Q1 2026 The Descartes Systems Group Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Descartes Systems Group quarterly results Conference call.
At this time, Oh, I'm, sorry in listen only mode.
Following the presentation, we will conduct a question and answer session.
Any time during this call you require you need assistance. Please press star zero for operator.
Speaker Change: This call is being recorded and staging forest, playing 25, I would now like to turn the conference over to Mr. Hu stopping and please go ahead.
Hu Stopping: Thank you and good afternoon, everyone. Joining me on the call today are Ed Ryan CEO, and Allan Brett CFO and I Trust that everyone has received a copy of our financial results press release that was issued earlier today.
Purchases of today's call other than historical performance include statements of forward looking information within the meaning of applicable securities laws.
Hu Stopping: These statements are made under the safe Harbor provisions of those laws.
These forward looking statements include statements related to our assessment of the current and future impact of geopolitical trade tariff and economic uncertainty on our business and financial condition.
Hu Stopping: Descartes operating performance financial results and condition.
Hu Stopping: 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.
Yeah.
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 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.
<unk> 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.
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.
With that let me turn the call over that.
Speaker Change: Hey, Thanks, Scott and welcome everyone to the call today, we are reporting strong first quarter revenues and annual adjusted EBITDA growth consistent with our plans and very challenging and uncertain market conditions for our customers.
We're excited it wherever 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 the call.
I'll start by hitting some highlights of last quarter and some aspects of how our business before I'll then hand, it over to Alan who will go over the Q1 financial results in more detail.
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 Q2, and we will then open it up to the operator to coordinate the Q&A portion of the call.
Okay.
Speaker Change: Let's start with the first quarter that ended April 30.
Speaker Change: Key metrics. We monitor include revenues profits cash flow from operations operating margins and returns on our investments for this past quarter. We again had very good performance in each of these areas.
Speaker Change: Total revenues were up 12% from a year ago. The services revenue is up 14% from a year ago.
Speaker Change: Income from operations was up 9% from a year ago with adjusted EBITDA up 12%.
Speaker Change: Our adjusted EBIT margin was up one point from a year ago to 45%.
Speaker Change: We had $115 million plus some restructuring costs to acquire three G. Tms Nash and acquisition I'll speak to later.
Speaker Change: We also generated almost $54 million in cash from operations in Q1 in a quarter, where we also have payments to restructure <unk> immediately at closing.
Speaker Change: At the end of the quarter, we had more than $175 million of cash and we were debt free with an undrawn $350 million line of credit.
Speaker Change: We remain well capitalized cash generating growing ready to continue to invest in our business.
Speaker Change: We had a few things that were the primary drivers of growth in our business and I'll talk about each of these now.
Speaker Change: First was in our transportation management area.
Speaker Change: First area of strength within our transportation management pillar in particular with our macro point real time visibility business.
Speaker Change: So many challenges with goods that are moving across borders solutions to help companies with more efficient domestic transportation moves have seen strong demand. We believe that we have the highest quality tracking service in the market with a very high percentage of loads able to be tracked through our networks.
Speaker Change: Our consistent focus on interacting with carriers and other transportation management systems to get status updates.
Speaker Change: Or even leveraging AI technologies to help our customers tracking even greater percentage of awards.
Speaker Change: As we ended the quarter, we were seeing some of our strongest months ever macro point business against the backdrop of declining domestic truckloads in United States.
Speaker Change: The recent my carrier portal acquisition also has been a great addition to the transportation management solution stack Theres been a lot of media market attention on cargo theft, and fraud criminal network with supporting systems by creating big carriers and accepting delivery loads to steal cargo <unk> get payment Mike.
Speaker Change: My carrier portal helps identify this type of fraud by helping customers evaluate the legitimacy of carriers are doing business with.
Speaker Change: We recently held a women are with the California Highway patrol to talk about the cargo fraud and it was one of our highest attended events ever.
Speaker Change: A report on its been a great addition to the portfolio, allowing us to further distinguish ourselves in the transportation market.
Speaker Change: We also made another addition to our transportation management before well portfolio, where we combined with <unk> and <unk>.
Speaker Change: Latter part of this quarter.
Speaker Change: <unk> has a traditional domestic transportation management system on a modern cloud architecture. So many challenges in the international trade, making investment in domestic transportation was logical for us through G. Also a strength in parcel shipping which is an excellent complement to our existing shipping solutions overall the acquisition provides some great functionality George.
Speaker Change: Existing customers and allows <unk> customers with access to a real time visibility and fraud prevention solutions.
Speaker Change: <unk> did require some restructuring to put them on a path to the margins that they prefer to operate at which used some of our cash from operations in the quarter to get the business better positioned in particular with the acquisition happened near the end of the quarter. It meant that <unk> didn't contribute much to our Q1 adjusted EBITDA. It will require some operating history before its fully.
Speaker Change: To integrate it into our normal calibration.
Speaker Change: Overall transportation management grew well in a challenging environment.
Speaker Change: U S. In particular is still a declining number of freight brokers and domestic truck moves however, with our ability to become more efficient at tracking shipments and further distinguishing ourselves in the market, we've been able to grow with more track loads and more customers.
Speaker Change: Second area of strength was our global trade intelligence business tariff changes have been coming fast and furious increases decreases pauses commodity specific tariffs. It's been a very busy time for our tire group our customers are adjusting almost daily to a new tariff environment, maybe even though they've got a timely and accurate information source to make their.
Speaker Change: In addition, our customers are researching how other companies are handling the changes so our data mining research tools are in high demand. So that no customer gets left behind our best marketing tool is every mentioned of tariffs and news headlines. So it's an area of strength in the quarter.
Speaker Change: The third area with customs and regulatory compliance.
Speaker Change: These are primarily customs and security filings related to shipments crossing borders a couple of things contributing to growth here first there were some newer import control system requirements in the EU that have driven demand for solutions to comply secondaries.
Speaker Change: Second we saw some lumpy vineland blips in the market as people rushed imports to get ahead of the pending tariffs or alternatively to take advantage of temporary tariff for crews.
Speaker Change: As part of our business is strong as long as shipments are moving.
Speaker Change: However, one area of the business is seeing a bunch of change is the import of small packages in the United States.
Speaker Change: Otherwise known as de Minimis shipments.
Speaker Change: <unk> had a filing mechanism called type 86 that allow low value shipments under $800 to come into the United States on the tariff free basis that exemption and filing Maxim mechanism was used most often by Chinese e-commerce retailers, who are selling into the United States U S has stopped the availability of that exemption.
Speaker Change: Meaning there are tariffs duties that now need to be paid on those shipments. So in that business. We saw an influx of activity type 86 before the tariff exemption disappeared on may 2nd after the quarter. Since then there seem to be a temporary pause from some larger foreign e-commerce vendors as they determine how to best import goods states under the new procedure.
Speaker Change: And then a resumption of imports under a more traditional an important measure.
Speaker Change: 11 are type one filings with tariffs being paid in those cases.
Speaker Change: We can handle those traditional import processes of high volumes. So we saw good demand from e-commerce vendors to move or to our alternative finance solutions, including some large competitive wins from other vendors.
Speaker Change: Yeah.
Speaker Change: So those are the areas that had the largest impact on our growth in the quarter. However, the broader macro environment was very challenging for our customers at its heart. The global trade environment has caused uncertainty for customers often paralyzing their decision, making we saw shipment volumes down in various modes of transportation, particularly in the U S. China trade and West Coast ports, we saw each.
Speaker Change: Our vendors do import from China, struggling with sourcing and or whether the past tariff changes onto their own customers.
Speaker Change: So the broad broader market struggling with the potential broader inflationary impact of tariffs on the U S economy, we saw several domestic economies looking at recessionary economic statistics.
Speaker Change: With that uncertainty in the global trade market and the economy in general we took steps and made to reduce our cost by completing our restructuring that impacted about 7% of our workforce. You did this to put ourselves in the best position to grow during this challenging environment, those who followed our business over past years I know that we take our commitment to continue.
Speaker Change: Adjusted EBIT to grow very seriously these cost reductions work to prepare our business for any further challenges our customers may face in this uncertain market.
Speaker Change: We restructured our business from a position of strength and our company is now in a position to grow consistent with our plans and to be flexible enough to address challenges with our customers.
Speaker Change: May face from global trade and economic conditions, we did it because of similar approach has helped us weather past challenging business environments. We did it because it's what our stakeholders would expect us to do we restructured our business to be even stronger in the future.
Speaker Change: Okay.
Speaker Change: We are doing what you would expect that they start to do in Q1, we posted strong double digit annual growth in revenues and adjusted EBITDA consistent with our 10% to 15% annual adjusted EBIT growth plan and consistent with the ramp up we previously communicated that we expected to see over the year. We grew by acquisition by expanding our transportation management portfolio, we reduced our.
Speaker Change: Cost base to mitigate against potential future economic risks, we did exactly what you would expect a car to do I am excited about where our business is Q1 shows that we're on the right track for our plans for the year.
Speaker Change: Thanks to all of the Descartes team members for everything they've done to contribute to a great quarter and great business and with that I'll turn the call over to Alan to go through our Q1 financial results in more detail.
Alan: Okay. Thanks, Ed as indicated I'm going to walk you through our financial highlights of our first quarter, which ended on April 30th.
Alan: Revenues came in at $168 7 million in the quarter, an increase of approximately 11, 5% from revenues of $151 3 million in Q1 of last year.
Alan: Revenue from the acquisitions completed in the back half of last year as well as the acquisition of <unk> completed earlier in the first quarter contributed nicely to our revenue this quarter, while growth from new and existing customers also contributed including revenues Rev.
Speaker Change: Revenue growth in our global trade intelligence solutions, and our macro point trade visibility solution.
Speaker Change: Consistent with past quarters, our revenue mix in the quarter continued to be very strong with services revenue, increasing 13, 6% to $156 6 million and coming in at 93% of revenue in the first quarter.
Speaker Change: License revenues were again minor at less than 1% of revenue in the quarter, while professional services and other revenue came in at $11 8 million or 7% of revenue down 9% from 13.0 million in the same period last year.
Speaker Change: Mainly due to a decline in safety training activity in our ground cloud business in Q1 last year, we had a sharp increase in the safety training revenue. This is because most of our ground cloud Fedex carriers need to recertify. Their training every 24 months. So this revenue stream tends to be quite lumpy with increases every other year and this.
Speaker Change: Being an off year for our safety training services.
Speaker Change: Outside of ground cloud professional services revenues were generally flat with the first quarter of last year.
Speaker Change: In addition, there was also a slight decrease of just over half a million dollars in revenue this quarter from foreign exchange changes.
Speaker Change: As despite its more recent weakness of the U S. Dollar was stronger against the Euro the Canadian dollar and the British pound in Q1 compared to the same quarter last year.
Speaker Change: We estimate that our growth in services revenue without the impact of recent acquisition of foreign exchange changes would have been approximately 4% in the first quarter.
Speaker Change: Gross margin for the first quarter came in at 76, 4% of revenue this year down very slightly from gross margin of 76, 6% realized in the first quarter last year.
Speaker Change: With continued operating leverage our operating expenses increased less than the increase of sales growing by approximately 10, 4% in Q1 over the same period last year, primarily related to the impact of acquisitions that were completed in the back half of last year.
Speaker Change: As a result of the higher revenues and our continued operating leverage on expenses. We saw adjusted EBITDA grow by 12, 1% to $75 1 million or 44, 5% of revenue in the quarter, which was up from 67.0 million or 44, 3% of revenue in the first quarter last year.
Speaker Change: From a GAAP earnings perspective, net income came in at $36 2 million up 4% from net income of $34 7 million in the first quarter last year and this is despite higher amortization costs and other financial charges related to our recent acquisitions.
Speaker Change: Cash flow generated from operations came in at $53 6 million or approximately 71% of adjusted EBITDA in the first quarter down from operating cash flow of $63 7 million or 95% of adjusted EBITDA in Q1 last year.
Speaker Change: Cash flow from operations was negatively impacted this quarter as we saw a slight increase in our days sales in receivable from an incredible 29 days of sales at the end of the fourth quarter to 30 to 32 days sales in receivable at the end of Q1.
Speaker Change: Cash flow from operations was also impacted by some onetime acquisition related charges related to the <unk> acquisition as well as the payment of prior year annual bonuses.
Speaker Change: As we had indicated in our conference call at the end of the fourth quarter and as Ed mentioned earlier on the call. There is a lot of uncertainty out there in the global trade market, especially for our customers as they try to navigate these challenges.
Speaker Change: So we remain very pleased with these operating results against this uncertain market environment.
Speaker Change: If we look at the balance sheet, our cash balances totaled $176 million at the end of April down from cash balances of $236 million at the end of January as we used approximately $112 million of our cash balances to complete.
Speaker Change: <unk> acquisition, while we continue to generate additional positive cash flow from operations.
Speaker Change: As a result, we still have the 176 million of cash as well as $350 million available for us to draw under our credit facility for future acquisitions.
Speaker Change: We continue to be very well capitalized to allow us to consider all acquisition opportunities in our market consistent with our business plan.
Speaker Change: As we look towards the balance of our fiscal 2026, we should note the following.
Speaker Change: After spending approximately $1 9 million in capital additions in the first quarter, we expect to incur approximately $4 million to $5 million in additional capital expenditures for the balance of this year as our business will continue to be non capital intensive.
Speaker Change: After incurring amortization costs of $19 1 million in Q1, we expect amortization expense will be approximately $60 million for the balance of the year with this figure being subject to adjustment for foreign exchange changes.
Speaker Change: Acquisitions.
Speaker Change: Our tax rate in Q1 came in at 24, 4% of pretax income slightly lower than our expected range of 25% to 30% and this was mainly a result of a few smaller tax benefits and recoveries realized in the first quarter.
Speaker Change: Looking at the balance of the year. We currently expect our tax rate will trend much closer to our expected range for the next few quarters, meaning that our tax rate for the year is likely to end up in a range of between 24 and 28% of pretax income.
Speaker Change: Somewhere either side of our staff, our blended statutory tax rate of 26, 5%.
Speaker Change: However, as always we should add that our tax rate may fluctuate from quarter to quarter from onetime tax items that may arise as we operate internationally across multiple countries.
Speaker Change: After incurring stock based compensation expense of $4 4 million in the past quarter. We are currently we currently expect stock compensation to be approximately $20 million for the remainder of fiscal 2006 subject to any forfeitures of stock options or share units.
Speaker Change: As we have previously and we have mentioned in the past few quarters, we estimate that the payment of contingent consideration for earn out arrangements for the balance of this year will be approximately $2 $3 million subject to any necessary adjustments, resulting from the final earn out calculation.
Speaker Change: Going forward subject to unusual events or and quarterly fluctuations, we expect to continue to see solid cash flow conversion and expect our cash flow from operations between to be between 80, and 90% of our adjusted EBITDA in the quarters ahead.
Speaker Change: Yes.
Speaker Change: And finally as Ed indicated earlier in the call given the economic and global trade uncertainty that many of our customers are facing we have faced we have taken the steps to reduce our cost structure by reducing our global workforce by approximately 7% and eliminating various other operating expenses.
Speaker Change: As a result, we will be recording a restructuring charge of approximately $4 million in Q2 this year.
Speaker Change: And would highlight that once completed we would anticipate annual cost savings of approximately $15 million from our Q1 operating expense run rate.
Speaker Change: Simply we remain committed to managing our business to grow adjusted EBITDA by 10% to 15% that remains our objective for the current fiscal year. Despite the unique and tougher trade global trade environment. We operate in so with that I'll turn it back to Ed to provide our baseline calibration for Q2, okay. Great. Thanks, Alan as I said earlier and last quarter.
Speaker Change: These are challenging business conditions for our customers just some of the most recent changes include tariffs between the U S. In Shanghai in China at record high levels, even with a temporary agreement to reduce those tariffs during the negotiation period.
Speaker Change: Allegations of violations of that temporary U S. China agreement, putting the temporary reduce tariff structure at risk increased U S tariffs on imports of steel and position and suspension of tariffs on the EU challenges and appeals relating to the legality of U S tariffs warning.
Speaker Change: Earnings to countries that temporarily.
Speaker Change: Temporary tariff relief measures will expire if new trade agreements with the U S aren't reached by early July.
Speaker Change: Pensions in the war in Ukraine, and corresponding sanctions new postmaster general.
Speaker Change: U S postal service with potential changes in policies and services, so thats a lot.
Speaker Change: Our customers can deal with change businesses supply chain. They are adaptable however, what's more challenging than changes uncertainty, it's very difficult for our customers to make decisions, especially long term loans. When there is no certainty on how or when the landscape will change, but just the belief that it will.
Speaker Change: When our customers have difficulty predicting how their businesses will perform or be impacted if it becomes more challenging for us I think we're starting to see some of that uncertainty impacting volumes in what feels like a pretty volatile shipping market domestic U S truck volumes remain depressed.
Speaker Change: Shipments had been trending with modest growth, but look to be under pressure ocean traffic has seen massive shifts in trade lanes and productivity with the pullback from China are negatively impacting some ports another court benefiting from alternative sources.
Speaker Change: Each month, we prepare global shipping report that monitors ocean imports into the U S with data obtained from U S customs and border protection. A report for me will be coming out in the next few days and highlights then in the month of May use container imports declined following several months of growth falling 10% from April and 7% year over year.
Speaker Change: As part of that imports from China dropped sharply down 21% from April and down 7% compared to May 2024.
Speaker Change: For Descartes, we've grown during challenging business conditions in the past our plan is to continue to do so again now some of those things that we believe put us in a good position to do that include <unk>.
Speaker Change: We're diversified in domestic logistics and international logistics many of the changes right now impact international supply chains. However, we have great strength in domestic transportation moves in our routing and scheduling businesses transportation management and e-commerce and last mile businesses.
Speaker Change: We're particularly strong in the global trade intelligence business. We believe we can provide a ton of help to our customers in an environment, where people are looking for information or help managing tariffs and duties.
Speaker Change: Updating sanctioned party list thirsting for competitive intelligence and dealing with increased export license complexity.
Speaker Change: We're diversified globally, you've got domestic transportation solutions that can be used around the world and where they're shifting international trade relations. We have an established global logistics network that can be leveraged by our customers.
Speaker Change: Proactively taken steps to reduce our cost base to address potential revenue uncertainty.
Speaker Change: We have a total growth model, we have an extensive track record of acquisition activity to complement organic growth changing market conditions, often provide us with even more opportunities to add solutions for our customers and grow by acquisition.
Speaker Change: We're well capitalized we have more than $175 million in cash and a $350 million Undrawn line of credit we are a cash generating business.
Speaker Change: Ultimately, regardless of how well Descartes has positioned our success is determined by our ability to help our customers our customers remain uncertain about how these market conditions will impact their businesses. We're mindful of this and the impact of the changing global trade and foreign exchange environments, and setting our calibration and considering what our final.
Speaker Change: Quarterly financial results may be.
Speaker Change: Our quarterly report, we provided a comprehensive description of baseline revenues baseline calibration and there are limitations as of May 26, the day recommence, our cost reduction activities using foreign exchange rates of 73, the Canadian dollar.
Speaker Change: $1 14 to the Euro and $1 36 to the pound we've estimated that our baseline revenues for the second quarter of fiscal 2026, or approximately $155 million and our baseline operating expenses were approximately $92 5 million. We consider this to be our baseline adjusted EBIT calibration of approximately 50.
Speaker Change: The $8 million for the second quarter of fiscal 2026, or approximately 39% of our baseline revenues as at May 26 2025.
Speaker Change: We continue to expect that we'll operate in an adjusted EBIT to operating 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.
Speaker Change: These are uncertain times for our customers, it's a challenge for them to know what they can rely on in this.
Speaker Change: Global trade environment. Our goal is to continue to show our customers and other stakeholders that nothing they can rely on is descartes. Thank.
Speaker Change: Thank you 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 Q&A portion of the call.
Speaker Change: Yes.
Speaker Change: Thank you very much ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question. Please press star followed by the number one longer Touchtone phone then you will hear a prompt that you had has been raised Jewish.
Speaker Change: Should you wish to decline from the polling process. Please press star followed by the number two issue.
Speaker Change: We are using a speaker phone please make sure to lift your handset before pressing any keys.
Speaker Change: Your first question comes from the line of Dylan Becker from William Blair. Please go ahead.
Dylan Becker: Hey, guys.
Speaker Change: Jackson Bouley on for doing factor. So I was just curious about the workforce reduction and if there was any additional color that you'd give on maybe what areas.
Speaker Change: That was cut out of and how youre thinking about going forward those are <unk>.
Speaker Change: Levers that you will see in the business. Thanks.
Speaker Change: Thanks Jackson.
Speaker Change: Yes, it was generally across the board and across the board not only for functional areas, but geographically it was about <unk>.
Speaker Change: A little under 200 people in our business.
Speaker Change: Unfortunately, and we did it to make ourselves a healthier business.
Speaker Change: Going forward and put ourselves in a position where we can continue to make the kind of margins that.
Speaker Change: But the street has come to expect from us.
Speaker Change: In.
Speaker Change: Our business on a daily basis.
Speaker Change: Things like AI helped us.
Speaker Change: Maybe make.
Speaker Change: Some of these cuts a little easier, but at the end of the day, we thought it was the right thing to do and to prepare for the uncertainty that I just talked about.
Speaker Change: Great. Thank you.
Speaker Change: Thank you Jeff.
Speaker Change: Your next question comes from the line of Paul Treiber from RBC capital markets. Please go ahead.
Speaker Change: Oh, thanks very much.
Paul Treiber: Just a question on organic services growth you mentioned is 4% this quarter and I think last quarter was 6% you did a good job calling out some of the stronger growing areas of the business, but what what did you see that were headwinds what segments were softer.
Paul Treiber: That were.
Speaker Change: Were a drag on on organic services growth this quarter.
Speaker Change: And as you might expect it was.
Speaker Change: The uncertainty that has gone on led to big.
Speaker Change: Big movements in.
Speaker Change: And transaction volumes.
Speaker Change: Some of the areas I mentioned some of the customers bond security found areas that we can.
Speaker Change: Certainly ocean was down truck.
Speaker Change: Cedar continues in a bit of a depressed state.
Speaker Change: We did write on macro point, but maybe some of the other areas within truck messaging not.
Speaker Change: On that as well.
Speaker Change: And I think Thats the result of the tariffs.
Speaker Change: If people aren't sure what they are doing they freeze and.
Speaker Change: 31% of our business or so is that transaction revenue.
Speaker Change: We have underlying minimums that they.
Speaker Change: Our backstop against that.
Speaker Change: The customers Werent getting down to their minimums, they're just doing a little less than they used to.
Speaker Change: Overall, we're pretty happy with how we performed given answer you heard our last call.
Speaker Change: Yes.
Speaker Change: There is probably even more uncertainty coming into that cost of change since then.
Speaker Change: And.
Speaker Change: We've got the company performed pretty well during that time, we made up for some of us.
Speaker Change: Some areas that we are getting hit with some some areas that we're doing pretty well like the macro point.
Speaker Change: And the content businesses that I've talked about at the beginning of the call.
Speaker Change: That's that's helpful to understand the have you seen a change in either renewal rates or.
Speaker Change: And I guess conversion.
Speaker Change: Sales pipeline is as a result as well.
Speaker Change: Not much actually although we might anticipate that that could happen. If this keeps up.
Speaker Change: We've continued to have good sales momentum.
Speaker Change: With the.
Speaker Change: With the shrink.
Speaker Change: Subscription deals that week.
Speaker Change: We have always done pretty well at that.
Speaker Change: Continued to keep up.
Speaker Change: I think we haven't seen customer.
Speaker Change: Customer defections are people spending significantly less money with us or trying to change the terms of their contract.
Speaker Change: But we've got to see what happens with the economy those things happen when the economy turns down.
Speaker Change: Haven't seen yet where the economy is going and probably a lot of it has to do with how quickly does this end.
Speaker Change: Does the U S negotiated and do a lot of these tariff situations with the with the countries, where they just delayed 90 days to date delay another 90 days or something like that.
Speaker Change: What happens with the China negotiation things like that are the balls that are up in the air that having us say, we're not sure what's going to happen next.
Speaker Change: In the meantime.
Speaker Change: This conservative operators.
Speaker Change: We've got to weather the storm.
Speaker Change: Cut our costs and try to run our business as efficiently as we can under the circumstances.
Speaker Change: And then just lastly, just on <unk> T M S.
Speaker Change: It contributed $2 4 million in the quarter is that a normal runway rate to assume going forward and then can you just confirm that it's not reflected in the baseline.
Speaker Change: No from a baseline perspective Paul.
Speaker Change: Typical with us with acquisitions I think we're getting to know that business forget they can know the renewal rates and the renewal times et cetera. So we've incorporated.
Speaker Change: Conservatively.
Speaker Change: Corporate that into the baseline right now.
Speaker Change: So it is reflected in baseline again pretty typical as we get to know businesses more we've had we've owned that business for two months now so.
Speaker Change: We will protect that I think we said that in the prepared remarks that it is.
Speaker Change: For the most part reflected in baseline calibration.
Speaker Change: Yeah.
Speaker Change: Okay. Thanks for taking my questions.
Speaker Change: Alright. Thanks.
Speaker Change: Your next question comes from the line of Raimo <unk> from Barclays. Please go ahead.
Speaker Change: Perfect. Thank you.
Speaker Change: You have seen.
Speaker Change: Seen downturns before.
Speaker Change: How do you compare what you're seeing at the moment with at all.
Speaker Change: For once.
Speaker Change: 2022 into 2023.
Speaker Change: Ernie.
Speaker Change: Okay.
Speaker Change: I mean at the moment it doesn't feel as bad but what's interesting is I think there's a lot more uncertainty right now people don't know what's going to happen I think.
Speaker Change: In the pandemic it may not have known what's going to happen right away, but they were preparing for the worst and the pandemic for everything to shut down and it turns out it got better pretty quickly.
Speaker Change: I think people really prepared for the worst and that really was a bad situation for about a year.
Speaker Change: Until our government stepped in and start pumping more money into the economy.
Speaker Change: And we were not only in a recession, but a depression right now I think it's hard to identify what were in right are we in a recession right now are we close to one.
Speaker Change: Does all of this go away if the tariffs.
Speaker Change: Get renegotiated or.
Speaker Change: The final analysis that youre not allowed to change all these tariffs I know except to see balls in the air and our customers I think don't know what to do and.
Speaker Change: They are still shipping stuff, but.
Speaker Change: Certainly not everything shipped Stewart from United States as lots of other stuff shipping around the world other locations that we benefit from as well, but U S is obviously, a big portion of that.
Speaker Change: The worlds.
Speaker Change: Container volume and shipment volume.
Speaker Change: And we are kind of behaving as a as you might expect us to do we're trying to be conservative in and manage our business to keep making money now.
Speaker Change: Uh huh.
Speaker Change: You mentioned on the call it where total growth model.
Speaker Change: We see this as if things get worse, we see this as an opportunity to keep making money and use that money to buy up competitors that might not be as good a position as that so.
Speaker Change: We're just.
Speaker Change: Watching what's going on like everybody else and trying to run our company the best through it doesn't seem like dire circumstances.
Speaker Change: Not yet at least.
Speaker Change: Sure.
Speaker Change: If I had to guess I'd say, probably won't get as bad as if some of the other downturns, we've had but I don't know either for sure.
Speaker Change: And then.
Speaker Change: Hum.
Speaker Change: You actually recognize as quickly with the.
Speaker Change: With.
Speaker Change: The changes in the cost base and as we said that we see coming.
Speaker Change: Talk a little bit about what drove that to do it now rather than weeks.
Speaker Change: Thank you.
Speaker Change: Great. Thanks very much.
Speaker Change: Yes, Thats just our just our with the way we operate right where you saw us do that in the beginning of the pandemic.
Speaker Change: I think it was.
Speaker Change: It may its great.
Speaker Change: 5% reduction in force because our revenue went down 5%.
Speaker Change: This is a reaction to similar to that rate.
Speaker Change: See a lot of uncertainty in the market.
Speaker Change: I'd say, we need to react to that and if we can't control. The revenue right now we can at least control the cost.
Speaker Change: It's important to us to keep making money and to keep trying to make 10% to 15% growth in EBIT every year.
Speaker Change: Really the main promise that we make to our shareholders.
Speaker Change: We won't be able to live up to that promise and put ourselves in a position to live to fight another day and get through this.
Speaker Change: A little better than other companies do so that.
Speaker Change: When they get themselves in trouble, we have the money to buy up some of the better assets just like we did.
Speaker Change: And the.
Speaker Change: And the prices and maybe to a lesser extent in the.
Speaker Change: Covid crisis.
Speaker Change: Okay makes sense and good luck.
Speaker Change: Alright, thank you.
Speaker Change: Your next question comes from the line of Stephanie price from CIBC. Please ask a question.
Stephanie Price: Hi, Thank you.
Stephanie Price: Ed I was hoping you could talk a little bit deployment of the new Chief commercial officer, and just curious if you expect to make additional changes in the sales organization.
Speaker Change: No I mean, we've built work here five six years now we're very comfortable with him.
Speaker Change: It's been growing for this move anyway.
Speaker Change: Timing.
Speaker Change: Bit of a surprise to us, but I think there's a lot of faith in our company that he has the rig after the job.
Speaker Change: And happy for him that he's getting a step up.
Speaker Change: Most parties were not a large part of the salesforce leading into this.
Speaker Change: And now he's taken over the wholesales for so.
Speaker Change: Hey, Nick.
Speaker Change: For the most part youre not going to see a whole lot of change in our sales effectiveness.
Speaker Change: Great and then just on the consolidation that we're seeing within the space, Obviously wise check announced the acquisition of EQ Open just curious what your thoughts are around the competitive environment here and how you see it evolving over time.
Speaker Change: No I mean, it's probably a sign of the times right, we have been saying for a while prices are coming down people.
Speaker Change: More willing to.
Speaker Change: Coming to a price range that we think is an appropriate amount to pay for a company of the wife Jackie to open deals probably a sign of that we looked at that deal long time ago, and decided probably wasn't a great fit for us.
Speaker Change: <unk> check the best now really competitive with either of those two companies in the market per se.
Speaker Change: But we do think we're in a very good position.
Speaker Change: Yes, just with a lot of cash that we're sitting on a lot of debt capacity that we have to make.
Speaker Change: Make additional acquisitions in the future as prices come more into line and.
Speaker Change: We're in a healthier position than most to take advantage of that and.
Speaker Change: When we see stuff that's closer to what we like we like to be able to jump on it and make sure that we make it part of our global logistics network.
Speaker Change: Thank you.
Stephanie Price: Thank you Stephanie.
Stephanie Price: Okay.
Speaker Change: Your next question comes from the line of John shall firm of National Bank. Please go ahead.
John: Yes, thanks for taking my questions.
Speaker Change: I understand there's a bit of noise around international freight volume at this point.
John: One could be potentially volatile, but how should we think about the domestic freight volume, especially the correlation between domestic or international any trend or any considerations you may share with us given that it sounds like youre doubling down investment domestic.
Speaker Change: Yes.
Speaker Change: We're exposed to both in the tariff changes or international spacer.
Speaker Change: Between the U S and the rest of the world, but not other parts of the world other parts of the world. So there's still two thirds of our international business sits in normal shape.
Speaker Change: At the moment.
Speaker Change: We've been an unfortunate position it to do very well on domestic despite.
Speaker Change: Maybe that market being a weaker market for the last year and a half to two years and hope to continue that and also as we expand over season domestic markets overseas to be a real opportunity.
Speaker Change: To take the dominance that we've enjoyed here in North America over the last couple of years kind of kind of growing in the face of.
Speaker Change: Increasing transaction volumes in domestic transportation, you've continued to grow.
Speaker Change: That business, because we've been able to pick up business from our competitors because we think we have a stronger offering.
Speaker Change: And we're looking forward to bringing some of that overseas in the coming years.
Speaker Change: Got it thanks for the colors and in terms of the organic growth considering some of the tariffs pauses. After Q1, so how should we think about organic growth profile for Q2, and maybe going forward do you think it's going to be similar to the current level.
Speaker Change: Uh huh.
Speaker Change: Yes, the short answer is I don't know.
Speaker Change: Well see what happens and I'm.
Speaker Change: Brought me, saying I don't know.
Speaker Change: More than I normally have to say it right now in the last couple of months in.
Speaker Change: We will just have to see I mean, we plan on running our business to perform well either way, we're very focused on making money and we plan to make the kind of money that we have always promised people that we would make.
Speaker Change: Despite whatever happens to the revenue.
Speaker Change: If you remember back 10, 12 years ago, we were growing 10% to 15% every year.
Speaker Change: With one 2% and 3% organic growth so.
Speaker Change: Even if four which is not as well as we were doing a year and a half ago and I think everyone might be able to see why.
Speaker Change: We're hoping that that turns up for open that these tariff situations get settled and people can.
Speaker Change: Some of the uncertainty in their business and start to move forward to make decisions and that will help our revenue growth. There in the meantime, we're planning to run our business. So that we can still keep making money at the at the clip that we've always promise people that we work.
Speaker Change: Okay, maybe one last question for me.
Speaker Change: One last question just trying to reconcile your cost reduction with your goal to grow EBITDA by 10% to 15%.
Speaker Change: Annual basis. So my question is that is it. So is the expected cost savings are already included in that or did or just purely incremental to the target.
Speaker Change: No. It's it was an effort to make sure that we are in a position to hit those targets.
Speaker Change: Okay.
Speaker Change: Incremental.
Speaker Change: Yeah, maybe come incremental if.
Speaker Change: Growth rates go up some of these to average just gets settled and people get back to shipping stuff like they normally did.
Speaker Change: We may end up doing better because of it but we made these decisions to.
Speaker Change: To make sure we're in a safe position to continue to.
Speaker Change: Two to do 10% to 15% growth in EBIT like we've always said we would.
Speaker Change: Okay. Thanks again.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Scott Group from Wolfe Research. Please go ahead.
Cole Cousins: Hey, guys. This is cole cousins on for Scott Group.
Speaker Change: Just a quick question on de Minimis is there any way that you guys can frame up how much of your transactional business as airfreight and do you have a sense for how much of that is tied to de minimis.
Speaker Change: I know you hit on it a little in the prepared comments, but can you expand more on the activity you're seeing now that de Minimis is going away.
Speaker Change: Yeah.
Speaker Change: Aldo.
Speaker Change: Separately broken that out what I can tell you is we've done quite well under the circumstances.
Speaker Change: If you think about what's happened here everyone was basically told US there is no more de Minimis finally, with China, where most of it was coming from.
Speaker Change: You can imagine.
Speaker Change: If theres no more type 86 filings in.
Speaker Change: Relatively small part of our quarter's revenue, but it's not nothing either.
Speaker Change: We were doing very well in it.
Speaker Change: And they all want a way one day.
Speaker Change: My second.
Speaker Change: I think what we're doing about it and we've benefited quite a bit from it.
Speaker Change: We also are the.
Speaker Change: Global leader in type one filings type two filings and saved 11 filings, which is what everyone's switch chip.
Speaker Change: And I think a lot of these companies they paused for a week or two and just said it I don't know what I'm going to do here is just like the <unk> and the team moves in a lot of other people like them.
Speaker Change: And then they started shipping again.
Speaker Change: And I think.
Speaker Change: We were ready for that.
Speaker Change: Some of our competitors were not we were able to pick up business from them as a result of that because it cannot handle the volume in these new types of transactions that we had a lot of experience with already but we're kind of new to some of our competitors and we picked up.
Speaker Change: Bunch of business as a result of that so.
Speaker Change: Oddly enough, it's working out pretty well for us.
Speaker Change: Okay great.
Speaker Change: Maybe just more broadly with the rest of the transactional air and Ocean business.
Speaker Change: Kind of can you describe what you saw following the 90 day pause and maybe is there any indication from shippers at this point as to what's to be expected.
Speaker Change: After the pause or is it just way too uncertain at this point no. It was no.
Speaker Change: Anyone I'll speculate about it what's going to happen with deposit no. One no one seems to know for sure pulling us.
Speaker Change: Prior to all this.
Speaker Change: As you might expect it there was some pull through where people trying to get stuff in before tariffs hit then we saw a shift from the west coast ports to the East Coast ports work West Coast volume was down significantly, but east coast to coast volume was up.
Speaker Change: And.
Speaker Change: Tenant that seems to have subsided now as well.
Speaker Change: And I told you the stats for me or they were lower across the board in Ocean.
Speaker Change: Erez held up pretty well domestics.
Speaker Change: Domestic continues I think to be in a freight recession.
Speaker Change: <unk> done pretty well on that and then.
Speaker Change: Picked up a lot of business from our competitors during that time and we thank.
Speaker Change: We offer a great service.
Speaker Change: In that area with macro point and we by far have the most connections out there and we've been able to to get people to switch to us in the process from some of our competitors. So that's been pretty.
Speaker Change: Pretty good news for us.
Speaker Change: Okay. Thanks, guys I'll turn it back.
Speaker Change: Thanks Scott.
Speaker Change: Next question comes from the line of Lackland Brown from Redburn Atlantic. Please go ahead.
Speaker Change: Hi, Alan Thanks for the question.
Speaker Change: J T isolation, Spain and growth driver for the business at the moment.
Speaker Change: Could you provide any breakout Mccarthy.
Speaker Change: I'm, sorry, I'm not clear.
Speaker Change: Could you provide any detail on that you're seeing within the tariff and duty database and then just any commentary on the performance of the other side of the global trade intelligent installations like sanction parties and sales of lighting.
Speaker Change: The sanction parties is largely business as usual, we've been doing very well.
Speaker Change: Sure.
Speaker Change: But really the strength in that business has been on the tariffs and duties portions where the rates are changing all the time, we're seeing very good growth rates there year over year I think we're.
Speaker Change: Somewhere almost approaching 20% right now.
Speaker Change: And.
Speaker Change: I expect that's going to continue as long as tariffs are in the news every day people are going to be looking for more access to that database.
Speaker Change: Little bit to our surprise pleasant surprises the data my business. That's also in that content area has done very well as people have started to look in that database a lot more.
Speaker Change: The rest of the lead to try and figure out what to do next and that's been a pleasant surprise for us so.
Speaker Change: When these transaction volumes have gone down and you'd say Gee that spanned all bad news for Descartes I go well some of the areas are actually doing alright based.
Speaker Change: Based on what's going on is we've got a broad solution set that that helps people a lot of areas, even when some of the shipment volumes now so.
Speaker Change: So I see us put up what I would say is decent results in the face of <unk>.
Speaker Change: A very uncertain environment, where people are frozen and not shipping as much as they.
Speaker Change: They did just a few months ago.
Speaker Change: That's very clear thanks, and on the <unk> acquisition I. Appreciate it's early days, but could you talk to the integration process and how you're thinking about the cross sell upsell opportunity.
Speaker Change: And also if you can provide any detail on the pricing structure. If it's volume bank still recurring subscription and if their plans to unify with Dr processing model Fiat in the Tms system.
Speaker Change: It's largely subscription.
Speaker Change: Our subscription business.
Speaker Change: And.
Speaker Change: We know its early days on the integration there we thought.
Speaker Change: We and I mentioned this in the prepared comments, we needed to get their cost structures in line with ours. So we got a bit of a REIT.
Speaker Change: Structuring.
Speaker Change: Great away day, one when we bought the company is seamless.
Speaker Change: Seen us do this a few times now macro point, we did this visual compliance you did this.
Speaker Change: In an effort to get them to run the way that we run.
Speaker Change: And when you take a cash charge for that which is just as planned.
Speaker Change: Counting issue, but.
Speaker Change: Yes in the long run I think that's going to allow us to operate that business more profitably and get it integrated into Descartes and more quickly.
Speaker Change: You've heard us talk about how are we doing integrations, we'd go fast.
Speaker Change: We move everyone into their component parts of our business and Thats already happened.
Speaker Change: Try and make them part of the same team and I know already that they are selling.
Speaker Change: No.
Speaker Change: <unk> three <unk>.
Speaker Change: Macro point in my carrier portal all bundled together.
Speaker Change: A number of times already so thats.
Speaker Change: A little bit of a sign to me that the acquisition is going to work well. So we're excited about that.
Ed: Thanks, Ed I appreciate the question.
Michael: Okay. Thank you Michael.
Speaker Change: Your next question is from the line of Richard <unk> from Scotiabank. Please go ahead.
Speaker Change: Hi, This is Richard in for Kevin today.
Speaker Change: I was wondering if you could talk a bit more about the acquisition pipeline. If you look across roughly your half dozen or so areas of logistics.
Speaker Change: Supply chain industry that you cover are there any areas that are standing out as a particular area of focus or interest.
Speaker Change: Can you talk about valuations and competition with peers or private equity, which may also be looking to make some acquisitions.
Speaker Change: The acquisition market for US is looking very good at the moment, you've seen us do a lot in the last year and a half I think you will probably likely to see that continue.
Speaker Change: Prices are coming down contrary to what you said a second ago, we are not seeing private equity firms show up nearly as much as they used to and we're seeing them back out of deals all over the place or.
Speaker Change: Be selling companies instead of buying companies.
Speaker Change: A good friend of mine and private equity once told me, we're either buying or we're selling we're not doing both and I think in large part they are selling right now.
Speaker Change: And trying to they are investors that are saying Where's my money I'd like to get some money back out of this thing and they're feeling that pressure.
Speaker Change: When they do show up in deals they are not showing up nearly as aggressively.
Speaker Change: As they have in the past and thats, creating an opportunity for us.
Speaker Change: High interest rates harm them, a lot more than they harm us, where we're making money and using our cash flow to buy companies. They were levering up to buy companies and doing so 4567 times, which in our role will be very dangerous, we probably wouldn't go past three.
Speaker Change: They were normally three was too low for them. They would think that was not using their cash well enough.
Speaker Change: While the sudden when interest rates are up in the high single digits that changes the game.
Speaker Change: And it doesn't change for us because we're making profits were putting that cash in the bank and using it to fund future acquisitions, and so we're kind of playing a different game than they are.
Speaker Change: And we want to be around one if prices keep coming down as the economy does.
Speaker Change: Take a turn for the worse here.
Speaker Change: We want to be able to keep making the same kind of <unk>.
Speaker Change: Margins, we are making in growing the same amount every year, even with lower.
Speaker Change: Revenue growth and.
Speaker Change: That's <unk>.
Speaker Change: Why you see us take a lot of the actions that we've described here on the call.
Speaker Change: I could argue this is one where our best historically as times get tough and the decision to get very difficult and we've been through a lot of that before.
Speaker Change: Yes.
Speaker Change: Long tenured management team that's been working together for a long time.
Speaker Change: And we've done well in a lot of difficult situations together.
Speaker Change: No.
Speaker Change: If I could describe it.
Speaker Change: Sure.
Speaker Change: When when when trouble like this starts a lot of teams start fighting with each other.
Speaker Change: About having to cut costs and why are you cutting costs and I'm not in Bolivar all of these things.
Speaker Change: That's not what's going on here.
Speaker Change: There are people that have been through this before and Theyre almost going hey, no one likes doing this but we are good at it and we're going to do a good job here so that we come out.
Speaker Change: In a better position than when we went into it and come out in a better position than our competitors.
Speaker Change: Which puts us in a very good position.
Speaker Change: Two to grow handsomely as things start to improve you saw that happen in a way you saw that happen in 2020 and.
Speaker Change: We're certainly gearing up to make sure that happens here.
Speaker Change: Got it thank you.
Speaker Change: Oh, sorry, I was wondering is there any way to give us a view of the breakdown of your customers our revenue base by SMB versus enterprise.
Speaker Change: And are you seeing any changes positive or negative in this current macro on the SMB portion of the business.
Speaker Change: I don't know if I don't know if I could I don't know.
Speaker Change: To break it down but I can tell you we were.
Speaker Change: We're seeing things havent gotten that bad we're seeing customers still sign contracts pay their bills.
Speaker Change: Certainly our larger customers have been pain.
Speaker Change: In our small and medium size ones remember most of our smaller ones are on credit card payments.
Speaker Change: They kind of have to pay their bills medium ones, maybe it's the area, where you would see that kind of change if things got bad, but we haven't seen it yet.
Speaker Change: Okay, great. Thanks for taking my question.
Speaker Change: Thanks.
Speaker Change: The next question comes from the line of Robert Young from Cochran. Please go ahead.
Robert Young: Hi, yes, good evening.
Speaker Change: The comment you made about macro point, the real time visibility driving some share gains just given your coverage and the demand youre seeing there.
Speaker Change: Last quarter, you suggested that that was particularly a function of the shipper market and youre moving into their big retailers and manufacturers I.
Speaker Change: I was curious if you can expand on that maybe dig into that a little bit if that's what's going on.
Speaker Change: Theres a little of that going on I think the biggest thing is picking up more.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: Freight brokers.
Speaker Change: And picking up more business from them as they consolidate.
Speaker Change: We tend to do business with almost all the big <unk> and.
Speaker Change: And <unk>.
Speaker Change: Freight brokers in the country and as some of the smaller or medium sized guys closed their doors are getting picked up by the some of our bigger bigger customers the robinsons.
Speaker Change: Con ways et cetera of the world convoys excuse me.
Speaker Change: And that's been good for us they go back to ask us.
Speaker Change: We have better data, we track rates almost at 90% of our competitors have track rates in the <unk>.
Speaker Change: <unk> and.
Speaker Change: If you want to track all your shipments and you spend a minute and you only get to track half of them as your visibility solution provider all of that good and if you send and announced a new track in 90% of them.
Speaker Change: I think youre pretty happy and you say hey, that's a good that's a good guide.
Speaker Change: And so when we buy up on a small company you tend to switch them over to us or when you have a contract with multiple players in the visibility space and you go to renegotiate those contracts you tend to sell most of the business to.
Speaker Change: Got it the best.
Speaker Change: Yes.
Speaker Change: Alright, and then in.
Speaker Change: In the call earlier, you said that youre not seeing any of the customers tripping their minimums on the transaction revenue.
Speaker Change: Was that was that a Q1 comment or is that as of today and is there any pricing pressure at all that youre seeing I would assume given that comment that there's not a lot of pricing pressure or pressure to renegotiate minimums.
Speaker Change: Can you just expand on that and then I'll pass the line.
Speaker Change: No we're not seeing any of that.
Speaker Change: I don't think.
Speaker Change: I haven't heard anyone say, we're in a recession yet although.
Speaker Change: We made here three months from now that we are in one now but yeah.
Speaker Change: Im not seeing our customers in any kind of dire Straits and we're not.
Speaker Change: I don't think I've seen anybody hit the bottom there minimum their minimums are usually set at 85% or 90% of there.
Speaker Change: Of their normal volume.
Speaker Change: And I haven't seen anyone have noted.
Speaker Change: Great. Thanks for the color I'll pass on.
Robert Young: Thank you Robert.
Speaker Change: And the last question comes from the line of Marshall Paul from Loop capital markets. Please ask your question.
Marshall Paul: Alright. Thank you for taking my question I was just wondering if you could just comment on the sentiment you're seeing from <unk> with respect to moving forward with large Tms upgrades expansions and are you are you seeing.
Speaker Change: T Musk Tms upgrades actually being crowded out by a variety of initiatives.
Speaker Change: I know, we've continued to see and we've seen this for the last several years.
Speaker Change: Yes, let's say the logistics and supply chain initiatives are rising to the top of the organizations to get their importance has increased in the last 10 years really maybe even more specifically less five since the pandemic.
Speaker Change: And I haven't seen any real change in that yes, I think if the economy turns and it got worse you.
Speaker Change: You might start to see that even in our space, but.
Speaker Change: We haven't.
Speaker Change: We haven't seen it yet in our space our subscription sales continue to go well.
Speaker Change: I don't think we had a record quarter this quarter subscription sales, but we were close to the high end of.
Speaker Change: Subscription sales over the last.
Speaker Change: Two years so happy.
Speaker Change: That's the case I look if we go into a recession that could change.
Speaker Change: And the last year, we've had a lot of customers today stuff to us like we've canceled a number of projects here, we're not canceling yours, because it's important but that always catches my attention because I think if things got a little worse it might catch us too.
Speaker Change: That has not happened yet.
Speaker Change: Thank you.
Speaker Change: Thank you Mark.
Speaker Change: There are no further questions at this time I'd like to turn the call over to Mr. Ed Ryan for closing comments, Sir. Please go ahead.
Speaker Change: Okay, Great guys. Thanks for your time look I'll be on the street in the coming weeks, we look forward to seeing a lot of you.
Speaker Change: Otherwise look forward to reporting back to you.
Speaker Change: On our Q2 here in September this year, thanks, guys.
Speaker Change: This concludes today's conference call. Thank you very much for your participation you may now disconnect.