Q4 2025 The Descartes Systems Group Inc Earnings Call
[inaudible]
Speaker Change: Good afternoon ladies and gentlemen, and welcome to the day card systems group quarterly results conference call.
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Speaker Change: Following the presentation, we will conduct a question and answer session.
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Speaker Change: This call is being recorded on Wednesday, March 5th of 2025.
Speaker Change: Thanks, and good afternoon, everyone. Joining me remotely on the call today are Ed Ryan, CEO and Allan Brett's CFO . And I trust that everyone has received a copy of our financial results press release that was issued earlier today.
Speaker Change: Portions of today's call other than historical performance include statements of forward-looking information within the meaning of applicable securities lawless.
Speaker Change: These statements are made under the same harbor provisions of those laws.
Speaker Change: These forward-looking statements include statements related to our assessment of the current and future impact of geophysical trade tariffs and economic uncertainty on our business and financial condition.
Speaker Change: Descartes operating performance, financial results in condition, cash flow and use of cash, business outlook, baseline revenues, baseline operating expenses and baseline calibration.
Speaker Change: Anticipated in Potential Revenue Losses and Games, Anticipated Recognition and Expensing us specific revenues and expenses.
Speaker Change: Potential Acquisitions and Acquisitions Strategy, Cost Reduction and Integration Initiatives, and other matters that may constitute forward-looking statements.
Speaker Change: These forward-looking statements involve known and unknown risks and certain assumptions and other factors that may cause the actual results, performance or achievements of Descartes' different materially from the anticipated results, performance or achievements implied by such forward-looking statements.
Speaker Change: These factors are outlined in the press release and in the section entitled certain factors that may affect future results.
Speaker Change: In documents filed and furnished with the Securities and Exchange Commission, the Ontario Securities Commission, and other Securities Commissions across Canada, including our management discussion and analysis filed today.
Speaker Change: We provide forward-looking statements solely for the purpose of providing information and about management's current expectations and plans related to the future. Your caution that information may not be appropriate for other purposes.
Speaker Change: 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 is required by law. And with that, let me pay the call over to Ed.
Thank you.
Ed Ryan: Hey, thanks, Scott, and welcome everyone to the call. Today, we're reporting a record fourth quarter in annual results and continued strong services revenue and adjusted EBITDA growth.
Ed Ryan: We're excited to go over these results with you and give you some of our perspective on the current business environment, but first let me give you a roadmap for this call.
Ed Ryan: I'll start by hitting some highlights of last quarter in the fiscal year and some aspects of how our business performed. I'll then hand it over to Allan who will go over the Q4 and FY25 financial results in word-tale.
Ed Ryan: After that, I'll come back and provide an update on how we see the current business environment and how our business was calibrated for FY26.
Ed Ryan: And we'll then open up to the operator to coordinate the Q&A portion of the call.
Ed Ryan: So let's start with the fourth quarter that ended on January 31st. Key metrics we monitor include revenues, profits, cash flow from operations, operating margins, and returns on our investments.
Ed Ryan: For this past quarter, we again had a very good performance in each of those areas. Total revenues were up 13% from a year ago, with services revenues up 15% from a year ago.
Ed Ryan: That income was up 27% from a year ago with adjusted EBITDA up 14%. I adjusted EBITDA margin to 45% from Q3 and one point from a year ago.
Ed Ryan: We also generated almost $61 million in cash and operations in Q4 or 81% of adjusted EBITDA, in line with how we would expect the business to perform.
Ed Ryan: That quarter topped off a great year with record results. For the year, revenues were up 14%, net income was up 24%, and adjusted EBITDA was up 15% 25% 25% 25% 25% 25% 25%
Ed Ryan: Our headline targets are 10 to 15% adjusted. You've been to growth per year. So it's great to see the business performing as expected.
Ed Ryan: At the end of the year, we had over $235 million in cash, and we were debt-free with an undrawn $350 million dollar line of credit. We remain well-capitalized, cash-generating, growing, and ready to continue to invest in our business.
Ed Ryan: There's a few things that were the primary drivers of growth in our business and I'll talk a bit about each of those now.
Ed Ryan: First off was our strength and domestic logistics and supply chain
Ed Ryan: Our business has had a long history of helping domestic transportation moves, including our deep strength in truck route scheduling, dispatch and execution solutions.
Last mile, the Library Enable, Mobile Delivery Monitoring, Execution
Ed Ryan: Vehicle Tracking, Transportation Management, and Driver Training. We've continued to make investments in these solutions over the past year to help our customers make their fleets more efficient, provide customers with uber-like, fast, less mild delivery experiences, and plan and track shipments on vehicles that they've hired.
Ed Ryan: One area of investment for us continues to excel. Our macro point solutions are still the leading customer source for real-time visibility. The solution is integrated to our own and other transportation management solutions to provide customers seamless ability to track shipments. [inaudible]
Ed Ryan: and with its integration to the global logistics network, it can provide visibility even deeper in the supply chain to other modes of transportation where necessary before the domestic move. Thank you.
Ed Ryan: A broad network of connected carriers, freight workers, and other logistics intermediaries, and shippers give us better tracking efficiency than any provider out there.
Ed Ryan: So, macro point was a great catalyst of growth and we think an important area of continued investment as domestic transportation increases importance.
The secondary was our global trade intelligence business.
Ed Ryan: This encompasses such things as our tariffs and duties technologies, our sanctioned party screen solutions, and our data-mind trade trend research tools.
Ed Ryan: We sell strong demand for these solutions in Q4, likely in no small part due to the focus on the global trade environment.
Ed Ryan: Potential and implemented tariff changes have had our teams very busy updating our solutions and supporting our customers with various tariff related questions.
Ed Ryan: Sanction lists went through many changes from both an outgoing and incoming US administration.
Ed Ryan: And with the trade environment becoming more challenging, we've seen an increase in interest in our data-owned trade research tools as companies monitor competitors and peers trade flows to understand the most efficient and cost-effective way to move goods from existing and potentially new suppliers and routes we've seen an increase in interest in our data-owned trade research tools as companies monitor competitors trade flows
Ed Ryan: The interest in our global trade intelligence solutions was very apparent as the in-person innovation form we recently held in Washington, D.C. At the event, we shared many new developments in our tools, including those leveraging artificial intelligence technologies to help with tariff of classification and research and enhancements to our risk assessment capabilities.
Ed Ryan: We have many day card speakers and government trade representatives on site to provide the latest information.
A high attendant who reflected.
Ed Ryan: A thirst for information at this point about global trade issues, as well as interest in not just speaking to Descartes, but to share information with other attendees about how businesses are coping with the amount of...
Ed Ryan: Mouth and pace of change in the global trade landscape. So big interest in global trade intelligence, which was reflected in our two four results.
Ed Ryan: The third area of contribution was from our recent acquisitions. In fiscal 2025, we combine with five businesses consistent with our total growth strategy.
Ed Ryan: Our plans for the year would grow our business 10-15% over the previous year through a combination of organic and acquisition activities. Our business generate cash that could be reinvested to improve the business for our customers and stakeholders, including in acquisitions.
Ed Ryan: We consider where to invest based in part on returns we can generate in our invested capital.
Ed Ryan: As I mentioned, we combined with five businesses this year, I've spoken about how their contribution to our business has been reflected on previous calls. However, I wanted to provide a bit more of an update on our two most recent acquisitions, my character portal and seller cloud.
Ed Ryan: Our Mike Carrier Portal investment helps US freight workers with risk management of the thousands of truck carriers they deal with for domestic news.
Ed Ryan: The platform allows the brokerage to evaluate the risk of working with a carrier based on a number of factors including licensing, past service record, safety potential for our risk.
Ed Ryan: Insurance Compliance. This is a natural fit with our macro point business where we're helping free-breakers track loads and identify potential available domestic truck capacity.
Ed Ryan: are my tower of portal integration as well ahead of plan and the contribution to the combined business has been exceptional.
Ed Ryan: In particular, the combined offering of macropoint in my carrier portal has been well received by customers, with several new customers coming on using the combined solutions. A great investment, a great team, an excellent contribution to our business in Q4.
Ed Ryan: Our several cloud investment has been paying similar dividends as a great contributor to you for ahead of our plans.
Ed Ryan: Solar Cloud focuses on inventory and order management for e-commerce sellers who are using multiple channels to sell with particular strength with small and mid-market retailers. By combining solar cloud with our strength and warehousing and shipping of e-commerce orders, we offer a very comprehensive suite to our customers as flexible as they grow and add new sales channels. [inaudible]
Ed Ryan: In particular, the combination of people box and seller cloud is a very powerful offering for our customers. We've already seen significant post-deal joint selling success in the US, Europe and Australia, a good Q4 contributor with momentum as we entered the New Festival year.
Ed Ryan: I'll provide some more perspectives later in the current trade environment, but just to hit what we saw this past quarter, there were some slight general increases in volumes across air and ocean modes, which we attribute to some imports being expedited ahead of potential tariffs and the general holiday flow. [inaudible]
Ed Ryan: But I wouldn't characterize it as significant or across the board in all industries as it appears that many businesses continue to evaluate how to best proceed in the current trade environment.
A global shipping report that we put out every month.
Nurse, noted that we saw.
Ed Ryan: Some of the highest January ocean shipping numbers, and almost record numbers of imports from China ahead of tariffs [inaudible]
Ed Ryan: But again, this was ahead of a new tariffs put in place, and the Chinese will under new year slowdown, so good bond for Q4 were certainly helpful
Ed Ryan: It's a challenging business environment for our customers. Our primary purpose is to be able to help our customers meet these types of business challenges. Our own business has been designed to weather significant changes to the global and domestic trade landscape. We focus on total growth and have diversified our business across international and domestic supply chains. [inaudible]
to grow organically and by way of acquisition. [inaudible]
were diversified across all modes of transportation. [inaudible]
We provide business value across seven solution pillars.
Ed Ryan: We have over 26,000 customers with both customer concentration. We serve all parties to supply chain and logistics transactions, carriers, logistics service providers, ports, governments and shippers. [inaudible]
Ed Ryan: Descartes the business, our customers rely on, that our team can be proud of, and that our stakeholders have relied on to consistently deliver. Descartes shown again with our results this past quarter in year.
Speaker Change: So, let me just summarize as I handed over to Allan to give the full financial details in the quarter and year to date. We had good financial results, the business performed well, and we believe that the good reflection of the value that our customers continue to get from our solutions.
Speaker Change: The quality and contribution of our acquisitions we've added to our business and the hard work that our team continues to put in for our customers.
Speaker Change: We enter the quarter with more than $230 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.
Speaker Change: We remain focused on profitable growth so that we can continue to ensure that our customers have a secure, stable and growing technology partner that can help them with their challenges well into the future.
Speaker Change: I thanks to the entire day card team for everything they've done to contribute to a great quarter, year, and business overall But that I'll turn the call over to Allan to go through our Q4 financial results and more to tell Allan
Allan Brett: Hey, thanks Ed. I was indicating I'm going to walk you through our financial highlights for our fourth quarter and year ended January 31st, 2025.
Allan Brett: We're pleased to report quarterly revenues of 167.5 million in this quarter, an increase of just over 13% from revenues of 188.2 million in Q4 of last year.
Allan Brett: Our revenue mix in the quarter continued to be very strong despite a negative headwind from foreign exchange service revenue increased over 15% to 156.5 million from 135.7 million last year in the fourth quarter [inaudible]
Allan Brett: with services revenue coming in at 93% of total revenues this quarter, up from 92% of total revenue in Q4 last year.
Allan Brett: Removing the impact of both recent acquisitions, as well as the negative impact from changes in FX rates, we would estimate that our growth in services revenue from new and existing customers would have been approximately 6% this quarter when compared to the same quarter last year.
Allan Brett: Professional service and other revenue, including hardware revenue, came in at 10.7 million, or just over 6% of revenue for the quarter.
Allan Brett: Down slightly from 11.1 or 7% of revenue in the same quarter last year. Mainly due to lower, slightly lower hardware revenue this quarter when compared to the same quarter last year.
Allan Brett: Note that as planned for and as a message last quarter, hardware revenue was down more than 3.5 million in the quarter from Q3 where we had just completed a replacement program of certain AI-enabled cameras in our ground cloud business.
Allan Brett: In addition, after a larger license revenue quarter in Q3 of approximately 3.5 million, license revenue came in at 300,000 in the quarter, which is also a drop from 1.4 million in license revenue recorded last year in the fourth quarter.
Allan Brett: For the year, revenue was a record 651 million, up just under 14 percent from revenue of 573 million in the previous year, again despite a negative impact from foreign exchange rates.
Allan Brett: Gross Margin came in at 76% of revenue for the fourth quarter and the year in our fiscal 2025, consistent with the gross margins realized in the fourth quarter and for the entire year last year.
Allan Brett: For the fourth quarter and the year, our operating expenses increased primarily related to the impact of the five acquisitions completed in the year, including the OCR acquisition, which was completed early in FY 25.
For the year, operating expenses increased by just under 12% [inaudible]
Allan Brett: As a result of solid revenue growth and gross margin, as well as controlled growth in operating expenses, Adjusted EBITDA came in at a record 75.0 million in the fourth quarter, or 44.8% of revenue.
Allan Brett: Up just over 14% from a just a bit of 65.7 million, or 44.3% in the fourth quarter last year.
from $247.5 million or 43.2% of revenue last year.
Allan Brett: We should also note that in order to streamline our operations and reduce several redundant positions across our business.
Allan Brett: During the fourth quarter we completed a restructuring plan to reduce approximately 45 personnel, or just under 2% of our workforce.
Allan Brett: This restructuring plan, which we've now completed, is expected to reduce our offering expenses by approximately 4 million annually and resulted in expense in other charges in our offering results of just $800,000 in the fourth quarter.
Allan Brett: From a gap earnings perspective, net income for the fourth quarter came in at 37.4 million, up 18% from net income of 31.8 million in the fourth quarter last year.
Allan Brett: While these operating results are strong, with these up-strong operating results and collections from customers, cash flow generated from operations, came at at 60.7 million, or 81% of adjusted Epida in the fourth quarter this year.
Allan Brett: compared to cash flow from operations of 63.4 million or 96% of adjusted EBITDA in the fourth quarter last year. And these are when we exclude both the impact of earn payments made on past acquisitions in both periods.
for the year.
Allan Brett: Casual from Operations, again, excluding the impact of these higher urinal payments in both periods.
was $244.3 million, or 86% of adjusted EBITDA, up 11%.
from 220.3 million or 89% of adjusted EBITDA last year.
Allan Brett: Overall, as Ed mentioned, we are certainly pleased with our operating results in the fourth quarter and fiscal 2025 overall, as we continue to see revenue growth allowing us to achieve 15% growth in a justity of a DAW, while we improved our Adjustity of a DAW margin to 43.7% of revenue.
Allan Brett: and we achieve strong growth in casual from operations for the year.
Allan Brett: If we look at our balance sheet, our cash balance is total 236 million at the end of January .
for the Year. [inaudible]
Allan Brett: Excluding the payment of earnout payments on past acquisitions, we generated an operating cash flow of just over 244 million as mentioned earlier. That was offset by deploying approximately 290 million in capital towards new acquisitions.
Allan Brett: and we also paid an additional $34 million in earnings related to past acquisitions.
Allan Brett: So, after ending the year with just over 236 million of cash and an undrawn line of credit of 350 million, they're clearly well capitalized and positioned to execute on acquisition opportunities in a market consistent with our plan.
Allan Brett: As we look to the current year, our fiscal 2026, we should note the following [inaudible]
Allan Brett: After incurring approximately $6.8 million in capital dishes this past year, we expect to incur between $6.7 million in additional capital dishes this coming year.
Allan Brett: After incurring amortization expense of 69.4 million this year, expect amortization expense will come in slightly higher at 71.2 million for fiscal 2026, with this figure being subject to adjustment for foreign exchange rates and future acquisitions.
Allan Brett: After paying contingent consideration on current or earn out payments of approximately 34 million on past acquisition last year, we would currently anticipate that we will make additional earn out payments of approximately 3 million in FY26.
Allan Brett: Our income tax rate in the fourth quarter came in into approximately 23.3% of pre-tax income, resulting in a tax rate for the year, of 24.2% in FY25, which is lower than our statutory tax rate.
Allan Brett: For FY 23, we're expecting the tax rate will be in the range of 24% to 28% of our pre-tax income, which means there will be something on either side of our blended statutory tax rate of approximately 26.5% [inaudible]
Allan Brett: And finally, we are currently expected stock compensation will be approximately 15.1 million for physical 2026, subject to any future equity grants, as well as any forfeitures of stock options or share units.
Ed Ryan: And with that, I'll now turn it back over to Ed to provide our baseline calibration for Q1.
Ed Ryan: Hey, great down. These are challenging business conditions for our customers, just some of the changes from the last 30 days are as follows. US imports. [inaudible]
Ed Ryan: U.S. has imposed tariffs on imports from China, Canada, and Mexico, ranging from 10 to 25 percent.
Ed Ryan: Though just this afternoon, the White House announced a one-month exemption for automakers that comply with the USMCA. Canada and China have responded with their own tariffs, with Mexico planning on tariffs starting later this week.
The U.S. has announced
Ed Ryan: It will impose reciprocal tariffs on products from other countries to restore perceived trade and balances. The U.S. has indicated it may impose tariffs on the EU.
Ed Ryan: The de minimis tariff exemption for low-value imports was suspended, but that suspension has been temporarily lifted The U.S. administration is also considering changes to the USPS that could include no longer being an independent agency and changes to his economic structure. [inaudible]
Ed Ryan: The US is revisiting a sanctioned regime that has imposed a connection with the war in the Ukraine.
Ed Ryan: The International Law Insurement and Warehouse Union reached a labor deal with the ports to remove labor uncertainty Supplemental U.S. port fees have been proposed for vessels that aren't U.S. made Some shipping has resumed in the Red Sea and there's new ownership of the ports in the Panama Canal . . .
Ed Ryan: That's a lot of change that has come very quickly. For tariff changes, our customers often have open questions about if they will come into effect and if so for how long.
Ed Ryan: These types of business commissions call the ton of uncertainty that may get very hard for our customers to make decisions. Businesses have been somewhat paralyzed if they consider decisions for the short and long term. They've got to consider how to restructure their supply chains and the just-ex apparations.
Thank you.
Ed Ryan: with the potential for movement of manufacturing and sourcing facilities, changes in trading partners, heightened scrutiny and sanctions on particular goods and countries, the potential for further sanctions and tariff changes.
Ed Ryan: We've had experience with challenging business conditions, such as in 2008, we were able to grow through those challenging times, and our goal is to continue to do so now. Some of the things that we believe put us in a good position to do that include.
We're diversified in domestic logistics and international logistics.
Ed Ryan: Many of the changes right now impact international supply chains. However, we have great strength when domestic transportation moves in our routing and scheduling businesses, transportation management, and e-commerce, less mile businesses.
Ed Ryan: We're particularly strong in global trade intelligence. We believe we can provide a ton of help to our customers in the environment where people are looking for information. We're helping to manage tariffs, continually updating sanctions and party lists, thirsty for competitive intelligence and dealing with increased export licensing complexity.
Ed Ryan: We're diversified globally. We've got domestic transportation solutions that could be used around the world and where there's shifting international trade relations, we have an established global logistics network that could be leveraged by our customers. [inaudible]
Ed Ryan: We have a total growth model. We have an extensive track record of acquisition activity to complement the strong organic growth we've been delivering, changing market conditions often provide us with even more opportunities to add solutions for our customers and grow by acquisition.
Ed Ryan: And finally, we're well-capitalized. We have more than $235 million in cash, and $350 million in under online credit. We are a cash generating business.
Ed Ryan: Ultimately, regardless of how well they cart us positioned, our success is determined by our ability to help our customers. Our customers are uncertain about how these market conditions will impact their business. They just don't know. [inaudible]
Ed Ryan: Different industries, products, and customers are going to be impacted differently by recent changes.
Ed Ryan: Some industries where there are limited alternative sourcing options will pass these increased costs directly to end users and customers.
Ed Ryan: Others may make decisions to be less profitable to remain price competitive, and others may decide to exit markets altogether.
Ed Ryan: It's difficult for our customers to forecast what's going to happen next, which also makes it more challenging for us to forecast exactly what will happen in our own business.
Ed Ryan: For Descartes, our annual goal as it has been for each of the past many years is to grow our adjusted EBITDA by 10-15% over the previous year As I mentioned we plan to do this through a combination of organic and inorganic activities
Ed Ryan: with the business uncertainty that our customers are facing now. It's quite possible that they cards quarterly patterns of distribution of growth this fiscal year may be different than in past years.
Ed Ryan: The annual goal remains the same. Remindful of this and the impact of the challenging global trade and foreign exchange environments and setting our calibration and considering what our final quarterly financial results may be.
Ed Ryan: and our annual report we've provided a comprehensive description of baseline revenues based on calibration in their limitations.
As of February 1st, 2025 25th
Ed Ryan: 2026 were approximately $145 million. Their baseline operating expenses were approximately $89.5 million. We consider this to be our adjusted EBITDA calibration of approximately $55.5 million for the first quarter of fiscal 26.
Ed Ryan: or approximately 38% of our baseline revenues as at February 1, 2025.
Ed Ryan: If you continue to expect that we'll operate in an adjusted, you get to operate any more margin range of 40 to 45% Our margin can vary in that range given such things as revenue mix, foreign exchange movements and the impact of acquisitions as we integrate them into our business [inaudible]
Ed Ryan: Things are hard at the moment for our customers, things are changing for them rapidly and consistently strive to be a partner that they can count on helping isolate them from at least some of the complexity clouding their ability to make business decisions.
Ed Ryan: Thanks to everyone for joining us on the call today, as always we're available to talk to you about our business and whatever manner is most convenient for you, and with that I'm not turning the call over to the operator for questions.
Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
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Speaker Change: Your first question comes from Dylan Becker of William Blair. Your line is already open.
Perfect. Thank you. Hey, Ed Allen. And you kind of handed it to some of the...
tail end of your remarks and but wondering.
Speaker Change: What, obviously, global complexity uncertainty is going to look like forte carte this year. I mean, if anything, that's probably the new certainty, and it's driving a lot of decisioning.
Speaker Change: questions from, I'm sure from customers, there's a lot of variables, some of you may be secular in nature at this point in time, but how should we think about kind of a simplified netting out, because historically complexity is served as a net positive for Descartes?
Speaker Change: Yeah, and we think it will be here as well, but for our customers, there's a lot of uncertainty and things are changing, then changing back quite frequently just in the test, you know, once or two, you know, obviously I mentioned we operate our global trade intelligence business is a...
Speaker Change: Big beneficiary of people needing to pay close attention to this information, so that's great for us.
Speaker Change: To the extent it affects trade flows, we can benefit and suffer right along with our customers depending on what it does to their business as they move stuff across borders and the challenges they make face when they do that.
Speaker Change: and that positive and that for us, there's negatives that they reduce the amount of goods that they ship across borders.
Speaker Change: You know, I've probably heard it in my prepared remarks. You know, we don't really know what's going to happen. Next, we just want to be...
Speaker Change: Prepared to help our customers where they need help, and we want to be prepared to...
Speaker Change: Manage our business, you know, consistently where, you know, where we need to pay attention to things that are changing So, if you've done a very good job of that in the past that expect this to continue to do a good job of that we're pretty conservative that's why I'm bringing all this up on the call
Speaker Change: But you know the big answer to this is we don't know what's gonna happen next and I don't think anyone else does here [inaudible]
Speaker Change: Maybe on the AI front, right? You do have a substantial data set that you can leverage and help kind of drive some efficiency despite some of this uncertainty.
Speaker Change: I guess maybe how are you guys thinking about incremental areas for external monetization, connection points throughout that data, as well as maybe, Allan, anything you guys are seeing internally in your ability to deploy and manage and serve as your customers that can drive incremental kind of operating leverage across the business?
Thanks.
Speaker Change: I mean, we got thanks Dylan. Yeah, we're seeing a ton of opportunity with AI, I've mentioned a bunch of them on previous calls, both in our own internal operations and development.
Speaker Change: and customer support and marketing ability for us to be more efficient in delivering services and also...
Speaker Change: provide better service to the customers, which is a lot of great news.
Speaker Change: In addition to that, we have the ability for AI and our actual products to deliver, and that's probably what we're most excited about in the long run. I mentioned a bunch of them on previous calls and the Global Trade Intelligence Pillar and the Transportation Management Pillar and the Fleet Management Pillar, but just some examples.
Speaker Change: David A.I., model for improved the night party screening in the GTI pillar which seems significant productivity improvements.
Speaker Change: over the last six, eight months as we're doing that and rolling out to customers.
Speaker Change: We've released a beta chatbot for the Data Mind Service to interact with our trade data, which will help customers gain.
Better usability of that information.
Speaker Change: In the fleet pillar, we're using machine learning models to improve ETA calculations which stand in term and turn improves the customer's planning process. So there's lots of examples of this in the business and keep coming up with new ones.
Speaker Change: Almost every day, we separated out an AI team that's able to go in and help any of the pillars with ideas that they have, and so I think this is going to be a big business for us in the long run. You think about it?
Speaker Change: People are increasingly putting IoT devices out in the field to tell you what various trucks, planes, ships, engine components, tires, etc., all these things that are reporting back to us about what's going on in the field.
Speaker Change: and right at the same time, AI comes out and gives us the ability to go through that information very rapidly and help our customers make better decisions.
Speaker Change: I think 10 years from now, that's going to be a very big part of our business, so we're excited about that opportunity.
Very helpful. Thanks, Ed. Thanks, Ed.
Thanks, Paul.
Speaker Change: Your next question comes from John Campbell of Steven's Inc. Please go ahead.
Hey guys, good afternoon.
Speaker Change: Hey, good. On the margin front, I get there's a lot of uncertainty here still, but, you know, if I kind of put these puzzle pieces together, I mean the revenue mix chef was clearly helpful this quarter. It seems like that probably continues.
Speaker Change: You've done the cost reduction plan that's going to add a little bit of savings next year, and then you've got a couple of acquisitions in the mix, and if history kind of holds, you've had past acquisitions, you've worked margins up over time, so it seems like you've got...
Speaker Change: You know, you know, some Tellwins as you get into next or get into the fiscal year. I know a lot is gonna, is gonna hinge on the pattern or is kind of the phasing of revenue and if that holds up. But Allan,
Speaker Change: You know, if we assume that the normal cadence of revenue kind of holds up here, it seems like you're going to be kind of pushing north of that 45% the high end of your current target. I know you want to see a couple quarters in the bag and I know you want to see some of this resolution kind of come out, but I'm curious about your list all from a range and how we should be thinking about just probably about margin this year. [inaudible]
Speaker Change: Let me take this one. John , if you watch this in the past, we usually bump up again and even a couple of times through that range before we adjusted up. We're pretty cautious about this kind of stuff.
Speaker Change: and there's a couple of reasons. One foreign exchange can change it quickly. You see in that right now, the foreign exchange movement going on at the moment that's...
Speaker Change: You know, Strengthening US Dollar, which changes the numbers around. We don't really care so much. We run the whole business but it's out there and it would affect the percentages that we provide to you.
Speaker Change: Two, and maybe more importantly, most of the businesses that we buy, and you know, we're pretty acquisitive and a lot of good deals going on right now, and if there's a lot of uncertainty in the market, you know, and we're a stable business, or at least a lot more stable than other companies in our industry. You know, we might be in a very good position to buy companies, and when we do...
Speaker Change: Oftentimes, those companies don't have nearly as high an image of margin as we do. So, for me to tell you that it's going to keep going up, I would have to assume that all things are going to stay the same and I don't believe they will.
Speaker Change: We buy a business that makes 25-30% profit margin. With an expectation that we're going to grow it over time to more of our levels, but the day we buy it, it drags our EBITDA margins down considerably. We always have that in the back of our mind when we're putting out these numbers. So...
Speaker Change: Now, it's possible that we'll bump up against it again, it's possible that we'll go over it, I'm not going to apologize for that when it happens.
Speaker Change: But at the same time I want to be conservative when we're putting it out there it's very possible we go buy some other businesses and that temporarily drags our ebit to margin down and that's a good thing in our mind but I also don't want to miss a number that I told you we'd hit [inaudible]
Speaker Change: Yeah, Tony, thanks a lot. Oh, actually, let me add one more thing. Let me, let me have one more thing.
We over time, in the core business.
Speaker Change: that, as it grows, it keeps getting more profitable, meaning it has a very low cost.
Speaker Change: and Criminally, and as our business grows, we have, and all things being equal, which we know that they're not going to be, but if all things were going to remain the same, we do believe that we would keep driving that number up, because the core business...
Speaker Change: Does have some relatively fixed cost components to it that the revenue goes up and the cost stays the same and that's a constant driver upwards on that number. And at the same time some of the things I mentioned like acquisitions, you know, have the potential to drag it down and that's why we're concerned about it. Sorry.
Speaker Change: Okay, that's all for, and then you can't hand it at this, but on the M&A front, I mean...
Speaker Change: There's a lot of market uncertainty out there, and if you guys are starting to feel bad, I can only imagine the sub-scale players with what they're feeling right now, so maybe if you could talk to whether that's made its way, starting to make its way into the multiples, if you see any change there, and then change as far as new opportunities either coming to you organically or being shown to you. So, if you'd like to see any change there, I'd like to see a change there, and then change as far as new opportunities ever coming to you, and then change as far as new opportunities ever coming to you.
Speaker Change: You know, we've seen it over the last year, you know, and you see that's helping us get deals done, we've got five deals done this year
Speaker Change: We think we're in pretty good position to get more done in the future. At the same time that I think the real question you're asking is am I seeing it right now because the uncertainty is going on in the last month and the answer to that is no, it doesn't go that fast. It'd be a couple of months before.
Speaker Change: People go, oh boy, this is going to be a problem. Maybe I should tell my business for less. There's usually a lag and I wouldn't be surprised if there were this term. If infections turn out positive, they're going to be. I don't know if I should tell my business. I don't know if I should tell my business. I don't know if I should tell my business.
Thank you.
Speaker Change: If the world runs into trouble, we're probably going to fare better than most and some of those companies are going to be in a position where they feel like they have to sell and that's going to affect the purchase price. And that'll be good for us.
Thanks, Sean. Thanks, Ed.
Thank you.
Your next question comes from Stephanie Price of CIBC.
Your line is already open.
Thank you.
Speaker Change: Just circling back on the tariff discussion, you mentioned 2018 year-prepared remarks. Can you dig into that historical precedent a little and just talk a bit about what the typical consumer behavior was in those volatile times and if you're seeing the same thing this time around.
Speaker Change: I can only talk about it, so wait, I haven't seen much of it yet, but I wonder what's going to happen, its prices go up.
I certainly know eight, you know, when you saw [inaudible]
Speaker Change: You know, this is a moment in time, October 2008, where everything hit the fan, and everything grinded to a halt and Christmas slowed down in the next year. We were on the verge of a depression.
Speaker Change: and we definitely saw consumer spending go down. You probably heard me talk about this before, if you've been with us for a while. Our shipment volumes were down about 8% that year, which has always been shocking to me. You think it would be down even worse. I think what you see is...
Speaker Change: People still have to get certain things. They have to get food, they have to get diapers, they have to get certain basic things. They might not be buying boats and jet skis, but they're still one in their life as soon as they assume they still have a job. They make bigger changes that they don't, but most people kept their job during that time. [inaudible]
Speaker Change: At the same time, it was tough times for people. And just see why it was only down 8% I look and go, you know, you might not buy a lobster but you still have to buy chicken. And, you know, the chicken costs the same amount of money to move as the lobster does. So, for us, there's similar transaction numbers. They were down 8%, but they worked down to 30 or 40. [inaudible]
Speaker Change: And I don't think we're in a time like that. It's a rid of them feel like that right now to me. Just feel like there's a lot of uncertainty right now and that maybe makes people frees for a little bit before they figure out what to do next.
Speaker Change: We really benefited during that time, and I looked back on it, and I think it wasn't fun to go through it, but when I looked back, we picked up some of the backstacks acquisitions.
Speaker Change: at very good prices coming three or four years. [inaudible]
Speaker Change: because of that recession. And I don't know what we're heading into right now in another we are in a recession but if we are or we head into one you know part of me goes well this isn't going to be that much fun but on a part of me goes like we may end up doing pretty well in this. We're going to look back on this time laughing at it going this.
Speaker Change: This is the set of things that propelled the next stage at Garitha Descartes, so we probably have a different outlook on it than most businesses, just because of who we are and what we do and all the things I mentioned that prepared March and the call, but those are some of the thoughts we have about it.
Speaker Change: That's good color. Thank you. And then just on macro point, you also mentioned that in the prepared remarks. Can you talk a little bit more about the growth you're seeing there? You know, the growth rate of the business and what sort of additional investment you're looking to make in the business? [inaudible]
Speaker Change: Yeah, that continues to do very well for us, you know, we've become the leader in the brokerage space and really start moving even the super space because of our track rates and our competitors are tracking
Speaker Change: 55 to 60% of the shipments that they have and we're tracking 85 to 90% of the shipments. That means if I give you a shipment to track half the time, you're not going to be able to find it and you're not going to give me any track. [inaudible]
Speaker Change: That is one of the broker market where there's high volume and they really need to track as many of the ship as possible. And let's put us in a very good position because we have a lot of truckers on our network. We have competitors there that run this software company and we run it like a network and that's...
Speaker Change: I think I'm very helpful for us. And then, you know, so we're taking customers from them and breaking it into the shipper market, which we haven't paid as close attention to over the years as they have, but I think, you know, we're heading in that direction as well, and I think they're going to appreciate higher track rates.
Speaker Change: as well as we start to move into it. So we're making investments to make the software better and better for big retailers and manufacturers and I think you're going to see us head in that direction or we can't. [inaudible]
Great. Thank you very much.
Thank you.
Your next question comes from Paul Treiber of CRBC Capital Markets.
Your line is already open.
Thanks very much and good afternoon.
Speaker Change: You mentioned the uncertainty in the environment and potentially that customers could pause what they're doing to evaluate that. The professional services in the quarter and licensed revenue were lighter than the previous quarter. Is that related to seasonality or did you begin to see some of that pause impacting revenue there?
Speaker Change: No, no, in effect, let me frame that. We're mostly looking at the services at the time. I have recurring numbers the way that we drive our business. I'd like to have no professional services
Speaker Change: meaning that everyone can just get our software and use it right away. I don't think it's ever going to be that simple.
Speaker Change: and some of the software packages, some of them are, that's an intellectual, but not all of them. And they need people to go and install them and make sure that they get what they're paying for. And, you know, we want to be there to do that for them, but...
Speaker Change: I'm not as focused on those two numbers. I mean, we want…
Gross and returning revenues [inaudible]
Speaker Change: And we sell professional services so that we can install our products that need to be
Speaker Change: installed over a period of time because they're a little more complicated to run. The licenses that rather themselves are coming now are software fees, but you know some customers have all deals with us, they're able to get licensees so they do. But now we're probably selling as well as we sold off.
and this best quarter, so now nothing there.
Speaker Change: Shifting, looking at service revenue, Allan mentioned, I think it's 6% organic or a constant currency or organic service revenue growth. He was down a little bit from the prior quarters. Any moving parts there to call out just in terms of the comparison to the last couple quarters?
Speaker Change: I'm not nothing big. It's all related to buying some individual across a lot of little customers and nothing that you know.
I understand everyone who's not working on our companies.
Speaker Change: 6, 6 1⁄2, 7, 7 1⁄2, you know, what's the difference between them and to us, it's probably more. We just want to keep them, see them keep growing. There could be lots of little reasons, it's up and down.
Speaker Change: and a lot of it outside of our control. It is important us to keep growing. We keep telling everyone where we're going to grow. You have to tend to fit some percent. And that's what we're focused on. And it truly is what we're focused on. But at the same time, you know...
Speaker Change: We're aware that growing revenue is important in that mix, and 6% and 7% those are fine numbers as far as we're concerned. The guys that run this company have been here for 30 years. I've seen 1%, I've seen half a percent growth, so 6, 7, 8 all sounds great to me.
Speaker Change: And then just a bigger picture question, you mentioned, there's a lot of interest in your global trade intelligence products because of the tariff uncertainty. How much is, first of all, getting you in the door and then once you're in the door, is it opening up the discussion around broader digital transformation of supply chains? [inaudible]
Speaker Change: Yeah, sometimes. I mean, the biggest driver of that is our network, right? So people sign up for a network and then we start going, well, now that you're on the network, here's what else you can do.
That's certainly the...
Speaker Change: The biggest way and the best way that we get people in the door and sell them more stuff. But yeah, it happens from time to time with global trade intelligence. That's what I'm talking about.
Speaker Change: People get in trouble, they get to find their lawyers say, hey, how do you prevent this from happening in the future? And they said, we didn't know we weren't impacting the lawyer because that's not a good answer. And they refer them to us.
Speaker Change: and we'll help them with sanction parties. People have global trade issues where they overpaid or underpaid and if you underpaid there's a big fine and if you overpay it takes a long time, a lot of work to get your money back. [inaudible]
It's kind of odd that way, so...
Speaker Change: You know, more and more people, especially as the tariffs are changing every day, you know, I tend to look to us for our GTI solutions. We're now the biggest in the business and certainly we think of the best.
Speaker Change: and it's absolutely away in the door for us. Probably the second or third biggest lane door biggest way being the network.
Speaker Change: So it's nice to be in the position we're in right now with all the tariff talk to be able to help our customer deal with it and come up with more innovative solutions to help them deal with it more accurately and more efficiently.
Speaker Change: Yeah, but there's a lot of other stuff we do, and if customers come in and buy that, we'd love the opportunity to show them all the additional things that we can do for you.
and thanks to Dean the Carson's.
Hey, thanks, boss.
Speaker Change: Your next question comes from Kevin Krishnarat of Scotiabank. Please go ahead.
Speaker Change: Hey there, good evening, maybe kind of on back to Paul's questions. Can you remind us again the sort of structure of your sales team, how big is sort of the upsell cross-elting? I can imagine you're probably getting a lot of inbound, but...
Speaker Change: You know, talk about how you might be being proactive and, you know, looking at your listed customers, looking at what products they've got and trying to help educate them on what they should be buying next. And maybe you can also talk about some of the feedback from your innovation forum that you have with customers.
Speaker Change: Yes, so I think Phil's forces in around 300 now and they're all able to cross sell and they're all able to sell new stuff.
Speaker Change: They would break them into two groups, MRDM, Manufacturers Retailers, Distributors and Noble Service Carotters, and then they have a group being logistics.
Speaker Change: and Transportation Providers. And they're all doing both really, they're all selling new products to new customers, and more often cross-selling to be up to price 65.
Speaker Change: At times up to 70% cross-sell, we have 26,000 customers and it results in a lot of cross-selling, we used to have pretty low cross-selling numbers 15 years ago, but we really focused on it, and as we've gotten bigger, it's become a very big part of what we do.
Speaker Change: On the innovation forums, we had one in that you see in a couple of Chicago a few months ago. Very well received.
Speaker Change: Coming out of the pandemic, we just have one big user group [inaudible]
Speaker Change: with a lot of different kinds of companies there doing a lot of different things and a lot of different tracks.
Speaker Change: And after the pandemic where we weren't able to have to use a group, we decided to start doing it this way, which is a little more focused and we can go and maybe partially for our own people's time and partially for the customers to make sure we're very focused on them while they're there. We've broken into smaller chunks.
Speaker Change: and around the country that do different locations where maybe more the users are. So we had a lot of success doing it. I think the customers get a lot from us. We certainly get a lot from them, who I heard we mentioned before, a lot of our ideas about what to buy next and what business to get into come from them and come from them specifically at these forms. So I think we're going to have a lot of success in the future. We're going to have a lot of success. We're going to have a lot of success in the future.
Speaker Change: They get to talk to each other, right? Because they're all solving problems in similar problems in different ways and they get to hear how other people are doing it and I think their businesses benefit from that. It makes it a somewhat unique event for customers to come to and get great information, so we're excited about it.
Glad it.
Thanks for that. Second question for me is…
Speaker Change: You've brought it up. I know it's been back and forth and back and forth here, but can you?
Speaker Change: Talk about, you know, how you see, you know, any changes there impacting your business, I can think on the positive, I mean e-commerce, a bit of a boom-tree you've also got.
Speaker Change: a business netCHB, that sort of plays in that space. But on the other hand, you know, if it goes away completely, does that, you know, mean better business for, you know, the more traditional customers brokers who are also your customers as I will for them as well, I'm just trying to think about it. That's what's in there.
Speaker Change: It does. You actually set it all pretty well. We don't know what's going to happen yet. The minutes may go down, it could go away, it could stay the same. We do a lot of the diminished transactions. They go at very low fees per transaction. We do even more of the regular customs filing transactions. They go at higher fees per transaction, just for an entire container or something like that.
Speaker Change: It really depends. You know what you see, but the rule comes out as we have a lot of confidence that if it lowers, that we are going to lose those diminimous transactions that have burned...
Speaker Change: Very, very low transaction fee, and pick up a lot of new customs filing that higher transaction fees because they're a more sophisticated transaction. I mean, they're much more sophisticated transactions. So, you know, I don't know how it's going to work yet. I don't know what the impact will be, you know, if a customer puts...
Speaker Change: All of a particular commodity in one container that's only going to be one customs filing, which might have been, you know, hundreds before.
Speaker Change: You know, 30 different types of packages in those containers, and it'll end up being 30 different customs finds which would end up being a lot better for us.
Speaker Change: So, not only do I have to see what the rules are, but I have to see how the customers react to it and uh...
Speaker Change: I'm not going to spend too much time worrying about it. It's probably going to be good for us and we'll just have to see what happens when the government does something or decides that they're not going to [inaudible]
Speaker Change: Got it. Okay, great. That's you from me. I'll hop back in the queue. Thanks guys
Thanks.
Your next question comes from Cole Cousins of Wolfe Research.
Her line is already open.
Cole Cousins: Hey guys, this is Colin for Scott Group. I know you called out some pull forward ahead of tariffs in the quarter. Is there any way to quantify how much that helped you guys and unrelated, maybe coming out of the Chinese New Year? What kind of activity are you seeing so far to start the year? [inaudible]
Cole Cousins: I don't think it's your first party of question, they helped, but I don't want it
Cole Cousins: Nothing material. Second part of your question, I can't really answer because it's talking about a period of time that we're not reporting on so...
Cole Cousins: Now see any big changes, you can look at our... [inaudible]
We're looking at our...
Cole Cousins: Global, our monthly global shipping report, it'll give you some information about it, but uh... [inaudible]
Cole Cousins: Without saying too much, it's similar stuff, similar stuff to prior years at the moment.
Speaker Change: Okay, and there's been a lot of uncertainty about the potential charges on Chinese built ships and shipping companies, and how do you guys see that kind of playing out as we go into 2025?
Speaker Change: I don't think it's going to be a big deal for us, almost every container ship in the world.
Speaker Change: minus the Joan Dex ships that are here in the United States, go to Puerto Rico, Alaska, and why are farm built? So, uh...
Speaker Change: If they're going to charge for foreign build ships, every ship that bringing containers to the United States pretty much from another country. In fact, every ship from another country I believe will be in a foreign build ship. So I, you know,
Speaker Change: I don't know what to say about that other than I don't think it can matter much to us, but it'll certainly matter to our she-haired customers [inaudible]
Okay, and if I could squeeze one last question in.
Obviously, EBITDA growth was strong in the quarter, and then...
Speaker Change: for the full year, and I know you guys said that. [inaudible]
Speaker Change: Quarterly Patterns might be a little bit different here in 2025. Can you expand on what exactly you meant by that? And I know you're focused on continued 10 to 15% EBITDA growth.
Speaker Change: going forward, but maybe there's a lot of uncertainty right now. What's your confidence that can continue to kind of end up just called 2026?
Speaker Change: No, we're confident we're going to deliver that in 2026. We put the caveat in there just, I don't know if I'm going to mention it, but we're pretty cautious.
Speaker Change: But if stuff started to happen quickly, and it started to make change, negative change in our business, we're going to need a little bit of time to...
Speaker Change: to deal with that, and if it goes the other way around, and if it goes great for our business, you know, we don't have to worry about it, but we just wanted to tell people with that uncertainty that we're seeing, that even if we didn't do it quarter to quarter, we plan on doing it year and year. And that's maybe just a commentary on how we always operated the business.
Speaker Change: When things go bad, we react and we do stuff about it. And if they go great, I'll be happy. Maybe I don't have to do too much, but one of the more people that that's, you know, how we're gonna handle it. [inaudible]
Okay, thanks, I'll turn it back [inaudible]
Your next question comes from John Chao of National Bank.
Your line is already open.
John Chow: Thanks for taking my questions. So there are some articles online about the tariffs on Canadian software, what technically doesn't sound realistic, so what's our take on this?
John Chow: We don't know what's going to happen this evening, but a lot of our stuff is down in other locations, so I don't know if that's going to be part of the issue or not, but we don't believe it's going to have any impact on us at the moment.
Speaker Change: Okay, got it. And, as you also mentioned, a couple drivers, organic grills, you know, prepare remarks, but I'm just curious about, you know, the other side of the balance. So any examples of your business that might potentially be on a pressure, you know, if the trade marmin starts to get worse from here.
Speaker Change: Well, I don't know if this is going to happen, but I think if less stuff starts shipping internationally because tariffs are high and certain products that are kind of forced out of the market because of that, that's a possibility. If that happens, we'll suffer along with everyone else who...
Speaker Change: We get, you know, who I floor a ship and mine, and I'm getting paid by the shipment for stuff, and there's less stuff going across the border. You know, we get less transaction violence from that, that's the area where we would be impacted. I mean, everything else is almost...
Good for us, right at the end, click about it there.
Speaker Change: Increased complexity, you always hear us talking about that, and we're certainly facing increased complexity right now. In the long run, I believe this will benefit us.
No matter what happens in the showroom. [inaudible]
Speaker Change: and the next one. Thank you for watching. And I hope you have a good day. And I'll see you next time. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.
Speaker Change: and you know it's putting a lot of focus on supply-chaining logistics, which means money is going to start, more money is going to flow to supply-chaining logistics to help solve the problem in the first place.
Speaker Change: The people usually put their money in a technology because that's where they get the biggest banks of the box. That's dope.
Speaker Change: In the long run, I'm very optimistic about it. In the short run, if less stuff starts moving across a particular border because the tariffs went up, you know, and I get paid to move that stuff or to process the transactions about that stuff moving, we're going to have a short term issue along with everybody else. And, uh...
Speaker Change: You know, we're not immune from that. At the same time, overall, I think this is probably going to end up being very good news for us because it plays into the things that we're best on.
Thanks for the color of the pop-up line.
Speaker Change: Your next question comes from Mark Chappelle of Loop Capital Markets
Your line is already open.
Mark Chappell: Hi, thank you for taking my question. During your prepared remarks, you've called out areas of your business where you sell strength in the quarter, particularly macro point, global trade intelligence. Could you just talk a little bit about maybe parts of the business that were not quite as strong in the quarter?
Mark Chappell: I don't know if we had any areas that were, you know, what I would call weak, you know, the...
Mark Chappell: The shipment processing was maybe a little slower than normal. You could see that in the trade flows, but that...
Mark Chappell: made up for another area is like macro point, that's a given processing business that you know was doing very well at the same time. Whether we had anything that we thought was doing badly at the moment, you know, we put up pretty good growth numbers and uh...
Mark Chappell: Most of the stuff was performing pretty well. Global trade intelligence was doing, you know, better than normal because of what you see going on, but I didn't really have anything that was I would say down.
Remedial.
Speaker Change: Great, thanks. And then, as a follow-up, could you just comment a little bit about what you're seeing on the pricing front? Are customers becoming more aggressive trying to get price
Speaker Change: Not really know, pricing issues tend to crop up more when you get into a deeper kind of recession environment we're not in that and stress right at the moment. I think our customers are mostly focused on how to deal with these tariff issues and what changes it.
Speaker Change: brings to their business and they're probably trying to buy more stuff from us and usually when they're trying to buy more stuff from Us they're not sticking it to us on price They're trying to figure out how to get the best software to solve the problem that they're having so at the moment We're not seeing that
Thank you. That's helpful. That's all for me
Thanks.
Operator: Your next question comes from Steven Li of Raymond James. Your line is already open.
Stephen Lee: Thanks. Any thoughts on Amazon getting into LTL? If it impacts your customers, does it hurt you in a similar way or are there offsets?
Stephen Lee: Then we do a lot of business vans, and it's probably good to have more competition there.
Stephen Lee: Now, I mean, as with all the LTL providers, a bunch of them go out of business, we usually pick them up at the other ones, so...
You might end up seeing the same thing here
Speaker Change: Okay, okay, helpful. And on your calibration, your baseline revenues and operating expenses are very similar to last quarter. Can we expect Q1 to be similar to Q4 in terms of revenues any better? Yeah.
You mean absolute numbers of percentages? Yeah, actual numbers, yeah.
Allan Brett: Well, yeah, Allan makes it up and give you more here, but I believe it's a headwind of effects going on right now that may end up making the absolute numbers.
Speaker Change: Closer than they normally are, I don't know if they're going to be, they'll probably still be higher, but death [inaudible]
Speaker Change: I don't know if you have anything to add to that.
Speaker Change: Yes, Steven, there's certainly an FX headwind that's sitting in those numbers. You'll see it in the exchange rates that we gave in calibration that definitely are different from from
Speaker Change: from Q3, and what we experienced in Q4. So keep that in mind at the same time. I think the back to Ed's points earlier, it's an uncertain set of times. So I think our calibration reflects some level that uncertainty.
Speaker Change: Got it, and Allan, I've got you on. You set services plus 6% Concentre Currency Organic. What would that number be for overall revenues, Concentre Currency Organic?
Allan Brett: Yeah, we had lower license revenue. We had slightly lower hardware revenue in the, in the, in the professional services, another bucket. So slightly less than that, that the FX headwind was, was over two million. And, um,
Allan Brett: a year over year and sequentially, so we certainly had some compression there that was purely FX, but overall growth is slightly lower than that 6% just given the lower numbers in license and how do I read? David.
Yes, so something like five.
In that range, yes, Steven. Okay, perfect. Thank you
Your next question comes from Robert Young of Canacor Genuity.
Your line is already over.
Robert Young: I, on the trade intelligence said lots of demand, especially recently in the biggest driver, I think you said at the current network, so existing customers and you really focus on cross sell, is there any?
Speaker Change: Metrics, or maybe even rough idea that you can share with us on penetration there, and whether you expect that penetration obviously to move forward pretty quickly in this environment that's still complex, then I'll pass on.
Speaker Change: Probably something that may not be so obvious to you, more and more people will buy it that never needed it before. There's more and more e-commerce businesses popping up that need this information.
Speaker Change: You know, we tend to pick up a lot of the new guys. So, uh...
Thank you. Thank you.
Speaker Change: You know, I don't see any real end in sight today.
Speaker Change: Hey, look at the 26,000 customers. I may imagine there's a lot of really small ones, you know, free brokers and stuff like that. Like do all of those customers, is there a use case for all of your customers to use trade intelligence? Or is it something more just in the larger customers where they'd be that complex? It's needed. It's mostly...
Speaker Change: Yeah, it's mostly mid-size and larger guys. If you have one product that's going to one country, you can probably watch the tariff rate yourself.
Not yet 10, maybe you can go
Speaker Change: Watch yourself, when you start having 50, it goes to 50 countries. [inaudible]
Speaker Change: 500 that go to 50 countries, there's no way you're going to be that properly yourself [inaudible]
Speaker Change: and those are the people that need to buy it. It's not every customer needs to do it. A lot of our customers only do domestic but as soon as they start buying or still start making some products it goes to a lot of different countries.
Speaker Change: You know, they end up needing the solution to solve the problem, or they end up paying the wrong rates and not through real problems [inaudible]
Okay, thanks for the color.
Your next question comes from Lachlan Brown of Red Burn Atlantic.
Your line is already open
Lachlan Brown: Hi, Allan, thanks for squeezing me in the interest of time. I'll just keep it to the one question. Allan mentioned the reduction of the 45 personnel in the fourth quarter and use remarks. Just the areas of the business that these reductions came from.
Lachlan Brown: Yeah, lawfully came across the business. When we looked at our business, we do this all the time. We're constantly assessing our business. We just looked across the business. And for the most part, these are role eliminations as we streamline our business. And something you can expect from Descartes on a fairly regular basis, but spread out across the entire business.
Okay, that's clear. Thanks
Lachlan Brown: There are no further questions at this time. I would hand over the call to Ed Ryan for closing remarks. Please go ahead.
Ed Ryan: Hey everyone, thanks very much for your time on today's call and we look forward to reporting back to you on Q1 results in June of this year and otherwise look forward to seeing you guys out on the street with your customers. Have a great day. Thank you.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.