Q4 2024 The Descartes Systems Group Inc Earnings Call

Operator: Good afternoon, ladies and gentlemen, and welcome to the Descartes Systems Group quarterly results conference call. At this time, all lines are in a listen-only mode.

Good afternoon, ladies and gentlemen, and welcome to Descartes Systems Group quarterly results Conference call.

At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.

Operator: Following the presentation, 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. I would now like to turn the conference over to Scott Pagan. Please do so.

Many times you can just call you require immediate assistance. Please press tours are no party operator.

I would now like to turn the conference all participant pagan. Please go ahead.

Scott Group: Thank you, and good afternoon, everyone. Joining me remotely on the call today are Ed Ryan, CEO, and Allan Brett, CFO, and I trust that everyone has received a copy of our financial results press release that was issued earlier today. Portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the safe harbor provisions of those laws.

Thank you and good afternoon, everyone. Joining me remotely on the call today are Ed Ryan CEO, and Allan Brett CFO and I Trust that everyone has received a copy of our financial results press release that was issued earlier today.

Portions of today's call other than historical performance include statements of forward looking information within the meaning of applicable securities laws. These statements are made under the safe Harbor provisions of those laws.

Scott Group: These forward-looking statements include statements related to our assessment of the current and future impact of geopolitical, trade, and economic uncertainty on our business and financial condition, Descartes' operating performance, financial results, and condition, Descartes' gross margins and any growth in those gross margins, cash flow and use of cash, business outlook, baseline revenues, baseline operating expenses, and baseline calibration, anticipated and potential revenue losses and gains, anticipated recognition and expensing of Possible 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 Descartes to differ materially from the anticipated results, performance, or achievements implied by such forward-looking statements.

These forward looking statements include statements related to our assessment of the current and future impact of geopolitical trade and economic uncertainty on our business and financial condition.

<unk> operating performance financial results and condition.

Descartes gross margins and any growth in those gross margins.

Cash flow and use of cash business outlook baseline revenues baseline operating expenses and baseline calibration.

Anticipated and potential revenue losses, and gains anticipated recognition and expensing of specific revenues and expenses.

Central 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 descartes to differ materially from the anticipated results performance or achievements implied by such forward looking statements.

Scott Group: These factors are outlined in the press release and in the section entitled certain factors that may affect future results in documents filed and furnished with the FEC, the OSC, and other securities commissions across Canada, including our management's discussion and analysis filed today. We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future. Please be careful that such information may not be appropriate for other purposes.

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

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

You are cautioned that such information may not be appropriate for other purposes.

Scott Group: We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions, or circumstances on which any such statement is based, except as required by law. And with that, I will turn the call over to Ed. Hey, thanks, Scott, and welcome everyone to the call. Today we're reporting record fourth-quarter and annual financial results, even stronger organic growth, and further improvements to our operating margin. We're excited to go over these results with you and give you some perspective on the business environment we see right now. But first, I want to give you a roadmap for the call.

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

Hey, Thanks, Scott and welcome everyone to the call today, we're reporting record fourth quarter and annual financial results, even stronger organic growth and further improvements to our operating margins.

We're excited to go over these results with you and give you some perspective about the business environment, We see right now, but first let me give you a roadmap for the call.

Edward J. Ryan: I'll start by hitting some highlights from the last quarter and some aspects of how our business performed. Then I'll hand it over to Allan, who will go over the Q4 and annual financial results in more detail. I'll then come back and provide an update on how we see the current business environment and how our business was calibrated as we entered the new fiscal year. And finally, we'll open it up to the operator to coordinate the Q&A portion of the call. So let's start with the quarter that ended on January 31st.

Start by hitting some highlights of last quarter and some aspects of how our business performed.

I'll hand, it 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 how we see the current business environment and how our business was calibrated as we entered the new fiscal year.

Finally, we will open it up to the operator to coordinate the Q&A portion of the call.

So let's start with the quarter that ended January 31 <unk>.

Edward J. Ryan: The metrics we monitor include revenues, profits, cash flow from operations, operating margins, and returns on our investment. For this past quarter, we again had outstanding performance in each of those areas. Total revenues were up 18% from a year ago, with services revenues up 20%. Adjusted EBITDA was up 19% from a year ago. The adjusted EBITDA margin was at 44%, and excluding the impact of earn-out payments we made on past acquisitions, which Allan will explain later, we generated $63.6 million in cash from operations, representing 96% of adjusted EBITDA. At the end of the quarter, we had almost $320 million, $21 million in cash, and we were debt-free with an undrawn $350 million line of credit.

The metrics. We monitor include revenues profits cash flow from operations operating margins and returns on our investments.

For this past quarter, we again had outstanding performance in each of those areas total revenues were up 18% from a year ago with services revenues up 20% adjusted EBITDA was up 19% from a year ago. Adjusted EBIT margin was at 44% and excluding the impact of earn out payments, we made on past acquisitions, which Alan will.

Explain later, we generated $63 $6 million in cash from operations, representing 96% of adjusted EBITDA.

At the end of the quarter, we had almost $320 million $21 million in cash and we were debt free with an undrawn $350 million line of credit.

Edward J. Ryan: We remain well capitalized, cash generating, have strong organic growth, and are ready to continue to invest in our business. We had a strong quarter of organic growth in our core services revenues from a year ago. Many of the key drivers are similar to past periods. The biggest growth areas were in real-time visibility, global trade intelligence, and routing and scheduling solutions. So let me touch on a few of those. First, real-time visibility.

We remain well capitalized cash generating have strong organic growth and remain ready to continue to invest in our business.

We had a strong quarter of organic growth in our core services revenues from a year ago. Many of the key drivers are similar to past periods. The biggest growth areas were in real time visibility global trade intelligence and routing and scheduling solutions. So let me touch on a few of those.

First in real time visibility the core of our real term real time visibility solutions as macro point.

Edward J. Ryan: The core of our real-time visibility solutions is MacroPoint. In this market, there are three important types of logistics players. Carriers. These are companies who have vehicles, ships, planes, and trucks that move goods. And, two, we have shippers.

In this market there are three important types of logistics players.

Carriers. These are companies, who have vehicles shifts planes and trucks to move goods.

Two we have shippers as your companies that their goods to be shipped manufacturers retailers and distributors.

Edward J. Ryan: These are companies that have goods to be shipped, manufacturers, retailers, and distributors. These three intermediaries are companies who help manage parts of the movements of goods on behalf of shippers and carriers, including booking. These are sometimes called freight brokers, forwarders, or third party logistics providers.

Three intermediaries. These are companies, who help manage parts of the move ins up goods on behalf of shippers and carriers, including booking. These are sometimes called freight brokers borders where third party logistics providers.

Edward J. Ryan: When freight is booked, it's not always the shipper booking it with the carrier; it's often an intermediary booking for multiple shippers with multiple carriers. So if a shipper wants to know where a particular delivery is at any specific point in time, it can be challenging because the shipper didn't make the booking and doesn't know what vehicle the goods are on. Enter real-time visibility solutions.

On freight is booked it's not always the shipper booking it with the carrier, it's often an intermediary booking for multiple shippers with multiple carriers. So.

So if a shipper wants to know where a particular delivery is at any specific point in time, it can be challenging because the shipper make the bulking it doesn't know what vehicle because Iraq.

And your real time visibility solutions, we provide a network sources information from carriers shippers and intermediaries and present it in a way that makes business sense. The most common answer we're providing the shippers and intermediaries as to the question.

Edward J. Ryan: We provide a network of resources information from carriers, shippers, and intermediaries and present it in a way that makes business sense. The most common answer we're providing to shippers and intermediaries is to the question, "where's my stuff?". Knowing the location of a shipment and when it's going to arrive is critical to serving your customers and running your business.

My stuff.

Knowing the location of a shipment and when it's going to arrive as critical to serving your customer can running your business, but even more importantly, knowing where youre stuck with ads versus where it's meant to be when things arent going to plan and getting updated ETA'S. It's critical if you want to set yourself apart from the competition and that's exactly what we help our customers do.

Edward J. Ryan: But even more importantly, knowing where your stuff is versus where it's meant to be when things aren't going to plan and getting updated ETAs is critical if you want to set yourself apart from the competition. And that's exactly what we help our customers do. To get our strong growth in Q4, it comes from two things. One, we're winning more deals. And two, our existing customers are attracting more loads than they have in the past. I believe there are four key reasons for that.

To get our strong growth in Q4 comes from two things one we're winning more deals into our existing customers attracting more loads than they have in the past I.

<unk> believes there are four key reasons for this first our solutions are better attracting loads and our competitors are key operational metrics for this business as a percentage of load submitted that are able to be successful track there can be challenges with tracking the load. If you can't get tracking information from a driver there are challenges with the carriers data or systems.

Edward J. Ryan: First, our solutions are better at tracking loads than our competitor. A key operational metric for this business is the percentage of loads submitted that are able to be successfully tracked. There can be challenges with tracking a load if you can't get tracking information from a driver.

Edward J. Ryan: There are challenges with the carrier's data or systems, or if you have incorrect information about a load. We've invested in a team of dedicated professionals and systems focused on resolving any challenges with tracking the load to maximize our customers' ability to know where their goods are. We believe we have the largest network of connected carriers to get tracking information from. If carriers aren't already connected, we've got self-connect tools to help our customers get even more location coverage across their network of carriers.

You are incorrect information about alert.

We've invested a team.

<unk> dedicated professionals and systems focused on resolving any challenges with tracking the load to maximize our customers' ability to know where their goods are we believe we have the largest network of connected carriers to get tracking information from carriers are already connected we've got self connect tools to help our customers even more location coverage across their network of carriers.

Ultimately, we are aligned with our customers' interests because our customers pay us by the number of successfully track loads are tracking percentage approved again this quarter and we believe we have opportunities to improve it further going forward or improvement and tracking percentages as outpaced any recent decrease in industry shipping bottles.

Edward J. Ryan: Ultimately, we're aligned with our customers' interests because our customers pay us by the number of successfully tracked loads. Our tracking percentage improved again this quarter, and we believe we have opportunities to improve it further going forward. Our improvement in tracking percentages has outpaced any recent decrease in industry shipping volume. The second reason is that visibility is embedded in many Descartes solutions.

The second is visibility is embedded in many Descartes solutions are real time visibility solutions work with a host of other Descartes solutions key integration areas, our transportation management solutions, allowing shippers and intermediaries to manage their relationship with carriers from booking through invoicing, while getting visibility to shipments in motion.

Edward J. Ryan: Our real-time visibility solutions work with a host of other Descartes solutions. Key integration areas are transportation management solutions, allowing shippers and intermediaries to manage their relationship with carriers from booking through invoicing while getting visibility into shipments in motion. We believe we offer a more comprehensive suite of solutions than our competitors. Third, we're experienced in multiple transportation modes.

We believe we offer a more comprehensive suite of solutions than our competitors.

Third we're experiencing multiple transportation modes.

Edward J. Ryan: We have a long operating history with solutions and customers in all transportation modes, truck, rail, ocean, and air. We believe we have a more comprehensive global logistics network than any other provider in the industry. And finally, we're a reliable, stable, and growing partner. Our customers take a lot of comfort from working with Descartes as a large public company with a long track record of financial stability. We have a long history of operating secure cloud services across the globe. This makes us a service provider of choice in the real-time visibility market. The second area is global trade intelligence solutions. These solutions fall into three main categories.

A long operating history with solutions and customers in all transportation modes truck rail Ocean and air We believe we have a more comprehensive global logistics network.

Other provider in the industry and.

And finally, we're reliable stable and growing partner.

Customers, taking a lot of comfort in working with the card is a larger public company with a long track record of financial stability, we have a long history of operating secure cloud services across the globe. This makes US a service provider of choice and the real time visibility market.

The second area is global trade intelligence solutions. These solutions fall into three main categories.

Edward J. Ryan: First, competitive intelligence, which is understanding trade flows and goods classifications through research in our extensive database of manifest information. Second is Tariff and Duty Intelligence, which is researching and using our database of global tariffs and duties to help you manage your global trade and shipments. And the third is Sanctions Party Screening, which is reviewing customer shipments, employees, guests, and otherwise against our extensive list of domestic and international sanctioned parties to help ensure you're operating your business in accordance with the law.

Competitive intelligence, which is understanding trade flows and goods classifications through research and our extensive database of manifest information.

This tariff and duty intelligence, which is researching and using our database of global tariffs and duties to help you manage your global trade and shipments and a third of sanction party screen, which is reviewing customer shipments employees guests and otherwise against our extensive list of domestic and international sanction parties to help ensure you're operating.

Business in according with the law in accordance with the law.

Edward J. Ryan: To oversimplify, these solutions become more important to our customers when things change. When trade flows change, our customers need to adjust their relationships and systems. When tariffs and duties change, it may impact sourcing, manufacturing, and logistics decisions. And when sanctioned parties change, businesses need to reevaluate who they're doing business with for legal compliance purposes.

To oversimplify these solutions become more important to our customers and things are changing with.

<unk> voice change our customers need to adapt our relationships and systems and tariffs and duties change it may impact sourcing manufacturing and logistics decisions and when sanction parties change businesses need to reevaluate, who theyre doing business with for legal compliance purposes.

Edward J. Ryan: There's been a lot of change in the world over the past years. It's been a big driver for our global trade intelligence business. And there are some areas of change that are happening right now, which have helped drive demand for our solution. The first is the Red Sea disruption. Military conflict, terrorism, and piracy have made following traditional logistics routes through the Red Sea a very difficult thing for ocean carriers.

There's been a lot of change in the world over the past years, it's been a big driver for our global trade intelligence business and there are some areas of change that are happening right now, which has helped drive demand for our solutions.

The first was Red sea disruption military conflict terrorism piracy have made following traditional logistics route through the Red Sea very powerless thing for Ocean carriers. Many ocean carriers that we were out of their vessels to instead travel around the capable of Africa.

Edward J. Ryan: Many ocean carriers have rerouted their vessels to, instead, travel around the Cape of Africa. This adds time and cost to salons and reduces available capacity. Shippers scrambled to secure space on ocean vessels for their shipments and readjust their supply chain for delays. Carriers adjusted prices, added surcharges, and reallocated two vessels capable of making the Cape journey. This has created demand for many deck parts solutions, such as our ocean rate management, booking, and tracking solutions, but has also impacted demand for competitive intelligence and compliance screening for new trading relations, seconds additional sanctioned parties. This past quarter has once again seen additional international sanctions imposed, primarily as a result of the war in Ukraine, activities in Israel and Gaza, and on the specific companies using forced labor. Even after our fiscal year ended in February, the US announced 500 additional sanctions against Russia as a consequence of the ongoing war in Ukraine and the death of Alexei Navalny.

This added time and cost of ceilings and reduce available capacity shippers scrambled to secure space on ocean vessels for their shipments and readjust their supply chain for delays carriers' adjusted prices added surcharges and reallocated to vessel capable vessels capable of making keep journey. This is Craig.

Demand for many Descartes solutions, such as erosion rate management booking and tracking solutions, but it has also impacted demand for competitive intelligence and compliance screening for new trading relationships.

Second additional sanction parties just this past quarter has once again seen additional international sanctions imposed primarily as a result of the work in Ukraine activities in Israel in Gaza and on the specific comps.

Companies using forced labor you.

Even after our fiscal year ended in February the U S announced 500 additional sanctions against Russia as a consequence of the ongoing war in Ukraine, and the depth of Alexi and evolving.

Edward J. Ryan: An expanding world of sanctions presents difficult compliance challenges for our customers, so we've had to be on top of updating lists and able to meet the increased demand for sanctioned parties. And finally, the Panama Canal. The Panama Canal Authority has had to restrict ship transit due to low water flow levels in the canal.

Expanding world of sanctions presents difficult compliant challenges for our customers. So we've had to be on top of updating less and able to meet the increased demand for sanction parties list.

And finally, the Panama Canal.

Panama Canal authority has had to restrict to ship transit due to low water flow levels in the canal. This has reduced the available capacity of sailing through this route and correspondingly increase the price many shippers of salt alternative trade routes or mechanisms, including shifting a portion of their journeys to being by rail or truck east creative approaches are pushed them.

Edward J. Ryan: This has reduced the available capacity of sailings through this route and correspondingly increased the price. Many shippers have sought alternative trade routes or mechanisms, including shifting a portion of their journeys to being by rail or truck. These creative approaches have pushed demand for competitive intelligence and screening as many parties establish brand new trading and logistics relationships. And the last area is our routing and scheduling solutions. These solutions help you manage your own fleet of vehicles rather than hiring space from other people.

So competitive intelligence and screening as many parties established brand new trading and logistics relationships.

And the last areas in our routing and scheduling solutions.

These solutions help you manage your own fleet of vehicles, rather than hiring space on other People's vehicles. We believe we have the premier routing and scheduling solutions in the market our customers face pressure to use their vehicles efficiently whether its due to cost pressures limited labor or environmental concerns.

Edward J. Ryan: We believe we have the premier routing and scheduling solutions in the market. Our customers have faced pressure to use their vehicles efficiently, whether it's due to cost pressures, limited labor, or environmental concerns. This is particularly so with the current focus on climate reporting and compliance, so we've seen continued good demand. We've also made recent investments to help our customers with delivery challenges and to deliver an enhanced delivery experience to consumers. Our customers recognize that the delivery experience is a key part of the customer's purchase experience, so they're very interested in being able to provide delivery recipients with time-definite delivery windows and an Uber-like delivery visibility experience in the final mile.

Particularly so with the current focus on climate reporting and compliance. So we've seen continued good demand.

We've also made recent investments to help our customers with delivery challenges and to deliver an enhanced delivery experience to consumers our customers recognize that the delivery experience is a key part of the customers' purchase experience. So they're very interested in being able to provide delivery recipients time definite delivery windows and an uber like delivery visibility.

<unk> and the final miles.

Edward J. Ryan: Our innovations in this area continue to drive customers with complex delivery challenges to Descartes for solutions. So those were some of the key areas of organic growth for us in the quarter. We also saw some growth in our customs and regulatory business, principally as a result of new customs standards in Europe, meaning traction. However, overall, there have been challenges in the global freight market, challenges that were predicted earlier in the year and that we've been playing for.

Our innovations in this area continue to drive customers with complex delivery challenges to Descartes for solutions.

Where some of the key areas of organic growth for us in the quarter. We also saw some growth in our customs and regulatory business principally as a result of new customs standards in Europe, gaining traction.

However, overall there have been challenges in the global freight market challenges that were predicted earlier in the year and then we've been planning for while aggregate transportation volumes in the industry have been negatively impacted we focused on delivering enhanced value to our customers for shipments.

Edward J. Ryan: While aggregate transportation volumes in the industry have been negatively impacted, we focused on delivering enhanced value to our customers for shipments that they're processing, and that's contributed to the results we've reported today. Additionally, our organic growth was complemented by the contribution of previously completed acquisitions. Several previous acquisitions performed better than we originally planned for, resulting in more earn-out being accrued and paid in the quarter. Allan will get into that in more detail in his section in a few minutes.

<unk> and that's contributed to the results we reported today.

Our organic growth was complemented by the contribution of previously completed acquisitions several previous acquisitions performed better than we originally planned for resulting in more earn out being accrued and paid in the quarter Alan will get into that in more detail in his section in a few minutes.

Separate from our announced let me touch briefly on the operational contribution of Grand cloud through our business. We've now got almost a full year of experience with Grand cloud safety and compliance solutions.

Edward J. Ryan: Separately from our announcement, let me touch briefly on the operational contribution of GroundCloud to our business. We've now got almost a full year of experience with GroundCloud safety and compliance solutions. GroundCloud helps identify safety incidents faced by drivers and provides responsive and targeted video training on the challenges that drivers face.

<unk> helps identify safety incidents faced by drivers and provides responsive and targeted video training on the challenges the driver space. They also help companies manage delivery obligations as they are subcontractors to other delivery brands such as federal Express.

When we first combined we indicated we anticipated some impact on our overall adjusted EBITDA margin, which we saw in Q1 and Q2, we've made good progress on integration and our aggregate adjusted EBIT margin was back up to 44% in Q3 and slightly improved in Q4.

Edward J. Ryan: They also help companies manage delivery obligations as they have subcontractors to other delivery brands such as Federal Express. When we first combined, we anticipated some impact on our overall adjusted EBITDA margin, which we saw in Q1 and Q2. We've made good progress on integration, and our aggregate adjusted EBITDA margin was back up to 44% for Q3 and slightly improved in Q4. The ground flat business is now less dependent on professional services revenue and continues to deliver great value to its customers. We believe driver safety is an area of continued importance and interest for the global logistics community.

<unk> business is now less dependent on professional services revenue and continues to deliver great value to its customers. We believe driver safety is an area of continued importance and interest for the global logistics.

So let me just summarize as I hand, it over to Alan to give the full financial details of the quarter and the year, we had record financial results. The business performed well and 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. We ended the quarter with 321 million.

Edward J. Ryan: So let me just summarize as I hand it over to Allan for the full financial details of the quarter and year. We had record financial results, the business performed well, and 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. We ended the quarter with $321 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. 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 the entire Descartes team for everything they've done to contribute to a great quarter and continue to put our business in an enviable position for future success. With that, I'll turn the call over to Allan to go through our Q4 and annual financial results in more detail now. Okay, thanks, Ed.

In cash $350 million in available credit on our market opportunity, where we can continue to grow the business for our customers both organically and through acquisition. 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 challenge is well into the future.

My thanks to the entire Descartes team for everything they've done to contribute to a great quarter and continuing to have our business in an enviable position for future success with that I'll turn the call over to Alan to go through our Q4 and annual financial results in more detail now.

Okay, Thanks, Ed and as indicated I'm going to walk you through our financial highlights for our fourth quarter and year ended January 31 2024.

We're pleased to report record quarterly revenues of $148 $2 million. This quarter, an increase of just over 18% from revenues of $125 1 million in Q4 of last year.

Allan Brett: As indicated, I'm going to walk you through our financial highlights for our fourth quarter and year end of January 31st, 2024. We are pleased to report record quarterly revenues of $148.2 million this quarter, an increase of just over 18% from revenues of $125.1 million in Q4 of last year. A Revenue Mix. The revenue mix in the quarter continued to be very strong, with services revenue increasing over 20% to $135.7 million from $113.4 million last year in the fourth quarter, with services revenue increasing to 92% of total revenue this quarter, up from 91% of total revenue in Q4 last year. Removing the impact of both the recent acquisitions as well as a small impact from foreign exchange rates, we would estimate that our growth in services revenue from new and existing customers would have been approximately 10% this quarter when compared to the same quarter last year, which is up slightly from the increase of approximately 9% in the past few quarters of FY24.

Our revenue in the mix.

Revenue mix in the quarter continued to be very strong with services revenue increasing over 20% to $135 7 million from $113 4 million last year in the fourth quarter with.

With services revenue increasing to 92% of total revenue this quarter up from 91% of total revenue in Q4 last year.

Removing the impact of both the recent acquisitions as well as a small impact from foreign exchange rates.

We would estimate that our growth in services revenue from new and existing customers would have been approximately 10% this quarter when compared to the same quarter last year, which is up slightly from the increase of approximately 9% in the past few quarters.

Slide 24.

Professional services and other revenue, including hardware revenue came in at $11 1 million or just over 7% of revenue up from 10.0 million or 8% of revenue.

In the same quarter last year, mainly as a result of the Crown cloud acquisition early in FY 'twenty four.

In addition license revenue came in at $1 4 million compared to $1 7 million last year in the fourth quarter.

Allan Brett: Professional Services and other revenue, including hardware revenue, came in at $11.1 million, or just over 7% of revenue, up from $10.0 million, or 8% of revenue, in the same quarter last year, mainly as a result of the ground cloud acquisition early in FY24. In addition, license revenue came in at $1.4 million compared to $1.7 million last year in the fourth quarter, pretty consistent at roughly 1% of revenue.

Consistent at roughly 1% of revenue.

For the year, our revenue was a record $572 9 million up 18% from revenue of $486 million in the previous year.

For the year services revenue came in at $529 million up almost 20% from $435 7 million last year with just more than half of this growth coming from growth in revenues from new and existing customers. While the remainder of the growth can be attributed to growth from acquisitions.

Allan Brett: For the year, our revenue was a record $572.9 million, up 18% from revenue of $486 million in the previous year. Services revenue came in at $520.9 million, up almost 20% from $435.7 million last year, with just more than half of this growth coming from growth in revenues from new and existing customers, while the remainder of the growth can be attributed to growth from acquisitions. Gross margins came in at 76% of revenue for the fourth quarter of the year, down slightly from 77% for the fourth quarter and 77% for the entire period last year.

Gross margins came in at 76% of revenue for the fourth quarter of the year.

Down slightly from gross margin.

77% for the fourth quarter.

For the fourth quarter last year and for the entire period last year.

This slight decrease in gross margin was mainly result of the impact of lower gross margins experienced as experienced in the businesses that we acquired during the year, including ground glass.

Operating expenses for the fourth quarter and for the year increased primarily related to the impact of recent acquisitions, including ground cloud, but also increased slightly as a result of additional investments that we made in our business over the past year, primarily in the area of sales marketing product development and network security.

As a result of the above adjusted EBITDA came in at a record $65 7 million in the fourth quarter or <unk> 44, 3% of revenue.

Allan Brett: This slight decrease in gross margin was mainly a result of the impact of lower gross margins experienced in the businesses that we acquired during the year, including ground class. Operating expenses in the fourth quarter and for the year increased primarily due to the impact of recent acquisitions, including GroundCloud, but also increased slightly as a result of additional investments that we made in our business over the past year, primarily in the areas of sales, marketing, product development, and network security. As a result of the above, Adjusted EBITDA came in at a record $65.7 million in the fourth quarter, for 44.3% of revenue, up a solid 19% from Adjusted EBITDA of $55.4 million, also at 44.3% of revenue in the fourth quarter last year.

Up a solid 19% from adjusted EBITDA of $55 4 million.

So at 44, 3% of revenue in the fourth quarter last year.

After having our adjusted EBITDA as a percentage of revenue.

And early in the year with the lower margins from the ground cloud business strong operating leverage from organic growth.

As well as improvements from the ground cloud margins during the year resulted in this recovery of our adjusted EBITDA margin by the fourth quarter back to last year's Q4 ratio.

Looking at the annual results again as a result of strong revenue growth. We continue to see strong adjusted EBITDA growth to a record of two.

$247 5 million or 43, 2% of revenue.

Allan Brett: After having our adjusted EBITDA as a percentage of revenue weakened early in the year with lower margins from the ground cloud business, strong operating leverage from organic growth, as well as improvements in the ground cloud margins during the year, resulted in this recovery of our adjusted EBITDA margin by the fourth quarter back to last year's Q4 ratio. Looking at the annual results, again, as a result of strong revenue growth, we continue to see strong adjusted EBITDA growth to a record of 247.5 million, or 43.2% of revenue, for FY 24, up 15% from $215.2 million, or 44.3% of revenue last year. With these solid operating results, cash flow generated from operations came in at $50.8 million, or 77% of adjusted EBITDA, in the fourth quarter.

For FY 'twenty, four up 15% from $215 2 million or <unk> 44, 3% of revenue last year.

With these solid operating results cash flow generated from operations came in at $58 million or 77% of adjusted EBITDA in the fourth quarter.

However, we should note that this cash flow figure was negatively impacted by the payment of $12 6 million in earn out payments on past acquisitions that were larger than the original estimates that we made on those acquisitions.

As we've mentioned in the past.

Payment is greater than the earn out amount originally estimated at the time of the acquisition the accounting rules require us to separate that earn out payment in two parts on the statement of cash flows first the portion of the earn out payment that was estimate at the time of the acquisition is charged against cash flow from financing activities second the excess amount of the earn out payment horizon.

Allan Brett: However, we should note that this cash flow figure was negatively impacted by the payment of $12.6 million in earn-out payments on past acquisitions that were larger than the original estimates that we made on those acquisitions. As we've mentioned in the past, when an earn out payment is greater than the earn out amount originally estimated at the time of acquisition, the accounting rules require us to separate that earn out payment into two parts on the statement of cash. First, the portion of the year-end outpayment that was estimated at the time of the acquisition is charged against cash flow from financing activities.

<unk> from better than expected performance of that acquisition those acquisitions is charged against cash flow from operations.

So if we would exclude this unusual accounting treatment of higher earn out payments and our operating cash flow in the fourth quarter would have been $63 4 million or <unk>, 96% of adjusted EBITDA in Q4 up 25% from operating cash flow of $50 6 million or <unk>, 91% of adjusted EBITDA in the fourth quarter last year.

For the year cash flow from operations, excluding the impact of these higher earn out payments in both periods.

$223 million or 89% with adjusted EBITDA up 11% from $198 million or 92% of adjusted EBITDA last year.

Allan Brett: Second, the excess amount of year-end outpayment arising from better-than-expected performance of those acquisitions is charged against cash flow from operations. So, if we were to exclude this unusual accounting treatment of higher earner payments, then our operating cash flow in the fourth quarter would have been $63.4 million, or 96% of adjusted EBITDA in Q4, up 25% from operating cash flow of $50.6 million, or 91% of adjusted EBITDA in the fourth quarter last year. For the year, cash flow from operations, excluding the impact of these higher earner payments in both periods, was 220.3 million, or 89% of adjusted EBITDA, up 11% from 198 million, or 92% of adjusted EBITDA last year. Going forward, we expect to continue to see strong operating cash flow conversion in the range of 80 to 90% of our adjusted EBITDA in the years ahead, of course, subject to unusual events and quarterly fluctuations, including adjustments related to future earner payments that exceed our estimates made at the time of acquisition. From a gap earnings perspective, net income for the fourth quarter came in at $31.8 million, up 7% from net income of $29.8 million in the fourth quarter last year.

Going forward, we expect to continue to see strong operating cash flow conversion in the range of 80% to 90% of our adjusted EBITDA in the years ahead of course subject to unusual events and quarterly fluctuations, including adjustments related to future earn out payments that exceed our estimates made at the time of acquisitions.

From a GAAP earnings perspective, net income for the fourth quarter came in at $31 8 billion up 7% from net income of $29 8 million in the fourth quarter last year.

But.

For the year net income was $115 9 million or 134 cents per diluted common shares up 13% from 142 from $102 2 million or $1 18 per.

Diluted common share.

Overall as Ed mentioned earlier were certainly pleased with the operating results for fiscal 2024.

And as our continued revenue growth has allowed us to invest in several areas of the business, while still allowing us to achieve 15% growth in adjusted EBITDA and maintain a strong adjusted EBITDA margin and achieved solid growth in our cash flow from operations.

If we turn our attention to the balance sheet.

Our cash balances totaled $321 million at the end of January.

However for the year, our cash balances increased by approximately.

$45 million as we generated pro forma operating cash flow of just over $220 million as I just mentioned.

Allan Brett: For the year, net income was $115.9 million, or $0.134 per diluted common share, up 13% from $102.2 million, or $1.18 per diluted common share. Overall, as Ed mentioned earlier, we're certainly pleased with the operating results for fiscal 2024 and as our continued revenue growth has allowed us to invest in several areas of the business while still allowing us to achieve 15% growth in adjusted EBITDA, maintain a strong adjusted EBITDA margin, and achieve solid growth in our cash flow from operations. If we turn our attention to the balance sheet, our cash balances totaled $321 million at the end of January.

While offsetting that we've deployed $143 million in capital towards new acquisitions, and also paid an additional $31 7 million in her note payments.

On past acquisitions in FY 'twenty four.

Okay.

So after that any year with just over $320 million of cash and Undrawn credit facility of $350 million, we are clearly well capitalized.

Positioned to consider all acquisition opportunities in our market consistent with our business plan.

Okay.

As we look to the current year, wherein our physical 2025, we should note the following.

After incurring approximately $5 6 million in capital additions. This past year, we expect to occur approximately five five to $6 5 million in additional capital expenditures this coming year.

Allan Brett: However, for the year, our cash balance has increased by approximately $45 million as we generated pro forma operating cash flow of just over $220 million, as I just mentioned. While offsetting that, we've deployed $143 million in capital towards new acquisitions and also paid an additional $31.7 million in ERNOTE on past acquisitions in FY 24. So after ending the year with just over $320 million of cash and an undrawn credit facility of $350 million, we are clearly well capitalized and positioned to consider all acquisition opportunities in our market, consistent with our business plan. As we look to the current year we are in, our physical 2025, we should note the following. After incurring approximately $5.6 million in capital additions this past year, we expect to incur approximately $5.5 to $6.5 million in additional capital expenditures this coming year. We expect that amortization expense will be approximately $57.5 million for fiscal 2025, with this figure being subject to adjustment for foreign exchange rates and any future acquisitions.

We expect that amortization expense will be approximately 50.

<unk> $57 5 million for fiscal 2025, with this figure being subject to adjustment for foreign exchange rates and any future acquisitions.

After paying contingent consideration on kirker earn out payments of 31 7 million on past acquisitions. This past year. We currently anticipate that we will make an additional earn out payments of $34 million in FY 'twenty five.

Of this $34 million estimate to be the estimate estimated amount to be paid $7 7 million relates to the portion of the earn out arrangements accrued for at the time of the acquisitions and will be reflected in cash flow from financing activities.

With the remaining balance estimated at $26 $3 million will be reflected as a reduction in cash flow from operating activities. The majority of which is likely to be paid in Q1.

Our income tax rate in the fourth quarter came in at approximately 26% of pretax income, resulting in a tax rate for the year.

23, 3% in FY, 'twenty, four which is lower than our statutory tax rate, mainly a result of the reversal of certain uncertain tax positions.

Allan Brett: After paying contingent consideration or earn out payments of $31.7 million on past acquisitions this past year, we currently anticipate that we will make an additional earn out payment of $34 million in FY25. Of this $34 million estimated amount to be paid, $7.7 million relates to the portion of the earn-out arrangements accrued for at the time of the acquisitions and will be reflected in cash flow from financing activities, with the remaining balance estimated at $26.3 million will be reflected as a reduction in cash flow from operating activities. The majority of which is likely to be paid in Q1. Our income tax rate in the fourth quarter came in at approximately 20.6% of pre-tax income, resulting in a tax rate for the year of 23.3% in FY24, which is lower than our statutory tax rate, mainly as a result of the reversal of certain uncertain tax positions during fiscal 24.

Physical 24.

Looking forward to FY 'twenty five we're expecting the tax rate will be in the range of 23% to 28% of our of our pre tax income.

Which means it will be something on either side of our blended statutory tax rate of approximately 26, 5%.

So as always we should add that our tax rate may fluctuate from quarter to quarter from onetime items that may arise as we operate internationally across multiple countries.

And finally.

We currently expect stock compensation stock compensation expense will be approximately $13 4 million for fiscal 'twenty five subject to any future equity grants as well as any future forfeitures of stock options or share units.

I'll now turn it back over to Ed.

Great. Thanks Alan.

We're a month into Q1 and the end of our fiscal year <unk>.

One is generally one of the more challenging quarters as the market.

Cover from the holiday rush and the shipping deals with great disruption caused by the Chinese new year.

Ocean volumes have been stronger than in other non pandemic years. However, we're monitoring to see the impact of the Red Sea in Panama Canal diversions on our volumes.

Allan Brett: Looking forward to FY 25, we're expecting the tax rate to be in the range of 23 to 28% of our pre-tax income, which means it will be something on either side of our blended statutory tax rate of approximately 26.5%. As always, we should add that our tax rate may fluctuate from quarter to quarter from one-time items that may arise as we operate internationally across multiple countries. And finally, we currently expect stock compensation expense to be approximately $13.4 million for fiscal 25, subject to any future equity grants, as well as any future forfeitures of stock auctions or share use.

These things is mined in mind as we set 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 adjusted EBITDA, 10% to 15% per year.

We grow through a combination of organic and inorganic.

Are acquisitions, we take a neutral party approach to building and operating solutions on a global logistics network, we don't favor any particular party, we run our business for all supply chain participants connecting shippers carriers logistics service providers and customs authorities.

Edward J. Ryan: I will now turn it back over to Ed. Great. Thanks, Allan. We're a month into Q1 and the end of our fiscal year. Q1 is generally one of the more challenging quarters as the market recovers from the holiday rush, and the shipping deals with freight disruption caused by the Chinese New Year. However, recent ocean volumes have been stronger than in other non-pandemic years.

When we over performed we try to reinvest that over performance back into our business.

Focus on recurring revenues and establishing relationships with customers for life and we thrive on operating a predictable business that allows us forward visibility to our revenues and investment paybacks.

Edward J. Ryan: However, we're monitoring to see the impact of the Red Sea and Panama canal diversions on our bodies. We keep these things in mind as we set 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 adjusted EBITDA by 10 to 15% per year. We grow through a combination of organic and inorganic growth or acquisition. We take a neutral party approach to building and operating solutions on our global logistics network. We don't favor any particular political party.

In our annual report, we provided a comprehensive description of baseline revenues based on calibration and their limitations.

As of February one 2024, using foreign exchange rates of <unk> 75 to the Canadian dollar.

The dollar to the euro at $1 27 to the Great Britain pound, we estimate that our baseline revenues for the first quarter of fiscal 'twenty, five or approximately $135 million and our baseline operating expenses are approximately $81 million.

Edward J. Ryan: 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 we thrive on operating a predictable business that allows us forward visibility to our revenues and investment payback. In our annual report, we've provided a comprehensive description of baseline revenues based on calibration and their limitations.

We consider this to be our baseline adjusted EBIT calibration of approximately $49 5 million for the first quarter of fiscal 2025 were approximately 38% of our baseline revenues as at February one 2024.

We continue to expect that we'll operate in the adjusted EBIT operating margin range of 40% to 45%.

Margins can vary in that range, given such things as foreign exchange movements and the impact of acquisitions as we integrate them into our business like we saw with brand club.

Edward J. Ryan: As of February 1st, 2024, using foreign exchange rates of 75 cents to the Canadian dollar, $1.08 to the euro, and $1.27 to the Great Britain pound, we estimate that our baseline revenues for the first quarter of fiscal 25 will be approximately $130.5 million, and our baseline operating expenses will be approximately $81 million. We consider this to be our baseline adjusted EBITDA calibration of approximately $49.5 million for the first quarter of fiscal 2025, or approximately 38% of our baseline revenues as at February 1st, 2024. We continue to expect that we'll operate in an adjusted EBITDA operating margin range of 40 to 45 percent. Our margins can vary in that range, given such things as foreign exchange movements and the impact of acquisitions as we integrate them into our business, like we saw with Brown Club.

Got lots of exciting things planned for our business. It remains a challenging economic supply chain and compliance environment for our customers, but we believe our proven track record of execution solid capital structure customer focus will help us serve them well.

Thanks to everyone for joining us on the call today as always we're available to talk to you about our business in whatever manner is most convenient for you and with that operator, I will turn it over to you for the Q&A portion of the call.

Thank you ladies and gentleman, we will now begin the question and answer session did you have a question. Please press the star followed by the one on your Touchtone phone.

You will hear today, John trumped acknowledging your request questions will be taken and get order received should you wish to cancel your request. Please press the star followed by the tail. If you are using a speaker phone. Please lift the handset before pressing Andy keys.

Edward J. Ryan: We've got lots of exciting things planned for our business. It remains a challenging economic supply chain and compliance environment for our customers, but we believe our proven track record of execution, solid capital structure, and customer focus will help us serve them well. Thanks to everyone for joining us on the call today.

Your first question is from Stephen Lang from Stephens. Please ask your question.

Yeah.

Hi, Good afternoon. This is Justin long from Stephens, how are you doing.

Hey, Justin how are you.

Good so maybe to start I think you gave the organic growth in services revenue for the quarter, but could you also talk about all in organic growth.

Operator: As always, we're available to talk to you about our business in whatever manner is most convenient for you. And with that, operator, I'll turn it over to you for the Q&A portion of the call. Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the star followed by the 1 on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by the. If you are using a speakerphone, please lift the handset before pressing any button.

Then looking forward if we do see signs of a better freight cycle. This year is it reasonable to expect that organic growth to accelerate or is there anything that you see on the horizon that could prevent that from happening.

Maybe I'll comment at the end on the overall number but no I think youre your presumption is correct.

We're expecting.

Maybe kind of what we've seen so far in the market and if it improves from there would certainly help our business in probably our brokerage as well I don't know the overall number off top my head.

Justin Long: Your first question is from Steven Long from Stevens; please ask your question at www.descartesagroup.com. Hi, good afternoon. This is Justin Long from Stevens. How are you doing? Hey Justin, how are you? So maybe to start, I think you gave the organic growth and services revenue for the quarter. But could you also talk about all organic growth? And then looking forward, if we do see signs of a better freight cycle this year, is it reasonable to expect that organic growth to accelerate? Or is there anything that you see on the horizon that could prevent that from happening?

Yeah, Justin we're just just around 10% on services and as you know thats the bulk of our revenue.

Professional services outside of the acquisitions, where we're relatively flat licenses were down ever so slightly so somewhere.

It is down to 10% a little bit maybe by by half a point to a point.

But that's the number we focus on is that 10% growth fund services.

Got it understood and I guess, secondly, I wanted to ask about acquisitions and could you just comment on the pipeline that youre seeing today versus a quarter ago and it's been a few quarters. Since we saw an acquisition materialize I guess, hence ground cloud so what's your confidence that.

Edward J. Ryan: Maybe Allan can comment at the end on the overall number. But no, I think your presumption's correct. I mean, we're expecting maybe kind of what we've seen so far in the market. And if it improved from there, it would certainly help our business and probably our growth rates as well. But I don't know the overall number off the top of my head.

We can see that change in the quarters ahead.

Yes, there is a lot going on right now.

Allan Brett: Yeah, Justin, we're just around 10% on services. And as you know, that's the bulk of our revenue. Professional services outside of acquisitions were relatively flat, and licenses were down ever so slightly. So somewhere, water's down to 10% a little bit, maybe by half a point to a point.

First and foremost, it's kind of a little bit of a struggle over price with.

With the number of people that are out in the market.

Expect just based on what we're seeing ahead of us and number of companies that are saying theyre going to go out.

We would see it start to pick up in the near future.

Okay, great congrats on the quarter.

Great. Thank you very much just I appreciate it.

Thank you.

Justin Long: But that's the number we focus on is that 10% growth in services. Got it understood. And I guess, secondly, I wanted to ask about acquisitions. Ed, could you just comment on the pipeline that you're seeing today versus a quarter ago? And you know, it's been a few quarters since we saw an acquisition materialize, I guess, since ground cloud. So what's your confidence that we can see that change in the quarters ahead? Yeah, there's a lot going on right now. And first and foremost, kind of a little bit of struggle over price with the number of people that are out in the market. We expect, just based on what we're seeing ahead of us and the number of companies that are saying they're going to go out that we would see it start to pick up in the near future. Okay, great. Congratulations on the quarter. Hey, thank you very much, Justin.

Your next question is from will Milner from Goldman Sachs. Please ask your question.

Hi, I am William Miller on for Mark.

Thanks for taking my question.

In your prepared remarks, I believe you commented aggregates volume was down.

Strong demand in their subscription products are the changes in the operating environment that just the ongoing conflict in the middle East.

Increasing more and enough adoption of subscription products to offset any decline.

Transaction volume and revenue.

Yes, that's certainly part of it and I mentioned, a couple of other things in the beginning of the call or maybe even more prominent.

We're picking up a bunch of business from our competitors.

During tough times, I think people tend to flock to safe and reliable source, that's been a big help for us.

Our macro point business in our global trade intelligence business.

Edward J. Ryan: I appreciate it. Thank you. Your next question is from Willow Miller from Willow and Bear. Please ask your question. Hi, I'm Willow Miller. I'm from Matt Pfau.

That's been the case, which is great.

And as you mentioned.

The conflicts around the world put more people on the sanction parties list tariffs and duties changes as a result of things like that.

Willow Miller: Thanks for taking our question. In your prepared remarks, I believe you commented that aggregate rate volume is down, but you're seeing strong demand for your subscription products. Are the changes in the operating environment, such as the ongoing conflict in the Middle East, increasing more and enough adoption of subscription products to offset any decline in transaction volume and revenue? Yeah, that's certainly part of it. And I mentioned a couple other things in the beginning of the call that are maybe even more important.

As we've said all along complexity and change is a big growth driver for us in our business and I think that's why you've seen us outperform.

The logistics transportation market over the last year.

That's great. Thank you.

Thank you.

Thank you. Your next question is from Paul Treiber from RBC capital markets. Please ask your question.

Edward J. Ryan: You know, we're picking up a bunch of business from our competitors. As you know, during tough times, I think people tend to flock to a safe and reliable source. That's been a big help for us. Unknown Executive, Descart Sys Grp, Unknown Executive, Descart Sys Grp, That's great.

Thanks, very much and good afternoon just.

The commentary in the prepared remarks on the drivers of organic growth are really helpful.

When you look back over the years do you see the changes that youre benefiting from or do you feel like these these drivers are structural and likely to persist for.

Unknown Executive: Thank you. Thank you. Thank you.

Paul Treiber: Your next question is from Paul Treiber from RBC Capital Markets. Please ask your question. Oh, thanks very much. And good afternoon. Just the comments and the prepared remarks on the drivers of organic growth are really helpful.

For a while or does it seem like it's more short term in nature and May subside side at some point in the future.

Edward J. Ryan: You know, when you look back over the years, do you see the changes that you're benefiting from? Like, do you feel like these drivers are structural and likely to persist for a while? Or does it seem like it's more short-term in nature and may, you know, subside at some point in the future?

No that certainly the latter I mean, we see a bunch of things going on and you've probably heard me mentioned before the biggest one which is just that the whole world is realized supply chain and logistics is more important.

The first place they tend to put it.

It didn't cause them to tend to make extra investments in the first place to put those investments into the technology would be disappears then the fastest return on investment.

Edward J. Ryan: Now certainly the latter, I mean, we see a bunch of things going on. You probably heard me mention before the biggest one, which is just that the whole world has realized that supply chain and logistics are more important. And that the first place they tend to put them is where they tend to cause them to make extra investments. And the first place to put those investments is in technology because it gives them the fastest return on investment and it's the most visible to their customers.

Most visible for their customers I think that's been helping us.

Since the pandemic started.

I see no end in sight to that.

Yeah.

There is.

Yeah.

Other areas, where we're.

Drivers in our business.

People are putting more money into technology and as a result.

Theyre going with the kind of the.

Edward J. Ryan: I think that's been helping us since the pandemic started, and you know, I see no end in sight to that. You know, there's other areas where there are drivers in our business. People are putting more money into technology, and as a result, you know, they're going with the kind of the IBM of the industry, someone who is seen as a trusted and reliable provider. So we tend to move from small guys to larger guys during times like this. And then just some of the products that we have are fast growing, like e-commerce and global trade intelligence, which are fast growing things that we kind of see that going on for a long time to come. I don't know when it ends, but I don't see any.

IBM is the industry somewhat is seen as a trusted and reliable provider. So we tend to move some small guys. The larger guys during times like this.

And then just some of the products that we have are our fast growing and.

Like ecommerce and global trade intelligence that are that are fast growing things that we can.

Cigarette going on for a long time to come.

When it ends, but I don't see any end in sight.

So.

Certainly the latter.

That's good to hear.

And then how do you see that stronger.

Fundamentally stronger organic growth.

<unk> your business model.

Or would you consider changing your business model around it.

What I mean by that is.

Would you consider.

Edward J. Ryan: So, certainly the latter. That's good to hear. And then how does that stronger, fundamentally stronger organic growth, changing your business model? Or would you consider changing your business model around it? And what I mean by that is, would you consider a higher level of sales and marketing investments? Are there different types of acquisition targets that you consider in light of seeing stronger organic growth than you have historically?

Higher levels of sales and marketing investments are there different types of acquisition targets that you consider in light of seeing stronger organic growth than historically.

Yes.

<unk> seen us describing that in the past couple of years, putting more money into sales and marketing, we're still pretty prudent investors who were cautious guys.

We're running this business for a long term, we try to treat the money like it's our own and Thats.

Edward J. Ryan: Yeah, I mean, I think you've seen us describe in the past couple of years, putting more money into sales and marketing. You know, we're still pretty prudent investors, and we're cautious guys. You know, we're running this business for the long term; we try to treat the money like it's our own. And that's certainly one of the things that we do, continue to make investments as we get better in our business. And I think you're going to see us continue to do that. But it's probably not going to be fundamentally changing the business, maybe just incremental changes to try to make improvements as things get better. You mentioned acquisitions. You know, probably over the last 10 years, we've gravitated towards faster growing businesses that are profitable and mostly recurring revenue. I think, you know, we've gotten quite comfortable doing that, and we certainly look for those types of businesses in the acquisition environment.

Certainly one of the things that we do is continue to make investments as we have done better.

Our business and I think youre going to see us continue to do that but it's probably not going to be.

Fundamentally changing.

The business, maybe just incremental changes to try to make improvements as things get better you mentioned.

Acquisitions are probably over the last 10 years, we've gravitated towards faster growth businesses that are profitable and mostly recurring revenue I think.

We've gotten quite comfortable doing that and certainly look for those types of businesses and the acquisition environment.

We will consider anything but certainly we gravitate towards some of those faster growing things that we think we're going to be the stuff that our customers want an accident.

To see us do that.

Moving into the future.

And then just lastly for me on the acquisition side.

Edward J. Ryan: We'll consider anything, but certainly, we gravitate towards some of those faster growing things that we think are going to be the stuff that our customers want next. And I think they'll continue to see us do that, www.descart sysgrp.com. And then just lastly, for me on the acquisition side, do you have a, you mentioned faster growing businesses. I mean, there's been a lot of money that the VCs have put into the space of the last couple years, maybe some of them are struggling now. Do you lean more towards, you know, buying healthier businesses, you know, the cash flow positive, or would you consider some that are, you know, fixer uppers that may have seen stronger growth but are, you know, unprofitable or burning cash?

Do you have a.

You mentioned profit growing businesses I mean, there's been a lot of money that the bdcs or put it into this space of last couple of years, maybe some of them are struggling now do you lean more towards.

Buying healthier businesses.

The cash flow positive or would you consider some that are.

Or is that they may have seen stronger growth flat or are unprofitable are burning cash.

The three things that we look for companies that are growing companies that are profitable and companies that are all or mostly recurring revenue and we kind of stick to our guns on that we will consider something else, but it's.

It's rare that you find us.

Looking at something that doesn't have all three of those things so.

Edward J. Ryan: And we, you know, the three things we look for are companies that are growing, companies that are profitable, and companies that are all or mostly recurring revenue, and we kind of stick to our guns on that. We'll consider something else, but it's rare that you find us looking at something that doesn't have all three of those things. We would like to see a business be profitable before we buy it. As we would say, you know, we don't want to shoot a hole in our own boat.

We would like to see a business be profitable before we buy it we would say we don't want to shoot a hole in our own book great. So.

When we're looking at a business, we'd like to see them demonstrated an ability to make it a profitable business before we get involved.

And.

So it fits and culturally with us.

Companies that are losing a lot of money trying to operate in a different way in different mindset.

Edward J. Ryan: When we're looking at a business, we'd like to see them demonstrate an ability to make it a profitable business before we get involved. And, you know, just so it fits in culturally with us, right? The companies that are losing a lot of money tend to operate in a different way and have a different mindset. And when they get to be profitable, they tend to operate a lot more like we do. And we don't want to be the ones trying to change the culture.

And when they get to be profitable they tend to operate a lot more like we do and we don't want to be the ones trying to change the culture at some companies.

Thanks for taking the question.

Yes, Thank you Paul.

Thank you. Your next question is from Daniel Chan from TD Cowen. Please ask your question.

Hi, Good evening I know I asked this question last quarter, but your cash balance is now over $320 million. So any update on your thoughts on the use of cash you've got more cash on the balance sheet than you've ever spent in any year for acquisitions and it looks like you're likely to generate more than $200 million of free cash flow next year. So would you be able to use all of that for M&A or are you considering.

Paul Treiber: Thanks for taking the questions. Yeah, thank you. Thank you. Your next question is from Daniel Chan from C.D. Kellins.

Daniel Chan: That's your question. Hi, good evening. I know I asked this question last quarter, but your cash balance is now over $320 million. So, any update on your thoughts on the use of cash? You've got more cash on the balance sheet than you've ever spent on acquisitions, and it looks like you're likely to generate more than $200 million of free cash flow next year. So will you be able to use all of that for M&A, or are you considering returning some of it to shareholders?

During returning some of it to shareholders.

No we see a.

A strong environment for M&A in the next couple of years.

A couple of years now we're not much of sold and there's been a little bit of a fight about what the what the prices should be.

Companies that are not growing out because I don't think it's a good environment to sell the company and I think that's starting to change we're seeing that change going on in the market right now and.

Edward J. Ryan: No, we see a strong environment for M&A in the next couple of years. It's been a couple of years now where not much is sold, and there's been a little bit of a fight about what the prices should be. Companies that are not going out because they don't think it's a good environment to sell a company in, and I think that's starting to change.

We're holding onto that cash so if theres a need to deploy a larger amount we're ready to do that and we think our company has the wherewithal to do a lot of acquisitions in a year. When we're still very prudent about how we do it and very careful about the investments, we make but with more of them came Addison given your.

Edward J. Ryan: We're seeing that change going on in the market right now, and, you know, we're holding on to that cash. So if there's a need to deploy a larger amount, we're ready to do that. We think our company has the wherewithal to do a lot of acquisitions in a year. We're still very prudent about how we do it and very careful about the investments we make. But if more of them came at us in a given year, and we suspect that could happen one of these days, we want to be prepared with cash on hand to pull it off. Okay, that makes sense. And then earlier, you commented that it's a pretty competitive market out there. Any changes to acquisition thresholds or KPIs that you use when you're considering these targets, especially with higher rates and, like you said, more competition space? Yeah, we try to stick to our guns. You know, we look at each end of each acquisition individually, right? I mean, some have, they're all different; they all have reasons that we might pay more or less for them.

We suspect that could happen one of these days.

We wanted to be prepared with cash on hand and pull it off.

Okay that makes sense and then earlier you commented that it's a pretty competitive market out there.

Any changes to acquisition thresholds or Kpis that you use when youre considering these targets.

Especially with like higher rates and like you said more competition space.

We try to stick to our guns.

Yeah.

We looked at each and each acquisition individually Reits I mean somehow.

They are all different and they all have reasons that we might pay more or less for them, but.

Back at home, we're sitting there thinking about.

This is the way we buy companies and this is how we evaluate what's a good price for them and we do our damages stickiness to this.

Priorities.

And then maybe on the on the EBITDA margin I mean continues to tick higher and nice to see that the acquisitions being layered in nicely.

Can you.

If we were to just kind of ignore acquisitions for a second organically do you think what do you think the upper level is do you think can get above that 45% range.

Edward J. Ryan: But, you know, back at home, we're sitting there thinking about, you know, this is the way we buy companies. And this is, you know, how we evaluate what's a good price for them. And we do our damage to stick to this, to this priority.

We think that there is a natural push in our business the natural tailwind for it to keep going higher we have a bunch of businesses as you probably heard me describe in the past and took that global trade intelligence, our network cost and selling businesses.

Edward J. Ryan: And then maybe on the EBITDA margin, I mean, it continues to tick higher. Nice to see that the acquisition is being layered in nicely. Can you if we were to just kind of ignore acquisitions for a second, organically, do you think what the upper level is you think will get above that 45% rate? We think that there is a natural push in our business, a natural tailwind for it to keep going higher. We have a bunch of businesses, as you probably heard me describe in the past, which is Global Trade Intelligence, our network, our customs filing business, www.descartesagroup.com, you know, in total, and across some of our fastest growing businesses.

That have a very high incremental.

Margin.

So when we sign a new customer.

Most of that money flows right to the bottom line and Thats it.

In total.

Across some of our fastest growing businesses.

That creates a natural tailwind where that number keeps getting pushed up over time.

Those businesses all operate above the line that we're at right now 44%.

And all things being equal I think it would get pushed over time as those businesses grow.

Edward J. Ryan: That creates a natural tailwind where that number keeps getting pushed up over time. This business all operates above the line that we're at right now, 44%. And, you know, all things being equal, I think it would get pushed over time as those businesses grow. Now, that having been said, we go out and box up five companies; they all make less than us. That's going to drag them down at the same time.

That having been said.

Go out in Blackstock companies, they all make left but most of that's going to drag it down at the same time.

I don't view that as bad news I think that's an opportunity for us to get those businesses to perform like the rest of our business and make our whole company.

More profitable and stronger over time.

But.

All things being equal.

Edward J. Ryan: I don't view that as bad news. I think that it's an opportunity for us to get those businesses to perform like the rest of our business and make our whole company more profitable and stronger over time. But, you know, all things being equal, and if there were no acquisitions, you know, I think you'd see some of the strongest areas in our business with some of the strongest growth and some of the highest incremental margins. We continue to push that number. Thanks, Ed.

There are no acquisitions, you can see some of the strongest areas in our business with some of the strongest growth in some of the highest incremental margins will continue to push that number up.

Thanks, Ed.

Thank you Dan.

Thank you. Your next question is from Ann Duignan from Raymond James Please ask your question.

Thank you for taking my questions.

Andy Nguyen: Thank you. Your next question is from Andy Nguyen from Raymond James. Please ask your question. Thank you for taking my questions. Maybe I have a question for Allan.

A question for Alan could you give us some more color on the FX impact on the.

Revenue as well as the EBITDA.

Yeah. So so we are fairly naturally hedged from a from a profitability perspective from from FX, we are a little bit more expensive than Canada.

Allan Brett: Could you give us some color on the FX impact on revenue as well as EBITDA? Yeah, so we're fairly naturally hedged from a profitability perspective by FX. A little bit more expensive than Canada, a little bit more revenue and profits coming out of the UK or continental Europe.

Little bit more revenue and profitability profits coming out of the UK or continental Europe. So we're very naturally hedged there so very very minor impact this quarter as well as most quarters on the EBITDA side from a revenue perspective, we do have some level of exposure with 30% or so of our revenue.

Allan Brett: So we're very naturally hedged there. So a very, very minor impact this quarter, as well as most quarters on the EBITDA side. From a revenue perspective, we do have some level of exposure with 30% or so of our revenue coming from those currencies. And so in a strong US dollar environment, we see a bit of weakness in our revenues. It was actually a very, very minor quarter; it had a very small, less than half a million dollar, impact on revenues in Q4 and really a small impact for most of FY 24 on revenues. That hasn't always been the case, but it was also a low impact on EBITDA, and that is pretty much always the case. Does that help?

Coming from from those currencies, and so and a strong U S dollar environment, we see a bit of weakness in.

In our in our revenues it was actually a very very minor quarter. It was a very small less than half a million dollar impact on revenues.

In Q4, and really a small impact for most of FY 'twenty four on revenues that hasn't always been the case, but it is it was also a low impact on EBITDA and that is pretty much always the case does that help.

Andy Nguyen: Yeah, no, gotcha. That's, that's very helpful. And maybe some questions on the Miracle Pictures.

Yes no.

That's very helpful and maybe a question on the backhaul pictures there had been to report a softening retail spending in the U S.

Andy Nguyen: There has been a report of softening retail spending in the US, maybe across Europe as well. Could you give us some more color on what you see on the ground in terms of the volume of retail sales? Yeah, I mean, I think the retailers we see are all focused on improving their supply chain operations so they can operate more efficiently. And, you know, we're benefiting from that right now; the minor ups and downs in that industry show up in some of our transportation statistics that we've been seeing for a while. But the bigger growth driver from retailers and manufacturers that we're doing business with directly is them implementing more transportation management solutions, supply chain visibility solutions. And some of these short-term things that you just mentioned, while they may, you know, provide minor ups and downs in our global logistics network, moreover, from these types of companies, we're getting increased investment because they see a need to improve their supply chains. It's something that customers are focused on right now, and making sure they know where everything is is not only important, it's important to their customers. And that's been a big benefit for us. And I suspect it will continue for a long time. Thank you. I'll pass the line.

Across Europe as well.

Could you give us some more color on what you're seeing on the ground in terms of evolving with the retailer.

Yes.

The retailers from what we see are all focused on improving our supply chain operations. So they can operate more efficiently and.

We're benefiting from that right now the miner.

And down in that industry show up in some of our transportation statistics that we've been seeing for a while.

But the bigger growth driver from retailers and manufacturers that were doing business with directly with them and plenty more transportation management solutions quite some visibility solutions.

And these some of these short term things that you just mentioned while they may provide.

Provide minor.

Minor ups and downs in our in our global Logistics network.

Moreover from these types of companies, we're getting increased investment.

They see a need to improve their supply chains.

It's something that customers are focused on right now and making sure. They know where everything is there is not only important to them. It's important to our customers and that's been a big benefit for us and I suspect it will for a long time to come.

Okay.

Edward J. Ryan: Thank you. Thank you. Your next question is from Robert Young from Canaccord. Please ask your question. Hi, good evening.

Hi.

Thanks, Jamie.

Thank you. Your next question is from Robert Young from Canaccord. Please ask your question.

Hi, Good evening, I think there's a little bit of a continuation of Paul's earlier question is it seems trade intelligence been very successful high margin and maybe the world is always going to be this volatile, but it feels as though you're benefiting from a lot of.

Robert Young: I think this is a little bit of a continuation of Paul's earlier question, which is, it seems trade intelligence has been very successful, high margin. And I mean, maybe the world is always going to be this volatile, but it feels as though you're, you know, benefiting from a lot of, you know, volatility and changes. And, you know, if we're looking at a couple years, and things calm down, does the interest in your customers to maintain subscriptions there maintain activities? Like, how does the business do? How does the revenue change if things get calmer? Yeah, that's a good question.

Volatility and changes in.

If we're looking at a couple of years and things calm down it does the interest in your customers to maintain subscription there can maintain activities like how does the business.

As the revenue change if things get calmer.

Yeah, that's a good question Rob.

Edward J. Ryan: So what we've seen is that once you start using these things, you don't stop. And there are always changes. I mean, even in times of slower change, which we're in the middle of, www.descart sysgrp.com, you need to keep having that solution. So once you switch to it, it's hard to get off. It's an almost impossible stop, actually; you need to have it.

So what we've seen is that once you start using these things you don't stop.

And there's always changes I mean, even in times of slower change and we're in the middle.

Time of high change right now, but even when that slows down in C U E.

Even within a year, we see pickup in slowdown.

The customers that are already doing.

Must always stay honest the services they need to know what's happening we need to know what the sanctions parties or if youre, if youre shipping stuff and you've been find once or twice already and when you sign up for our solutions in this constantly people getting added to the sanction Party list.

Edward J. Ryan: The only thing that would make you stop is if your company got smaller, or you stopped shipping as many products to as many different countries. You might not buy as much stuff from us. But as long as your company continues to do well, you're probably going to be buying the solution. Unknown Speaker.

Even in a slow time with lots of people getting added everyday and lots of countries and products et cetera.

You need to you need to keep having that solution. So once you switch to it.

Edward J. Ryan: And then the second question would be, in the past, you've highlighted some of the labor negotiations in US ports as maybe a headwind, and I think that this year there will be some expected negotiations in Atlantic and golf course ports. And just curious, does that impact you? Or does the shim just move?

It's hard to get off almost impossible stop actually you need to add the only thing that would make two stops with country at your company got smaller.

Or you stopped shipping as many products to as many different countries you might not buy as much stuff from us, but as long as your company continues to do well youre, probably going to be buying those solutions from us.

Once you've got a couple.

And then my second question would be around in the past you've highlighted some of the labor negotiations in U S ports as maybe a headwind and I think that this year there is some expected.

Edward J. Ryan: Does it have any impact on you if that's an extended? Yeah, when I've talked about it, when I've talked about it in the headwind, it's really a headwind for our customers and creates challenges for them. It actually tends to help us because they have to move stuff around and change things very rapidly to do that, and that tends to drive more transaction volume for us. I don't know whether there's going to actually be a strike there.

[noise] negotiation in the Atlantic and Gulf Coast ports, and I'm, just curious does that impact you or just the assumed just move this.

Have any impact on you if that if there's an extended yes, when I've talked about it when I talked about it as a headwind its really a headwind for our customers great challenges for them and actually tends to help us because they have to move stuff around and change things very rapidly to do that and that tends to drive more transaction volume for us.

Edward J. Ryan: Most of the time, things are threatened, they don't actually go through. The Gulf Atlantic ports are not as big as the West Coast ports, which just got resolved a year ago. Unknown Executive, Descart Sys Grp. And, you know, if it did, our customers have to make arrangements to get around it, and that usually benefits them. Makes sense. Thanks. I'll pass the line.

I don't know, whether there is going to actually be a strike that most of the time. These things just threaten they don't actually go through.

Gulf linked towards just not as big as like say, the West Coast ports, which has got resolved a year ago.

Six eight months ago.

Nonetheless, since Youre doing business out of those areas would impact you.

If it did our customers have to make arrangements to get around it not usually benefits.

Benefits us.

Makes sense, Thanks, I'll pass the line.

Scott Group: Thanks, Rob. Thank you. Your next question is from Scott Group from Wolf Research. Please ask your question. Hey, afternoon. So I just want to go back to organic growth for a second. The bit of a pickup from last quarter wasn't clear. Is that more?

Thanks Robert.

Yeah.

Thank you.

Our next question is from Scott Group from Wolfe Research. Please ask your question.

Hey, Thanks afternoon.

So I just wanted to go back to the organic growth for a second.

The bit of a pickup from last quarter.

It wasn't clear is that more are you seeing the transactional.

Edward J. Ryan: Are you seeing the transactional side start getting a little bit better? Or is it the other parts of the business that are getting better? And then maybe just as you talked about the Panama Canal and the Red Sea, you know, your data clearly showing a big shift to the West Coast ports. Just wondering, do you think that continues or maybe starts to fade? So on the latter, I mean, it's going to continue for a while. You can watch the war in, you know, what's going on in Israel. It's probably causing that, that, you know, I don't know what's going to happen there, but, you know, it'll go on until it stops. And, you know, our customers would be thrilled if it did stop, but there's not much we The Panama Canal is more a function of water levels in the Panama Canal. I've heard. I'm not a meteorologist, but I've heard that this is in part due to El Nino, which I guess ends at some point.

Start getting a little bit better or is it the other parts of the business that got better and then maybe just you talked about Panama Canal and Red Sea.

Your data clearly showing a big shift to the West Coast ports. Just wondering do you think that continues or maybe starts to fade.

So on the latter.

I mean, it's going to continue for a while I mean I need to watch those.

We're in.

What's going on in Israel, probably causing that.

I don't know whats going to happen there, but we.

It will go on until that it stops and.

Our customers will be thrilled if it did stop but not much we can do about it.

Panama Canal is more a function of water levels and the Panama Canal I've heard another I'm not a meteorologist, but I've heard that this is in part due to El Nino, which I guess.

At some point.

Later this year so.

Edward J. Ryan: Unknown Executive, Descart Sys Grp, without knowing what the weather is going to be like next year, obviously. And sorry, what was the first part of the question? Just like how organic growth picked up a little bit. Is that more transactional getting better? Or is it the other parts getting better?

We'll see what that actually helps things but.

My understanding is that it should be the Panama would be a little better next year.

Without knowing what the weather's going to be next year, obviously I'm sorry, what was the first part of the question.

Just like what what the organic growth picked up a little bit is that more transactional getting better or is it. The other part is getting better.

Edward J. Ryan: It's our services, overall, getting better. And a little of it was from transaction volume, and probably a little more of it was subscription volume. I mean, subscriptions are going up and down here through the pandemic. They went way up and then way down and back up to normal, and you know, probably, muddling around over the past year, maybe kicking up a little bit towards the end.

It's our services overall getting better and a little of it was from transaction volume and probably a little more of it was from subscription volume I mean subscriptions.

The transactions are going up and down through the pandemic. They went way up and then lay down and back up to normal and probably.

Muddling around over the past year, maybe ticking up a little bit towards the end you seen R. R.

Edward J. Ryan: You see, in our move from 9% to 10%, subscriptions have been steady, you know, steadily moving up over the past four or five years. A great source of strength for our business and something that's helped us keep the growth rates up, even with the network a year or two ago that was having a lackluster performance was kind of more than making up for it. The subscription part of our business. We'll see what happens in the future, man.

Move from 9% to 10% the subscriptions have been steady.

Steadily moving up over the past four or five years, it's been.

A great source of strength for our business and something Thats helped us keep the growth rates up even with.

The network or a year or two ago that was having lack luster performance kind of more than making up for it.

Subscription part of our business, we will see what happens in the future.

Edward J. Ryan: You know, I don't know what's gonna happen in the economy; that'll probably have some impact on the transactional business. But the subscription business over the last several years has seemed to be somewhat, you know, not really impacted by that. I think the overriding issue there is that more companies are saying, Hey, we got to do something about the supply chain to manage it better. Our customers are expecting us to do that, and we're going to pump more money into that investment, and that money is predominantly going to go into the purchase of technology, because that's where we get the biggest bang for the buck and the highest visibility by the customer, and I see no end in sight. www. Am I right that you're talking more about that? Is this a new trend, or has this been going on for a while?

I don't know what has been happening economy, they will probably have some impact on the transactional business.

Subscription business over the last several years and seem to be somewhat.

Not really impacted by that.

The overriding issue there is that more companies are saying, Hey, we gotta do something about this supply chain to manage it better our customers are expecting us to do that and we're going to pump more money into that and investment and that money is predominantly going to go into the purchase of technology, because that is where we get the biggest bang for the Buck and the highest visibility by the customers.

And.

I see no end in sight to that.

See what happens but.

Continue to see manufacturers and retailers make investments in those areas.

When they do they they oftentimes you're choosing to take part which is great.

So maybe just to follow up there like I feel like you talked more.

Today about <unk>.

Share gains for your services.

Right that you are talking more about that is this a new trend.

Or has this been going on and going off of what's been going on for a while or you probably explained it better or worse thoroughly today than I have in the past.

Edward J. Ryan: It's been going on for a while. I probably explained it better or more thoroughly today than I have in the past. You know, people would ask over the last year, "hey, black box transportation environment, how do you continue to put up good numbers?" And I think that's your answer. You know, even in a flat environment, we have been taking gains from our competitors and taking gains from ourselves in the sense that, you know, we get a customer hands us a whole bunch of shipments and says, please track. Two years ago, we were able to track 70% of them. Today, I'm able to track 87% of them. I get paid by the shipment to track it, And as we got better at tracking, not only did that help us beat out our competitors, but if you're a customer, you want to go with the company that can track the most shipments.

People would ask over the last year, he Blackhawks transportation environment, how do you continue to put up good numbers and.

I think that's your answer.

Even in a flat environment, where you're taking gains from our competitors.

And taking gains from ourselves in a sense in that.

We get a customer hands off a whole bunch of shipments that says please tracks.

Well two years ago, we were able to track 70.

Just 70% up today I'm able to track, 87% I get paid by the shipments to track and as we got better tracking not only did that help us be that are competitive with your customer you want to go with the company the contracted most shipments.

Edward J. Ryan: But it also helped us, you know, increase our transaction volume because I was using the math I was using before. We were leaving 30% of them on the ground a couple years ago, and now we're leaving 13% of them, and we continue to try and bump that number up. So that's been a big help for us, and we continue to focus aggressively on that area. I think we spend a lot more time than our competitors doing stuff like that, and it's paying off. And then just last one, if I can, so you guys, continue to come in at the high end of that. 10 to 15% annual EBITDA target. I know it's early, but how are you feeling about fiscal 25? I mean, we're always trying to beat that 15% number. We say 10% to 15%. We all get our bonuses based on beating the 15.

But it also helped us.

Chris our transaction model because that was.

Stay with the math was even before we were we to 30% of them on the ground couple of years ago, and now, we're leaving 13% of them on the ground.

And continuing to try and bumped that number up so so that's been a big help for us and we continue to focus aggressively on that area. I think we've spent a lot more time than our competitors doing stuff like that and it's paying off.

And then just last one if I can so you guys continue to come in at the high end of that.

10% to 15% annual EBITDA target I know, it's early but how you're feeling about.

Fiscal 'twenty five.

I mean, we're always trying to beat that 15% number Scott.

You say, 10% to 15%.

We all get our bonuses based on page 13, so yeah, we are.

Edward J. Ryan: So, yeah, we're confident we will, as we always are, and we're going to do our damndest to make sure we get there. It makes sense.

We're confident we will as we always are and.

We're going to again just to make sure we get there.

Scott Group: Thank you, guys. I appreciate it. And thank you, Scott. Have a great day!

Makes sense. Thank you guys appreciate it.

Thank you Scott have a great day.

Kevin Krishnaratne: Thank you. Your next question is from Kevin Krishnaratne from Scotiabank. Please ask your question. Hey there, good evening. I've got one.

Thank you. Your next question is from Kevin Cristian <unk> from Scotia Bank. Please ask your question.

Hey, there good evening I've just got one.

Edward J. Ryan: How do we think about the opportunity for cross-selling upside? I know it might be tough to say, but you've got so many products and services, like how early are you? And how do you measure where you are versus where you can go?

How do we think about the opportunity for cross selling upside I know it might be tough at the state, but you've got so many products and services like how early are you and how do you measure where you are versus where you can go.

Edward J. Ryan: You know, many, many SAS firms do give metrics like net retention ratio to measure how much more revenue they're generating from a given client over time. I know, you know, I'm going to give that, but just how do we think about that? Any thoughts there and how you're looking at the revenue generation on a given client over time from cross sell? We do.

Many fast firms do you give metrics like net retention ratio to measure how much more revenue, they're generating from that given client over time.

I know you don't give that but just how do we how do we think about that any thoughts there on how you're how you're looking at the.

Revenue generation.

Generation.

Client over time from that process I mean, we do.

Edward J. Ryan: Yeah, sure. We do business with just about every transportation company of any size in the world and just about every intermediary in the world of any size, so we have a lot of cross-selling opportunities. If you look at any reports every Thursday night, what we sold that weekend, it's usually in the two-thirds of the sales or new sales to existing customers, which is a cross sell. And I would expect it to continue that way for a while.

Yeah sure sure we do business with just about every transportation company of any size in the world and just about every intermediary in the rolling stock.

So we have a lot of.

Cross sell opportunity.

If you look at any different.

Torts every Thursday night, what we sold that weekend or easily in that two thirds of the sales of new sales to existing customers, which is a cross sell.

And I would expect it to continue that way for a while.

Edward J. Ryan: I see no end in sight to cross-selling being a very large part of what we do. Remember, we continue to buy new companies too. So as soon as we buy a company, you know, so we'll give you an example, we buy a company with, say, 500 freight forwarders, and the customers love that product. And we buy the company, and I say, hey, we've got 5000. So the first thing we're going to do is go to the other 4500 and say, hey, this is the product. And because we're already in there, you know that the company we bought might have had to fight its way into each account.

I see no end in sight to cross sell being a very large part of what we do.

Remember, we continue to buy new companies to so as soon as we buy a company and so we.

To give you. An example, we buy a company with say 500 freight forwarders and the customers love that product and we buy the company and I say, Hey, we've got 5000.

So the first thing we're going to do is go to the other 4500 and say Hey, This thing is the product and because we're already in there.

The company, we bought might've had a spike there way into each account and were walking writing because we've been I might offer some 23 products and so my ability to walk in the door and show the product is.

Edward J. Ryan: We're walking right in because we've been selling 2030 products. And so my ability to walk in the door and show the product is immediate. And I'm not saying they're all going to buy it right away, but if we can bring it out to a much wider customer base, I like our chances of selling a lot more of it than the company we just bought does.

Media.

And I'm, not saying, they're all going to buy it right away, but if we can bring it out to a much wider customer base I like our chances of selling a lot more of it than the company. We just bought us and I think Thats why you see our cross sell continue to be a big part of our business and will be for.

Kevin Krishnaratne: And I think that's why you see our cross-sell continue to be a big part of our business and will be for a long time to come. Great. I appreciate it.

A long time to come.

Great appreciate it thank you.

Raimo Lenschow: Thank you. Thank you, Kevin. Thank you. Your next question is from Raimo Lenschow from Barclays. Please ask your question.

Hey, Thank you Kevin.

Thank you.

Your next question is from Raimo <unk> from Barclays. Please ask your question.

Edward J. Ryan: Thank you. Quick question on whether you think about ESG, carbon footprint, etc. Like, how is that starting to come through for your clients? Because in our checks, we're hearing quite a good bit of extra interest there to optimize things there. And what are you doing on the product side there? Thank you. Hey, thanks very much. So, you know, ESG for a long time, for 20 years, even before it was a household name, we had a lot of retail customers starting in the grocery industry that had customers, they're consumer customers that were environmentally conscious and started positioning our product as a way to help the environment. They would have, they would have, you know, green deliveries; they would say that they were offering these deliveries to the consumer.

Thank you.

And a quick question on if you think about.

ESG carbon footprint et cetera.

How is that starting to come through for your clients.

Our checks, we're hearing quite a bit of extra interest to optimize things Darren.

What are you doing on the product side, Dan. Thank you.

Hey, thanks very much.

So.

You know ESG.

For a long time for 20 years before that was a household name.

We had a lot of retail customers starting into the grocery industry that had customers their consumer customers that we're environmentally conscious.

Started positioning our product as a way to help the environment. They would they would have green deliveries. They would say they were offering these deliveries up to the consumer.

Edward J. Ryan: You know, here we are 20 years later, and this is, you know, a household name, and while it's getting beat up a little bit, you know, in the last six months to a year, I think the environmental part of it is less beat up because of that. I think there are a lot more companies going, hey, you know, we need to do our part to help the environment. We need to answer these questions for regulators who are asking a lot of questions and specifically about the environment and our products, and there are several products that help them solve that problem. Make no mistake, our customers are buying our products because they save money, but it's really nice for them when not only does it save them money, but it also helps reduce their carbon footprint.

20 years later and this is a household name.

Well, it's getting beat up a little bit in the last six.

Six months to a year.

Byron mental part of it.

As Les Ddos and talking about I think it was a lot more companies going Hey, you know we need to we need to do our part to healthy environment, we need to answer these questions for.

For regulators, who were asking a lot of questions and specifically about the environment.

And our products and there are several products that.

That help them solve that problem.

Make no mistake, our customers are buying our products because they save money, but its really nice for them win not only does it save you money, but it also helps reduce carbon footprint and we have several products out there that does.

Edward J. Ryan: And, you know, we have several products out there that do provide a significant impact on reducing your carbon footprint. So, you know. Not only with the amount of money we save for a big retailer manufacturer that routes trucks with us, but we get into the C-suite because of that. But once we do get into the C-suite, they're also going, hey, I'm being asked about all these other things. You know, how is this going to impact the environment? And, you know, our answers to that are very good. You know, we have a number of products that reduce the miles driven, boost the amount of trucks driven, and the amount of gasoline used to deliver goods, and it's a significant reduction, tens of millions of miles a year that we're taking off the road across our customers. And, you know, as regulatory bodies start to put more and more pressure on companies, shareholders start to put more and more pressure on our customers to answer questions about that, and we know that drives demand for our products, which has been great.

Provide a significant impact on reducing your carbon footprint.

You know.

Not only with the amount of money, we save for a big retailer or manufacturer that say routing trucks with us we get into the C suite because of that but once we do get into the C. Suite. There also going Hey, I'm being asked about all these other things.

Is this going to impact the environment and.

Our answers and that are very good yep.

We have a number of products that reduce the miles driven versus the amount of trucks, driven and the amount of gasoline used.

To deliver goods and its significant reductions.

Tens of millions of miles a year that were taken off the road across our customer base and.

As regulatory bodies start to put more and more pressured shareholders talk about more and more pressure on our customers to answer things about that and how that drives demand for our products, which has been great.

Raimo Lenschow: Okay, perfect. Thank you. Hey, thank you, Raimo. Thank you. There are no further questions at this time. I will now hand the call back to Ed Ryan for his closing remarks. Great. Thanks, everyone. Appreciate your time this afternoon, and we look forward to reporting back to you on the next quarter in early June. Thanks for your time tonight, and have a great day. Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining me. You may now disconnect.

Yeah, Okay. Thank you.

Hey, Thank you Remo.

Thank you there are no further questions at this time I will now hand, the call back to Ed Williams for closing remarks.

Great. Thanks, everyone. I. Appreciate your time this afternoon, and we look forward to reporting back to you on next quarter in early June.

Thanks for your time Tonight and have a great day.

Thank you ladies and gentlemen, the conference has now ended thank you all for joining you may all disconnect.