us forward visibility to our revenues and investment paybacks. In our annual report, we've provided a comprehensive description of baseline revenues, baseline calibration, and their limitations. We typically provide calibration as of the first day of the fiscal period. However, with the ground cloud acquisition happening on February 14th, we've updated calibration to that date.

Speaker 2: It remains an uncertain, broader economic environment, what we believe are proven track record of execution, style, capital structure, and customer focus will serve us well to have a great fiscal year. Thanks to everyone for joining us on the call today, as always, we're available to talk to you about our business and whatever manner is most convenient for you. And with that, I'll turn the call over to the operator to handle the Q&A portion of the call. Thank you. Ladies and gentlemen, we will now conduct the question and answer session.

Speaker 4: And included those aspects of grand poud for which we feel we have sufficient visibility to at this point. As of February fourteenth 2023, using a foreign exchange rate of 75 cents to the Canadian dollar, one zer seven to the euro and 1: one point two: one to the great Britain pound, we estimate that our baseline revenues for the first quarter of 2020 four.

Speaker 3: If you have a question, please press star, followed by the number one on your touchtone phone. You will hear a one-tone prompt acknowledging a request. One moment please for your first question. Your first question comes from the line of Matt Faw from William Lear. Your line is now open. Great, thanks for taking my questions. Ed, just circling back to all the macro comments that you made, maybe just help us understand what the impact you're seeing on your business from those comments is. Are you seeing any impact on either transactions or deal closures as a result of some of the items you called out?

Speaker 4: are approximately $117 million, and our baseline operating expenses are approximately $74 million. We consider this to be our baseline adjusted EBITDA calibration of approximately $43 million for the first quarter of 2024, or approximately 37% of our baseline revenues as at February 14, 2023. Last quarter, we indicated that our targeted cost was perfectly Luigi Example Crossing mean by $ steer a

Speaker 3: Yeah, minor, but you know, parts of our business that are really doing well right now, I think I caught a few of those after in the call and you know while our ocean business was being impacted, you know, minor way by, by shipping behind being down with other parts of business booming. So I think that's why you see the results you saw today. Okay, great. And then in terms of acquisitions, yeah, I think larger acquisitions is an area that you called out where there was perhaps a bigger discrepancy between, you know, valuations you were willing to pay and where valuation expectations were.

Speaker 4: such things as foreign exchange movements and completing larger acquisitions that are operating below our aggregate margin at the time of acquisition.

Speaker 4: groundcloud is a profitable, cash-generating business and one of the larger acquisitions we've ever done. However, groundcloud currently operates at a lower margin than D cart's target aggregate adjusted EBITDA margin.

Speaker 4: Primarily as a result of its revenue mix with higher professional services from in-person safety training courses that complement the software platform. So we anticipate that for Q1 our adjusted ebitdto operating margin could be lower than Q4 by between one and two percentage points. As we work on integrating this business and into they car, we've include that margin impact into our consideration in providing our Q1 calibration. We've got lots of exciting things planned for our business this year.

Speaker 3: You made a larger acquisition with Ground Cloud. Is that sort of signal that market's opening back up or maybe just some comments in terms of what you're seeing there? Yeah, I was just a university university and a healthy market for that. And the prices can be all over the place, depending on the company and who's selling them and what bank's representing and things like that. But we're certainly seeing lots of opportunity out there. And you can see we just...

Speaker 4: We've already completed some exciting acquisitions and other investments that we believe will be a big benefit to our customers. It remains an uncertain broader economic environment, but we believe our proven track record of execution, solid capital structure and customer focus will serve us well to have a great fiscal year. Thanks to everyone for joining us on the call today. As always, we're available to talk to you about our business and whatever manner is most convenient for you.

Speaker 3: We've pulled off two acquisitions in the past couple of months, so we certainly see a market that's open for business. Okay, great. Thank you. Thanks, Matt. As I reminder, it is time one to ask a question. Your next question comes from the line of Paul Traber from RBC Capital Markets. Your line is now open. Thanks very much for your afternoon. Just hoping that you could elaborate on some of the financial details for ground cloud. Specifically, you mentioned the mix of professional services is higher than your business. How should we think about the mix there?

Speaker 2: And with that I'll turn the call over to the operator to handle the Q a portion of the call. Thank you, Ladies and gent gentlemen, who will now conduct the question and answer session. If you have a question, please press star followed by the number one in your Touchstone phone. You will hear a one known omp acknowledgeingary request.

Speaker 5: One moment please for your first question. Your first question comes from the line of Matt Faugh from William Lehr. Your line is now open. Great, thanks for taking my questions. Ed, just circling back to all the macro comments that you made, maybe just help us understand what the impact you're seeing on your business from those comments is.

Speaker 2: And in any additional comments you could provide on a company's revenue or growth or the netage of the profitability is definitely been then-day current. Okay, let me handle that at a high level. I don't see if Alan has any other comments. If you think about their business, they're providing training services to customers. A lot of it's based on driver feedback on telematics devices where they're steaming drivers to certain things during the day and then they're recommending them for video-based training that might when they're maybe in the cab or-

Speaker 2: or before they go to work the next morning. At the same time, when they start this business off, when they start new customers off, they go through a comprehensive training program that involves onset training. That's why you see a little higher professional services where it's in those businesses than maybe the cards are custom-tuned. Normally, we say in our business, we would like it if there was no professional services, because that would mean that the products were all easy to install and then one had to get in medicine complicated to get them in, but there's obviously products even in our business that...

Speaker 4: being impacted minor way by shipment bonds being down. We had other parts of the business booming. So I think that's why you see the results yourself today.

Speaker 5: Okay, great. Then in terms of acquisitions, I think larger acquisitions is an area that you called out where there was perhaps a bigger discrepancy between valuations you were willing to pay and where valuation expectations were. You made a larger acquisition with Ground Cloud. Does that sort of signal that?

Speaker 2: that are more sophisticated and take a little while to put in. Grand Clubs kind of the same, you know, when they get a new customer as part of the process, they provide a comprehensive training program for all the drivers. And then specific behavior-based training as the drivers driving routes during each business day and they're seeing errors being made and they're recommending them, based on those errors for videos that they might watch at night. I don't know if you have anything to add to that, Ellen. Yeah, and not a lot. I think from a revenue perspective, it still gets the mold of what we want to buy, which is predominantly a recurring revenue business. In this case, yes, the professional service and other category will be higher than day carts number. We were at eight, nine percent, it'll probably be double that percentage, but still gets the exact moldable, which we want, which is very predictable subscription-based business recurring.

Speaker 4: And you can see we just.

Speaker 4: Pulled off two acquisitions in the past couple of months. A certainly see a market that's open for business.

Speaker 4: Put off through acquisitions in the past couple of months, So certainly see a market that's open for your businessokay great, Thank you.

Speaker 2: backas a a reminder. It's a star oneatt to ask a question. Your next question comes from the line of Paul tber from RBC Capital markets. Your line is now open.

Speaker 5: Thanks very much and good afternoon. Just hoping that you could elaborate on some of the financial details for GramCloud. Specifically, you mentioned the mix of professional services is higher than your business. How should we think about the mix there and any additional comments you could provide on the company's revenue or growth or the magnitude of the profitability that's different than Descartes?

Speaker 2: Okay, that's helpful. It just sort of it puts it in the ballpark. So that's helpful. And then how do you see it integrating with the remainder or complimenting the remainder of your existing mobile routing and telematics business? Well, I think about it. We're helping these same types of companies plan route every day. So it's a very similar customer base. We do business with a lot of delivery companies that are doing daily route plans in our routing software to deliver to the home. And that's a great customer base to sell this into.

Speaker 4: Let me handle that at a high level and see if Alan has any other comments. If you think about their business, they're providing training services to customers. A lot of it's based on driver feedback on telematics devices where they're seeing drivers do certain things during the day and then they're recommending them for video-based training at night when they're maybe in their cab or before they go to work the next morning.

Speaker 2: But like a lot of the companies that we've bought, you know, they have a certain type of customer they go after and they have a couple hundred of them or a couple thousand of them, whatever it is. And we got a couple hundred or a couple thousand more than that. And so we're able to go out and quickly bring our solutions to a much broader audience in that to, you know, a big advantage for us when we buy a company like Grand Club. Okay. And then just one last one. Can you speak the impact of an inflation on your business in it to what degree? Or not, you know, have you updated pricing for inflation? And how do we think about it from a cost point of view? So we've had some impact on all of it. You probably heard of saying the past that we.

Speaker 4: At the same time when they start those businesses off, when they start new customers off, they go through a comprehensive training program that involves onsetite training. That's why you see a little higher professional services rates in those businessices than maybe get carts are custom to. Normally we say in our business they were, we would like to. If there is no professional services, because that meanthat the products were all easy to install and then one had to to get in anything complicated to get them, get them in. But there's obvious a products even in our business that get are more sophisticated and take a little while to put in- grantflo's kind of the same- that when they get a new customer.

Speaker 4: As part of the process they provide a comprehensive training program for all the drivers and then specific behavior based training as the drivers driving routes during each business day and they're seeing evers being made in their recommending them based on those Ares for videos that they might watch at night I don't know if you have anything to add to that out butyes and not a lot I think I think from a revenue perspective it still GIS the mold of what we want to buy which is.

Speaker 2: Typically, only raised prices in the areas where our costs are going up directly, so we have avoided in the past inflation-based price increases on our network and the transaction type businesses. That changed when the inflation rates went up to 70%, and maybe higher around the world over the last couple of years. We started to make some adjustments to customer prices. The minor compared to maybe what some other companies were doing. So I would say it was fairly well received for a price increase within our customer raises. I've always seen this as fair. And on the cost side.

Speaker 3: predominantly a recurring revenue business. In this case, yes, the professional service and other category will be will be higher than Descartes number. We were at 8, 9%. It would probably be double that percentage, but it still fits the exact mold of what you want, which is very predictable subscription based business recurring. Okay, that's helpful. It just sort of it puts it in the ballpark. So that's helpful.

Speaker 2: We certainly have some cost to proceed and some of our numbers are cost to go on up maybe a little faster than they might have otherwise, but we're more than making up for that with that worth in our business.

Speaker 3: Thanks for taking my questions. Hey, thanks Paul. Our next question comes from the line of Justin Lange from Stephens. Their line is not open. Thanks. Following up on the ground cloud acquisition, is there anything you can share on what financial targets need to be achieved in order for that earn out to be paid? And...

Speaker 5: And then how do you see it integrating with the remain, der or complementing the remainder of your existing mobile routing and telematics businesswell I think about? We're helping these same types of companies plan route every day, So it's a very similar customer base.

Speaker 4: We do business with a lot of delivery companies that are doing daily route plans in our rotting software to deliver to the home, and that's a great customer base to sell this into. Like a lot of the companies that we've bought, they have a certain type of customer they go after and they have a couple hundred or a couple of thousand on whatever it is, and we a ouple hundred or a couple thousand more than that.

Speaker 2: How does the gate, anything you can help us, could you help us with the kind of year one revenue contribution we should be expecting from this business? We'll start with that at least, staff. As with the without getting into service, because then I want to provide competitive information to people that...

Speaker 5: And so we're able to go out and quickly bring our solutions to a much broader audience, and that's a a big advantage for us when we buy a company like rank-up okay. And then just one last 1, just can you speak the impact of an inflation on your business? To what degree?

Speaker 2: might not be on our side. But suffice it to say like every acquisition you've done, when we have an earn out, we are more than happy to pay it. In other words, if they can get the growth that's set forth in the earn out, it's great for our business. So let's hope that that happens in this one as well.

Speaker 4: Or not? Have you updated pricing for inflation and how do we think about it from a constplpoint of you? So we had some impact from all of the. You probably heard of saying in the past that we typically only raiseed prices in the areas where our costs are going up directly. So we have avoid in the past inflation based price increases for on our network and the transaction type businesses.

Speaker 2: So, places to say, if you could see it, the fairly significant number in the grant law acquisition, that some substantial growth for them to get there. So, let's see what happens, but we would hope that that does happen and be more than happy to pay the ironically out there. I don't know if you have any more detail you want to provide. No, just generally the way we build out those acquisitions, any time we have an urn out, we are thrilled to pay the entire urn out. It will meet our financial metrics if it grows to the levels that will require us to pay the urn out. So, this business is entirely consistent with that. We'd be happy to pay that urn out.

Speaker 1: Okay, and when you say meet your financial objectives, are you saying that it would be within that target margin range if the revenue objectives are achieved? I'm more speaking to getting our payback on our acquisitions when we deploy that capital. We're looking to get our money back in five to seven years of 15 to 20% return, and we think we can achieve that if, you know, at any level within that or note.

Speaker 4: And, you know, on the cost side, we've certainly seen some of it, and we certainly have some costs in proceeds, and some of our numbers, our costs are going up maybe a little faster than they might have otherwise. But we're more than making up for that with that growth in our business.

Speaker 2: Thanks for taking my questions. Thanks, Paul. Our next question comes from the line of Justin Long from Stevens. Your line is now open.

Speaker 6: Thanks following up on the ground cloud acquisition, is there anything you can share on what financial targets need to be achieved in order for that earn out to be paid and out of the gate anything you can help help us? Could you help us with the kind of yearar one revenue contribution we should be expecting from this?

Speaker 4: Understood and Alan I think you mentioned earlier that excluding fx organic growth was about 9 and a half percent Anything you can share on the impact from transactional volumes within that number and then I guess on the 150 organic headcount ads this year What are you assuming for organic growth going forward as you make that investment?

Speaker 4: Other words, if they can get the growth that's, it's set forth in the earn out,'s it, it's great for our business.

Speaker 1: I'll take the first one and add if you want to talk to the head counts, but as far as the organic growth, that's our estimated growth within the services category. You know our services are split between transactional and subscription. Now for the most part, both are growing. Our subscriptions tend to be some of the higher growth areas of the business, but growth a little bit slanted towards subscription, but both growing adding up to that 9.5%. Ted on head counts, did you want to make a comment? Yes, sir. So I mean, yes.

Speaker 4: So let's, let's hope, with that happens- and it's one as well, suffices to say you could say S' a fairly significant and it's a fairly significant number in the grandcloud acquisition- that some substantial growth for them to get there.

Speaker 4: So lets's see what happens, but we would hope that that does happ morethan happ to pay there andonautomically. gotthere don't know any more detail. You want to proct it, just generally the way we build out those acquisitions. Any time we haven't earn out, we are thrilled to pay the entire earnout. It will.

Speaker 2: It's a full year ahead of us and we obviously reserve the right to adjust course Depending on what happens in the business you probably saw that last year I don't think the plan on having that many last year just the the business started performing very well And we needed more people and went out and got them I think roughly our plans are maybe for an increase of half that But I wouldn't read too much into that if things go well We could see us increasing that if if if the economy stalls more You know we would probably reduce that just to be prudent operators as a business you probably heard me saying the past couple quarters you know hey we know as you

Speaker 3: Iit will meet our financial metrics if it if it if it grows to to the levels that will require us to pay your's So this is that's just this business is entirely consistent with that be be happy to pay that on it OK and when you say meet your financial objectves than you say that it would be within that target margin range if the revenue objectives are achieved I'm more speaking to getting our payback on our acquisitions when we deploy that capital we're looking to get our money back and.

Speaker 2: There's a lot of economic uncertainty. We were starting to remove our pedal from the gas pedal and kind of not press the brake like you may have seen a lot of other technology companies do but certainly cover it just to make sure we don't get ourselves into any trouble. So I just seem to come out of that right now. It was the headlines I'm reading in newspapers. So we'll see what happens. But you know, for the most part we plan for

Speaker 3: about half the growth that you saw in headcount organically last year in the coming year and we'll adjust accordingly as we see how the business wants. Okay, got it. Thanks for the time. Hey, thank you, Justin. Your next question comes from the line of Daniel Chan from TD. Your line is now open. Yes, thanks.

Speaker 4: The target is usually not anything more than growth in revenue.

Speaker 6: And Alan, I think you mentioned earlier that excluding FX organic growth was about 9.5%. Anything you can share on the impact from transactional volumes within that number? And then I guess on the 150 organic size chart.

Speaker 5: As you talked about ground cloud having a higher mix of professional services driving a lower ebidum margin, just wondering whether for you to get there ebidum margin more in line with your target, whether you have to change their business model to reduce that PS mix.

Speaker 3: Headcount ads this year. What are you assuming for organic growth going forward as you make that investmenti'll take the first one and Ed. You want to talk to the headcounts, But as far as, as far as the organic growth, that's our estimated growth within the services category.

Speaker 5: And if so, how do you do that and how long will it take for you to get those margins that that's where you want it to be?

Speaker 3: Know you know our services are split between transactional and subscription. Now, for the most part, both are growing. Our subsptions tend to be some of the higher growth areas of the business but you know, growth a little bit slanted towards subscriptions, but both growing. Adding up to that nine and a half percent head on headcounes that you want to make a com.

Speaker 2: We could see ourselves doing more of that virtually and with larger audiences that may end up having us over time, you know, have a much more profitable professional services, a training mix. You know, one of the big things in any software companies just selling more of the stuff. You know, when you, you know, if you have 100 customers and you're providing software and writing software for those 100 customers, if you make it 200 customers.

Speaker 4: Yes sure, So I mean the full year ahead of us and we obviously reserve the right to adjust course depending on what happens in the business. Price saw last year. I don't take the plan on having that many last year. Just the business started performing very well and we need more people and went out and got them. I think roughly our plans are maybe increase half that, but I wouldn't read too much into that. If things go well we could see us increasing. That is if if the economy stalls more, we would probably reduce that, just to be prudent operators in the business.

Speaker 2: Invariably, that company is going to be more profitable. You're ready to the same piece of code for now, double the amount of people. And if they're all paying a fair price, your profits go up.

Speaker 2: which has been a big part of our growth in EBITDA over the past 10 years. As we get a bigger and bigger customer base and therefore have a bigger and bigger group of people to go sell our next acquisition into. And I think we might see the same from the ground cloud overtime. That makes sense. Thanks for that.

Speaker 4: You probably heard say in the past couple of quarters- you know, heyyou know there's a lot of economic uncertainty. We were starting to remove our peduddle from foot, from the gas pedudd, and kind of not pressed the break likeyou may have seen a lot of other technology companies do, but but certainly cover it just to make sure we don't ourselves any trou. thir, to seem to come out of that right now was the headlines. I'm reading the newspapers So we'll see what happens. But you know, for the most part we planned for about half the growth that you saw had count organically last year in the coming year and just accordingly as be have the business launchokay got it. Thanks at the time.

Speaker 2: And then shifting gears a bit, just wonder if there's any impact from the Windsor Framework you just got passed. You know, we're still analyzing it, but you know, they've established a Green Lane and a Red Lane month like you've seen passenger traffic. We understand that both lanes are going to continue to have a filing. So...

Speaker 2: You know, at first blush my gut is that there's not going to be a ton of impact to our business negative or positive.

Speaker 2: my gut is that there's not going to be a ton of impact to our business negative or positive. Okay, great. Thank you.

Thank you. Your next question comes from the line of Robert Yell from Cynacarginio ETH. Your line is not open. Hi, Graeme. The couple of the macro comments and questions around the transactions, I get the sense that maybe that was a minor headwind and so if you clarify that and then maybe just give a refresher.

Speaker 4: They were providing one on one training classes for individual companies or we could see ourselves doing more that virtually and with larger audiences. That may end up having us over time have a much more profitable professional services of training mixed.

kind of easing up and you know right after Christmas I kind of suspect that's what we're seeing right now. Truck and air were still pretty strong and I seen air getting even stronger in the last couple weeks based on the data mine stats so you know we'll see but impacting this past quarter was minor and we had plenty of stuff that made up for it or more than made up.

Speaker 4: one of the big things and any softwarecompanies just selling more of the stuff. You know, when you know if you have hundred tomers providing stare and writing softwarede for those hundred customers, if you make the 200 customers, invariably that company is going to be more profitable. You're write the same piece of code for now, double the amount of people and if they're all paying a fair price, your profits go up. You know's what'sa.

Speaker 4: Been a big part of our growth in EBITDA over the past 10 years, as we get a bigger and bigger customer base and therefore have a bigger and bigger group of people to go sell our nextx acquisition into- and let's see the same from groundcloud over the time.

rest. Okay, and then you touched on my second question around China. There's a lot of news about the reopening and the impact. Maybe it's more on air travel. Is that not having a more positive impact? Yeah, I think it is. I thought that I was just kind of mentioning in the ocean space, so we're starting to see a pickup in the stats we get from government. So...

Speaker 4: That makes sense. Thanks for that. And then shouldif think here a bit, just won if there's any impact from the windsor framework that just got passed. You know we're still anal- I've been it- but you know ve' veestablished a a green LAN in a Red Lane. Much like you seeing passenger traffic, we understand that both lanes are going to continue to have a filing. So you know, at first blush, my gut is that there's not going to be a ton of impact to our business.

and retailers get through Christmas. And as I mentioned that we thought a lot of retailers were selling stuff that they had ordered pretty early last Christmas and as the stock, as the shelves emptied out. They're now looking to replenish those things. And now that a bunch of factories are open in China. So my guess is maybe it's a little better than most, but still I don't know exactly what's going to happen. But I think I'm starting to see the...

Speaker 2: Negative or positiveokay great, Thank you. Thank youyour next question comes from the line of Robert Young, from kind of genuity. Your line is now open.

Speaker 5: Hi did even the couple of the the macro comments and questions around the transactions I got the sense that maybe that was a a minor headwind and so you you clarify that and then maybe just give a refresher on how minimum contracts protect that or ifthat's still in place may you just maybe refresher there yeah I mean I caught out the ocean business actually if I look at the data on stats it's actually starting recover in January and.

In the past couple of weeks, the impact of that and increased trade bonds. Last question, just a little clarification in the press release, the 40-45% of just EBITDA range. The way I read it seemed to suggest it was inclusive of M&A forward. I just want to make sure I'm not reading that incorrectly. The 40-45 doesn't include any anticipated future M&A. That's just up to this point. Well, yeah, just remember that it's an EBITDA margin range.

you know, borrowing us by buying something massive and you can see here with ground cloud it has a bit of a negative impact on our overall margins because we bought a company that makes less money as a percentage of revenue than we do. But still, you know, only a point or two and that was a fairly large acquisition for us. So yeah, no, I think we are trying to say we'll be in that 40 to 45 percent margin range. If we did something gigantic, sure, if you go outside of the animals.

Speaker 4: You know we'll see, But in impacting this past quarter was was minor. I mean, we had itwe had plenty of stuffthatmade up loor or more than made up for and you know had us kind of beaten our projections for the the last quarter, because there's a bunch of businesses wewere firing off but know full cylinders, and you know we had Osha business that was only down slightly. So on, all pretty good news for us.

way more profitable than us. It would move out, if it's less profitable than us, it moves down. But, you know, NetNet, I'd be surprised if it changed outside of that range 40 to 45%.

It would move off, but less profitable than us that moves down, but you know net net I'd be surprised if it changed I understand based on acquisitions. All right. Thanks you

Speaker 5: Okay and then it touched on my second question. Around China, there's a lot of news about the reopening and the impact- maybe, maybe it's more on air travel- just is that not having a more positive impact?

Your next question comes from the line of Kevin, Krish Maratni from Scotiabank. Your list is open. Hey guys, good evening. Question for you just on competition and potential competition. You understand you cover several areas in the broader logistics ecosystem. Just curious, given the momentum that we're seeing in space, there are any particular areas we're seeing new competitors or outsized funding from...

Speaker 4: Yeah, I think it is. That's what I was just kind of mentioning in the ocean space. So we're starting to see it pick up in the stats we get from governments over the past month or so.

Speaker 4: And I I think that's exactly what's going on. There's a year, COVID-19 policy ended, I think mid-December or something like that, and people started to get back to work and eventually factories get reopened and start producing more stuff and retailers get through Christmas and, as I mentioned that we thought a lot of retailers were selling stuff that they had ordered pretty early.

you know, private equity or anything in that regard. You know, areas that are hot and curious, you know, what you're seeing and how well you may be positioned in these areas, you may be willing to direct more of your attention to from an emanate perspective. Yeah, thanks, Kevin. We're seeing over the last several years, we're seeing a lot more money coming into this space, which I think is good news. I mean, you're talking about it in terms of the being competitors.

Last Christmas and as the stock, as the shelves, you know, emptied out, they're now looking to replenish things. You know now that a bunch of factors are up in China. So my, my guess maybe it's a little better than the most of, but still I don't know exactly what's going to happen, but I think I'm starting to see the in the past couple weeks, the impact of that and increased trade volumes. Ok, and last question, just a little clarification in the press release, the 40 to 40, five percent of just keep range, I think.

I understand there are also potential acquisition candidates for us, which is as much how we think of it as competition. Competitors come up with new ideas and they think we watch 10 of them get started and we get to see who's the best one or two guys out there and maybe one day we'll end up buying one of the companies. And that tends to be more the way we think about it, but yeah, it's absolutely. There's been a ton more investment in the space and I think that's great news. Is there any is it just pretty widespread curious if there's any particular well areas that are popping up?

The quote from you Allan maybe the way I read it it seemed to suggest there's inclusive of eate forward and I just want to make sure I'm not reading that in correctly the 40 40 five doesn't include any anticipated future emane that's just up to this point well I just remember that it it it's an bit the margin range So.

You know, barring us by buying something massive. And you can see here with grantlot it has a bit of a negative impact on our overall margins because we bought a company that makes less money as a percentage of revenue than we do, but still you know only a point or 2, and that was a fairly large acquisition for us. So, yeah know, I think I think we are trying to say we'll be in that 40 to 40 five percent margin range. If we did something gigantic directly go outside of that am it's way more profitable than us. It would move out to the.

Well, you can see the supply chain visibility space is hot with the, you know, we were the first move or a net space by a macro point. A macro point has some competitors that have also attracted a ton of investment. And there's more people popping up in that space all the time that they're also potential customers of ours right? They need they need access to the data that we have because we do business with most of the the freight brokers in the North America. We.

We tend to have more data than any of our competitors in that space and are able to sell that to other people who are building their own supply chain visibility tools, but don't have access to a network like ours, so that's been great for us. You can see all these IOT devices that you're starting to see come out and I suspect we're just at the beginning of this, but people are making smaller and smaller things to put in packages to put in pallets to put in.

Less profitable with us that moves down. But you know me that I'd be surprised if could changed outside of that range. fortyyou to 40, 10% understood caseful acquisitions. Thank you right. Their next question comes from the line of Kevin Chris marrockney from skcotisha bank. Here is so open. Hey guys, good evening. Question free. You just on on competition, of potential competition, when you understanding you cover several areas in the broader logistics, that ecosystem. Just curious, you know, given the momentum that we're seeing based there are any particular areas, re seeing new competitors or outside funding from? You know private equity or anything in that regard? You know areas that are hot, curious you.

Plains and trucks and containers and everything else and I'll tell you what's happening to your product while it's moving where it is What's happened to her at that did it get a you know hard bounce all kinds of stuff like that so that you can Eventually build software around that to help the big manufacturers and retailers make better decisions about what's going on in their supply chain based on these IoT devices that are out there so I Think we're at the beginning to that right now

hundreds of thousands of companies that start up based on that and we're really excited about it because that's all information that we could use to help our customers get better results. God, I'd appreciate those comments. Maybe to continue on the M&A, I know it's definitely been taken up a bit, assets getting a little bit bigger. It's been a while, I think the last several acquisitions have made it all cash and in the past, the macro points that include stock and this.

Here's about your philosophy on purchase price for acquisitions, your decision on a mix of cash and equity, any thoughts there? We try to be cash buyers. When people get, when you see stock getting pissed in a deal, it's usually because

And maybe one day'll end up buy a lot of companies and that's tends to be more the way we think about it but.

Yeah it's absolutely. There's been a ton more investment in the space and I think it's wr news. Is there any? Is it just pretty widesprem curious if there's any particular- well you know- area they're popping up.

Well you can see the pllychain visibility space is hot with we were the first mover in that space by a macro point MacroPoint hasingsome competitors that have also attracted a ton of investment and there's more people popping up in that space all the time that there are also potential customers of ours are they need they need access to the data that we have because we do business with most of the freight brokers in the North America we.

the people that own the business have asked for some component of it to be in day card stock. Oftentimes they go, hey, you know, we're buying some company for say $50 million and they're going, all right, I'll take 40 of it in cash and 10 of it in stock. And if they requested from us, you know, that's good news for us. We're not really up for, we're not looking for reasons to dilute our shareholders. But if the owner of a business says, hey, I want you to buy the company, I want to pick you guys to be the buyer.

We tend to have more data than any of our comtitors and that' space are able to se that the other people who are building their own supply chain visibility tools but don't have access to a network like our, So that's been great for us. You can see all these IoT devices that you're starting to see come out- and I suspect we're just at the beginning of this- but people are making smaller and smaller things to put in packages, to put in.

And I want to take back some <expletive> Kartsdack. We look at that as, you know, something that we should do. Right. And now I have an owner in that business. It's probably going to still work here and probably going to be very vested in our success. So that's something we'll almost always say yes to. Got it. Thanks for that. Maybe just the last one for me. Just a question on the sort of your marketing spend and efforts. I think it was just over a year ago and you kind of talked about more meaningfully stepping up the efforts there. There the customer.

What's going on in our supply chain based on these I devices that are out there. So I think we're at the beginning of that right now and you be know hundreds, if not thousands, of companies that start up based on that, and we're really excited about it because that's all information that we could use to help our customers getip better results and appreciate comments.

retention stats and we already do. We think it's been very helpful for us. We've had enough success with it in the last year that we're starting to roll it out now in Europe as well. We think it's, you know, as our business gets bigger, we need to do things like that to stay as close to the customers.

Maybe to continue on the M&A, it's definitely been picking up a bit, assets getting a little bit bigger. It's been a while, I think, the last several acquisitions may have been all cash. In the past, you've been macro-pointed and included stock. I'm just curious about your philosophy on purchase price for acquisitions. Brian Can

as we were when we were a small company. And we think investments like this are the smart thing to do. And the good news is we went and did it over the last two years and it really worked well. And we're doing more of it as original.

decision on a mix of cash and equity. Any thoughts there? We try to be cash buyers. When you see stock getting pissed in a deal, it's usually because

Understood. Thanks a lot. I'll pass the line. Okay, thanks. Your next question comes from the line of Stephen Lee from Raymond James. Your line is now open.

The people that own the business have asked for some component of at the B and day C stockoftentimes they go Hey, you know, or buying some company for say, $5 million, and they're going on, I'll take 40 of it in cash and 10 of it in stock and if, if they requested from us, you know, that's good news for us. We're not really up. We're not looking for reasons to dilute our shareholders. But if the owner of a business says Hey, I don'twant?

Thank you. Maybe a question for Alan to start. Can I check with you so the overall organic growth is around 7.5% at constant currency, Alan?

Yeah, so in the prepared comments we mentioned 9.5% growth in services revenue. We did see a drop in professional service and other revenue. It was partly hardware a little bit on the people side. When you blend those together for the fourth quarter, we are somewhere in that 7.5% range.

you to buy the company, I want to pick you guys to be the buyer, and I want to take back some <expletive> Cardstock. We look at that as, you know.

But the most important for us is to be that long-term growth in services, which is highly recurring revenue for us. So 9.5 on services, coming down to sort of that 7.5, 8 on the total revenue. And I was curious, given the higher PS makes with...

Something that we should do right, and now I have an owner in that business that's probably going to still work here and probably going to be very vested in our success, So that's something we'll almost always say yes to.

Got it. Thanks for that. Maybe just the last one for me, just a question on your marketing spending efforts. I think it was just over a year ago when you talked about more meaningfully stepping up the efforts there, the customer success team, the new digital marketing initiatives. I'm just wondering how that's been progressing. Are you happy with the ROI? Is there anything you could share there in terms of net retention, share of wallet increases?

Brown Cloud does not mean that the services organic growth going forward is going to miss both PS organic growth from Brown Cloud is it better to look at the overall organic growth?

Does that not mean that the services organic growth going forward is going to miss those PS organic growth from ground cloud? Is it better to look at the overall organic growth? Well, I'm sorry. I didn't...

I didn't catch your question. Because I believe your services organic growth, you exclude PS revenues from that, right? So, and I was asking, given your recent acquisition, Grand Cloud, a lot of, while a higher mix of their revenues is PS, we're looking at services organic growth, we'd be missing the organic growth coming from those PS revenue streams from Grand Cloud.

Anything you know that you're seeing that you're willing to share in terms of v. you know to return on that. That step up that you be, we're- we're very happy with it. I don't know that I want't release any more retention stats than we already do. We think it's been very helpful for us we're.

We've had enough success with it in the last year that we're starting to roll it out now in Europe as well, and we think it's as our business gets bigger. We need to do things like that to stay as close to the customers as we were when we were a small company, and we think investments like this are the smart thing to do and the good news. We went and get it over the last two years and it really worked well and we're doing more of it as result.

We've had enough success with it in the last year that we're starting to roll it out now in Europe as well, and we think it's. You know, as our business gets bigger, we need to do things like that to stay as close to the customers as we were when we were a small company, and we think investments like this So are the smart thing to do. And you know, the good news is we went and get it over the last two years and it really worked well and we're going more of it as result. Understood, Thanks a lot, a pline.

Yeah, we're obviously going to try to grow that business, both on the, on the description side for the software as well as, as well as the, the PS side. I mean, realistically for us, the, the subscription piece should grow faster if we execute to our plan. You know, we will continue to, to, to focus on, on both elements, but, uh, and both of those two as we go. I mean, we're, we're disclosing, um, services revenue growth because that's the most relevant number. It also goes, so... It allows the, uh, the financial re assigned cup, industry freaking. I

thankyour next question comes from the line of Stephen Lee, from Raymond James. Your line is now open. Thank you, maybe a question for and to start, can I check with you of the overall organic growth is around seven centand a half percent at constant currency.

for us in the long-term piece of the business, but both will be important in all of the message accordingly. Got it. Thanks. And then just given your comments, so shipment volumes on one side and then, but other parts booming, would this organic growth like 78% high single digit?

Would it be a good day for this year or we can do better than that? What's the health? I mean we think we're going to be in that.

So for this year, or we can do better than that? Well, I mean, we think we're going to be in that range. And we always kind of plan to run our business in the forest.

Those together for the fourth quarter. We are somewhere in that seven and a half 8% range. But the most important for us is to be that long term growth in services, which is highly recurring revenue for us. So So, nine and a half on services, coming down to sort of that seven and a half eight on the total revenue. Got Guard and I was curarious, given the high P.

66% organic revenue growth range and trying to get 10 to 15% even to growth out of that. We've seen this too much better than that in the past years. But you know if the economy kind of went into a boom period there for a year or two and it started to come back down, we're pretty happy being in that 9% range right now.

you know, just think that came from quality of acquisitions growth that we've brought to you. Quality acquisitions that we brought on in the past, a little bit of it from customers thinking that supply chains and logistics is a lot more important than they thought it was pre-pandemic. And yeah, I'm hopeful that that range stays up in that 8, 9 percent, but we'll just have to say. Got it. And then add your also your comment this at shipping.

cer question because I believe your services organic growth. You exclude P's revenues from that right. So and I was asking, given your recent acquisition, ground cloud a lot, while a higher mix of revenues is P would, looking at services anic growth, would we be missing the organic growth coming from those P's revenuue streams from?

ground cloud what has been their growth profile in recent years

And was it all organic? Thanks. It was their best growing company and it was all organic. So the double digit in terms of growth? I didn't call out. I don't know.

On both elements, but and moves just just close to you as we go. I mean we're disclosing.

Services revenue growth, because that's the most relevant number for us in the long term piece of the business, but both will be important and we'll message it accordingly.

It's a fast ground company. It's one of the reasons we wanted to buy it.

Got it, thanks. And then just given your comments, so shipment volumes on one side and then other parts booming, would this organic growth like 7-8% high single digit, would it be a good base for this year or we can do better than that?

We have an opportunity to expose it to a lot more customers and as a result, you know, maybe you may be continuing that growth in the future. Got it. And then maybe an update on the XPS. I remember the year now there was sizable. How are they doing so far? And would you expect them to be hitting their now targets with you?

Well, I mean, we think.

We're going to be in that, in that range, and we always kind of planned to run our business in the 4- 6% organic revenue growth range and trying to get 10% to fif 6% EBITDA growth out of that. We've seen this too much better than that in the past years. But if the economy kind of went into a boom period, there we a year or Q and it started to come back down.

I don't know if I could speak to the RNAT targets, but yes, they're doing very well since they've gotten here. It's been a great business for us and we're real happy. You know, I'm not going to comment on the RNAT until we...

until they get there, but we're very happy with the acquisition so far. Let's put it that way. All right, thanks guys. Your next question comes from the line of Scott Group from Wolfe. Your line is not open. Hey, thanks afternoon. So is there a lot of, there are much seasonality to the revenue at ground cloud or work?

We're pretty happy being in that 9% range right now and you know, just just think that came from quality of acquisitions, growth that we've, that we brought your qual of exisitions that we brought on in the past a little bit of it from from customers thinking that supply chains and logistics is a lot more important than they thought it was prepandemic.

And yeah, I'm hopeful that that range stays up in that 8, 9%, but we'll just have to see. Got it. And then also your comment, you said shipping volumes may increase through the year. So does that mean maybe we see a slower first half and then a better second half in terms of organic growth as well?

Should we try and take, should we take like the bump in that the baseline for Q1 and annualize that? I'm just trying to figure out the right way to try and ballpark.

full your revenue. It's a fairly consistent, performing business, yes, not a kind of season now. But is it an incident? Is it kind of business where you would expect the actual revenue to outperform the baseline like we see in the rest of the business?

Yes I mean I want the predictions the year out, But if our customers do well like that yeah, I would expect our business to continue to do better and better over time.

I don't know if exact numbers, but yes, with most of our business we're expecting.

Got it. And then a couple of questions on your recent acquisition. So, Ground Cloud, what has been the growth profile in recent years and was it all organic? Thanks.

you know, a baseline and then, and then, you know, quarter to quarter, there'll be some increase in the business as we get the actual results. And I think, Grant.

It was their first growing company and it was all alwrong. So sorry, did you say, did you in terms of growth? I didn't, I didn't call out.

cloud would probably be no different. Okay, and then I know it's obviously better beginning of the year. You always talk about 10 to 15% of the data. Thank you.

pretty much get there to the high end or exceed it every year. I know it's early, but what's the visibility to repeating that again this year?

on a specific digit. But it's a fast-growing company. It's one of the reasons we wanted to buy it. We think we have an opportunity to expose it to a lot more customers. And as a result, maybe continue that growth into the future.

We don't take our bonuses and we don't get to 15. So we're all planning on getting to 15. I think we've beaten the 15 years in a row. I've gotten a, yeah.

Got it. And then maybe an update on the XPS. I remember the urn out there was sizable. How are they doing so far and would you expect them to be hitting their targets this year? I don't know if I could speak to the urn out targets, but yes, they're doing very well since they've gotten here. It's been a great business for us and we're real happy we.

You know, I obviously can't make a promise about it, but I certainly are in tension is to be a 15 or better. We say 10 to 15 and we do our damage to get to 15.

Okay, good stuff. Thank you guys. Appreciate it. Thank you, Scott.

Your next question comes from the line of Fremont Lenshow from Barclays. Your line is now open. Great, thank you. This is Jeremy on Fremont. I was just wondering if you could share a bit more detail on how the E-commerce business is trending. Would you say like it's reached more of a steady state post of deceleration from the pandemic or really any color you can share there would be helpful. Thanks.

Audit you know we're not going to comment on the or not until until we till they get there, butwe're very happy with the acquisitition. So far was going that way, all right. Thanks, guys. Hey, Thank you, Steve.

The next question comes from the line of Scot group from wol. The line is not open.

Pay thanks afternoon. So is there a lot of? Is there much seasonality to the revenue at ground cloud or to try and TAS? So we take like the bump in that the baseline for Q1 and annuale that I'm just trying to figure out the right way to try and ballparkfull year revenue. It's a fairly consistent performing business yes, simply.

Sure, thanks Jeremy. So, you know, we had massive growth coming out of the pandemic and the end of 20 and 2021, like a lot of e-commerce companies had. I think we ended up in a different circumstance soon thereafter. A lot of e-commerce companies that we saw went flat. That's not what happened to us. We kind of went back to our normal.

you know, the low double digit growth coming out of that and we continue to see that be the case right now. It's a very nice business for us. It continues to grow at a nice pace every quarter and yeah, we're still seeing, I don't want to use the word flat because it's

Baseline and then then quarter-to-quarter there'will be some increase in the business as we get the actual results and I think grant.

The growth rate is flat, but it's still growing nicely every quarter and every year coming out of that big blip in the beginning of the pandemic. When I read the newspapers about some other e-commerce results, I don't think we're subject to the same things that they are. Maybe because we're selling a lot more new customers.

cloud would probably be no different. Okay, and then I know it's obviously the very beginning of the year. You always talk about 10 to 15 percent, but I think you've pretty much get there to the high end or exceed it every year. I know it's early, but what's the visibility to repeating that?

So we continue to get growth even if e-commerce styles are flat for a quarter or so.

to get close even if e-commerce sells a flat for a quarter or so. Goddess uw welcome me. Nice afternoon? team Thank you.

We don't take our bonuses and we don't get to 15. So we're all planning on getting to 15. I think we've beaten it 15 years in a row, Scott. And I obviously can't make a promise about it, but that's certainly our intention is to be a 15 or better. We say 10 to 15 and we do our damage to get to 15.

Thank you. There are no further questions at this time. Ed Ryan, please group seat. Hey, thanks everyone. Appreciate it all your time today and I hope to see you as we're out on the road in a And otherwise, look forward to reporting back to you next week. Have a great night and take a few times. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Okay, good stuff. Thank you guys. Appreciate it. Thank you. Scott. Your next question comes from the line of Raimo Lench Chow from Barclays. Your line is now open.

Right Thank you. This is Jeremy on forrival. I was just wondering if you could share a bit more detail on how the e commerce business is trending. Would you say, like if it's reached more of a steady state post deceleration from the pandemic, or really any color you can share? They would be helpful.

sherif. Thanks, jemy. So you know we had basive growth coming out of the pandemic and the 20 and 20 20 one like a lot of e-commerce companies.

Had I think we ended up in a different circumstance soon there after a lot of e-commerce companies that we saw went flat. That's not what happened us. We kind of went back to our normal double low, double-digit growth coming out of that and we continue to see that be the case right now. It's a very nice business for us. It continues to grow.

At a nice pace every quarter and we're still seeing. I don't want to these door flat because it's the growth rates are flat, but it's still growing nicely every quarter and every year, coming out of that big lift in the beginning of the pandema.

When I read the newspapers about some other e-commerce results, I don't think we're subject to the same things that they are, maybe because we're selling a lot more of new customers, though we continue to get growth, even if e-commerce sales are flat for a quarter or so.

The newspapers about some other e commerce results. I don't think we're subject to the same things that they are, maybe because we're selling a lot more customers, though we continue to get growth, even if e commerce stells are flat for a quarter or so guy. Thank you.

Thank you. There are no further questions at this time. Ed Ryan, please proceed. Hey, thanks, everyone. Appreciate all your time today and hope to see you as we're out on the road in the coming weeks. Otherwise, look forward to reporting back to you next quarter. Have a great night and thanks for your time.

Ladies and gentlemen, this completes today's conference call. Thank you for your participation. You may now disconnect.

The.

I.

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we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, March 1, 2023. I would now like to turn the conference over to Scott Pagan. Please go ahead. Thanks and good afternoon, everyone.

These statements are made under the safe harbor provisions of those laws.

These forward-looking statements include statements related to our assessment of the current and future impact of geopolitical and economic uncertainty on our business and financial conditions, Descartes' operating performance, financial results and conditions, Descartes' gross and operating margins, and any variation in those margins.

Cash flow and use of cash. Business outlook, baseline revenues, baseline operating expenses and baseline calibration anticipated in potential revenue losses and gains.

Anticipated recognition and expensing 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 achievements of dcard to differ materially from the anticipated results, performance or achievements implied by such forward-looking statements.

These factors are outlined in the press release and the section entitled certain factors that B effectexfuture results in documents filed and furnished with the SEC, the OC and other securities commissions across Canada, including our management's discussion and analysis filed todaywe provide forward-looking statements solely for the purpose of providing information about management's current expect.

compptions or a circumstance one which any such statement is based, except as required by law. And with that let me turn the call over to head.

Hey, great. Thanks, Scott, and welcome everyone to the call. We had an excellent fourth quarter and year with record financial results. We've also made some significant investments in business. We're excited to go over those with you and give you some perspective about the business environment we see right now. But first, let me give you a roadmap for this call. I'll start with highlighting some aspects of our financial results, how our business performed in the last quarter, and some investments we've made.

I'll then hand the call over to Alan who will go over the Q4 and annual financial results in more detail. I'll then come back and provide an update on the current business environment 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. Let's get started by looking at our year. Key metrics we monitor include revenues, profits, cash flow from operations, and return on investment. Over this past year we had record performance in each of those areas.

Total revenues were up 14% in the year, with services revenues up 15%. Net income and earnings per share were both up eighteteen percent, while adjusted EBITDA was up 16%. It generated almost $2 million in cash from operations, representing 89% of adjusted EBITDA. 92%, if you exclude the acquisition, are not payments we made during the year that went through cash from operations.

A good headwind to have considering how well the acquisitions performed and contributed to our businesses. And the year ended strongly for us as well. We had record Q4 quarterly revenues with services revenues up 14%. We had record profits of almost $30 million in net income and $55 million of adjusted EBITDA. We generated more than $50 million in cash from operations, representing 91% of our adjusted EBITDA.

And we use that cash flow and our balance sheet to make further investments in our business. So a very strong financial quarter and year for us. These results happened in a very challenging foreign exchange environment. Our annual revenues would have been $14 million higher if we'd used last year's FX rates, and our quarterly revenues would have been $3 million higher. While we're fairly naturally hedged, we still face some foreign exchange headwinds to adjust with EBITDA.

Alan will go into this in more detail later, however strong results that might have been even stronger in a different foreign exchange environment. At the end of the year we had $276 million in cash and were debt free with an undrawn $350 million line of credit that we just extended the term on.

We use some of that cash after the year to buy GroundCloud, which I'll discuss in a few minutes. However, we remain well capitalized, cash generating, debt free, and ready to continue to invest in our business.

We believe a company like ours is well positioned to continue to thrive in market conditions like these. There are some areas in our business that were very strong in the fourth quarter. Our data content businesses continue to have high demand.

Particularly in nine -party screening, as companies continue to deal with complying with the myriad of new sanctions that have come out relating to the conflict in the Ukraine. Our transportation management businesses saw strong growth, with demand for MacroPoint's real-time visibility shipments across all modes leading the way, and we saw a good seasonal above in e-commerce volumes to end the year. Transportation volumes were otherwise as we would expect in our business to end the year, given seasonality.

The cart was able to deliver superior financial performance last year. While continuing to invest in our business, we continued our approach of making both organic and acquisition investments. On the organic side, the improvement we saw this past fiscal year in organic growth was helped by the customer-facing investments we made in our business in the year and in the prior fiscal years.

We expanded our sales and marketing groups. We created a pillar focused on internal management oversight structure. We established and expanded a customer success group designed to improve the customer experience and identify additional ways our customers can get value from using our solutions.

And consequently improve our revenue and customer retention. These investments were made while balancing achieving our immediate financial targets in positioning the company even better for the future.

This fiscal year was no exception to that organic investment. We organically added more than 150 people to our business this year. Many of those roles were designed to help us with future organic growth, the sales, customer success, and development continue to be a focus area for hires. We believe we built a resilient business that our customers can rely on for their needs toEdward

four new businesses into Descartes, with our customers continuing to see e-commerce as a growth and focus area. We combined with MetCHB in February 2022 to strengthen our e-commerce customs filing capabilities as our customers expressed interest in enhanced routing and scheduling solutions that leveraged artificial intelligence and machine learning. We combined with Foxtrot in April .

And with our customers moving more and more small partial goods, particularly in e-commerce, we teamed up with XPS in June of 2022. Our last deal of the fiscal year was in January when we combined with Supply Vision. Our logistics service provider customers are in the midst of a big push to digitize their operations, both internal and customer-facing.

We've made several historical investments to help them out, including containers, Portrix, and QuestaWeb. With Supply Vision, we're adding to that arsenal of tools to help logistics service providers better manage the life cycle of shipments for their customers. It's a comprehensive digital system that helps them quote, route, and book shipments through to final delivery. And when combined with our real-time shipment visibility solutions like MacroPoint, we're

It provides comprehensive end-to-end solution for them. We can also link Supply Vision into the global logistics network, giving Supply Vision customers broad access to a community of trading partners and services that can enhance their own business. While there was less than a month of Supply Vision in our Q4 results, we're thrilled with the early returns and excited to have the Supply Vision team on board. Welcome to them all. Following the end of the fiscal year, we ended up closing one of the larger acquisitions we've done.

And like the previous acquisitions I've described, this one was very much guided by customer demand and input. Starting from even before the pandemic, final mile delivery to homes and businesses has become a critical part of the logistics cycle. There are tens of thousands of independent final mile delivery specialists and carriers in North America alone.

before you even consider all the private fleets also making these deliveries. With the increased delivery volumes, our customers have been eager for more help to make these delivery operations more efficient, reliable, and safe. Grand Clyde is the perfect fit for this market. It provides a robust solution that helps independent final mile delivery companies manage their operations with particular specialization for service providers who are performing the bulk of their deliveries for large transportation brands.

such as FedEx, Amazon, or Front Door Collective. The platform lets them receive delivery orders, plan and execute the routes, train and monitor driver performance, manage their assets and resources, and analyze their operating efficiency. GrandPod has also integrated to video telematics solutions to provide driving, event detection, and verification, combining with reactive coaching solutions to improve driver safety.

It's a great solution for the market and an excellent complement to our investment and shift track for the carrier market. GroundCloud is a well-run and profitable business with lots of room for future growth with independent last mile delivery companies. What really distinguishes GroundCloud is its specialization and attention to driver safety.

They've done an excellent job of creating and providing easily digestible driver training video content to deliverable to drivers' mobile devices. We've seen increased attention to driver and worker safety through our broader customer base, particularly in private fleet. This is often driven by environmental, social and governance views of having safer roads for our communities and safer work environments, but also for economic reasons due to the high cost of accidents.

litigation, and resulting insurance impact. We believe that ground cloud safety and driver training solutions can be very helpful to our private fleet clients in having safer businesses and a meaningful impact on their communities. We're very excited to have ground cloud as part of Descartes. Welcome to the whole team. We look forward to being able to report back on what we've been able to accomplish together in the near future. With that, let me just summarize with a hand over to Alan to give the full financial details on the year and quarter. We had record financial results.

the business performed well. We believe that's a good reflection of the value that our customers continue to get from our solutions and the hard work that our team continues to put in for our customers. Even with broader economic challenges last year, including big foreign exchange headwinds, we were able to achieve our targets. And we did it while continuing to invest in our business to drive our longer-term growth. We continue to make internal investments in customer-facing roles to drive future organic growth.

We also invest in four acquisitions to address areas where our customers continue to see growth. We ended the year in great financial shape with a large customer roster and a high percentage of recurring revenues.

We ended the year with $276 million in cash, $350 million in available credit, and a market opportunity where we can continue to grow the business for our customers both organically and through acquisition.

And following the year, we used some of that cash to complete one of the largest acquisitions to date. We remain focused on profitable growth so that we can continue to ensure that our customers have a secure, stable, and growing technology partner that can help them with their challenges well into the future. My thanks to all Descartes team members for everything they've done to contribute to a great year.

And continuing to have our business in an enviable position for future success. I'll now turn the call over to Alan to go through our annual and Q4 financial results in more detail. Tae okay thanks, edad. As indicated, I'm going to walk you through our financial highlights for our fourth quarter and year-ended January thirty-firstwe are pleased to report record quarterly revenues of 125.1 million this quarter.

an increase of 11% from revenues of $112.4 million in Q4 of last year. This revenue growth was achieved despite the continued headwind from FX, resulting from a strong US dollar. On an FX neutral basis, our revenue growth would have been over $3 million higher in Q4, meaning that our revenue growth year over year would have been over 14% for Q4. Our revenue mix in the quarter continued to be very strong, with services revenue increasing 14%.

to $113.4 million up from $99.5 million in the 4th quarter last year. With services revenue increasing to 91% of total revenue this quarter, up from 89% of total revenue in Q4 last year.

Removing the impact of both the recent acquisitions as well as the negative impacts from FX that we had mentioned. On a like-for-like basis, we would estimate that our growth in services revenue from new and existing customers would have been approximately 10% in the quarter when compared to the same quarter last year.

Professional services and other revenue, including hardware revenue, came in at one million or 8% of revenue, down slightly from 11.7 million or 10% of revenue as a result of lower hardware revenue, as well as a decrease in professional service, as more of our solution sales require less implementation or configuration work, which is certainly consistent with our long-term plans.

In addition, license revenue came in at 1.7 million compared to 1.2 million last year in the fourth quarter, consistent at just 1% of revenue. For the year, revenue was a record 486.0 million, up 14.4% from revenue of 424.7 million in the previous year. Again, the foreign exchange headwinds on revenue were significant all of last year, with a negative impact on revenue of 14 million from FX.

As a result, revenue growth was closer to 18% on a currency neutral basis. For the year, services revenue came in at $435.7 million, up 15% from $378.7 million in Q4 last year.

Gross margin increased to 77% of revenue for the 4th quarter and the year up from gross margin of 76% for the 4th quarter and the entire year, entire period last year. The slight improvement in gross margin is consistent with the operating leverage that we would expect to achieve as a result of the continued growth in our business.

Operating expenses in the fourth quarter and the year endinto January thirty-first increased primarily related to the impact of recent acquisitions, but also was a result of additional investments that we've made in our business over the past year primarily, as I said, in the areas of marketing sales, product development and network securityadjusted EBITDA came in as a record 55.4 million in the fourth quarter.

2018 dollar in this in this period resulting in this loss on the adjusted EBITDA line. Looking at the annual results as a result of the revenue growth and gross margin expansion from continued leverage that we described earlier, we continue to see strong adjusted EBITDA growth to a record 215.2 million or 44.3 percent of revenue for the year.

Up 15.9% from 185.7 million or 43.7% of revenue last year. We should note that for the fifth year in a row, as a percentage of revenue, our adjusted EBITDA continue to increase as we benefit from the operating margin as the operating leverage as we grow the business.

These solid operating resultscash flow generated from operations came in at 50.6 million, or 91% of adjusted E, bitda in the fourth quarter this year, up 11% from operating cash flow of forty-fivepoint five million or 91% of adjusted EBITDA in Q4 last yearfor the year, cash flow from operations.

was 192.4 million or 98% of adjusted EBITDA, up from 176.1 million or 95% of adjusted EBITDA last year. In addition, we should note that as a result of the stronger than expected results on the past acquisitions of both Ship Track and Containers, we ended up paying an additional 5.6 million in earnouts compared to our original estimates that were made at the time of those acquisitions.

And as a result of additional cash payments went through our cash flow from operations this year. Excluding the impact of those additional or no payments, cash flow from operations would have been approximately 92% of adjusted EBITDA for the year. Going forward, we expect to continue to see strong operating cash flow conversion.

in the range of 85 to 90% of our adjusted EBITDA for the years ahead, of course, subject to unusual events and quarterly fluctuations. From a GAAP earnings perspective, net income for the fourth quarter came in at $29.8 million, up 55% from net income of $19.2 million in the fourth quarter last year. For the year, net income was $102.2 million, or $1.18 per diluted common share, this year than monthly payments andaps. So, number of countries Beat superintendent vasaser With assets includes all the market

Up 18.4% from 86.3 million or $1 per diluted common share last year. Overall, as Ed mentioned earlier, we're certainly pleased with our operating results for fiscal 2023 as our continued revenue growth allowed us to invest in several areas of our business while still allowing us to achieve 15.9% growth and adjusted beta.

Expand our adjusted EBITDA marchin to 44% of revenue and achieved growth in our cash flow from operations for the yearif we look at the balance sheet, our cash balances will total 276.4 million at the end of January and we did not have any borrowings under our credit facility at the end of the yearas that mentioned. Subsequent to year-end, on February fourteenth, we announced we used approximately 138 million of our existing cash balance.

Consistent with our business plan.

As we look to the current year, our fiscal 2024, we should note the following.

After incurring approximately $6.1 million in additional capital additions this past year, we expect to incur approximately $5 to $7 million in additional capital expenditures this coming year. We expect amortization expense will be approximately $15 million for fiscal 2024, with this figure being subject to adjustments for foreign exchange rates, foreign exchange rate changes, and any future acquisitions.

Our income tax rate in the 4th quarter came in at approximately 17.5% of pre-tax income. Resulting in a tax rate for the year of approximately 24%. Which is slightly lower than our statutory tax rate, mainly as a result of the reversal of certain uncertain tax positions that we recorded in Q4 of this year. Looking at FY24.

We current. We currently expect that our TA ratewe could be low, slightly lower than our statutory tax rate, if certain other and uncertain tax positions are released as a result. We re expecting the tax rate be in the range of 22 to 27% of our pretax income in our fiscal 2000 and twenty-fouralthough, as always, we we should add that our tax rate may fluctuate from quar to to quarter from onetime tax items that may arise as we operate internationally across multiple countries.

And finally, we currently expect stock compensation to be approximately 10 to 11 million for fiscal 2024, subject to any future equity grants, as well as any future forfeitures of stock options or share units.

And with that, I'll turn it back over to Ed to wrap up with our baseline calibration. Hey, thanks, Alan. We're already a month into our new fiscal year in quarter.

We've already been busy by completing the acquisition at GroundCloud. We're excited about the upcoming year and our business. However, we remain cautious about the broader economic circumstances that are out there. There's high interest rates, higher inflation, a pervasive conflict in the Ukraine that's into its second year, and the various recessionary pressures and economic discussion. We've seen some companies taking actions to ready their business for what may come. So for us, we will be cautious in the face of uncertainty.

Supply chain and logistics continues to be a critical business function for our customers regardless of the economic circumstances. I wanted to share some areas that our customers are monitoring and to shape the market that we're currently operating in.

The first is US ocean container imports are at pre-pandemic levels. Based on public data available through our DataMine service, it's clear that there was a pullback in ocean imports over the past six months starting in August .

Current volumes are 15 to 20 percent lower than the pandemic highs, but are consistent with the levels we saw in 2019 and 2020. There's less impact from COVID delays in China. Part of the reason for the pullback in ocean imports was China's approach to zero COVID, with many businesses critical to the international logistics and supply chains either shuttered or severely understaffed.

Recently, China has eased up on that policy, and so our customers anticipate goods may start to flow more freely. The next is port transit delays have improved. As volumes came off a bit, the backlog that had been seen at many ports has begun to work through. We're no longer seeing ocean ports with long lines of ships offshore and containers that are otherwise starting to move through the ground system more efficiently. The next is U.S. ocean imports have shifted to East Coast ports.

There's been a recent trend where volumes have shifted to East Coast ports. That's likely in part due to continued labor challenges. On the West Coast there still isn't a contract in place, the Doc workers and new regulations impacting truck drivers being classified as employees rather than independent contractors in California. Our customers are mindful of this import flow change when making their decisionsocean freight rates are expected to come down during the pandemic ocean rates.

surged almost $20,000 a container from pre-pandemic $2,000 to $3,000 levels. The spring period is when many shippers and carriers negotiate their freight rates for the upcoming year. Our customers are expecting that rates will come down and that may be a catalyst for volumes to increase over time. Next, our customers anticipate that shipment volumes may increase as the year progresses.

Prior to this past holiday season, many retailers had excess inventory and accordingly didn't order or ship as much to replenish inventory. Now that we're through the holiday period, we're hearing retailers are mindful of the broader economic circumstances but are cautiously looking to replenish inventories. That may have retailer-driven shipment volumes increase as the year progresses.

Next, final mile delivery is still key. During the pandemic, e-commerce volumes grew at unprecedented rates. We're still seeing growth in e-commerce, just not as strong as during the pandemic. E-commerce growth has in part contributed to a continued focus on the importance of last mile delivery. Gone are the days of a home delivery of anything being a novelty. Recently Target announced that it was investing $100 million into its network to improve next day on it.

Our customers are looking for detailed information from their trading partners so they can meet and report on their own ESG goals. Also, our customers need this information to show their compliance with existing pending regulations addressing such issues as use of forced labor, environmental impact of operations, and trading with restricted parties. We've recently seen several countries roll out additional sanctions on entities and people there.

connected with the Ukraine conflict, so we anticipate compliance and ESG reporting solutions will continue to get mindshare with our customers.

So those are some of the things we're hearing from our customers and seeing in our business, things that also inform our calibration for the quarter. Our business is designed to be predictable and consistent. We believe that 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. Our long-term plan is for our business to grow just at EBITDA 10-15% annually. We grow through a combination of organic growth and acquisitions.

We take a neutral party approach to building the 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.

When we overperform, we try to reinvest that overperformance back into our business. We focus on recurring revenues and establishing relationships with customers for life. And finally, we thrive on operating a predictable business that allows us forward visibility to our revenues and investment paybacks. In our annual report, we've provided a comprehensive description of baseline revenues.

Baseline calibration and their limitations. We typically provide calibration as over the first day of the fiscal period. However, with the ground cloud acquisition happening on February fourteenth, we've updated calibration to that date and included those aspects of ground cloud for which we feel we have sufficient visibility to at this point, as of February fourteenth 2023, using a foreign exchange rate of 75 cents to the Canadian dollar.

107 to the euro and 1.21 to the Great Britain pound, we estimate that our baseline revenues for the first quarter of 2020 far are approximately $117 million and our baseline operating expenses are approximately $74 million. We consider this to be our baseline adjusted EBITDA calibration of approximately $43 million for the first quarter of 2024, or approximately 37% of our baseline revenues as at February 14th, 2023.

Last quarter, we indicated that our targeted adjusted EBITDA operating margin range was 40 to 45 percent. Last year in Q1 and Q2, we were at 44 percent. In Q3, we were at 45 percent. And in Q4, we were at 44 percent. We're maintaining that same 40 to 45 percent for this fiscal year. As we've indicated in the past, we anticipate that our margin will vary in that range given such things as foreign exchange movements and completing larger acquisitions that are operating below our aggregate margin at the time of acquisition. Ground Cloud is a profitable, cash-generating business and one of the larger acquisitions we've ever done.

some exciting acquisitions and other investments that we believe will be a big benefit to our customers. It remains an uncertain broader economic environment, but we believe our proven track record of execution, solid capital structure, and customer focus will serve us well to have a great fiscal year. Thanks to everyone for joining us on the call today. As always, we're available to talk to you about our business and whatever.

A one-own prop acknowledging a request.

One moment please for your first question. Your first question comes from the line of Matt Faugh from William Lehr. Your line is now open. Great, thanks for taking my questions. Just circling back to all the macro comments that you made.

Maybe just help us understand what the impact you're seeing on your business from those comments is. Are you seeing any impact on either transactions or deal closures as a result of some of the items you called out? Minor, but there's some parts of our business that are really doing well right now. I think I caught a few of those out during the call. And while our ocean business was being impacted minor way by shipment volumes being down, we had other parts of the business booming still around.

what the impact you're seeing on your business from those comments is. Are you seeing any impact on either transactions or deal closures as a result of some of the items you called out? Minor, but there's some parts of our business that are really doing well right now. I think I caught a few of those out during the call. And while our ocean business was being impacted minor way by shipment volumes being down, we had other parts of the business booming. So I think that's why you see the results yourself today.

Okay, great. Then in terms of acquisitions, I think larger acquisitions is an area that you called out where there was perhaps a bigger discrepancy between valuations you were willing to pay and where valuation expectations were. You made a larger acquisition with Ground Cloud. Does that sort of signal that market's opening back up or maybe just some comments in terms of what you're seeing there?

Yeah, we're seeing a very healthy market for that. The prices can be all over the place, depending on the company and who's selling them and what banks are presenting and things like that. But we're certainly seeing lots of opportunity out there. And you can see we just pulled off two acquisitions in the past couple months. So we certainly see a market that's open for business.

Okay, great. Thank you. Thanks, Matt. As a reminder, it is star one to ask a question. Your next question comes from the line of Paul Traber from RBC Capital Markets. Your line is now open.

Thanks very much and good afternoon. Just hoping that you could elaborate on some of the financial details for GramCloud. Specifically, you mentioned the mix of professional services is higher than your business. How should we think about the mix there and any additional comments you could provide on the company's revenue or growth?

they're seeing drivers do certain things during the day and then they're recommending them for video-based training at night when they're maybe in their cab or before they go to work the next morning. At the same time, when they start those businesses off, when they start new customers off, they go through a comprehensive training program that involves onsite training. That's why you see a little higher professional services rates in those businesses than maybe the carts are accustomed to. Normally we stay in our business day.

We would like it if there was no professional services, because that would mean the products were all easy to install and no one had to get in anything complicated to get them in. But there's obviously products even in our business that are more sophisticated and take a little while to put in. Ground Club is kind of the same. When they get a new customer as part of the process, they provide a comprehensive training program for all the drivers. And then specific behavior-based training as the drivers driving routes during each business day and...

than Descartes' number. We were at 8-9%. It would probably be double that percentage, but it still fits the exact mold of which we want, which is very predictable subscription-based business recurring. Okay, that's helpful. It puts it in the ballpark. That's helpful. And then how do you see it integrating with the remainder or complementing the remainder of your existing mobile routing and telematics business?

Well, I think about it, we're helping these same types of companies plan routes every day. So it's a very similar customer base. We do business with a lot of delivery companies that are doing daily route plans in our routing software to deliver to the home. And that's a great customer base to sell this into. Like a lot of the companies that we've bought, you know, they.

they have a certain type of customer they go after and they have a couple hundred of them or a couple thousand of them, whatever that is. And we have a couple hundred or a couple thousand more than that. And so we're able to go out and quickly bring our solutions to a much broader audience. And that's a big advantage for us when we buy a company like GrandCloud. Okay, and then just one last one. Can you speak to the impact of inflation on your business? To what degree or not have you updated pricing for inflation? And how do we think about it from a cost point of view? So we've had some impact from all of it.

You've probably heard us saying in the past that we typically only raise prices in the areas where our costs are going up directly. So we have avoided in the past inflation-based price increases on our network and the transaction-type businesses. That changed when the inflation rates went up to 7%, 8% and maybe higher around the world over the last couple of years. We started to make some.

adjustments to customer prices, minor compared to maybe what some other companies were doing. So I would say it was fairly well received for a price increase within our customer base. It was probably seen as fair. And on the cost side, we've certainly seen some of it. We certainly have some costs in our proceeds and some of our numbers. Our costs are going up maybe a little faster than they might have otherwise, but we're more than making up for that with that growth in our business.

Thanks for taking my questions. Thanks, Paul. Our next question comes from the line of Justin Long from Stevens. Your line is now open. Thanks. Following up on the ground cloud acquisition, is there anything you can share on what financial targets need to be achieved in order for that earn-out to be paid? And out of the gate, anything you can share? Okay. Thanks, Paul. Thanks, Justin. Thanks, Paul. Thanks, Paul. Thanks, Paul.

help us, or could you help us with the kind of year one revenue contribution we should be expecting from this business? Let me start with that at least. As with that going into the statistics, because I don't want to provide competitive information out there to people that might not be on our side, but suffice it to say like every acquisition we've done when we have an earn-out, we are more than happy to pay it. In other words, if they can get the growth that's set forth in the earn-out, it's great for our business.

So let's hope that that happens in this one as well. Suffice it to say, you should see it's a fairly significant number in the ground cloud acquisition. That's some substantial growth for them to get there. Let's see what happens, but we would hope that that does happen and be more than happy to pay the earn-out if we got there. Al, I don't know if you have any more detail you want to provide. No, just generally the way we build out those acquisitions, anytime we have an earn-out, we are thrilled to pay the entire earn.

I'm more speaking to getting our payback on our acquisitions. When we deploy that capital, we're looking to get our money back in five to seven years of a 15 to 20% return. And we think we can achieve that if at any level within that or note with zero or whether we hit that or note. That's what I'm looking for. Well, maybe I can add to that, Justin.

Our earnings are almost always, in fact, anytime I can think of, they're based on revenue, getting the revenue targets. We take it on ourselves to manage the costs of the business and help make it more profitable over time. So the targets are usually not anything more than growth in revenue. Understood. And Alan, I think you mentioned earlier that excluding FX, organic growth was about nine and a half percent. Anything you can share on the impact from transactional volumes within that number and then...

I guess on the 150 organic headcount ads this year, what are you assuming for organic growth going forward as you make that investment?

I'll take the first one and then if you want to talk to the head counts, but as far as as far as the organic growth, that's our estimated growth within the services category. You know, you know, our services have split between transactional and subscription now, for the most part, both are growing our prescriptions tend to be some of the higher growth areas of the business.

But growth a little bit slanted towards subscription, but both growing, adding up to that 9.5%. Ed on head counts, did you want to make a comment? Yeah, sure. So, I mean, it's a full year ahead of us and we obviously reserve the right to adjust course.

Depending on what happens in the business, you probably saw that last year. I don't think we planned on having that many last year. Just the business started performing very well and we needed more people and went out and got them. I think roughly our plans are maybe for an increase of half that, but I wouldn't read too much into that. If things go well, we could see us increasing that. If the economy stalls more, we would probably reduce that just to...

that right now with the headlines I'm reading in the newspapers. So we'll see what happens. But for the most part, we've planned for about half the growth that you saw in headcount organically last year, in the coming year, and we'll adjust accordingly as we.

I'm reading in the newspapers, so we'll see what happens. But for the most part, we've planned for about half the growth that you saw in headcount organically last year, in the coming year. And we'll adjust accordingly as we see how the business forms.

Okay, got it. Thanks for the time. Thank you, Justin. Your next question comes from the line of Daniel Chan from TD. Your line is now open. Yes, thanks. You talked about Ground Cloud having a higher mix of professional services driving a lower EBITDA margin. Just wondering whether for you to get their EBITDA margin more in line with your target, whether you have to change their business model to reduce that PS mix? And if so, how do you do that? How long will it take for you to get those margins up to where you want it to be? Certainly, we have some thoughts about how to do it.

If you make it 200 customers, invariably that company is going to be more profitable. You're writing the same piece of code for now, double the amount of people. And if they're all paying a fair price, your profits go up, which has been a big part of our growth in EBITDA over the past 10 years as we get a bigger and bigger customer base and therefore have a bigger and bigger group of people to go.

Sell our next acquisition into and I think you might see the same from ground cloud over time. That makes sense, thanks for that and then shifting gears a bit. Just wonder if there's any impact from the Windsor framework that just got passed. You know, we're still analyzing it, but, you know. They've established a green lane in a red lane, much like you see in passenger traffic. We understand that both lanes are going to continue to have a filing. So. You know, at first blush, my gut is that there's not going to be a ton of impact to our business.

and I think we might see the same from ground cloud over time. That makes sense. Thanks for that. And then shifting gears a bit, just wondering if there's any impact from the Windsor framework that just got passed? You know, we're still analyzing it, but, you know, they've established a green lane and a red lane, much like you see in passenger traffic. We understand that both lanes are going to continue to have a filing. So, you know, at first blush, my gut is that there's not going to be a ton of impact to our business, negative or positive.

Okay, great. Thank you. Thank you. Your next question comes from the line of Robert Young from Kanakar Genuity. Your line is now open. Hi, good evening. The couple of the macro comments and questions around the transactions, I got the sense that maybe that was a minor headwind and so if you clarify that and then maybe just give a refresher on how minimum contracts protect that or if that's still in place.

maybe a refresher there. Yeah, I mean, I called out the ocean business and actually, if I look at the data mine stats, it's actually starting to recover in January and into early February . So I'm expecting that here, we kind of mentioned that the China effect kind of easing up right after Christmas. I kind of suspect that's what we're seeing right now. Truck and air, we're still pretty strong and I see an air getting even stronger in the last couple of weeks based on the data mine stats. So we'll see, but the impact in this past quarter was minor. I mean, we had plenty of stuff that made up for it or more than made up for it and had us kind of beating our projections for the last quarter because...

because a bunch of businesses were firing on off full cylinders and we had an ocean business that was only down slightly so all in all pretty good news for us.

Okay, and then you touched on my second question around China. There's a lot of news about the reopening and the impact. Maybe it's more on air travel. Is that not having a more positive impact?

Yeah, I think it is. That's what I was just kind of mentioning in the ocean space. We're starting to see it pick up in the stats we get from governments over the past month or so. And I think that's exactly what's going on. There's your COVID policy ended, I think, mid-December or something like that. And people started to get back to work and eventually factories get reopened and start producing more stuff and retailers get through Christmas and everything, so we just got really really concerned about ways people reach out and

As I mentioned, we thought a lot of retailers were selling stuff that they had ordered pretty early last Christmas, and as the shelves emptied out, they're now looking to replenish those things now that a bunch of factories are opening in China. My guess is maybe it's a little better than most, but still, I don't know exactly what's going to happen. I think I'm starting to see in the past couple of weeks the impact of that and increased trade volumes. Last question, just a little clarification in the press release, the 40 to 45% of just the guitar range, I think.

the quote from you Alan, maybe the way I read it it seemed to suggest it was inclusive of M&A forward and I Just want to make sure I'm not reading that incorrectly. The 4045 doesn't include any anticipated future M&A That's just up to this point. Well, yeah, I just remember that it's it's it's an even to margin range So, you know barring us by buying something massive and you can see here with ground cloud It has a bit of a negative impact on our overall margins because we bought a company that makes less money As a percentage of revenue than we do but still, you know only a point or two

And that was a fairly large acquisition for us. So, yeah, no, I think we are trying to say we'll be in that 40 to 45 percent margin range. If we did something gigantic, Stuart, we'd go outside of that. If it was way more profitable than us, it would move up. If it's less profitable than us, it moves down. But, you know, net-net, I'd be surprised if it changed outside of that range, 40 to 45 percent. Understood. Thanks. All right. Thank you, Rob.

Their next question comes from the line of Kevin Chris mrockney from skcoal bank. Here Ice open. Hey guys, good evening, question free. You just on on competition, of potential competition, when you're understanding you cover several areas in the broader logistics ecosystem. Just curious. You know, given the momentum that we're seeing in bas, there are any particular areas we're seeing new competitors or outsiz funding from you? Know private equity or anything in that regard. You know areas that are hot. Curious, you know what you're seeing and how well you may be positioned in these area. You know.

10 of them get started and we get to see who's the best one or two guys out there and maybe one day we'll end up buying one of those companies. That tends to be more the way we think about it. But yeah, it's absolutely, there's been a ton more investment in the space and I think that's great news. Is there any, is it just pretty widespread? I'm just curious if there's any particular areas that are popping up. Well, you can see the supply chain visibility space is hot. We were the first move in that space by a macro point. Micro point has some competitors that have also attracted a ton of investment.

and there's more people popping up in that space all the time. There are also potential customers of ours, right? They need access to the data that we have because we do business with most of the freight brokers in North America. We tend to have more data than any of our competitors in that space and are able to sell that to other people who are building their own supply chain visibility tools but don't have access to a network like ours. So that's been great for us. You can see all these IoT devices that you're starting to see come out and I suspect we're just at the beginning of this.

I think we're at the beginning of that right now. It's going to be hundreds, if not thousands of companies that start up based on that. And we're really excited about it, because that's all information that we could use to help our customers get better results. God, I'd appreciate those comments. Maybe to continue on the M&A fee, I know it's definitely been picking up a bit. Assets getting a little bit bigger.

It's been a while, I think, the last several acquisitions you made have been all cash. In the past, you've macro-pointed and included stock. I'm just curious about your philosophy on purchase price for acquisitions, your decision on a mix of cash and equity. Any thoughts there? We try to be cash buyers. When people find out that you have not even gotten similarities despite being Lynette

I guess when you see stock getting pissed in a deal, it's usually because the people that own the business have asked for some component of it to be in day card stock. Oftentimes they go, hey, you know, we're buying some company for say $50 million and they're going, all right, I'll take 40 of it in cash and 10 of it in stock. And if they requested from us, you know, that's good news for us. We're not really up for, we're not looking for reasons to delude our shareholders. But if the owner of a business says, hey, I want you to buy the company. I want to pick you guys to be the buyer and I want to take back some day card stock. We look at that as, you know.

something that we should do right now. I have an owner in that business. It's probably going to still work here and probably going to be very vested in our success. So that's something we'll almost always say yes to. Got it. Thanks for that. Maybe just the last one for me, just a question on the sort of your marketing spending efforts. I think it was just over a year ago and you kind of talked about more meaningfully stepping up the efforts there, the customer success team, the new digital marketing initiatives. I'm just wondering how that's been progressing. Are you happy with the ROI? Is there anything you can share there?

as our business gets bigger, we need to do things like that to stay as close to the customers as we were when we were a small company. We think investments like this are the smart thing to do. The good news is we went and did it over the last two years and it really worked well and we're doing more of it as a result. Understood. Thanks a lot. I'll pass the line. Thanks, Tim.

Our next question comes from the line of Steven Lee from Raymond James. Your line is now open. Thank you. Maybe a question for Alan to start. Can I check with you? So the overall organic growth is around 7.5% at constant currency. Alan? Good afternoon.

Yeah, so so in the prepared comments, we mentioned 9 and a half percent growth in services revenue. We did see a drop in professional service and other revenue. It was partly hardware a little bit on the side when you blend those together for the 4th quarter. We are somewhere in that 7, a half 8% range. But the most important for us is to be that long term growth in.

in services, which is highly recurring revenue for us. So, nine and a half on services coming down to sort of that seven and a half, eight on the total revenue. Got it. And I was curious, given the higher PS mix with ground cloud, does that not mean that the services organic growth going forward is going to miss those PS organic growth from ground cloud? Is it better to look at the overall organic growth?

Sorry, I didn't catch your question. Because I believe your services organic growth, you exclude PS revenues from that, right? And I was asking, given your recent acquisition, ground cloud, a higher mix of the revenues is PS. Would looking at services organic growth, would we be missing the organic growth coming from those PS revenue streams from ground cloud? Yeah, listen, we're obviously going to try to grow that business both on the

on the subscription side for the software as well as the PS side. Realistically for us, the subscription piece should grow faster if we execute to our plan. We will continue to focus on both elements, and we'll just close to you as we go. We're disclosing services revenue growth because that's the most relevant number.

for us in the long term piece of the business, but both will be important and we'll message it accordingly. Got it, thanks. And then just given your comments, so shipment volumes on one on one side and then but the other parts booming, with this organic growth like 7-8% high single digit, will it be a good base for this year or we can do better than that?

Well, I mean, we think we're going to be in that range. We always kind of plan to run our business in the 4 to 6 percent organic revenue growth range and trying to get 10 to 15 percent even to growth out of that. We've seen this too much better than that in the past years. But you know, if the economy kind of went into a boom period there for a year or two and it started to come back down, we're pretty happy being in that 9 percent range right now. That's, that's I would say a good big deal.

Just think that came from quality of acquisitions growth that we've brought on in the past. A little bit of it from customers thinking that supply chains and logistics is a lot more important than they thought it was pre-pandemic. And yeah, I'm hopeful that that range stays up in that eight, nine percent, but we'll just have to see. Got it. And then also your comment, you said shipping volumes may increase through the year. So does that mean maybe we see a slower first half and then a better second half in terms of organic growth as well? Yeah, I mean, I don't wanna make predictions till year out, but if our customers do well like that, yeah, I would expect our business to continue to.

to do better and better over time. Got it. And then a couple questions on your recent acquisition. So GroundCloud, what has been their growth profile in recent years? And was it all organic? Thanks. It was, they're a fast growing company and it was all organic.

So it? Sorry, did you say it? Did you think that was a growth? I, I didn't. I didn't call out it's specific dig, but it.'s it's. It's a fast, it's a best ground company. That's one of the reasons we wanted to buy it. We think we have a lot an opportunity to expose it to a lot more customers.

and as a result, maybe continue that growth into the future. Got it. And then maybe an update on the XPS. I remember the urn out there was sizable. How are they doing so far and would you expect them to be hitting the urn out targets this year? I don't know if I could speak to the targets, but but yes, they're doing very well since they've gotten here.

It's been a great business for us and we're real happy we bought it. I'm not going to comment on the internet until they get there. But we're very happy with the acquisition so far, let's put it that way. All right, thanks guys. Hey, thank you, Steve. Your next question comes from the line of Scott Group from Wolf. Your line is now open. Hey, thanks afternoon. So is there a lot of, is there much seasonality to the revenue at GroundCloud or?

Should we take the bump in the baseline for Q1 and annualize that? I'm just trying to figure out the right way to try and ballpark full year revenue. It's a fairly consistent performing business, yes. It's not a kind of seasonal. But is it a kind of business where you would expect the actual revenue to outperform the baseline like we see in the rest of the business?

I don't know if the exact numbers, but yes, with most of our business, we're expecting a baseline and then quarter to quarter there will be some increase in the business as we get the actual results in. And I think cloud would probably be no different. Okay. And then I know it's obviously the very beginning of the year, you always talk about 10 to 15 money, but I think you've pretty much get there to the high end or exceeded every year. I know it's early, but what's the visibility to repeating that?

Again, this year. We don't take our bonuses and we don't get to 15. So we're all planning on getting to 15. I think we've beaten it 15 years in a row, Scott. And I obviously can't make a promise about it. But that's certainly our intention, is to be a 15 or better. You say 10 to 15, and we do our damage to get to 15. OK. Good stuff. Thank you, guys. Appreciate it.

Thank you, Scott. Your next question comes from the line of Raimo Lench-Chao from Barclays. Your line is now open.

Great, thank you. This is Jeremy on for Raimo. I was just wondering if you could share a bit more detail on how the e-commerce business is trending. Would you say it's reached more of a steady state post deceleration from the pandemic or really any color you can share there would be helpful? Thanks. Sure, thanks Jeremy.

You know, we had massive growth coming out of the pandemic in the end of 2020 and 2021, like a lot of e-commerce companies had. I think we ended up in a different circumstance soon thereafter, a lot of e-commerce companies that we saw went flat. That's not what happened to us. We kind of went back to our normal, you know, low double digit growth coming out of that and we continue to see that be the case right now. It's a very nice business for us. It continues to grow at a nice pace every quarter and yeah, we're still seeing, I don't want to use the word flat because it's.

The growth rates are flat, but it's still growing nicely every, every quarter and every year, coming out of that big blift in the beginning in the pandem. When I read the newspapers about some other e-commerce results, I don't think we're subject to the same things that they are, maybe because we're selling a lot more new customers, though we continue to get growth even if e-commerce slls are flat for a quarter or so.

Got it. Thank you. Thank you. There are no further questions at this time. Ed Ryan, please proceed. Hey, thanks, everyone. Appreciate all your time today. And I hope to see you as we're out on the road in the coming weeks. Otherwise, look forward to reporting back to you next quarter. Have a great night and thanks for your time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.