Q2 2026 The Descartes Systems Group Inc Earnings Call

September 3, 2025

We will conduct a question and answer session. If at any time. During this call you require immediate assistance. Please press star zero for the operator. This call is being recorded on Wednesday September <unk> 2025, and I would now like to turn the conference over to Mr. Scott Pagan. Thank you. Please go ahead.

Thanks, and good afternoon, everyone. Joining me in person on the call today are Ed Ryan CEO, Allan Brett CFO, and Ed Gardener, EVP corporate development and I Trust that everyone has received a copy of our financial results press release that was issued earlier today.

Portions of today's call other than historical performance include statements of forward looking information within the meaning of applicable securities laws. These.

Okay.

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

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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.

Good afternoon, ladies and gentlemen, and welcome to the V. Gard system script quite can deal with all this conference call. At this time all lines are in listen only mode. Following the presentation. We will conduct a question and answer session. If at any time. During this call you require immediate assistance. Please press star zero for the operator.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Descartes Systems Group Inc. Quarterly Results Conference Call. At this time, online is in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, September 3, 2025. I would now like to turn the conference over to Mr. Scott Pagan. Thank you. Please go ahead.

<unk> operating performance financial results and condition cash flow and use of cash business outlook baseline.

Baseline revenues baseline operating expenses and baseline calibration.

The anticipated and potential revenue losses, and gains anticipated recognition and expensing of revenues and expenses potential acquisitions and acquisition strategy.

This call is being recorded on Wednesday September 2025, and I would now like to turn the conference over to Mr. Scott You got it. Thank you. Please go ahead.

Cost reduction and integration initiatives and other matters that may constitute forward looking information.

Thanks, and good afternoon, everyone. Joining me in person on the call today are Ed Ryan CEO, Allan Brett CFO, and Ed Gardner EVP corporate development and I Trust that everyone has received a copy of our financial results press release that was issued earlier today.

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

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.

Portions of today's call other than historical performance include statements of forward looking information within the meaning of applicable securities laws.

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 Securities and Exchange Commission and the Ontario Securities Commission and other securities commissions across Canada, including our management's discussion and analysis filed today.

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

Okay.

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

Scott Pagan: operating performance, financial results and condition, 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 revenues and expenses, potential acquisitions and acquisition strategy, cost reduction and integration initiatives, and other matters that may constitute forward-looking information. 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 Systems Group Inc. 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 Securities and Exchange Commission, the Ontario Securities Commission, and other securities commissions across Canada, including our management's discussion and analysis filed today.

<unk> operating performance financial results and condition cash flow and use of cash business outlook.

Baseline revenues baseline operating expenses and baseline calibration.

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

The anticipated and potential revenue losses, and gains anticipated recognition and expensing of revenues and expenses potential acquisitions and acquisition strategy.

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

Cost reduction and integration initiatives and other matters that may constitute forward looking information.

Thanks, Scott and welcome everyone to the call today, we're reporting record quarterly revenues and adjusted EBITDA. After a period when we recalibrated our business.

We're edging ahead of our plans and are already focused on the second half of the fiscal year. We're excited to go over these results with you and give you some of our perspective on the current challenging business environment for our customers but.

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 performed I'll then hand, it over to Allen, who will go over the Q2 financial results in more detail after that I'll come back to provide an update on how we see the current business environment and how our business was calibrated for Q3 and will then open it up to the operator to coordinate the Q&A portion of the call.

Okay.

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

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.

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So let's start with the second quarter that ended on July 31 key metrics. We monitor include revenues profits cash flow from operations operating margins and returns on our investment.

For the past quarter, we had very good performance in each of those areas total revenues were at a record high $179 $8 million up 10% from a year ago and 7% from last quarter.

Ed Ryan: Thanks, Scott, and welcome everyone to the call. Today we're reporting record quarterly revenues and adjusted EBITDA after a period when we recalibrated our business. We're edging ahead of our plans and are already focused on the second half of the fiscal year. We're excited to go over these results with you and give you some of our perspective on the current challenging business environment for our customers. 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 performed. I'll then hand it over to Allan, who will go over the Q2 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 Q3.

Thanks, Scott and welcome everyone on the call today, we're reporting record quarterly revenues and adjusted EBITDA. After a period when we recalibrated our business.

Hi services revenues were up 14% from a year ago with our continued focus on generating recurring revenues.

<unk> ahead of our plans and are already focused on the second half of the fiscal year.

Net income was up 10% from a year ago record high income from operations was up 5% from a year ago and record high adjusted EBITDA was up 14% from a year ago.

We're excited to go over these results with you and give you some of our perspective on the current challenging business environment for our customers.

But first let me give you a roadmap for the call.

I will start by hitting some highlights of last quarter and some aspects of how our business performed I'll then hand, it over to Allen, who will go over the Q2 financial results in more detail after that I'll come back to provide an update on how we see the current business environment and how our business was calibrated for Q3 and will then open it up to the operator to coordinate the Q&A portion of the call.

Our adjusted EBITDA margin was up two points from a year ago to 45% we.

We generated $63 million in cash from our operations, even considering that we had $5 million of personnel departure costs in the quarter.

Without those costs, we would have been at 86% cash conversion so strong results.

Ed Ryan: We'll then open it up to the operator to coordinate the Q&A portion of the call. Let's start with the second quarter that ended on July 31. Key metrics we monitor include revenues, profits, cash flow from operations, operating margins, and returns on our investment. For the past quarter, we had very good performance in each of those areas. Total revenues were at a record high, $179.8 million, up 10% from a year ago and 7% from last quarter. Record high services revenues were up 14% from a year ago with our continued focus on generating recurring revenues. Record high net income was up 10% from a year ago. Record high income from operations was up 5% from a year ago. Record high adjusted EBITDA was up 14% from a year ago. Our adjusted EBITDA margin was up two points from a year ago to 45%.

Across all of these areas.

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So let's start with the second quarter that ended on July 31 key metrics we.

In June we completed a small tuck in acquisition of package route.

Monitor include revenues profits cash flow from operations operating margins and returns on our investment.

This complements our ground cloud business than right. After the quarter, we paid $40 million plus $15 million potential earn out consideration to acquire finality inventory and acquisition I'll speak to later.

For the past quarter, we had very good performance in each of those areas total revenues were at a record high $179 8 million up 10% from a year ago and 7% from last quarter.

At the end of the quarter, we had more than $240 million in cash and we were debt free with an undrawn $350 million line of credit, we remain well capitalized cash generating growing and ready to continue to invest in our business.

Record high services revenues were up 14% from a year ago with our continued focus on generating recurring revenues.

I'd like to talk about four of the primary drivers of growth for our business this quarter.

Record high net income was up 10% from a year ago record high income from operations was up 5% from a year ago and record high adjusted EBITDA was up 14% from a year ago.

First as global trade intelligence second is customer and regulatory solutions and third is transportation management.

Our adjusted EBITDA margin was up two points from a year ago to 45% with.

So global trade intelligence tariffs have always been something that's been talked about in logistics and supply chain. However, they are now much more part of the mainstream discussion.

Ed Ryan: We generated $63 million in cash from our operations, even considering that we had $5 million in personnel departure costs in the quarter. Without those costs, we'd have been at 86% cash conversion. Strong results across all of these areas. In June, we completed a small tuck-in acquisition of PackageRoute that complements our GroundCloud business. Right after the quarter, we paid $40 million plus $15 million in potential earnout consideration to acquire Finale Inventory, an acquisition I'll speak to later. At the end of the quarter, we had more than $240 million in cash, and we were debt-free with an undrawn $350 million line of credit. We remain well-capitalized, cash-generating, growing, and ready to continue to invest in our business. I'd like to talk about four of the primary drivers of growth for our business this quarter. The first is global trade intelligence. The second is customs and regulatory solutions.

We generated $63 million in cash from our operations, even considering that we had $5 million of personnel departure costs in the quarter.

Days trade landscape, even over the past 90 days includes new tariffs tariffs being repeal new commodities impacted new timelines for implementation delay repeal and new country specific tariff arrangements and trade agreements.

Without those costs, we would have been at 86% cash conversion so strong results.

Across all of these areas.

In June we completed a small tuck in acquisition of package route.

And the GTI part of our business. There are two main areas, where our customers have looked to descartes for help with tariffs.

This complements our ground cloud business than right. After the quarter, we paid $40 million plus $15 million of potential earn out consideration to acquire finality inventory and acquisition I'll speak to later.

The first is to expand access to our real time updated global tariff database used to fuel global trade management systems and the second is accessing our research tools to show how our customers peers and competitors are handling tariffs so that our customers can make better import and tariff classification decisions.

At the end of the quarter, we had more than $240 million in cash and we were debt free with an undrawn $350 million line of credit, we remained well capitalized cash generating growing and ready to continue to invest in our business.

Right now our global trade intelligence business has seen strong demand. We anticipate that this is going to continue considering the pervasive tariff uncertainty in the market and short as the tariff environment becomes more complex, our global trade intelligence solutions see more demand.

I'd like to talk about four of the primary drivers of growth for our business this quarter.

The first is global trade intelligence second is customer and regulatory solutions.

Ed Ryan: Third is transportation management. Global trade intelligence tariffs have always been something that's been talked about in logistics and supply chain. However, they're now a much more part of the mainstream discussion. Today's trade landscape, even over the past 90 days, includes new tariffs, tariffs being repealed, new commodities impacted, new timelines for implementations, delay, repeal, and new country-specific tariff arrangements and trade agreements. In the global trade intelligence part of our business, there are two main areas where our customers have looked to Descartes for help with tariffs. The first is to expand access to our real-time updated global tariff database used to fuel global trade management systems. The second is accessing our research tools to show how our customers, peers, and competitors are handling tariffs so that our customers can make better import and tariff classification decisions. Right now, our global trade intelligence business is seeing strong demand.

And third is transportation management.

So global trade intelligence tariffs have always been something that's been talked about in logistics and supply chain. However, they are now much more part of the mainstream discussion today.

Second areas customs and regulatory solutions.

<unk> also impacted our solutions in the Florida broker enterprise solutions in two principal ways. The first is the transition to new filing mechanisms to deal with the elimination of type 86 are de minimis programs in the United States and the second is the demand for foreign trade zone, our FTC solutions.

Today's trade landscape, even over the past 90 days includes new tariffs tariffs being repeal new commodities impacted new timelines for implementation delay repeal and new country specific tariff arrangements and trade agreements.

De Minimis the U S has eliminated the de Minimis program, which allowed imports with a value below $800 to come into the United States duty free.

And the GTI part of our business. There are two main areas, where our customers have looked to descartes for help with tariffs.

Now all imports other than some country specific 100 dollar exemptions for individual grip gifts attract tariffs and duties. This is a big impact on foreign companies selling direct to U S consumers and even U S sellers, who may have fulfilled or ship their order from foreign warehouses and facilities.

Right now our global trade intelligence business is seeing strong demand. We anticipate that this is going to continue considering the pervasive tariff uncertainty in the market and short as the tariff environment becomes more complex, our global trade intelligence solutions see more demand.

Yes.

Under the old de Minimis regime, importers would file a type 86 electronic filing to attract the duty free treatment.

Ed Ryan: We anticipate that this is going to continue considering the pervasive tariff uncertainty in the market. In short, as the tariff environment becomes more complex, our global trade intelligence solutions see more demand. The second area is customs and regulatory solutions. Tariffs have also impacted our solutions in the broker and forwarder enterprise systems in two principal ways. The first is the transition to new filing mechanisms to deal with the elimination of Type 86 or de minimis programs in the U.S. The second is the demand for foreign trade zone or FTZ solutions. With de minimis, the U.S. has eliminated the de minimis program, which allowed imports with a value below $800 to come into the U.S. duty-free. Now, all imports, other than some country-specific $100 exemptions for individual gifts, attract tariffs and duties. This has a big impact on foreign companies selling direct to U.S.

Now importers are making a type one or type 11 filing in or many of the appropriate duties.

We've held numerous customers transition to the new filing mechanism mechanism and have developed a reliable process to help our customers and the large volumes of time sensitive filings.

Second areas customs and regulatory solutions tariffs have also impacted our solutions in the Florida broker enterprise solutions in two principal ways. The first is the transition to new filing mechanisms to deal with the elimination of type 86 are de minimis programs in the United States and the second is the demand for foreign trade zone, our FTC.

Our success in this area has also attracted some large volume <unk>.

From our competitors. These circumstances have combined to make the transition away from de Minimis, a growth area for us and the customs filing space.

Solutions.

De Minimis the U S has eliminated the de Minimis program, which allowed imports with a value below $800 to come into the United States duty free now.

With regard to foreign trade zone.

With most of U S imports now tracking tariffs our customers have been looking for ways to not have to finance the burden of tariffs pending sales to the end use consumer.

Now all imports other than some country specific 100 dollar exemptions for individual grip gifts.

U S customers have the mechanism to enable this call foreign trade zones or <unk>. These are these are U S customers approved warehouses and facilities work goods can come into the United States duty free.

Tariffs and duties. This is a big impact on foreign companies selling direct to U S consumers and even U S sellers, who may have fulfilled or ship their order from foreign warehouses and facilities.

Ed Ryan: consumers and even U.S. sellers who may have fulfilled or shipped their orders from foreign warehouses and facilities. Under the old de minimis regime, importers would file a Type 86 electronic filing to attract the duty-free treatment. Now importers are making a Type 1 or Type 11 filing and remitting the appropriate duties. We've helped numerous customers transition to the new filing mechanism and have developed a reliable process to help our customers handle large volumes of time-sensitive filing. Our success in this area has also attracted some large volume filers away from our competitors. These circumstances have combined to make the transition away from de minimis a growth area for us in the customs filing space. With regard to foreign trade zones, with most U.S.

Leave the warehouse facilities to be sold to a U S consumer.

Yeah.

Under the old de Minimis regime, importers would file a type of these six electronic filing to attract the duty free treatment now importers are making a type one or type 11 filing and remaining the appropriate duties.

So if I'm an importer I can defer paying duties in July of a sale and the goods leave the warehouse. Once you have an approved U S customers FTC you have rigorous procedures to follow in regular filing obligations about what has come in and left the FTC.

We've held numerous customers transition to the new filing mechanism mechanism and have developed a reliable process to help our customers and the large volumes of time sensitive filings.

Our quest of web foreign trade zone solutions to exactly that we've been seeing very strong demand for our FTB FTC solutions, especially over the last three months or so and this has also picked up at the end of de Minimis with U S. Sellers looking to use the financing burden that otherwise need to bear from the new tariffs.

Our success in this area has also attracted some large volume <unk>.

From our competitors. These circumstances have combined to make the transition away from de Minimis, a growth area for us and the customs filing space.

With regard to foreign trade zone.

So both of those areas contributed well to the growth in the quarter. In addition, we saw some increased filing volumes in the quarter across different modes of transportation.

With most of our U S imports now attracting tariffs our customers have been looking for ways to not have to finance the burden of tariffs pending sales to the end use consumer.

Ed Ryan: imports now attracting tariffs, our customers have been looking for ways to not have to finance the burden of tariffs pending sales to the end U.S. consumer. U.S. customs has a mechanism to enable this called foreign trade zones or FTZs. These are U.S. customs-approved warehouses and facilities where goods can come into the United States duty-free until the goods leave the warehouse facility to be sold to a U.S. consumer. If I'm an importer, I can defer paying duties until I have a sale and the goods leave the warehouse. Once you have an approved U.S. customs FTZ, you have rigorous procedures to follow and regular filing obligations about what has come in and left the FTZ. Our QuestAweb foreign trade zone solutions do exactly that. We've been seeing very strong demand for FTZ solutions, especially over the last three months or so.

Tariff implementation has been set for early July and then pushed to August many importers rush to get goods into the U S. In advance of those deadlines and particular ocean imports to the U S. From all geographies were at their highest levels in July and the customs and security filings supporting us.

U S customers as a mechanism to enable this call foreign trade zones or <unk>. These are costs. These are U S customers approved warehouses and facilities work goods can come into the United States duty free until the goods leave the warehouse facilities to be sold to a U S consumer.

Supporting those imports have benefited our business.

So if I'm an importer I can defer paying duties in July of a sale and the good will leave the warehouse. Once you have an approved U S. Customs FTC you have rigorous procedures to follow in regular filing obligations about what has come in and left the FTC.

The last one is transportation management as we've discussed in past quarters Transportation management was again, a strong contributor to our growth in the quarter with.

Three main reasons were one the efficiency of our macro point tracking solutions to the contributions of <unk> and three of the importance of our fraud prevention assistant solutions.

Our cluster web foreign trades on solutions to exactly back.

<unk> seen very strong demand for our FTB FTC solutions, especially over the last three months or so and this has also picked up at the end of the de Minimis with U S. Sellers looking to use the financing burden that otherwise need to bear from the new tariffs.

Yes.

With regard to macro point macro point provides a real time visibility solution. We've built up a strong network of connected world carriers and freight brokers to get unprecedented access to real time location information on all shipments our solutions are used in the U S Europe and Australia. When a loan is given to us for tracking we believe we have the highest compliance rate out there.

Ed Ryan: This has also picked up with the end of de minimis, with U.S. sellers looking to ease the financing burden they'd otherwise need to bear from the new tariffs. Both of those areas contributed well to the growth in the quarter. In addition, we saw some increased filing volumes in the quarter across different modes of transportation, with some tariff implementations being set for early July and then pushed to August. Many importers rushed to get goods into the U.S. in advance of those deadlines. In particular, ocean imports to the U.S. from all geographies were at their highest levels in July. The customs and securities filing supporting those imports have benefited our business. The last one is transportation management. As we've discussed in past quarters, transportation management was again a strong contributor to our growth in the quarter.

So both of those areas contributed well to the growth in the quarter and Additionally saw some increased filing volume in the quarter across different modes of transportation.

To get our customers location information they need our solutions are complemented.

By interfaces to numerous transportation management systems, and closing, including our recently acquired through cheap Tms solution.

Even in the domestic U S freight market with a number of road shipments has been declining over the past few years macro point has been able to grow as it gained market share and attract more of the loews available to our customers.

Supporting those imports have benefited our business.

I will ask once transportation management as we've discussed in past quarters Transportation management was again, a sharp pullback contributor to our growth in the quarter with.

So macro point continues to shine.

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Ed Ryan: The three main reasons were: one, the efficiency of our MacroPoint tracking solutions; two, the contributions of 3GTMS; and three, the importance of our fraud prevention assistance solutions. With regard to MacroPoint, MacroPoint provides a real-time visibility solution. We've built up a strong network of connected road carriers and freight brokers to get unprecedented access to real-time location information on all shipments. Our solutions are used in the U.S., Europe, and Australia. When a load is given to us for tracking, we believe we have the highest compliance rate out there to get our customers the location information they need. Our solutions are complemented by interfaces to numerous transportation management systems, including our recently acquired 3GTMS solution. Even in a domestic U.S.

Transportation management systems are key sources of information for loans that need to be tracked so three GTS customers have a natural pickup with the integration between <unk> and macro point.

Three main reasons were one the efficiency of our macro point tracking solutions to the contributions of <unk> and three of the importance of our fraud prevention assistance solutions.

Yes.

In addition, Descartes has a rich history of providing shippers with transportation management solutions and Descartes's experience is now enhanced with the modernized cloud based <unk> <unk> solution.

With regard to macro point macro point provides a real time visibility solution. We built up a strong network of connected world carriers and freight brokers to get unprecedented access to real time location information on all shipments our solutions are used in the U S Europe and Australia. When a loan is given to us for tracking we believe we have the highest compliance rate out there.

<unk> come in and been Recalibrated to our Descartes vinyl and we've seen some excellent early success and demand. So it <unk> a great team to welcome in in a very good contributor in the quarter.

To get our customers the location information they need our solutions are complemented.

By interfaces to numerous transportation management systems, and closing, including our recently acquired through cheap Tms solutions.

And the last one for a prevention one of the biggest areas for investment for supply chain and logistics other than AI.

AI is fraud prevention is shipping mechanisms have become more digitized and distributed has become harder and harder to gauge the legitimacy of carriers and brokers that youre working with and.

Even in a domestic U S freight market with a number of road shipments has been declining over the past few years macro point has been able to grow as it gained market share and attract more of the loads available to our customers.

Ed Ryan: freight market, where the number of road shipments has been declining over the past few years, MacroPoint has been able to grow as it gained market share and attract more of the loads available to our customers. MacroPoint continues to shine. 3GTMS, transportation management systems are key sources of information for loads that need to be tracked. 3GTMS customers have a natural pickup with the integration between 3GTMS and MacroPoint. In addition, Descartes has a rich history of providing shippers with transportation management solutions, and Descartes' experience is now enhanced with the modernized cloud-based 3GTMS solution. 3GTMS has come in and been recalibrated to our Descartes model, and we've seen some excellent early success and demand. 3GTMS is a great team to welcome in and a very good contributor in the quarter. The last one is fraud prevention.

Information and identities are being leveraged to create phony logistics training partners, who are either intent on sept of loads or taking margins for work not performed well.

So macro point continues to shine.

<unk> Gms.

Transportation management systems are key sources of information for loans that need to be tracked so <unk> customers have a natural pickup with the integration between <unk> and macro point.

Previously invested in fraud prevention with our my carrier portal acquisition solutions that help our customers evaluate.

Logistics partners and separate fact from fiction.

We continue to be happy with the performance of that business its contribution in the quarter and the continued demand we see for our prevention.

<unk>.

Can you talk about acquisitions for a minute in June we combined with packaged packaged rep helps independent service providers, who are sub contracted by larger parcel delivery companies.

<unk> come in and been Recalibrated to our current model and we've seen some excellent early success and demand. So it <unk> a great team to welcome in in a very good contributor in the quarter.

Customer base that is very familiar to us given our ground cloud solutions.

And the last one fraud prevention, one of the biggest areas for investment for supply chain and logistics other than AI.

By bringing these businesses together, we believe we can offer a broader solution set to the customers and operate their businesses more efficiently for sustainable.

Ed Ryan: One of the biggest areas for investment for supply chain and logistics, other than AI, is fraud prevention. As shipping mechanisms have become more digitized and distributed, it's become harder and harder to gauge the legitimacy of carriers and brokers that you're working with. Information and identities are being leveraged to create phony logistics training partners who are either intent on theft of loads or taking margins for work not performed. We previously invested in fraud prevention with our MyCarrierPortal acquisition, solutions that help our customers evaluate their logistics partners and separate fact from fiction. We continue to be happy with the performance of that business, its contribution in the quarter, and the continued demand we see for fraud prevention. Let's talk about acquisitions for a minute. In June, we combined with PackageRoute.

AI is fraud prevention is shipping mechanisms have become more digitized and distributed has become harder and harder to gauge the legitimacy of carriers and brokers that youre working with and.

A sustainable investment all in all a logical tuck in for us with good customers and people.

Just as our last quarter ended.

<unk> also acquired finale inventory to complement our E Commerce solutions.

Information and identities are being leveraged to create phony logistics training partners short year intent on sept of loads or taking margins for work not performed well.

<unk> <unk> has inventory management solutions and this is an area you've seen us invest in recently as this complements our seller cloud solutions. Our approach is to have solutions that E. Commerce sellers can use at all stages of the growth from starting out with just a few product lines as selling mechanisms to more complex warehouse operations and sales channels with <unk>.

Previously invested in fraud prevention with our my carrier portal acquisition solutions that help our customers evaluate.

Logistics partners and separate fact from fiction.

We continue to be happy with the performance of that business its contribution in the quarter and the continued demand we see for our prevention.

Ali joining we believe we have a comprehensive solution set for the e-commerce seller lifecycle.

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Can you talk about acquisitions for a minute in June we combined with packaged packaged rep helps independent service providers, who are subcontracted by larger parcel delivery companies.

<unk> leads in our business that now we will find a home with vanilla inventory and opportunities for cross sell within our broader E Commerce solutions portfolio.

Ed Ryan: PackageRoute helps independent service providers who are subcontracted by larger parcel delivery companies, a customer base that is very familiar to us given our GroundCloud solutions. By bringing these businesses together, we believe we can offer a broader solution set to the customers and operate the businesses more efficiently for sustainable investment. All in all, a logical tuck-in for us with good customers and people. Just as our last quarter ended, we also acquired Finale Inventory to complement our e-commerce solutions. Finale has inventory management solutions, and this is an area you've seen us invest in recently as this complements our SellerCloud solutions. Our approach is to have solutions that e-commerce sellers can use at all stages of their growth, from starting out with just a few product lines and selling mechanisms to more complex warehouse operations and sales channels.

We've really hit the ground running in the first 30 days and see excitement in the team and the customer base, a great combination with more good things to come.

Our base that is Bert familiar to us given our Grand cloud solutions.

By bringing these businesses together, we believe we can offer a broader solution set to the customers and operate their businesses more efficiently for sustainable investment.

So Q2 was a very attractive quarter for us a very active quarter for us.

Our customers are dealing with a very uncertain market and we've had strong efforts from our team members to support that we've been responding to heightened demand across many solutions to help new customers deal with an increasingly complex trade environment. We've continued to invest in our business with two acquisitions and we've completed a restructuring of our operations so that our businesses appropriately.

All in all a logical tuck in for us with good customers and people.

Just as our last quarter ended we are also acquired <unk> inventory to complement our ecommerce solutions finality finale has inventory management solutions and this is an area you've seen us invest in recently as this complements our seller cloud solutions. Our approach is to have solutions that E. Commerce sellers can use at all stages of the <unk>.

Calibrated to deal with the revenue fluctuations that may come from an uncertain economy and trade landscape.

Growth from starting out with just a few product lines as selling mechanisms to more complex warehouse operations and sales channels.

I can't say enough about the job our team has done to help us get prepared for this with our customers.

Ed Ryan: With Finale joining, we believe we have a comprehensive solution set for the e-commerce seller lifecycle goal. We have numerous leads in our business that now will find a home with Finale Inventory and opportunities for cross-sell within our broader e-commerce solution portfolio. We've really hit the ground running in the first 30 days and see excitement in the team and the customer base, a great combination with more good things to come. Q2 is a very attractive quarter for us, a very active quarter for us, as you say. Our customers are dealing with a very uncertain market, and we've had strong efforts from our team members to support them. We've been responding to heightened demand across many solutions to help new customers deal with an increasingly complex trade environment.

With finality, joining we believe we have a comprehensive solution set for the e-commerce seller lifecycle.

But as I said last quarter, we're doing what you'd expect that car to do we've got a business prepared for difficult times, we're executing on demand areas in the market or investing in new technologies and businesses and most importantly, we're running our business consistent with our commitment to a 10% to 15% adjusted EBITDA growth are.

This leads in our business that now we will find a home with vanilla inventory and opportunities for cross sell within our broader E Commerce solutions portfolio.

We've really hit the ground running in the first 30 days and see excitement in the team and the customer base, a great combination with more good things to come.

Our business did very well in Q2, we're already hard at work on Q3, as you would expect us to be and with that I'll turn the call over to Alan to go through our Q2 financial results in more to SaaS.

So Q2 was a very attractive quarter for us a very active quarter for us This is Jay.

Okay. Thanks, Ed as indicated I'm going to take you through our financial highlights for our second quarter, which ended July 31.

Our customers are dealing with a very uncertain market and we've had strong efforts from our team members to support that we've been responding to heightened demand across many solutions to help new customers deal with an increasingly complex trading environment. We've continued to invest in our business with two acquisitions and we've completed a restructuring of our operations so that our businesses appropriately.

We are pleased to report record quarterly revenue of $179 8 million this quarter, an increase of 10% from revenue of $163 4 million in Q2 last year.

Ed Ryan: We've continued to invest in our business with two acquisitions, and we've completed a restructuring of our operations so that our business is appropriately calibrated to deal with the revenue fluctuations that may come from an uncertain economy and trade landscape. I can't say enough about the job our team has done to help us get prepared for this with our customers. As I said last quarter, we're doing what you'd expect Descartes to do. We've got a business prepared for difficult times. We're executing on demand areas in the market. We're investing in new technologies and businesses. Most importantly, we're running our business consistent with our commitment to a 10% to 15% adjusted EBITDA growth. Our business did very well in Q2. We're already hard at work on Q3, as you'd expect us to be.

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 of this year.

<unk> to deal with the revenue fluctuations that may come from an uncertain economy and trade landscape.

Can't say enough about the job our team has done.

<unk> added nicely to our revenue this quarter, while revenue growth from new and existing customers. Once again also contributed to our revenue growth in the quarter.

Help us get prepared for this with our customers.

But as I said last quarter, we're doing what you would expect that car to do <unk> got a business prepared for difficult times, we're executing on demand areas in the market or investing in new technologies and businesses and most importantly, we're running our business consistent with our commitment to a 10% to 15% adjusted EBIT to grow.

Growth in our global trade intelligence customs and regulatory compliance as well as our transportation management solutions as Ed mentioned earlier.

Our revenue mix continued to be very strong with services revenue coming in at a $166 8 million or <unk>, 93% of total revenue up 14% from services revenue of $146 2 million or <unk>, 89% of total revenue in Q2 last year.

Our business did very well in Q2, we're already hard at work on Q3, as you would expect us to be and with that I'll turn the call over to Alan to go through our Q2 financial results in more to SaaS.

Ed Ryan: With that, I'll turn the call over to Allan to go through our Q2 financial results in more detail. Allan?

Allan Brett: Okay, thanks, Ed. As indicated, I'm going to take you through our financial highlights for our second quarter, which ended July 31. We are pleased to report record quarterly revenue of $179.8 million this quarter, an increase of 10% from revenue of $163.4 million in Q2 last year. Revenue from the acquisitions completed in the back half of last year, as well as the acquisition of 3GTMS completed earlier in the first quarter of this year, contributed nicely to our revenue this quarter, while revenue growth from new and existing customers once again also contributed to our revenue growth in the quarter, including growth in our global trade intelligence, customs and regulatory compliance, as well as our transportation management solutions, as Ed mentioned earlier.

Thanks, Ed as indicated I'm going to take you through our financial highlights for our second quarter, which ended July 31.

License revenues were again miner at less than 1% of revenue in the quarter, while professional services and other revenue came in at $12 8 million down from $15 8 million in Q2 last year.

We are pleased to report record quarterly revenue of $179 8 million this quarter, an increase of 10% from revenue of $163 4 million in Q2 last year.

Note that for US other revenue includes hardware revenue and last year in the second quarter, we had an unusually high revenue hardware revenue in our ground cloud business as a result of an AI focused hardware replenishment cycle and this accounts for the majority of the drop of this revenue category year over year.

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 of this year contributed nicely to our revenue this quarter, while revenue growth from new and existing customers. Once again also contributed to our revenue growth in the quarter.

We should also mentioned that there was a positive impact on revenue of approximately $2 million from foreign exchange this quarter as the U S. Dollar was weaker against the British pound the.

Including growth in our global trade intelligence customs and regulatory compliance as well as our transportation management solutions as Ed mentioned earlier.

The euro and the Canadian dollar this quarter when compared to the same period last year.

Excluding the impact of our recent acquisitions as well as the impact of foreign exchange, we estimate that our growth in services revenue from new and existing customers or organic services revenue growth came in at around 4% in the second quarter, a similar level to the growth experienced in Q1.

Allan Brett: Our revenue mix continued to be very strong, with services revenue coming in at $166.8 million, or 93% of total revenue, up 14% from services revenue of $146.2 million, or 89% of total revenue in Q2 last year. License revenues were again minor at less than 1% of revenue in the quarter, while professional services and other revenue came in at $12.8 million, down from $15.8 million in Q2 last year. Note that for us, other revenue includes hardware revenue. Last year in the second quarter, we had an unusually high hardware revenue in our GroundCloud business as a result of an AI-focused hardware replenishment cycle. This accounts for the majority of the drop of this revenue category year over year. We should also mention that there was a positive impact on revenue of approximately $2 million from foreign exchange this quarter, as the U.S.

Our revenue mix continued to be very strong with services revenue coming in at $166 8 million or <unk>, 93% of total revenue up 14% from services revenue of $146 2 million or <unk>, 89% of total revenue in Q2 last year.

Gross margin for the second quarter came in at 77% of revenue up from gross margins of 75% of revenue that we realized in the second quarter last year and this was mainly a result of the unusual lower margin hardware sales and the Crown club business that'll be recorded in Q2 last year that I mentioned earlier.

License revenues were again miner at less than 1% of revenue in the quarter, while professional services and other revenue came in at $12 8 million down from $15 8 million in Q2 last year.

Operating expenses increased by just over 8% in the second quarter over the same period last year and this was mainly related to the result of recent acquisitions, including the <unk> acquisition again completed earlier in the first quarter of this year.

We should also mentioned that there was a positive impact on revenue of approximately $2 million from foreign exchange this quarter as the U S dollar was weaker against the British pound.

Opex expenses in the second quarter also increased to the impact of foreign exchange from a weaker U S. Dollar and this increase was offset by a partial quarter benefit from the restructuring efforts that were completed throughout the second quarter.

Allan Brett: dollar was weaker against the British pound, the euro, and the Canadian dollar this quarter when compared to the same period last year. Excluding the impact of our recent acquisitions, as well as the impact of foreign exchange, we estimate that our growth in services revenue from new and existing customers or organic services revenue came in at around 4% in the second quarter, a similar level to the growth experienced in Q1. Gross margin for the second quarter came in at 77% of revenue, up from gross margins of 75% of revenue that we realized in the second quarter last year. This was mainly a result of the unusual lower margin hardware sales in the GroundCloud business that we recorded in Q2 last year that I mentioned earlier. Operating expenses increased by just over 8% in the second quarter over the same period last year.

Euro and the Canadian dollar this quarter when compared to the same period last year.

So as a result of both revenue growth offset slightly by the offerings cost expenses. We just mentioned we continued to see strong adjusted EBITDA growth of 14% to a record $80 2 million in the second quarter up from $70 6 million in Q2 last year.

Gross margin for the second quarter came in at 77% of revenue up from gross margins of 75% of revenue realized in the second quarter last year and this was mainly a result of the unusual lower margin hardware sales and the ground cloud business that we recorded in Q2 last year that I mentioned earlier.

As a percentage of revenue adjusted EBITDA came in at 44, 6% of revenue up from 43, 2% of revenue in Q2 last year in part due to the impact of the lower margin hardware revenues recorded in Q2 last year.

As a result of the above net income under U S. GAAP came in at $38 zero million dollars or <unk> 43 per diluted common share in the second quarter, an increase from net income of $34 7 million or <unk> 40 per diluted common share in the second quarter last year.

Operating expenses increased by just over 8% in the second quarter over the same period last year and this was mainly related to the result of recent acquisitions, including the <unk> Tms acquisition again completed earlier in the first quarter of this year.

Allan Brett: This was mainly related to the result of recent acquisitions, including the 3GTMS acquisition, again completed earlier in the first quarter of this year. Off-expenses in the second quarter also increased due to the impact of foreign exchange from a weaker U.S. dollar. This increase was offset by a partial quarter benefit from the restructuring efforts that were completed throughout the second quarter. As a result of both revenue growth, offset slightly by the operating cost expenses we just mentioned, we continue to see strong adjusted EBITDA growth of 14% to a record $80.2 million in the second quarter, up from $70.6 million in Q2 last year. As a percentage of revenue, adjusted EBITDA came in at 44.6% of revenue, up from 43.2% of revenue in Q2 last year, in part due to the impact of the lower margin hardware revenues recorded in Q2 last year.

With these solid operating results and strong.

Receivable collections again this quarter, we once again recorded.

It generated strong cash flow from our operations recording an additional $63 3 million in operating cash flow in the second quarter.

I will note that the operating cash flow in second quarter was negatively impacted by the payment of approximately $5 million in personnel departure costs. So while the operating cash flow came in at 79% of our reported adjusted EBITDA. Excluding these personnel departure costs costs operating cash flow would have been approximately 86% of our adjusted EBITDA.

Looking at our operating results for the first half of the year revenue came in at $348 6 million, an increase of 11% from revenue of $314 8 million in the first six months last year.

Allan Brett: As a result of the above, net income under U.S. GAAP came in at $38.0 million or $0.43 per diluted common share in the second quarter, an increase from net income of $34.7 million or $0.40 per diluted common share in the second quarter last year. With these solid operating results and strong receivable collections again this quarter, we once again generated strong cash flow from our operations, recording an additional $63.3 million in operating cash flow in the second quarter. I will note that the operating cash flow in the second quarter was negatively impacted by the payment of approximately $5 million in personnel departure costs. While the operating cash flow came in at 79% of our reported adjusted EBITDA, excluding these personnel departure costs, operating cash flow would have been approximately 86% of our adjusted EBITDA.

For this first six months of the year adjusted EBITDA came in at $155 3 million or <unk> 44, 5% of revenue.

Up 13% from $137 6 million or 43, 7% of revenue last year.

With these solid operating results and strong.

Net income for the first half of the year also increased coming in at $74 3 million or <unk> 85 per diluted common share and this compares to $69 3 million or <unk> <unk> per diluted common share in the first half of last year.

<unk> collections again this quarter, we once again recorded that generated strong cash flow from our operations recording an additional $63 3 million in operating cash flow in the second quarter.

I will note that the operating cash flow in second quarter was negatively impacted by the payment of approximately $5 million in personnel departure costs.

Overall, we're again quite pleased with our operating results this quarter as the solid performance from recent acquisitions and continued organic services growth resulted in a 10% growth in revenue and a 14% increase in adjusted EBITDA for the second quarter.

So while the operating cash flow came in at 79% of our reported adjusted EBITDA. Excluding these personnel departure costs costs operating cash flow would have been approximately 86% of our adjusted EBITDA.

If we look over to the balance sheet, our cash balance increased by approximately $64 million in Q2, as we continued to generate strong cash flow from operations, while we used approximately $2 million to complete the smaller package acquisition during the quarter and just over $1 million.

Allan Brett: Looking at our operating results for the first half of the year, revenue came in at $348.6 million, an increase of 11% from revenue of $314.8 million in the first six months last year. For the first six months of the year, adjusted EBITDA came in at $155.3 million or 44.5% of revenue, up 13% from $137.6 million or 43.7% of revenue last year. Net income for the first half of the year also increased, coming in at $74.3 million or $0.85 per diluted common share. This compares to $69.3 million or $0.80 per diluted common share in the first half of last year. Overall, we are again quite pleased with our operating results this quarter and the solid performance from recent acquisitions and continued organic services growth, resulting in a 10% growth in revenue and a 14% increase in adjusted EBITDA for the second quarter.

Looking at our operating results for the first half of the year revenue came in at $348 6 million, an increase of 11% from revenue of $314 8 million in the first six months last year.

For this first six months of the year adjusted EBITDA came in at $155 3 million or <unk> 44, 5% of revenue up 13% from $137 6 million or 43, 7% of revenue last year.

Or an earn out payment related to a past acquisition, leaving our cash balances at approximately $240 million at the end of the quarter.

We should also note that just subsequent to the quarter.

We also used $40 million, our cash balances to complete the acquisition of <unk> inventory as Ed mentioned earlier.

As a result, we currently have approximately $200 million in cash available as well as a $350 million credit facility that we can drawn available available to continue to deploy towards future acquisitions.

In short, we continue to be well capitalized to allow us to consider all opportunities in our market consistent with our business plan.

So as we look to the second half of our fiscal 2026, we should note the following.

After incurring approximately $3 1 million in capital additions in the first half of the year, we expect to incur approximately $3 million to $4 million in additional capital expenditures for the balance of this year.

Allan Brett: If we look over to the balance sheet, our cash balance increased by approximately $64 million in Q2 as we continue to generate strong cash flow from operations, while we used approximately $2 million to complete the smaller PackageRoute acquisition during the quarter and just over $1 million for an earnout payment related to a past acquisition, leaving our cash balances at approximately $240 million at the end of the quarter. We should also note that just subsequent to the quarter, we also used $40 million of our cash balances to complete the acquisition of Finale Inventory, as Ed mentioned earlier. As a result, we currently have approximately $200 million in cash available, as well as a $350 million credit facility that we could draw on, available to continue to deploy towards future acquisitions.

After paying approximately $1 2 million in earn out payments during the first half of the year. We currently expect that we will make an additional earn out payment of $1 1 million in the second half of this year.

After incurring amortization costs of $39 6 million in the first half of the year, we expect that amortization expense will be approximately $39 7 million in the second half of the year with this figure being subject to adjustment for foreign exchange rates and future acquisitions.

We should also note that just subsequent to the quarter.

We also used $40 million of our cash balances to complete the acquisition of <unk> inventory as Ed mentioned earlier.

As a result, we currently have approximately $200 million in cash available as well as a $350 million.

Going forward subject to any unusual events and quarterly fluctuations, we expect to book.

Continue to see solid cash flow conversion and generally expect the cash flow from operations will come in between 80% to 90% of our adjusted EBITDA in the quarters ahead.

Credit facility that we can drawn available available.

Can you deploy towards future acquisitions and.

Allan Brett: In short, we continue to be well-capitalized to allow us to consider all opportunities in our market consistent with our business plan. As we look to the second half of our fiscal 2026, we should note the following. After incurring approximately $3.1 million in capital additions in the first half of the year, we expect to incur approximately $3 to $4 million in additional capital expenditures for the balance of this year. After paying approximately $1.2 million in earnout payments during the first half of the year, we currently expect that we will make an additional earnout payment of $1.1 million in the second half of this year.

In short, we continue to be well capitalized to allow us to consider all opportunities in our market consistent with our business plan.

Our tax rate for the first half of the year came in at approximately 24% of pretax income, which is just slightly lower than our estimated blended statutory tax rate of 26, 5% and this was due to some small onetime tax benefits recorded in the first half.

So as we look to the second half of our fiscal 2026, we should note the following.

Looking to the second half of the year. We currently expect that our tax rate will continue to be in the range of 24% to 28% of pre tax income or somewhere on either side of our blended statutory tax rate.

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

Allan Brett: After incurring amortization costs of $39.6 million in the first half of the year, we expect that amortization expense will be approximately $39.7 million in the second half of the year, with this figure being subject to adjustment for foreign exchange rates and future acquisitions. Going forward, subject to any unusual events and quarterly fluctuations, we expect that we'll continue to see solid cash flow conversion and generally expect that cash flow from operations will come in between 80% and 90% of our adjusted EBITDA in the quarters ahead. Our tax rate for the first half of the year came in at approximately 24% of pre-tax income, which is just slightly lower than our estimated blended statutory tax rate of 26.5%. This was due to some small one-time tax benefits recorded in the first half.

After incurring amortization costs of $39 6 million in the first half of the year, we expected amortization expense will be approximately $39 7 million in the second half of the year with this figure being subject to adjustment for foreign exchange rates and future acquisitions.

And finally after recording stock based compensation expense of $8 million in the first half of this year. We currently expect stock comp will be approximately $12 2 million for the balance of this year.

Going forward subject to any unusual events and quarterly fluctuations, we expect to book.

Subject to any forfeitures of stock options or share units and with that I'll turn it back over to Ed who will wrap up with some closing comments and our baseline calibration for Q3, okay.

Continue to see solid cash flow conversion and generally expect the cash flow from operations will come in between 80% to 90% of our adjusted EBITDA in the quarters ahead.

Hi, great. Thanks, Alan as I said earlier and also last quarter. These are challenging business conditions for our customers.

Just some of those most recent changes include new reciprocal tariff frameworks between the U S and various countries, new baseline or cyclical tariffs of 15% on many other countries.

Our 90 day and reciprocal tariffs between China, and the U S that expires in November.

Allan Brett: Looking to the second half of the year, we currently expect that our tax rate will continue to be in the range of 24% to 28% of our pre-tax income or somewhere on either side of our blended statutory tax rate. However, as always, we should state that our tax rate may fluctuate quarter to quarter from one-time tax items that may arise as we operate internationally across multiple countries. Finally, after recording stock-based compensation expense of $8.8 million in the first half of this year, we currently expect stock comp will be approximately $12.2 million for the balance of this year, subject to any forfeitures of stock options or share units. With that, I'll turn it back over to Ed, who will wrap up with some closing comments and our baseline calibration for Q3.

Steel and aluminum tariffs increased to 50% pending court challenges to the legality of tariffs.

The minimum is tariff free U S import exceptions have been eliminated.

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

<unk> countries in postal authorities have suspended parcel in postal deliveries to the United States as they understand the new tariff collection and remittance regime.

Finally, after recording stock based compensation expense of <unk> 8 million in the first half of this year. We currently expect stock comp will be approximately $12 2 million for the balance of this year.

And heightened tensions and conflicts in Ukraine, and the middle East and corresponding sanction to go along with it.

So far the economy has shown a degree of resilience. However, as we enter the second half of the year and the holiday buying period. It's uncertainty there is uncertainty as to the impact of new tariffs on pricing and inflation and even more on the consumer buying reaction to increases in pricing.

Just any forfeitures of stock options or share units and with that I'll turn it back over to Ed who will wrap up with some closing comments and our baseline calibration for Q3, okay.

Ed Ryan: Great, thanks, Allan. As I said earlier and also last quarter, these are challenging business conditions for our customers. Just some of those most recent changes include new reciprocal tariff frameworks between the U.S. and various countries, new baseline reciprocal tariffs of 15% on many other countries, a 90-day reciprocal tariff truce between China and the U.S. that expires in November, steel and aluminum tariffs increased to 50%, pending court challenges to the legality of tariffs. De minimis tariff-free U.S. import exceptions have been eliminated. Various countries and postal authorities have suspended parcel and postal deliveries to the United States as they understand the new tariff collection intermittent regime, and heightened tensions and conflicts in Ukraine and the Middle East and corresponding sanctions that go along with it. The economy has shown a degree of resilience.

Hi, great. Thanks, Alan as I said earlier and also last quarter. These are challenging business conditions for our customers.

Despite reaction will have a big impact on general economic activity and shipping related to inventory replenishment in 2026, so an important period of upcoming with the economic and tariff uncertainties as I mentioned last quarter changes better than uncertainty for our customers our business thrives on helping customers adapt to changes and manage that.

Just some of those most recent changes include new reciprocal tariff frameworks between the U S and various countries new baseline reciprocal tariffs of 15% on many other countries.

Our 90 day reciprocal tariffs between China, and the U S that expires in November.

<unk>, however, uncertainty puts our customers in a position where they don't know what decision to make or whether they make should make any decision at all.

Steel and aluminum tariffs increased to 50% pending court challenges to the legality of tariffs.

De Minimis tariff for U S important exceptions have been eliminated.

Uncertainty can impact the shipping market and silicon deadlines retire changes regardless of whether the deadlines are ultimately here too we've seen broad tariff change deadlines in early April and July most recent tariff delay between the U S. China kicking in in early August often will see shipping upticks in advance of.

<unk> countries in postal authorities have suspended parcel in postal deliveries to the United States as they understand the new tariff collection and remittance regime.

And heightened tensions and conflicts in Ukraine, and the middle East and corresponding sanctions that go along with it.

So far the economy has shown a degree of resilience. However, as we enter the second half of the year and the holiday buying period. It's uncertainty there is uncertainty as to the impact of new tariffs on pricing and inflation and even more of the consumer buying reaction to increases in pricing.

Ed Ryan: However, as we enter the second half of the year and the holiday buying period, there's uncertainty as to the impact of new tariffs on pricing and inflation and even more the consumer buying reaction to increases in pricing. This buying reaction will have a big impact on general economic activity and shipping related to inventory replenishment in 2026. An important period is upcoming with the economic and tariff uncertainties. As I mentioned last quarter, change is better than uncertainty for our customers. Our business thrives on helping customers adapt to changes and managing complexity. However, uncertainty puts our customers in a position where they don't know what decision to make or whether they should make any decision at all. Uncertainty can impact the shipping market, and deadlines for tariff changes can as well, regardless of whether the deadlines are ultimately adhered to.

<unk> increased deadlines each month, we prepare global shipping report that monitors ocean imports into the United States with data obtained from U S customs and border protection.

Ah report for August will be coming out in the next few days. However, the July report showed record high Ocean imports was strong levels of shipments to the U S from China. We expect this elevated shipments were highly impacted by the tariff deadlines subsequent.

Despite reaction will have a big impact on general economic activity and shipping related to inventory replenishment in 2020 six so an important period of upcoming with the economic and tariff uncertainties as I mentioned last quarter changes better than uncertainty for our customers our business thrives on helping customers adapt to changes and manage the.

In July we are seeing the prices to ship ocean containers come down which may be indicative of less demand of ocean shipping once that tariff deadline has passed and is also influenced by typical seasonality.

<unk>, however, uncertainty puts our customers in a position where they don't know what decision to make or whether they make should make any decision at all.

We have had an early look at August U S. Ocean imports based on public data imports are up about 3% from a year ago, but down 4% from July the same seasonal drop as last year and pork from China were down 10% from a year ago and 6% from August with.

Uncertainty can impact the shipping market and so it can deadlines for tire changes regardless of whether the deadlines are ultimately here too we've seen broad tariff change deadlines in early April and July most recent tariff delay between the U S. China kicking in in early August often will see shipping upticks in advance of.

Ed Ryan: We've seen broad tariff change deadlines in early April and July, the most recent tariff delay between the U.S. and China kicking in in early August. Often, we'll see shipping upticks in advance of tariff increase deadlines. Each month, we prepare a global shipping report that monitors ocean imports into the United States with data obtained from U.S. Customs and Border Protection. Our report for August will be coming out in the next few days. However, the July report showed record high ocean imports with strong levels of shipments to the U.S. from China. We expect those elevated shipments were highly impacted by the tariff deadlines. Subsequent to July, we've seen the prices to ship ocean containers come down, which may be indicative of less demand of ocean shipping once that tariff deadline has passed and is also influenced by typical seasonality. We've had an early look at August U.S.

With a notable impact of a 44% decrease in aluminum imports from China.

There was an import strength in other Asia Pacific countries, such as Vietnam, Thailand, Indonesia, Malaysia, Cambodia.

<unk> increased deadlines each month, we prepare global shipping report that monitors ocean imports into the United States with data obtained from U S customs and border protection.

U S domestic U S domestic truck volumes remain depressed year over year, though we've seen a slight increase since last quarter, which may also be attributed to seasonality air shipments have been trending with modest growth, but look to be under pressure in particular with some overseas parcel shipping to the United States being suspended.

Descartes grown during challenging business conditions in the past our plan is to continue to do so now some of these things we believe.

<unk> to put us in a good position to do that include.

We're diversified in domestic logistics and international logistics many of the changes right now impact international supply chains, However, where we have great strength in domestic transportation moves in our routing and scheduling businesses transportation management and E. Commerce last mile businesses were particularly strong in global trade intelligence.

We've had an early look at August U S. Ocean imports based on public data imports are up about 3% from a year ago, but down 4% from July the same seasonal drop as last year.

Ed Ryan: ocean imports based on public data. Imports are up about 3% from a year ago, but down 4% from July, the same seasonal drop as last year. Imports from China were down 10% from a year ago and 6% from August, with a notable impact of a 44% decrease in aluminum imports from China. There was an import strength in other Asia-Pacific countries such as Vietnam, Thailand, Indonesia, Malaysia, and Cambodia. U.S. domestic truck volumes remain depressed year over year. Though we've seen a slight increase since last quarter, which may also be attributed to seasonality, air shipments have been trending with modest growth but look to be under pressure, in particular with some overseas parcel shipping to the United States being suspended. For Descartes, we've grown during challenging business conditions in the past. Our plan is to continue to do so now.

In Portugal, China were down 10% from a year ago and 6% from August.

With the notable impact of a 44% decrease in aluminum imports from China.

And we believe we can provide a ton of help to our customers and in an environment, where people are looking for information or help managing tariffs.

There was an important strength in other Asia Pacific countries, such as Vietnam, Thailand, Indonesia, Malaysia, Cambodia.

Continually updating sanction parties list thirsting for competitive intelligence dealing with increased export license complexity and implementing new duty deferred foreign trade zones.

U S domestic U S domestic.

Truck volumes remain depressed year over year, though we've seen a slight increase since last quarter, which may also be attributed to seasonality air shipments have been trending with modest growth, but look to be under pressure in particular with some overseas parcel shipping to the United States being suspended.

The next is we're diversified globally, we'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.

For Descartes grown during challenging business conditions in the past our plan is to continue to do so now some of these things. We believe continue to put us in a good position to do that include.

We have proactively taken steps to reduce our cost base to address potential revenue uncertainty.

Ed Ryan: Some of these things we believe continue to put us in a good position to do that include 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 last mile businesses. We're particularly strong in global trade intelligence. 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, continually updating sanctioned parties' lists, thirsting for competitive intelligence, dealing with increased export license complexity, and implementing new duty-deferred foreign trade zones. The next is we're diversified globally.

We have a total growth model, we have an extensive track record 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 and.

And finally, we are well capitalized cash generating business at Q2 quarter end, we had more than $240 million of cash and a $350 million Undrawn line of credit.

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 that business. We're mindful of this and the impact of the changing global trade and foreign exchange environment, and setting our calibration and considering what our final quarterly financial.

And we believe we can provide a ton of help to our customers and in an environment, where people are looking for information or help managing tariffs.

Continually updating sanction parties lists thirsting for competitive intelligence dealing with increased export license complexity and implementing new duty deferred foreign trade zone.

<unk> may be.

Ed Ryan: We've got domestic transportation solutions that can be used around the world, and where there's shifting international trade relations, we have an established global logistics network that can be leveraged by our customers. We've proactively taken steps to reduce our cost base to address potential revenue uncertainty. 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. Finally, we're a well-capitalized, cash-generating business. At Q2 quarter end, we had more than $240 million of cash and a $350 million undrawn line of credit. Ultimately, regardless of how well Descartes is positioned, our success is determined by our ability to help our customers. Our customers remain uncertain about how these market conditions will impact their business.

And our quarterly report, we provide a comprehensive description of baseline revenues baseline calibration and their limitations.

As of August 1st 2025, using foreign exchange rates up 72 cents to the Canadian dollar.

We have proactively taken steps to reduce our cost base to address potential revenue uncertainty.

<unk>.

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 and.

$1 15 to the euro.

$1 32 to the pound and including estimated contribution from the acquisition of finale inventory, we estimate that our baseline revenues for the third quarter of fiscal 2026 were approximately $157 5 million and our baseline operating expenses approximately $96 $5 million.

And finally, we are well capitalized cash generating business at Q2 quarter end, we had more than $240 million of cash and a $350 million Undrawn line of credit.

We consider this to be our baseline adjusted EBIT, the calibration of approximately $61 million for the third quarter of fiscal 2006 or approximately 35.

Ultimately, regardless of how well the card has positioned our success is determined by our ability to help our customers our customers remain uncertain about how these market conditions will impact that business. We're mindful of this and the impact of changing global trade and foreign exchange environments, and setting our calibration and considering what our final quarterly financial.

Ed Ryan: We're mindful of this and the impact of the changing global trade and foreign exchange environments in setting our calibration and considering what our final quarterly financial results may be. In our quarterly report, we provide a comprehensive description of baseline revenues, baseline calibration, and their limitations. As of August 1, 2025, using foreign exchange rates of $0.72 to the Canadian dollar, $1.15 to the euro, and $1.32 to the pound, and including estimated contributions from the acquisition of Finale Inventory, we estimate that our baseline revenues for the third quarter of fiscal 2026 were approximately $157.5 million, and our baseline operating expenses were approximately $96.5 million. We consider this to be our baseline adjusted EBITDA calibration of approximately $61 million for the third quarter of fiscal 2026, or approximately 39% of our baseline revenues as at August 1, 2025.

39% of our baseline revenues as at August <unk> 2025.

We continue to expect that we'll operate in an adjusted EBITDA operating environment.

<unk> may be.

Operating 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.

And our quarterly report, we provide a comprehensive description of baseline revenues baseline calibration and there are limitations.

As of August 1st 2025, using foreign exchange rates up 72 cents to the Canadian dollar.

These are uncertain times for our customers, it's a challenge for them to know what they can.

<unk>.

But they can rely on in this global trade environment. Our goal is to continue to show our customers and other stakeholders that the one thing that can rely on us to cart. Thanks.

<unk>.

$1 15 to the euro.

$1 32 to the pound and including estimated contribution from the acquisition of <unk> inventory, we estimate that our baseline revenues for the third quarter of fiscal 2026 were approximately $157 5 million and our baseline operating expenses were approximately $96 $5 million.

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

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your telephone keypad.

We consider this to be our baseline adjusted EBIT, the calibration of approximately $61 million for the third quarter of fiscal 'twenty six or approximately 35 30.

To hear a prom that Johanna is minimized and should you wish to cancel your request. Please press star followed by the Q.

39% of our baseline revenues as at August <unk> 2025.

You're using a speaker phone please lift the handset before pressing any Keith one moment. Please for your first question.

Ed Ryan: We continue to expect that we'll operate in an adjusted EBITDA operating environment, operating 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. These are uncertain times for our customers. It's a challenge for them to know what they can rely on in this global trade environment. Our goal is to continue to show our customers and other stakeholders that the one thing they can rely on is Descartes. Thanks to everyone for joining us on the call today. As always, we're available to talk to you about our business in whatever manner is most convenient for you. With that, operator, I'll now turn it over to you to handle the Q&A portion of the call.

We continue to expect that we'll operate in an adjusted EBITDA operating in an environment of.

Thank you and your first question comes from the line of Sheila <unk> from William Blair. Please go ahead.

Hey, Jonathan This is Jackson boldly on for Dylan Becker I was wondering about the transactional side of the business.

These are uncertain times for our customers. It's a challenge for them to know what they can what they can rely on in this global trade environment. Our goal is to continue to show our customers and other stakeholders that the one thing that can rely on us to cart.

Yes.

How do you think about the recovery there.

How that shape of the recovery evolves now that we've kind of moved past the peak uncertainty I know, it's still out there but.

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

How does that recovery look like on the transactional component and especially considering the impact of de minimis going away as well.

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your telephone keypad, you'll hear a prompt that Johanna is minimized and should you wish to cancel your request. Please press star followed by the Q, if you're using a speaker phone. Please lift the handset before pressing any.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to cancel your request, please press star followed by the two. If you're using a speaker phone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. Your first question comes from the line of Dylan Becker from William Blair. Please go ahead.

Well diminished mis side, we've done quite well and so we thought there was some risk there for us six months ago, and it's turned out to.

Great.

Fortunately for US we're happy about that.

On the tariff or excuse me on the.

Tariffs impact on our network.

One moment. Please for your first question.

While we saw pretty good results this quarter so.

That's in large part because of those volumes start to tick up as there were some certainty about what what's going to happen all the way through.

Thank you and your first question comes from the line of Sheila Mcgrath from William Blair. Please go ahead.

Early August.

Now we've hit that August 9th date in <unk>.

Hey, Jonathan This is Jackson boldly on for Dylan Becker I was wondering about the transactional side of the business.

Jackson Bogley: Hey, gentlemen. This is Jackson Bogley on for Dylan Becker. I was wondering about the transactional side of the business. How do you think about the recovery there, and how that shape of the recovery evolves now that we've kind of moved past the peak uncertainty? I know it's still out there, but how does that recovery look like on the transactional component, especially considering the impact of de minimis going away as well?

You would think thats created more.

More certainty excuse me, but then a federal Appeals court judge said that he would invalidate the tariffs and the Trump administration comes back and says we'll find a way around that.

How do you think about the recovery there.

And how that shape of the recovery evolves now that we've kind of moved past the peak uncertainty I know, it's still out there but.

And it's probably going to the Supreme Court.

My gut is it's probably that they are going to be able to they are going to continue to give the president of the ability to two to.

How does that recovery look like on the transactional component and especially considering the impact of de minimis going away as well.

To handle the tariff regime as he sees fit but we'll see.

I agree with you that there is less uncertainty than there was a month or two ago, but.

Well Dominik.

Ed Ryan: On the de minimis side, we've done quite well, actually. We thought there was some risk there for us six months ago, and it's turned out to be a great opportunity for us. We're happy about that. On the tariff impact on our network, you saw we had pretty good results this quarter. That's in large part because those volumes started to tick up as there was some certainty about what was going to happen all the way through the early August. Now we've hit that August 9th date, and you would think that's created more certainty, but then a federal appeals court judge said that he would invalidate the tariffs, and the Trump administration comes back and says, we'll find a way around that. It's probably going to end up in the Supreme Court.

MS side, we've done quite well and so we thought there was some risk there for us six months ago, and it's turned out to.

Still plenty left I think.

Sure.

Cautiously.

Great.

Turning for us So we're happy about that.

Great. That's helpful. And then maybe going back to that network piece in thinking about your AI positioning and how.

On the tariff or excuse me on the.

Tariffs impact on our network while.

While you saw pretty good results this quarter so yes.

How well positioned you are to use that what does the opportunity look like to lean into the data across this network.

That's in large part because of those volumes start to tick up as there were some certainty about what what's going to happen all the way through.

And maybe to drive more operational Decisioning and performance and maybe also.

Early August.

Now we've hit that August 9th date.

What you think monetization could look like over time as you continue building out your AI capabilities.

You would think thats created more.

More certainty excuse me, but.

Appeals Court judge said that.

There are a lot of unknowns in what you asked there, but we do believe we're in a very attractive position.

Validate the tariffs and the Trump administration comes back and says we'll find a way around that.

And it's probably going to the Supreme Court.

In this regard.

Ed Ryan: My gut is it's probably that they're going to continue to give the president the ability to handle the tariff regime as he sees fit. We'll see. I agree with you that there's less uncertainty than there was a month or two ago, but still plenty left, I think, that we're cautious of.

We process a large number of the worlds shipments and what that means is we know where a large number of the world shipments are supposed to be days weeks and months from now.

My gut is it's probably that they are going to be able to they are going to continue to give the president of the ability to to to.

To handle the tariff regime as he sees fit but we'll see.

I agree with you that there is less uncertainty than there was a month or two ago, but.

And that's in our network combined with.

Iot devices out there to continue to collect more and more information about.

Still plenty left I think.

Sure.

What's going on out in the field and then AI gives you the ability to sort through it very quickly and make.

Cautiously.

Great. That's helpful. And then maybe going back to that network piece in thinking about your AI positioning and how.

Jackson Bogley: Great. That's helpful. Maybe going back to that network piece and thinking about your AI positioning and how well positioned you are to use that, what does the opportunity look like to lean into the data across this network and maybe to drive more operational decisioning and performance? Maybe also, what you think monetization could look like over time as you continue building out your AI capabilities.

Good decisions considering everything we know right now.

I think the guy that has the network that.

How well positioned you are to use that what does the opportunity look like to lean into the data across this network and maybe to drive more operational Decisioning and performance and maybe also.

That is the record of what's supposed to happen is in a very good position to help make modifications to those shipments.

Which would enable our customers to operate more efficiently.

Yes.

Nothing goes wrong on every shipment, it's really about what do you do about it.

What you think monetization could look like over time as you continue building out your AI capabilities.

To the extent, we can use Iot and AI to figure out something went wrong and what we're going to do about it quickly.

Ed Ryan: Sure. I mean, there's a lot of unknowns in what you asked there, but we do believe we're in a very attractive position in this regard in that, you know, we process a large number of the world's shipments. What that means is we know where a large number of the world's shipments are supposed to be days, weeks, and months from now. The fact that that's in our network combined with IoT devices out there that continue to collect more and more information about what's going on out in the field, and then AI gives you the ability to sort through it very quickly and make good decisions considering everything you know right now.

There are a lot of unknowns in what you asked there, but we do believe we're in a very attractive position.

Puts us in a very good position as the.

Because it's already managing the shipment to take advantage of that better than anybody else. So we're excited about that and the warmer.

In this regard.

We process a large number of the worlds shipments and what that means is we know where a large number of the wealth shipments are supposed to be days weeks and months from now.

Great. Thanks, guys.

Thank you Jackson.

Thank you and your next question comes from the line of Chris <unk> from Morgan Stanley. Please go ahead.

And that's in our.

Work combined with.

Iot devices out there to continue to collect more and more information about.

Hey, Ed.

Thanks for taking the question and really nice to be on the call here with you today.

What's going on out in the field and then AI gives you the ability to sort through it very quickly and make.

Wanted to ask on organic services growth is there.

Good decisions considering everything we know right now.

There any way you can kind of contextualize the impact from that record shipping volumes in the quarter and what were maybe some of the softer areas that detracted from that and were a drag on organic growth.

Ed Ryan: We think the guy that has the network that gets the record of what's supposed to happen is in a very good position to help make modifications to those shipments, which would enable our customers to operate more efficiently. Because, you know, something goes wrong on every shipment, it's really about what do you do about it? To the extent we can use IoT and AI to figure out something went wrong and what we're going to do about it quickly puts us in a very good position as the guy that's already managing the shipment to take advantage of that better than anybody else. We're excited about that in the long run.

I think the guy that has the network that.

That is the record of what's supposed to happen is in a very good position to help make modifications to those shipments.

Yes, so we I mean, we obviously estimate all these numbers with breaking down the estimated organic growth I think as Ed.

Which would enable our customers to operate more efficiently.

Something goes wrong on every shipment, it's really about what do you do about it.

As indicated in the prepared comments that we had some good strength in global.

To the extent, we can use Iot and AI to figure out something went wrong and what we're going to do about it quickly.

Global trade intelligence solutions, we had.

Good strength in regulatory compliance solutions as well as in transportation management solution. So so those areas we're certainly.

Puts us in a very good position.

The guidance already managing the shipment to take advantage of that better than anybody else. So we're excited about that and the warmer.

Strong for US we had some.

Volumes themselves as much as it came back a little bit we're still we're still not.

Great. Thanks, guys.

Jackson Bogley: Great. Thanks, Scott.

We are still in depressed levels of transactional volumes. So certain other transactional services continue to lead to limp along a little bit the flattish or even down slightly but those were the areas of strength that we had.

Thank you Jackson.

Ed Ryan: Thank you, Jackson.

Thank you and your next question comes from the line of Chris <unk> from Morgan Stanley. Please go ahead.

Operator: Thank you. Your next question comes from the line of Chris Quintero from Morgan Stanley. Please go ahead.

Yeah.

Hey, Thanks for taking the question and really nice to be on the call here with you today.

Stephanie Price: Hey, Ed. Hey, Allan. Thanks for taking the questions, and really nice to be on the call here with you today. I wanted to ask on organic services growth. Is there any way you can kind of contextualize the impact from that, you know, record shipping volumes in the quarter? What were maybe some of the softer areas that detracted from that and were a drag on organic growth?

As areas that we mentioned earlier.

Got it that's super helpful and then.

Wanted to ask on organic services growth.

I was wondering if you could update us on the restructuring and kind of how that's progressed versus your expectations. So far in.

Is there any way you can kind of contextualize the impact from that record shipping volumes in the quarter and what are maybe some of the softer areas that detracted from that and were a drag on organic growth.

How youre thinking about.

That in context, with your 10% to 15% EBITDA growth targets.

Yes, so we I mean, we obviously estimate all these numbers were breaking down not estimated organic growth I think as Ed as I indicated in the prepared comments that we had some good strength in global.

Allan Brett: Yeah. We obviously estimate all these numbers and breaking down estimated organic growth. I think, as Ed indicated in the prepared comments, we had some good strength in our global trade intelligence solutions. We had good strength in regulatory compliance solutions, as well as in transportation management solutions. Those areas were certainly strong for us. The volumes themselves, as much as they came back a little bit, are still not at, we're still in depressed levels of transactional volume. Certain other transactional services continue to limp along a little bit, flattish or even down slightly. Those were the areas of strength that we had, those areas that we mentioned earlier.

Yes, we said last quarter, when we came out of <unk>.

We started to make some plans we saw change in some businesses business product revenues et cetera, and so we said we made some changes we've implemented those plans for the most part we're fundamentally complete on the restructuring plan it's worked out.

Global trade intelligence solutions, we had.

Good strengths and regulatory compliance solutions as well as in transportation management solutions. Those so those areas we're certainly.

Pretty much as we expected.

Strong for US we had some.

The savings of approximately $2 million in the quarter there'll be some additional savings as we get to a full quarter of run rate.

Volumes themselves as much as it came back a little bit we're still we're still not.

We are still in depressed levels of transactional volume so certain other transactional services continue to to limp along a little bit the flattish or even down slightly but those were the areas of strength that we had.

Savings from.

From from those changes.

Look back we think we are at.

Unfortunate decisions with decisions that had to be made given given the.

Weakness in transaction volumes that we're experiencing so.

As areas that we mentioned earlier.

For the most part complete the restructuring and Thats, the kind of metrics as far as as far as numbers.

Got it that's super helpful and then.

Stephanie Price: Got it. That's super helpful. I was wondering if you could update us on the restructuring and how that's progressed versus your expectations so far, and how you're thinking about that in context with your 10% to 15% EBITDA growth targets.

I was wondering if you could update us on the restructuring and kind of how thats progressed versus your expectations. So far in.

Excellent thanks Alan.

Thanks, Chris.

Thank you and your next question comes from the line of Stephanie price from CIBC. Please go ahead.

How youre thinking about.

That in context, with your 10% to 15% EBITDA growth targets.

Hi, good evening.

Yes, we said last quarter, when we came out of <unk>.

Allan Brett: Yeah. As we said last quarter when we came out, we started, we made some plans. We saw a change in some businesses, business product revenues, et cetera. We said we made some changes. We've implemented those plans for the most part. We're fundamentally complete on the restructuring plan. It's worked out pretty much as we expected. There's savings of approximately $2 million in the quarter. There'll be some additional savings as we get to a full quarter of run rate of savings from those changes. If we look back, we think we were unfortunate decisions, but decisions that had to be made given the weakness in transactional volumes that we were experiencing. For the most part, complete the restructuring, and that's the kind of metrics as far as numbers.

Last quarter, you mentioned that you werent seeing customers shipping their minimums on transaction revenue just wondering if that still the case and what customers that kind of thinking about here and talking about the current environment.

Yes, Thanks Stephanie.

No I mean, we the numbers ticked up especially in the network. This quarter. So we're going to have a whole lot of discussions about.

Pretty much as we expected.

The savings of approximately $2 million in the quarter there'll be some additional savings as we get to a full quarter of run rate.

People not having their minimums.

Yes, I think most of our customers are looking for help.

Savings from.

From from those changes.

To figure out what to do about all the changes that are coming at them in mute.

Look back we think we are at.

Unfortunate decisions, but the decisions that had to be made given given the.

Tariff businesses as our visibility businesses are doing very well as a result, we had record sales.

Weakness in transaction volumes that we're experiencing so.

Our subscription area.

For the most part complete the restructuring and Thats, the kind of metrics as far as as far as numbers.

This quarter and to get some large part due to people going alright, I know some have a little more certainty, but certainly still not enough and what can they buy from us to help them.

Stephanie Price: Excellent. Thanks, Allan.

Excellent thanks Alan.

Thanks, Chris.

Ed Ryan: Thanks, Chris.

Thank you and your next question comes from the line of Stephanie price from CIBC. Please go ahead.

Operator: Thank you. Your next question comes from the line of Stephanie Price from Scotia Bank. Please go ahead.

Figure out how to.

Better manage through that.

Yes.

Hi, good evening.

Jackson Bogley: Hi. Good evening. Last quarter, you mentioned that you weren't seeing customers tripping their minimums on transaction revenue. Just wondering if that's still the case and what customers are kind of thinking about here and talking about in the current environment.

The good news for us is even.

The network struggled a couple of quarters ago now to get a little better.

But the subscription sales held up through all of that at a very high level because of what I just discussed there.

People need more information to deal with complexity and change just being thrown at them and.

Yes, Thanks Stephanie.

Ed Ryan: Yeah, thanks, Stephanie. Hi. No, I mean, the numbers ticked off, especially in the network this quarter. We're not having a whole lot of discussions about people not hitting their minimums. I think most of our customers are looking for help to figure out what to do about all the changes that are coming at them. You can see our tariff businesses and some of our visibility businesses are doing very well as a result. We had record sales in our subscription area this quarter. I think that's in large part due to people going, "All right, I know some, I have a little more certainty, but certainly, it's still not enough.

No I mean, the numbers picked up especially in the network. This quarter. So we're not having a whole lot of discussions about.

We're in an enviable position, where we have a lot of other tools that can help them deal with that.

People are not hitting their minimums.

That makes sense and then in your prepared remarks, you mentioned fraud prevention as a growth area. Just curious about the size of that fraud prevention business today, and whether it's an area of potential future M&A.

I think most of our customers are looking for help.

To figure out what to do about all the changes that are coming at them and you can see our tariff businesses as our visibility businesses are doing very well as a result, we had record sales.

It's not it's not a it's not a gigantic business it's.

Our subscription area.

It's a little less than 1% of our business. It is an area that's growing nicely.

This quarter and to get some large part due to people going alright, I know I have a little more certainty, but certainly it's still not enough and what can they buy from us to help them.

As we pick it up and we have a whole lot more customers bring it to bring it to.

Ed Ryan: What can they, you know, buy from us to help them figure out how to better manage through that?" The good news for us is, even though the network struggled a couple of quarters ago, now it's getting a little better. Subscription sales held off through all of that at a very high level because of what I just discussed there. People need more information to deal with the complexity and change that's being thrown at them. We're in an enviable position where we have a lot of other tools that can help them deal with that.

And it happens to be a hot topic right now.

Figure out how to.

We're seeing it grow nicely, but still growth relative to the overall size of our businesses, it's still relatively small.

Better manage through that.

Yes.

The good news for us is even.

The network struggled a couple of quarters ago, now, it's getting a little better.

As for as for acquisitions in that space.

But the subscription sales held up through all of that at a very high level because of what I just discussed there.

Maybe.

Let's see how this one goes but it's looking all right so far.

People need more information to deal with the complexity and change just being thrown at them and.

Great. Thank you very much.

Thank you.

Thank you and your next question comes from the line of Paul <unk> from RBC Capital Michael. Please go ahead.

We're in an enviable position, where we have a lot of other tools that can help them deal with that.

Hey, good afternoon, and thanks for taking the question.

Jackson Bogley: That makes sense. In your prepared remarks, you mentioned fraud prevention as a growth area. Just curious about the size of that fraud prevention business today and whether it's an area of potential future M&A.

Just what was the biggest surprise of the quarter.

Compared to when you gave that.

Towards the last quarter.

What are you looking to your fee going forward.

It's not it's not a it's not a gigantic business.

Ed Ryan: It's not a gigantic business. It's a little less than 1% of our business. It is an area that's growing nicely. As we pick it up and we have a whole lot more customers to bring it to, it happens to be a hot topic right now. We're seeing it grow nicely. Still, relative to the overall size of our business, it's still relatively small. As for acquisitions in that space, yeah, maybe. We'll see how this one goes, but it's looking all right so far.

Forward that could give you more confidence in the underlying environment.

That's a little less than 1% of our business. It is an area that's growing nicely.

Hi, I'm sorry, this is going to be a very simplistic answer but the.

The pleasant surprise was that the networks picked back up and.

As we pick it up and we have a whole lot more customers and bring it to bring it to.

And it happens to be a hot topic right now.

What I'd like to see that continue.

And I know Thats probably.

We're seeing it grow nicely, but still growth relative to the overall size of our businesses, it's still relatively small.

So for simplification of it but that is the biggest issue going on for us right now.

Yes.

What customers do.

As for as for acquisitions in that space.

No what was going to happen next they've bought a lot of subscription services from us to figure out how they might handle those things and stop shipping stuff.

Yes, maybe.

Let's see how this one goes but it's looking all right so far.

Great. Thank you very much.

Jackson Bogley: Great, thank you very much.

Ed Ryan: Thank you.

And.

Thank you.

Then when they got a little more certainty they started shipping more stuff.

Operator: Thank you. Your next question comes from the line of Paul Treiber from RBC Capital Markets. Please go ahead.

Thank you and your next question comes from the line of Paul <unk> from RBC capital markets. Please go ahead.

Pay by the shipments so 30% of our business.

Stephanie Price: Hey, good afternoon, and thanks for taking the question. A question for you, Ed. Just, you know, what was the biggest surprise of the quarter compared to when you gave your report of the last quarter? What are you looking to hear or see going forward that would give you more confidence in the underlying environment?

Hey, good afternoon, and thanks for taking the question.

Not a whole lot we can do about it other than help our customers figure out what to do.

Just what was the biggest surprise of the quarter.

And.

That turned around this quarter as you can see in our numbers.

Compared to when you gave that.

It performed very well.

For the last quarter.

And what I'd like to see that continue to answer your question.

What are you looking at your fee going forward that you can give you more confidence in the underlying environment.

Whether or not I don't know they definitely got more certainty the other day.

Hi, I'm sorry, this is going to be a very simplistic answer but the.

Ed Ryan: I'm sorry, this is going to be a very simplistic answer, but the pleasant surprise was that the networks picked back up. What I'd like to see is that continue. I know that's probably a bastard for simplification of it, but that is the biggest issue going on for us right now. We had, you know, when customers didn't know what was going to happen next, they bought a lot of subscription services from us to figure out how they might handle those things and stop shipping stuff. When they got a little more certainty, they started shipping more stuff. We get paid by the shipment. So 30% of our business was, you know, not a whole lot we could do about it other than help our customers figure out what to do. That turned around this quarter, as you could see in our numbers, and it performed very well.

At least we know what's going to happen and.

Might that make people shipping more stuff maybe.

The pleasant surprise was that the networks picked back up and.

Then it feels projects.

There was a little more uncertainty in and says hey.

What I'd like to see that continue.

And I know Thats probably bad.

I'm not sure it trumps allowed to do this and I don't know that.

Super simplification of it but that is the biggest issue going on for us right now.

By that I suspect that these are going to be overturned by the Supreme Court or even if it's not Trump administration is going to come up with five other ways.

Yes.

With customers.

No what was going to happen next they bought a lot of subscription services from us to figure out how they might handle those things and stop shipping stuff.

To do the same thing.

So.

Yes.

What we're looking for is a little more certainty out of people I think I think most of our customers.

And.

Then when they got a little more certainty they started shipping more stuff and we get paid by the shipments so 30% of our business.

Don't really care, what the tariffs are I just want to know that what they are and then my competitors are going to have to pay them to enroll.

Not a whole lot we can do about it other than to help our customers figure out what to do.

Get going again, and see what the consumer thinks of Houston, new higher prices.

And.

That turned around this quarter as you can see in our numbers.

One of the things you mentioned is the pickup in services.

It performed very well.

Sorry subscriptions.

Ed Ryan: What I'd like to see is that continue to answer your question. Whether it will or not, I don't know. They definitely got more certainty the other day on the 9th. At least we know what's going to happen. Might that make people ship more stuff? Maybe. An appeals court judge kind of throws a little more uncertainty in it and says, "Hey, you know, I'm not sure Trump's allowed to do this." I don't know that I buy that. I suspect that's either going to be overturned by the Supreme Court, or even if it's not, the Trump administration is going to come up with five other ways to do the same thing. What we're looking for is a little more certainty out of people, I think. I think most of our customers would say, "I kind of don't really care what the tariffs are.

And what I'd like to see that continue to answer your question.

I imagine a portion of that is related to the GPI business.

Whether or not I don't know they definitely got more certainty the other day the ninth.

Do you have a sense for how sustainable that that uplift is.

At least we know what's going to happen and Mike.

Might that make people shipping more stuff maybe.

It's sort of way of doing business is taking into account.

Then it fuels projects.

Or if it's much more than companies have done in the past and using tools like GTI to.

There was a little more uncertainty in and says hey.

To help manage it.

Im not sure trumps allowed to do this and I don't know.

Yes, that's fine that's playing a role in it for sure.

By that I suspect, that's either going to be overturned by the Supreme Court or even if it's not the Trump administration is going to come up with five other ways.

I think once they buy additional countries and additional.

Commodities from Us, which is which is how they.

Thanks.

The amount they pay goes up and that's what's happened in most cases.

Yes.

What we're looking for is a little more certainty out of people I think I think most of our customers safe.

During this let's say last year of <unk>.

Don't really care, what the tariffs are I just want to know that what they are and then my competitors are going to have to pay them to enroll.

Ed Ryan: I just want to know what they are, and then my competitors are going to have to pay them too. We'll, you know, get going again and see what the consumer thinks of it." They use some new higher prices.

High tariff increases.

I think they probably will turn those things off we'll probably keep them struggling independent nice recurring revenue stream for us.

If John again, and see what the consumer thinks of the Houston, new higher prices.

Then you have the old de minimus thing that we were.

Wondering six eight months ago that was going to.

One of the things you mentioned is it pick up in services.

Stephanie Price: One of the things you mentioned is the pickup in services, or sorry, subscriptions. I imagine a portion of that is related to the GTI business. Do you have a sense for how sustainable that uplift is? Do you expect that sort of the early way of doing business is taking into account tariffs much more than companies have done in the past and using tools like your GTI to help manage it?

Go well for us and.

Sorry subscriptions.

Yeah.

I think we've been pleasantly surprised that it works great for us.

I imagine a portion of that is related to the GPI business.

We were always a big provider.

The do you have a sense for how sustainable that that uplift is.

The customers started to say Hey, you know what I'm, just going to I'm, just going to pay tariffs.

We are.

Doing businesses is taking into account.

I have plenty of consumers that are willing to buy this whether this.

Tariffs much more than companies have done in the past and using tools like GTI.

Charge recorded $3 or $3 50, I don't care and I'll just pay the tariffs.

To help manage it.

And that put them in a situation where they had to do millions of millions of type one and type of 11 filings and we were.

Yes, that's fine that's playing a role in it for sure.

Ed Ryan: Yeah, that's playing a role in it for sure. I think once they buy additional countries and additional commodities from us, which is how the amount they pay goes up and is what's happened in most cases during this, let's say, last year of high tariff increases, I think they probably won't turn those things off. They'll probably keep them. It's probably going to end up being a nice recurring revenue stream for us. You have the whole de minimis thing that, you know, we were wondering six, eight months ago if that was going to, you know, go well for us. I think we've been pleasantly surprised that it went great for us. We were always a big provider. The customers started to say, "Hey, you know what? I'm just going to pay tariffs.

I think once they buy additional countries and additional.

Prepared for that because of the number of filings, we already manage and Fortunately for us our competitors were not and Thats shifted.

Our commodities from us, which is how they get there.

The amount they pay goes up and that's what's happened in most cases.

Traffic our way.

During this let's say last year of high tariff increases.

Okay.

Which is nice.

Alright, thanks for taking the questions.

I think they probably will turn those things off we'll probably keep them struggling at the premium nice recurring revenue stream for US and then you have the whole de minimus thing that we were.

Thank you Paul.

Thank you and your next question comes from the line of Kevin <unk> from Scotia Bank. Please go ahead.

Wondering six eight months ago that was going to.

Hey, there good evening, thanks for taking my questions.

Go well for us and.

Nice to see the continued strength in macro point.

<unk>.

I think we've been pleasantly surprised that it works great for us.

Youre doing while they are even despite seeing declines in trucking can you remind us whats driving that strength are you are you winning share. There is other competitors like for Titan project 44, maybe theres others are you winning share from them that pricing just sort of talk about what's driving the edge out there.

We were always a big provider.

The customers started to say Hey, you know what I'm, just going to I'm, just going to pay tariffs.

Ed Ryan: You know, I have plenty of consumers that are willing to buy this, whether this charger cord is $3 or $3.50. I don't care. I'll just pay the tariffs." That put them in a situation where they had to do millions and millions of Type 1 and Type 11 filings. We were prepared for that because of the number of filings we already managed. Fortunately for us, our competitors were not. That shifted a lot of traffic our way for good, which is nice.

I have plenty of consumers that are willing to buy this whether this.

Charge recorded $3 or $3 50, I don't care and I'll just pay the tariffs.

Largely winning market share from competitors in the past year.

And that put them in a situation where they had to do millions of millions of type one and type 11 filings and we were.

You can see the transportation volumes are relatively flat in the truck space, maybe even down in some months some quarters and.

Prepared for that because of the number of filings we already manage.

Yet we continue to go up every month.

And unfortunately for us our competitors, we're not shifting traffic our way.

And continue with a relatively high growth rate considering that the market's otherwise flat we have.

Good.

Which is.

Thanks.

And our ability and we spent a lot of time and effort and an ability to track every trucker that's out there and we'll continue to spend most of our time and energy looking at the macro point business that way.

Alright, thanks for taking the questions.

Stephanie Price: All right. Thanks for taking the questions.

Ed Ryan: Thanks. Thank you, Paul.

Thank you. Thank you Paul.

Thank you and your next question comes from the line of Kevin <unk> from Scotia Bank. Please go ahead.

Operator: Thank you. Your next question comes from the line of Kevin Krishnaratne from Scotia Bank. Please go ahead.

Okay. Good evening, thanks for taking my questions.

Stephanie Price: Hey there. Good evening. Thanks for taking my questions. It's nice to see the continued strength in MacroPoint. I know you're doing well there, even despite seeing declines in trucking. Can you remind us what's driving that strength? Are you winning share? There's other competitors like FourKites, Project44. Maybe there's others. Are you winning share from them? The pricing, just sort of talk about what's driving the strength there.

Thats because were.

And our lifetime network operators.

It's nice to see the continued strength in macro point.

Understand the network effect you have to have two people that want to talk to each other.

We are you are doing well there even in despite seeing declines in trucking can you remind us what's driving that strength are you are you winning share. There is other competitors like for Titan project 44, maybe theres others are you winning share from them that pricing just sort of talk about what's driving the edge out there.

And you have to be able to talk to both of them to get them communicating with each other and we spend our time and energy on that and I think some of our competitors spent a lot of time and energy building software that their customers told them to bill that is a very little use if you can't get in touch with the trucker to track a shipment.

Largely winning market share from competitors in the past year.

Ed Ryan: Largely winning market share from our competitors in the past year. You can see the transportation volumes are relatively flat in the truck space, maybe even down in some months, some quarters. Yet we continue to go up every month and continue with a relatively high growth rate considering that the market's otherwise flat. We have an ability, and we spent a lot of time and effort on an ability to track every trucker that's out there. We continue to spend most of our time and energy looking at the MacroPoint business that way. That's because we're, you know, in our lifetime network operators. We understand the network effect. You have to have two people that want to talk to each other, and you have to be able to talk to both of them to get them communicating with each other. We spend our time and energy on that.

And.

I think that's worked out very well for us in the macro point business, we are track rates approaching 90% and our competitors are nowhere close.

You can see the transportation volumes are relatively flat in the truck space, maybe even down in some months some quarters yet.

And yet we continue to go up every month.

Yeah makes sense thanks for that appreciate it.

And continue with a relatively high growth rate considering that the market's otherwise flat we have.

Second question, good to see that sort of stability here, the 4% services growth.

And ability and we've spent a lot of time and effort and ability to track every truck or that's out there and we'll continue to spend most of our time and energy looking at the macro point business that way.

The transaction the one that helped there.

On the software side, you're positive on what's to come there I know, there's a lot of uncertainty, but at some point.

Customers may have no choice, but to eventually.

By and deal with the uncertainty so is there any sort of underlying metrics that youre looking at whether that pipeline demo activity and conversations with customers that you can kind of point to that sort of maybe a leading indicator to what could be coming at some point. Thanks.

Thats because were.

And our lifetime network operators.

Understand the network effect you have to have two people that want to talk to each other.

Ed Ryan: I think some of our competitors spend a lot of time and energy building software that their customers told them to build that is of very little use if you can't get in touch with the trucker to track his shipment. I think that's worked out very well for us in the MacroPoint business. We have track rates approaching 90%, and our competitors are nowhere close.

Thanks, Tom and I think we're going to know pretty soon youre going to see it in the volumes.

If they if they think theres enough certainty and theyre going to okay. Here's a new tariff rates. They are probably going to stay in effect, let me ship stuff without thinking about change in the tariffs.

And.

I think that's worked out very well for us in the macro point business, we are track rates approaching 90% and our competitors are nowhere close.

That's going to be great news for us.

Pause again or or something new happens in the coming days that causes them to pause again that would be bad news for us.

Okay makes sense thanks for that appreciate it.

Stephanie Price: Yeah, makes sense. Thanks for that. Appreciate it. The second question, good to see the, you know, sort of stability here, the 4% services growth, the transaction element helped there. On the software side, you're, you know, positive on what's to come there. I know there's a lot of uncertainty, but at some point, I think customers might have no choice but to eventually, you know, buy and deal with the uncertainty. Is there any sort of underlying metrics that you're looking at, whether that's pipeline, demo activity, conversations with customers that you can kind of point to that's maybe a leading indicator to what could be coming at some point? Thanks.

Subscription side continues to sell at a pretty rapid clip, we're pretty happy with that side of the business.

Second question, good to see that sort of stability here, the 4% services growth.

30% that ends up in.

The transaction the one that helped there.

Decreased bookings decreased both awaiting for status messages.

On the software side, you're positive on what's to come there I know, there's a lot of uncertainty, but at some point.

Customs filings, if there's uncertainty where they think maybe I should shift now or.

Customers may have no choice, but to eventually.

Or increases to all of those areas if they think.

By and deal with the uncertainties. So is there any sort of underlying metrics that youre looking at whether that pipeline demo activity and conversations with customers that you can kind of point to that sort of maybe a leading indicator to what could be coming at some point. Thanks.

I know what the tariff rates going to be the same rate my competitors are paying and lets just.

Ship this stuff passed onto consumers and see how they react that will be the last thing out of consumers react to this over time.

That will probably aren't going to know with aggregate day in time, where we know hey.

Ed Ryan: Thanks. No, I mean, I think we're going to know pretty soon as you're going to see it in the volumes. I mean, if they think there's enough certainty and they're going to, okay, here's the new tariff rates, they're probably going to stay in effect. Let me ship stuff without thinking about changing the tariffs. That's going to be great news for us. If they pause again or something new happens in the coming days that causes them to pause again, that would be bad news for us. The subscription side continues to sell at a pretty rapid clip. We're pretty happy with that side of the business.

Thanks, Tom and I think we're going to know pretty soon youre going to see it in the volumes.

This is over we're going to have to watch for for several months here and say hey, the consumers getting.

Some item that <unk>.

15% more than it used to be do they still buy.

And as I do I think we're finding that they've done I think we are.

Not just us, but everyone is headed towards.

That's going to be great news for us.

Yes towards the recession cargos.

Pause again or or something new happens in the coming days that causes them to pause again that would be bad news for us.

And I appreciate it.

Yes, yes.

Great. Thanks Best of luck. Thank you.

Subscription side continues to sell at a pretty rapid clip, we're pretty happy with that side of the business.

Thank you and your next question comes from the line of Blackman Brown from Rothschild and fill Redburn. Please go ahead.

Ed Ryan: It's just 30% that ends up in decreased bookings, decreased bills of lading, decreased status messages, decreased customs filings if there's uncertainty where they think maybe I shouldn't ship now or increases to all those areas if they think that, you know what? I know what the tariff rate's going to be, the same rate my competitors are paying. Let's just ship this stuff, pass it on to the consumers, and see how they react. That would be the last thing. How do consumers react to this over time? Now, that we're probably not going to know. It's not going to be a day in time where we know, hey, this is over. We're going to have to watch for several months here and say, hey, the consumer's getting some item that is 15% more than it used to be. Do they still buy it?

30% that ends up in.

Decreased bookings decreased both awaiting for status messages.

Hi, Ed Ellen <unk>.

Customs filings, if there's uncertainty where they think maybe I should shift now or.

The finale acquisition could you talk to affirm its a competitive bidding process and how should we think about the relative multiples that you're paying for acquisition that if.

Or increases to all of those areas if they think.

I know what the tariff rates going to be the same rate my competitors are paying and lets just.

In this environment when compared to prior year.

Ship this stuff passed onto consumers and see how they react to that will be the last thing out of consumers react to this over time.

And maybe to just not maybe more to hopefully more broadly talk to the strategic rationale and how it compliments dot and tab complement sell cloud.

That will probably aren't going to know its not going be a date and time, where we know hey.

Yes.

This is over we're going to have to watch for for several months here and say hey, the consumers getting.

Inventory management and.

To a lesser extent warehouse management in that space. It's a good complement to SAR club. That's why we bought it there was some competition for it but I.

Some item that <unk>.

15% more than it used to be do they still buy.

Ed Ryan: If they do, I think we're fine. If they don't, I think we're, not just us, but everyone's headed towards recession. I don't know how far it goes.

And as I do I think we're finding that they don't I think we are.

I'd say across all of the deals we're doing now theres less competition, there is less private equity firms showing up and things.

Not just us, but everyone is headed towards.

Good friend of mine and the private equity business told me long ago, we were either buying or selling we are never doing both at the same time and I think right now they are all selling.

Towards recession cargos.

And I appreciate it.

Stephanie Price: Appreciate it.

Ed Ryan: Yeah, thanks.

Yes, yes.

Stephanie Price: Yeah, thanks, Professor Lang. Thank you.

They have investors that are clamoring principles that are clamoring to get some of their money back.

Great. Thanks Best of luck. Thank you.

Thank you and your next question comes from the line of Blackman Brown from Rothschild and co Redburn. Please go ahead.

Operator: Thank you. Your next question comes from the line of Lachlan Brown from Redburn Atlantic. Please go ahead.

And see if those.

Multiples that they have on their books are actually accurate.

They just keep telling them every time that they go up and up and up and.

Hi, Ed Ellen <unk>.

Stephanie Price: Hi, Ed. Allan. Hope you've been well. The Finale acquisition, could you talk to us a little bit about the competitive bidding process and how should we think about the relative multiples that you're paying for acquisitions in this environment when compared to prior years? Maybe if you just more broadly talk to the strategic rationale and how it complements, dive into how it complements our SellerCloud.

That's not always true.

The finale acquisition could you talk to affirm its a competitive bidding process and how should we think about the relative multiples that you're paying for acquisition that in this environment when compared to prior year.

A lot of their principals are saying, hey, let's get some returns here before I give you more money.

We're seeing signs of that in the market they are selling assets versus buying assets.

They're putting more up for sale, whether we buy them or not immaterial.

And maybe if you can just not maybe more to hopefully more broadly talk to the strategic rationale and how it compliments dive into how complement sell cloud.

Put more a for sale there's only so many dollars available for everyone to buy companies with more companies that are for sale.

People in.

Ed Ryan: Yeah, I mean, it's inventory management and, you know, to a lesser extent, warehouse management in that space. It's a good complement to SellerCloud. That's why we bought it. There was some competition for it, but I'd say across all the deals we're doing now, there's less competition. There's less private equity firms showing up and things. A good friend of mine in the private equity business told me long ago, we were either buying or we're selling. We were never doing both at the same time. I think right now they are all selling. They have investors that are clamoring, principals that are clamoring to get some of their money back and see if those multiples that they have on their books are actually accurate because they just keep telling them every time that they go up and up and up. That's not always true.

Yes.

Inventory management and.

Companies that are looking at are in the market.

To a lesser extent warehouse management in that space. It's a good complement to <unk> cloud Thats why we bought it there was some competition for it but I would say across all of the deals. We're doing now theres less competition, there is less private equity firms showing up and things.

That's helpful for us.

Okay.

Three or four years ago was us versus two private equity firms in every deal we were looking at now.

Us versus <unk>.

Good friend of mine and the private equity business told me long ago, we were either buying or selling we are never doing both at the same time and I think right now they are all selling.

If revenue, maybe a strategic something like that but some of them, where we go hey, we actually might be the guy that can make the most of this acquisition and we'd be willing to pay the most for it because the other people that used to show up in what we thought made bad decisions are no longer there.

They have investors that are clamoring principles that are clamoring to get some of their money back.

And see if those.

Multiples that they have on their books are actually accurate because they just keep telling them every time that they go up and up and up and.

And so we're trying to take advantage of those customer team.

He is doing more deals now probably than everson.

That's not always true.

That's good I don't think we would've gotten a finality deal two years ago.

Ed Ryan: I think a lot of their principals are saying, hey, let's get some returns here before I give you more money. We're seeing signs of that in the market. They're selling assets versus buying assets. It means they're putting more up for sale, whether we buy them or not, immaterial. They put more up for sale. There's only so many dollars available for everyone to buy companies with. The more companies that are for sale, the less people and companies that are, you know, looking at them are in the market. You know, that's helpful for us. Three, four years ago, it was us versus two private equity firms in every deal we were looking at. Now it's us versus maybe a private equity firm, maybe a strategic, something like that.

A lot of their principals are saying, hey, let's get some returns here before I give you more money.

Somebody or somebody else would have overpaid for it.

Interesting that's very clear thanks.

We're seeing signs of that in the market theyre selling assets versus buying assets. It means they're putting more up for sale, whether we buy them or not immaterial. They put more up for sale. There's only so many dollars available for everyone to buy companies with more companies that are for sale.

And that means that the M&A question.

Hi, I was mentioned at the start of the call sorry D C acquiring AI native technologies.

<unk> product the AI strategy or are you comfortable with that capturing organically through investing internally.

People in.

Companies that are looking at are in the market.

I mean, we're always.

We always buy stuff, we piggish, if and as customers and profits and growing and adding things that our customers want.

That's helpful for us.

Three or four years ago was us versus two private equity firms in every deal we were looking at now.

We usually while we always consider should we built up on ourselves.

Us versus.

Usually that decision comes down to I think be.

Maybe if revenue maybe a strategic something like that but some of them, where we go hey, we actually might be the guy that can make the most of this acquisition and we'd be willing to pay the most for it.

Ed Ryan: Someone where we go, hey, we actually might be the guy that can make the most of this acquisition and be willing to pay the most for it because the other people that used to show up and what we thought made bad decisions are no longer there. We're trying to take advantage of that as best we can. You see us doing more deals now probably than ever. That's good. I don't think we would have gotten that Finale Inventory deal a few years ago if somebody else would have overpaid for it.

Better off buying a profitable company that we think is going to be the winner in that particular space.

I see a lot of AI functionality in our space right now that looks to me like features on products that we have and those would be potential acquisition candidates.

The other people that used to show up in what we thought made bad decisions are no longer there.

And so we're trying to take advantage of those customer team.

You said, maybe it I don't think were going to youre going to see us buying any major of our nation.

You see us doing more deals now probably than everson.

That's good I don't think we would've gotten a finality deal two years ago.

Pure play AI.

AI tools that can be sold in other industries.

Somebody else would have overpaid for it.

We are focused on logistics and supply chain.

Stephanie Price: Interesting. That's very clear. Thanks. Maybe another M&A question. AI was mentioned at the start of the call. Do you see acquiring AI-native technologies as a potential part of the AI strategy, or are you comfortable with capturing this organically through investing internally?

Interesting that's very clear.

Thanks.

Really want to get out of that anytime soon.

And maybe some of the M&A question.

As mentioned at the start of the call sorry D C acquiring AI technology potential.

I would also add that.

A lot of this AI stuff as you see the startup from our fast a lot of it's pretty easy to do so when we see a new idea.

Potential product the AI strategy.

Are you comfortable with that capturing organically through investing internally.

Whereas five years ago, we'd say now I don't know that its worth it for us to code that new idea into our system, which by a company to do it and merge them in particular.

Ed Ryan: I mean, we're always, you know, we always buy stuff. We think if it has customers and profits and growing and things that our customers want, we usually, well, we always consider, should we build something ourselves? Usually, that decision comes down to, I think we'd be better off buying a profitable company that we think is going to be the winner in that particular space. I see a lot of AI functionality in our space right now that looks to me like features on products that we have, and those would be potential acquisition candidates. You said naked. I don't think you're going to see us buying any native or naked, pure play AI tools that could be sold in other industries. You know, we are focused on logistics and supply chain and don't really want to get out of that anytime soon.

I mean, we're always.

You always buy stuff we've tickets.

But as customers and profits and growing and adding things that our customers want.

We can go further faster that way.

We usually while we always consider should we built up on ourselves.

I would say.

More frequently now we're looking at some AI functionality, we can do that too with lack of review that heart and it's just a feature in our system like we have and we should do that ourselves.

Usually that decision comes down to I think we'd be better off buying a profitable company that we think is going to be the winner in that particular space.

Yeah.

I see a lot of AI functionality in our space right now.

We'll see what happens but.

I wouldn't be surprised if it was a little bit of both.

It looks to me like features on products that we have and those would be potential acquisition candidates.

I appreciate it thanks for the question.

Yes.

You said, maybe it I don't think were going to youre going to see us buying any major of our nation.

Thank you and your next question comes from the line of John <unk> from National Bank. Please go ahead.

Pure play.

Hey, guys. Thanks for taking my question on AI, some investors ask about the risk of <unk>.

Tools that can be sold in other industries.

We are focused on logistics and supply chain.

Don't really want to get out of that anytime soon.

Descartes has been disrupted by startups using AI to develop similar software potentially take the market share. So from your perspective, what are some of the inter barriers to reduce that risk.

Sure.

Ed Ryan: I'd also add that, you know, a lot of this AI stuff is, you see these startups come out fast. A lot of it's pretty easy to do. When we see a new idea, whereas five years ago we'd say, you know, I don't know that it's worth it for us to code that new idea into our system. We should buy a company to do it and merge them in. We could, we can go further faster that way. I would say more frequently now we are looking at some AI functionality and going, we can do that too. It's not going to be that hard. It's just a feature in a system like we have, and we should do that ourselves. You know, we'll see what happens. I wouldn't be surprised if it was a little bit of both.

I'd also add that.

A lot of this AI stuff as you see the startup from our fast a lot of it's pretty easy to do so when we see a new idea.

Well our network connectivity that connects to all of you. Please you can say youre going to do that what they are.

Whereas five years ago, we'd say now I don't know that its worth it for us to code that new idea into our system, we should buy a company to do it and merge them in particular.

Still got great health connections.

Lets connections changed so quickly in the mechanism to use the change.

We could we can go further faster that way.

Change so quickly by the time, you're done you'll have to start all over again or we don't and that's a pretty big barrier to entry.

More frequently now we're looking at some AI functionality, we can do that too with lack of review that heart and it's just a feature in a system like we have and we should do that ourselves.

All of these governments that we filed two that we have certifications in that.

And tools that handle every little thing.

Yeah.

We'll see what happens but.

They make it hard for people to compete if you.

I wouldn't be surprised if it was a little bit of both.

Think about someone if they want to compete with our network you can't walk in and say I can connect to these five trucking company. That's not good enough you need to be able to connect to everyone that we connected or I have all this tariff data, but I have it from 20 country Boy I've got it from 140 countries, who do you think the customers want to buy this stuff from.

Stephanie Price: I appreciate it. Thanks for the question.

I appreciate it thanks for the question.

Ed Ryan: Yeah.

Yes.

Thank you and your next question comes from the line of John <unk> from National Bank. Please go ahead.

Operator: Thank you. Your next question comes from the line of John Campbell from National Bank. Please go ahead.

Stephanie Price: Hey, guys. Thanks for taking my question. On AI, some investors ask about the risk of Descartes being disrupted by startups using AI to develop similar software, potentially take the market share. From your perspective, what are some of the entry barriers to reduce that risk?

Hey, guys. Thanks for taking my question on AI. Some investors ask about the risk of Descartes has been disrupted by startups using AI to develop similar software potentially take the market share. So from your perspective, what are some of the inter barriers to reduce that risk.

I do customs filing that do it in three countries at great. Mike vendor does it in 100 countries. So I want to do with them because it's just easier I don't feel like signing up with 50 view to get the same job done.

And those types of things are the barriers to entry to us.

And it's not like I, just mentioned, one there and I could go on and on and on about it too by the way. So theres a lot of barriers to entry and they start to build up pretty quick and.

Well our network connectivity that connects to all of you. Please you can say youre going to do that with AI.

Ed Ryan: Our network is connectivity that connects to all these people. You can say you are going to do that with AI, but you still have to create all the connections. Those connections change so quickly, and the mechanisms they use to change change so quickly. By the time you are done, you will have to start all over again and redo them. That is a pretty big barrier to entry. There are all these governments that we file to, that we have certifications in, and tools that handle every little thing that make it hard for people to compete. Think about someone, if they want to compete with our network, you cannot walk in and say, I can connect to these five trucking companies. That is not good enough. You need to be able to connect to everyone that we connect to.

You still got great health connections okay.

You might be able to convince my mom you can do this quickly, but you're probably not going to miss our customers that you can do it pretty quickly.

Lets connections changed so quickly in the mechanism they use the change.

Change so quickly by the time, you're done you'll have to start all over again or we don't.

It's a lot of work and you have to be done all of it to put yourself in a position to actually be competitive with us.

And that's a pretty big barrier to entry.

There is all these governments that we filed two that we have certifications in that.

At a high level, that's our barrier to entry.

And tools that handle every little thing.

Stuff that you'd have to that you would have to figure out to do at the same time to steal customers from us.

They make it hard for people to compete.

Someone if they want to compete with our network you can't walk in and say I can connect to these five trucking company. That's not good enough you need to be able to connect to everyone that we connect to.

Got it.

Let me add.

Let me add one thing to that just because I'm doing this a long time, we're watching it go down.

Ed Ryan: Or, I have all this tariff data, but I have it from 20 countries. When I have it from 140 countries, who do you think the customers want to buy this stuff from? I do customs filing. I do it in three countries. Great. My vendor does it in 100 countries. I want to do it with them because it is just easier. I do not feel like signing up with 50 of you to get the same job done. Those types of things are the barriers to entry to us. It is not like I just mentioned one there, and I could go on and on about it too, by the way. There are a lot of barriers to entry, and they start to build up pretty quick.

I have all this tariff data, but I have it from 20 country Boy I've got it from 140 countries, who do you think the customers want to buy this stuff from.

Yes, we have to stay on top of our game and we always have right. There's always going to be someone trying to do something that we do in trying to sneak in and find some other angle to do it and we have to keep doing a good job for our customers in and looking at what we do for them and saying how does this need to change over time, so that we stay the leader here.

I do customs filing I do it in three countries at great Mike vendor does it in 100 countries. So I want to do with them because it's just easier I don't feel like signing up with 50 view to get the same job done and those types of things are the barriers to entry to us.

And this is one of the reasons I like recurring revenue because there is always a gun to our head to do that because of the customer page every month you better be the best solution every month.

And it's not like I, just mentioned, one there and I could go on and on and on about it too by the way. So theres a lot of barriers to entry and they start to build up pretty quick and.

I think it.

Ed Ryan: You might be able to convince my mom you could do this quickly, but you are probably not going to convince our customers that you could do it pretty quickly. It is a lot of work, and you would have to be done all of it to put yourself in a position to actually be competitive with us. At a high level, that is our barrier to entry. You have a lot of stuff that you would have to figure out how to do at the same time to steal customers from us.

You could argue recurring revenue is really good for us, but I also go it's really good for the customer to because euro. When you are paying per month, you always know that you are paying for the best solution, because if youre not paying for the best solution you will switch to the best solution.

You might be able to convince my mom you can do this quickly, but you're probably not going to commit to our customers that you can do it pretty quickly.

It's a lot of work and you have to be done all of it to put yourself in a position to actually be competitive with us.

Quickly when you can out of it relatively quickly because youre on a month to month basis, It's a little harder. When you gave this got $20 million for your license to lead the S&P system.

At a high level, that's our barrier to entry.

Stuff that you'd have to that you would have to figure out to do at the same time to steal customers from us.

Ill get stuck on because they put so much money into it and that pressure is always there for us and I think it's healthy for us to have it too right, we better be divest where someone will beat us and the customers will leave and.

Got it.

Stephanie Price: Got it. That makes a lot of sense.

Let me add.

Ed Ryan: Let me add one more thing to that, just because I've been doing this a long time and watching it go down. We have to stay on top of our game, and we always have, right? There's always going to be someone trying to do something that we do and trying to sneak in and find some other angle to do it. We have to keep doing a good job for our customers and looking at what we do for them and saying, how does this need to change over time so that we stay the leader here? This is one of the reasons I like recurring revenue because there's always a gun to our head to do that. If the customer pays you every month, you better be the best solution every month.

Let me add one thing to that just because I'm doing this a long time I'm watching it go down.

That's the mentality we have around here.

This has kept us on top for 25 years and hopefully for a lot more time to come.

Got it thanks for the color, maybe maybe I just want to revisit one of the earlier topics. So my understanding is there has been a rebound in freight volume this quarter and which is a tailwind for you guys, but Europe services organic growth was flat quarter over quarter I'm, just curious with offsetting.

And this is one of the reasons I like recurring revenue because there is always a gun to our head to do that because of the customer page every month you better be the best solution every month.

Ed Ryan: I think you could argue recurring revenue is really good for us, but I also go, it's really good for the customer too because when you're paying per month, you always know that you're paying for the best solution. If you're not paying for the best solution, you will switch to the best solution quickly when you can have it, you know, relatively quickly because you're on a month-to-month basis with everyone. It's a little harder when you gave this guy $20 million for your license to leave the SAP system. People get stuck on it because they put so much money into it. That pressure is always there for us. I think it's healthy for us to have it too, right? We better be the best or someone will beat us and the customers will leave.

Yes, I think.

Okay.

You could argue recurring revenue is really good for us, but I also go it's really good for the customer to because euro. When you are paying per month, you always know that you are paying for the best solution. Because if you if you're not paying for the best solution you will switch to the best solution.

We were concerned that it was going to be going down and.

The fact that it's 4% again this quarter and looking pretty good as supplement we felt was.

Pretty good for our business under the circumstances.

Quickly when you can out of it relatively quickly because youre on a month to month basis, It's a little harder. When you gave this got $20 million for your license to lead the SAP system.

So im not disappointed in any way and the numbers should we put a spin on it I mean, it sounds like it's not good.

It's been working here for most of their life.

I think what just happened was pretty good.

Okay. It sounds good definitely good to see the stabilization out there. Thank you so much in our pipeline.

Thank you.

Ed Ryan: That's the mentality we have around here that's kept us on top for 25 years and hopefully for a lot more time to come.

Thank you and your next question comes from the line of Robert Young from Canaccord. Please go ahead.

That's the mentality we have around here.

That has kept us on top for 25 years and hopefully for a lot more time to come.

Hi, Yes, good evening another de Minimis question, if I could I'm just trying to understand if the.

Got it thanks for the color, maybe maybe I just want to revisit one of the earlier topics. My understanding is there has been a rebound in freight volume this quarter and which is a tailwind for you guys, but Europe services organic growth was flat quarter over quarter I'm, just curious with offsetting.

Stephanie Price: Got it. Thanks for the colors. Maybe just want to revisit one of the earlier topics. My understanding is there has been a rebound in freight volume this quarter, which is a tailwind for you guys, but your service organic growth is flat quarter by quarter. Just curious what the offset is.

I guess customers are swapping a type 86 for type one and type two or type of level is that a wash or is it better than you expected or is this now a bigger business than it would've been under the previous de Minimis I'm, just trying to understand that.

Okay.

It was a wash.

We were concerned that it was going to be going down and.

Start and that the customers said, hey, just payment was paid the same way, but instead of making it had been six filing youll make these gigantic type one or type 11 funds most of the type one and by the way.

Ed Ryan: We were concerned that it was going to be going down. The fact that it's 4% again this quarter and looking pretty good is something we thought was pretty good for our business under the circumstances. I'm not disappointed in any way in the numbers. You put a spin on it. They made it sound like it's not good. As someone who's been working here for most of their life, I think what just happened was pretty good.

The fact that it's 4% again this quarter and looking pretty good as supplement we felt was.

Pretty good for our business under the circumstances.

With millions of records in it.

So im not disappointed in any way and the numbers should we put a spin on it I mean, it sounds like it's not good.

Then the really good news happened for us which was.

On top of that our competitors struggled to process those transactions files with millions of transactions in it.

And that's been working here for most of their life.

I think what just happened was pretty good.

Okay sounds good definitely good to see the stabilization out there. Thank you so much in our pipeline.

Stephanie Price: Okay. Sounds good. Definitely good to see the stabilization out there. Thank you so much. I'll pass it along.

We had a lot of experience doing this because we've been dealing with the likes of DHL and Fedex.

EPS for a long time that have very large transactions in type one type 11 funds.

Thank you.

Ed Ryan: Thank you.

Operator: Thank you. Your last question comes from the line of Robert Young from Canaccord Genuity. Please go ahead.

Thank you and your next question comes from the line of Robert Young from Canaccord. Please go ahead.

Our systems have the scale and scope to be able to deal with it than our competitors did not.

Allan Brett: Hi, good evening. Another de minimis question, if I could. I'm just trying to understand if the customers are swapping a Type 86 for a Type 1, Type 2, or Type 11. Is that a wash? Is it better than you expected, or is this now a bigger business than it would have been under the previous de minimis? I'm just trying to understand that.

Hi, Yes, good evening another de Minimis question, if I could I'm just trying to understand if the.

They had a bunch of their largest customers come to us and say I need to switch and I need to switch now show me you can do this.

Did a day of filings for them when they went let's switch now.

FX several of them talk about like what switchover a couple of weeks and after day, one they called and said we're going to switch everything to you tomorrow.

Ed Ryan: It was a wash to start in that the customer said, "Hey, just pay me this. I'll just pay you the same way." Instead of making a Type 86 filing, you'll make these gigantic Type 1 or Type 11 filings, mostly Type 1, by the way, with millions of records in it. The really good news happened for us, which was, on top of that, our competitors struggled to process those transaction files with millions of transactions in it. We had a lot of experience doing this because we've been dealing with the likes of DHL and FedEx and UPS for a long time that have very large transactions in Type 1 and Type 11 filings. Our systems had the scale and scope to be able to deal with it, and our competitors did not.

It was a wash.

Okay.

That's clear Okay and then the second question, maybe just a continuation of that the volumes question. You said truck volumes were up quarter over quarter is that the network was up and I'm just trying to understand I think you noted something about seasonality is that just holiday.

Start and that the customers said, hey, just payment I was paid the same way, but instead of making it had been six filing youll make these gigantic type one or type 11 funds most of the type one and by the way.

With millions of records in it.

Season build or is it I mean, maybe just parse that out a little better just to understand if that's something that might continue to grow through the back half of the year.

Then the really good news happened for us which was.

On top of that our competitors struggled to process those transactions files with millions of transactions in it.

Chuck wasn't really grown we've just had growth in truck volumes, because we continue to pick up business from our competitors in the space.

We had a lot of experience doing this because we've been dealing with the likes of DHL and Fedex.

Otherwise.

EPS for a long time that have very large transactions in type one type 11 funds.

Christmas season is upon us as different meaning.

In each of the most of the transportation by the notion right now youre seeing that seeing the Christmas deliveries getting order.

Our systems have the scale and scope to be able to deal with it than our competitors did not.

Ed Ryan: They had a bunch of their largest customers come to us and say, "I need to switch, and I need to switch now. Show me you can do this." We did a day of filings for them, and they went, "Let's switch now." In fact, several of them talked about like, "Let's switch over a couple of weeks." After day one, they called and said, "We're going to switch everything to you tomorrow.

And with the intention to get everything in in October maybe early November.

I had a bunch of their largest customers come to us and say I need to switch and I need to switch now show me you can do this.

So we're going to have pretty soon here if the volumes continue.

Did a day of filings for them when they went let's switch now.

You saw that China.

FX several of them talked about like let's switchover, a couple of weeks and after day, one they called and said we're going to switch everything to you tomorrow.

Renegotiation I don't know, where that's going to go I figure.

Our customers don't either to the program transfer as much stuff into that Ken before it happens.

Okay.

Stephanie Price: Okay. That's clear. Okay. The second question, maybe just a continuation of the volumes question. You said truck volumes were up quarter to quarter. You said the network was up. I'm just trying to understand. I think you noted something about seasonality. Is that just holiday season build, or is it, I mean, maybe we just parse that out a little better just to understand if that's something that might continue to grow through the back half of the year.

And.

That's clear Okay and then the second question, maybe just a continuation of that the volumes question. You said truck volumes were up quarter over quarter is that a network was up and I'm just trying to understand I think you noted 70 about seasonality is that just holiday.

A truck in Aero, it's a little later, but.

Same kind of things.

Donna.

Yes.

Okay. That's.

That's fine thank you Robert.

Season build or is it I mean, maybe just parse that out a little better just to understand if that's something that might continue to grow through the back half of the year.

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

Great. Thanks, very much I appreciate everyone's time Tonight and.

Ed Ryan: Sure. Truck wasn't really growing. We just had growth in truck volumes because we continued to pick up business from our competitors in the MacroPoint space. Otherwise, you know, Christmas season's upon us. That has different meaning in each of the modes of transportation. In ocean right now, you're seeing the Christmas deliveries getting ordered with an intention to get everything in in October or maybe early November. We're going to know pretty soon here if the volumes continue. Still have that limited China, you know, renegotiation. I don't know where that's going to go. I think our customers don't need this, so they're probably going to try and sneak as much stuff in as they can before it happens. In truck and air, it's a little later, but same kind of things go on there.

Chuck wasn't really growing we just had growth in truck volumes, because we continue to pick up business from our competitors in the space.

We will look forward to reporting back to you.

Three months with the Q3 results have a great day.

Otherwise.

Christmas season is upon us as different meaning.

And this concludes today's call. Thank you for participating you may all disconnect.

In each of the most of the transportation by the notion right now youre seeing that seeing the Christmas deliveries getting order.

And with the intention to get everything in in October maybe early November.

So we're going to have pretty soon here if the volumes continue.

You saw that China.

Renegotiation I don't know, where that's going to go I figure.

Our customers don't either has to the program transfer as much stuff into that Ken before it happens.

And.

A truck in Aero, it's a little later, but.

Same kind of things.

Donna.

Yes.

Stephanie Price: Okay, thanks. That's fine.

Okay. That's.

That's fine thank you Robert.

Ed Ryan: Thank you, Robert.

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

Operator: Thank you. There are no further questions at this time. I would now hand the call back to Ed Ryan for any closing remarks.

Ed Ryan: Great, thanks very much. Appreciate everyone's time tonight. We will look forward to reporting back to you in three months with the Q3 results. Have a great night.

Okay, great. Thanks, very much I appreciate everyone's time Tonight and.

We will look forward to reporting back to you.

And three months with the Q3 results have a great night.

And this concludes today's call. Thank you for participating you may all disconnect.

Operator: This concludes today's call. Thank you for participating. You may all disconnect. Good

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Scott Pagan: Afternoon, ladies and gentlemen, and welcome to the Descartes Systems Group Inc. Quarterly Results Conference Call. At this time, the line is in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, September 3, 2025. I would now like to turn the conference over to Mr. Scott Pagan. Thank you. Please go ahead.

Good afternoon, ladies and gentlemen, and welcome to the D card systems Group quarterly results Conference call. At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.

At any time during this call you require immediate assistance. Please press star zero for operator. This call is being recorded on Wednesday September <unk> 2025, and I would now like to turn the conference over to Mr. Scott. Thank.

Thank you. Please go ahead.

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

Thanks, and good afternoon, everyone. Joining me in person on the call today are Ed Ryan CEO, Allan Brett CFO, Ned Gardner EVP corporate development and I Trust that everyone has received a copy of our financial results press release that was issued earlier today.

Portions of today's call other than historical performance include statements of forward looking information within the meaning of applicable securities laws.

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

Ed Ryan: operating performance, financial results and condition, 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 revenues and expenses, potential acquisitions and acquisition strategy, cost reduction and integration initiatives, and other matters that may constitute forward-looking information. 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 Systems Group Inc. 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 Securities and Exchange Commission, the Ontario Securities Commission, and other securities commissions across Canada, including our management's discussion and analysis filed today.

<unk> operating performance financial results and condition.

Cash flow and use of cash business outlook baseline.

Baseline revenues baseline operating expenses and baseline calibration.

The anticipated and potential revenue losses, and gains anticipated recognition and expensing of revenues and expenses potential acquisitions and acquisition strategy.

Cost reduction and integration initiatives and other matters that may constitute forward looking information.

Okay.

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

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.

Allan Brett: Thanks, Scott, and welcome everyone to the call. Today we're reporting record quarterly revenues and adjusted EBITDA after a period when we recalibrated our business. We're edging ahead of our plans and are already focused on the second half of the fiscal year. We're excited to go over these results with you and give you some of our perspective on the current challenging business environment for our customers. 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 performed. I'll then hand it over to Allan, who will go over the Q2 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 Q3.

Thanks, Scott and welcome everyone to the call today, we're reporting record quarterly revenues and adjusted EBITDA. After a period when we recalibrated our business.

<unk> ahead of our plans and are already focused on the second half of the fiscal year.

We're excited to go over these results with you and give you some of our perspective on the current challenging business environment for our customers, but first let me give you a roadmap for the call.

Chart by hitting some highlights of last quarter and some aspects of how our business performed I'll then hand, it over to Allen, who will go over the Q2 financial results in more detail after that I'll come back to provide an update on how we see the current business environment and how our business was calibrated for Q3 and will then open it up to the operator to coordinate the Q&A portion of the call.

Allan Brett: We'll then open it up to the operator to coordinate the Q&A portion of the call. Let's start with the second quarter that ended on July 31st. Key metrics we monitor include revenues, profits, cash flow from operations, operating margins, and returns on our investment. For the past quarter, we had very good performance in each of those areas. Total revenues were at a record high, $179.8 million, up 10% from a year ago and 7% from last quarter. Record high services revenues were up 14% from a year ago with our continued focus on generating recurring revenues. Record high net income was up 10% from a year ago. Record high income from operations was up 5% from a year ago. Record high adjusted EBITDA was up 14% from a year ago. Our adjusted EBITDA margin was up two points from a year ago to 45%.

So let's start with the second quarter that ended on July 31 key metrics. We monitor include revenues profits cash flow from operations operating margins and returns on our investment.

For the past quarter, we had very good performance in each of those areas total revenues were at a record high $179 8 million up 10% from a year ago and 7% from last quarter.

Record high services revenues were up 14% from a year ago with our continued focus on generating recurring revenues.

Hi, net income was up 10% from a year ago record high income from operations was up 5% from a year ago and record high adjusted EBITDA was up 14% from a year ago.

Our adjusted EBITDA margin was up two points from a year ago to 45%.

Allan Brett: We generated $63 million in cash from our operations, even considering that we had $5 million in personnel departure costs in the quarter. Without those costs, we'd have been at 86% cash conversion. Strong results across all of these areas. In June, we completed a small tuck-in acquisition of PackageRoute that complements our GroundCloud business. Right after the quarter, we paid $40 million plus $15 million in potential earnout consideration to acquire Finale Inventory, an acquisition I'll speak to later. At the end of the quarter, we had more than $240 million in cash, and we were debt-free with an undrawn $350 million line of credit. We remain well capitalized, cash-generating, growing, and ready to continue to invest in our business. I'd like to talk about four of the primary drivers of growth for our business this quarter. The first is global trade intelligence.

We generated $63 million of cash from our operations, even considering that we had $5 million in personnel departure costs in the quarter without those costs, we would have been at 86% cash conversion so strong results.

Across all of these areas.

In June we completed a small tuck in acquisition of package around that.

It complements our growing cloud business than right after the quarter, we paid $40 million.

Plus $15 million of potential earn out consideration to acquire finale inventory and acquisition I'll speak to later at.

I'd like to talk about four of the primary drivers of growth for our business this quarter.

The first is global trade intelligence second is customs and regulatory solutions.

Allan Brett: The second is customs and regulatory solutions. The third is transportation management. Global trade intelligence tariffs have always been something that's been talked about in logistics and supply chain. However, they're now much more part of the mainstream discussion. Today's trade landscape, even over the past 90 days, includes new tariffs, tariffs being repealed, new commodities impacted, new timelines for implementations, delay, repeal, and new country-specific tariff arrangements and trade agreements. In the GTI part of our business, there are two main areas where our customers have looked to Descartes for help with tariffs. The first is to expand access to our real-time updated global tariff database used to fuel global trade management systems. The second is accessing our research tools to show how our customers, peers, and competitors are handling tariffs so that our customers can make better import and tariff classification decisions.

And third is transportation management.

Okay.

So our global trade intelligence tariffs have always been something that's been talked about in logistics and supply chain. However, they are now much more part of the mainstream discussion today.

And the GTI part of our business. There are two main areas, where our customers have looked to descartes for help with tariffs.

Allan Brett: Right now, our global trade intelligence business is seeing strong demand. We anticipate that this is going to continue considering the pervasive tariff uncertainty in the market. As the tariff environment becomes more complex, our global trade intelligence solutions see more demand. Secondary is customs and regulatory solutions. Tariffs have also impacted our solutions in the broker and forwarder enterprise systems in two principal ways. The first is the transition to new filing mechanisms to deal with the elimination of Type 86 or de minimis programs in the U.S. The second is the demand for foreign trade zone or FTZ solutions. With de minimis, the U.S. has eliminated the de minimis program, which allowed imports with a value below $800 to come into the U.S. duty-free. Now, all imports, other than some country-specific $100 exemptions for individual gifts, attract tariffs and duties.

Second areas customs and regulatory solutions tariffs have also impacted our solutions in the border broker enterprise solutions in two principal ways. The first is the transition to new filing mechanisms to deal with the elimination of type 86 are de minimis programs in the United States and the second is the demand for foreign trade zone, our FTC.

Solutions.

With de Minimis. The U S has eliminated the de Minimis program, which allowed imports with a value below $800 to come into the United States duty free now.

Now all imports other than some country specific 100 dollar exemptions for individual grit gifts.

Tariffs and duties. This is a big impact on foreign companies selling direct to U S consumers and even U S sellers, who may have fulfilled or shift their order from foreign warehouses and facilities.

Allan Brett: This has a big impact on foreign companies selling direct to U.S. consumers and even U.S. sellers who may have fulfilled or shipped their orders from foreign warehouses and facilities. Under the old de minimis regime, importers would file a Type 86 electronic filing to attract the duty-free treatment. Now, importers are making a Type 1 or Type 11 filing and remitting the appropriate duties. We've helped numerous customers transition to the new filing mechanism and have developed a reliable process to help our customers handle large volumes of time-sensitive filing. Our success in this area has also attracted some large volume filers away from our competitors. These circumstances have combined to make the transition away from de minimis a growth area for us in the customs filing space. With regard to foreign trade zones, with most U.S.

Yeah.

Under the old de Minimis regime, importers would file a type 86 electronic filing to attract the duty free treatment.

Now importers are making a type one or type 11 filing in or many of the appropriate duties.

We've held numerous customers transition to the new filing mechanism mechanism and have developed a reliable process to help our customers and the large volumes of time sensitive filings.

Our success in this area has also attracted some large volume <unk>.

Way from our competitors. These circumstances have combined to make the transition away from de Minimis, a growth area for us and the customs filing space.

With regard to foreign trade zones.

With most use of U S imports now attracting tariffs our customers have been looking for ways to not have to finance the burden of tariffs pending sales to the end use consumer.

Allan Brett: imports now attracting tariffs, our customers have been looking for ways to not have to finance the burden of tariffs pending sales to the end U.S. consumer. U.S. customs has a mechanism to enable this called foreign trade zones or FTZs. These are U.S. customs-approved warehouses and facilities where goods can come into the United States duty-free until the goods leave the warehouse facility to be sold to a U.S. consumer. If I'm an importer, I can defer paying duties until I have a sale and the goods leave the warehouse. Once you have an approved U.S. customs FTZ, you have rigorous procedures to follow and regular filing obligations about what has come in and left the FTZ. Our Quest of Web foreign trade zone solutions do exactly that. We've been seeing very strong demand for FTZ solutions, especially over the last three months or so.

Leave the warehouse facilities to be sold to a U S consumer.

So if I'm an importer I can defer paying duties until I have a sale and the good leave the warehouse. Once you have an approved U S customers FTC you have rigorous procedures to follow in regular filing obligations about what has come in and left the FTC.

Our quest of web foreign trade zone solutions to exactly that we've been seeing very strong demand for our FTB F. T Z solutions, especially over the last three months or so and this has also picked up at the end of de Minimis with U S. Sellers looking to use the financing burden would otherwise need to bear from the new tariffs.

Allan Brett: This has also picked up with the end of de minimis, with U.S. sellers looking to ease the financing burden they'd otherwise need to bear from the new tariffs. Both of those areas contributed well to the growth in the quarter. In addition, we saw some increased filing volumes in the quarter across different modes of transportation, with some tariff implementations being set for early July and then pushed to August. Many importers rushed to get goods into the U.S. in advance of those deadlines. In particular, ocean imports to the U.S. from all geographies were at their highest levels in July. The customs and securities filing supporting those imports have benefited our business. The last one is transportation management. As we've discussed in past quarters, transportation management was again a strong contributor to our growth in the quarter.

So both of those areas contributed well to the growth in the quarter. In addition, we saw some increased filing volumes in the quarter across different modes of transportation.

Supporting those imports have benefited our business.

The last one is transportation management as we've discussed in past quarters Transportation management was again, a strong contributor to our growth in the quarter with.

Allan Brett: The three main reasons were: one, the efficiency of our MacroPoint tracking solutions; two, the contributions of 3GTMS; and three, the importance of our fraud prevention assistance solutions. With regard to MacroPoint, MacroPoint provides a real-time visibility solution. We've built up a strong network of connected road carriers and freight brokers to get unprecedented access to real-time location information on all shipments. Our solutions are used in the U.S., Europe, and Australia. When a load is given to us for tracking, we believe we have the highest compliance rate out there to get our customers the location information they need. Our solutions are complemented by interfaces to numerous transportation management systems, including our recently acquired 3GTMS solution. Even in a domestic U.S.

Three main reasons were one the efficiency of our macro point tracking solutions to the contributions of.

<unk> Tms in three of the importance of our broker mentioned assistant solutions.

Yes.

With regard to macro point backup point provides a real time visibility solution. We've built up a strong network of connected world carriers and freight brokers to get unprecedented access to real time location information on all shipments our solutions are used in the U S Europe and Australia. When a loan is given to us for tracking we believe we have the highest compliance rate out there.

To get our customers the location information they need our solutions are complementary.

By interfaces to numerous transportation management systems, and closing, including our recently acquired through Chi Tms solution.

Even in the domestic U S freight market, but the number of <unk> shipments has been declining over the past few years macro point has been able to grow as it gained market share and attract more of the loans available to our customers.

Allan Brett: freight market, where the number of road shipments has been declining over the past few years, MacroPoint has been able to grow as it gained market share and attracted more of the loads available to our customers. MacroPoint continues to shine. 3GTMS, transportation management systems are key sources of information for loads that need to be tracked. 3GTMS customers have a natural pickup with the integration between 3GTMS and MacroPoint. In addition, Descartes has a rich history of providing shippers with transportation management solutions, and Descartes' experience is now enhanced with the modernized cloud-based 3GTMS solution. 3GTMS has come in and been recalibrated to our Descartes model, and we've seen some excellent early success and demand. 3GTMS is a great team to welcome in and a very good contributor in the quarter. The last one is fraud prevention.

<unk> continues to shine.

<unk> Gms.

Transportation management systems are key sources of information for loans that need to be tracked so three GTS customers have a natural pickup with the integration between <unk> and macro point.

In addition, Descartes has a rich history of providing shippers with transportation management solutions and a carts experience is now enhanced with the modernized cloud based <unk> <unk> solution.

<unk> come in and been Recalibrated to our Descartes vinyl and we've seen some excellent early success and demand. So it <unk> a great team to welcome in in a very good contributor in the quarter.

And the last one fraud prevention and one of the biggest areas for investment for supply chain and logistics other than AI.

Allan Brett: One of the biggest areas for investment for supply chain and logistics, other than AI, is fraud prevention. As shipping mechanisms have become more digitized and distributed, it has become harder and harder to gauge the legitimacy of carriers and brokers that you're working with. Information and identities are being leveraged to create phony logistics trading partners who are either intent on theft of loads or taking margins for work not performed. We previously invested in fraud prevention with our MyCarrierPortal acquisition, solutions that help our customers evaluate their logistics partners and separate fact from fiction. We continue to be happy with the performance of that business, its contribution in the quarter, and the continued demand we see for fraud prevention. Let me talk about acquisitions for a minute. In June, we combined with PackageRoute.

AI is fraud prevention is shipping mechanisms have become more digitized and distributed has become harder and harder to gauge the legitimacy of carriers and brokers that youre working with and.

Information and identities are being leveraged to create phony logistics training partners sort your intent.

On Sept of loads, we're taking margins for work not performed well.

Previously invested in fraud prevention with our my carrier portal acquisition solutions that help our customers evaluate their.

Logistics partners and separate fact from fiction.

We continue to be happy with the performance of that business its contribution in the quarter and the continued demand we see for our prevention.

Yes.

Can you talk about acquisitions for a minute in June we combined with packaged packaged rep helps independent service providers, who are subcontracted by larger parcel delivery companies.

Allan Brett: PackageRoute helps independent service providers who are subcontracted by larger parcel delivery companies, a customer base that is very familiar to us given our GroundCloud solutions. By bringing these businesses together, we believe we can offer a broader solution set to the customers and operate the businesses more efficiently for sustainable investment. All in all, a logical tuck-in for us with good customers and people. Just after the last quarter ended, we also acquired Finale Inventory to complement our e-commerce solutions. Finale has inventory management solutions, and this is an area you've seen us invest in recently as this complements our SellerCloud solutions. Our approach is to have solutions that e-commerce sellers can use at all stages of their growth, from starting out with just a few product lines and selling mechanisms to more complex warehouse operations and sales channels.

Customer base that is very familiar to us given our growing cloud solutions.

By bringing these businesses together, we believe we can offer a broader solution set to the customers and operate their businesses more efficiently for sustainable investment.

All in all a logical tuck in for us with good customers and people.

Just ask there last quarter ended we are also acquired finale inventory to complement our ecommerce solutions finality finale has inventory management solutions and this is an area you've seen us invest in recently as this complements our seller cloud solutions. Our approach is to have solutions that E. Commerce sellers can use at all stages of the <unk>.

Growth are starting out with just a few product lines as selling mechanisms to more complex warehouse operations and sales channels.

Allan Brett: With Finale joining, we believe we have a comprehensive solution set for the e-commerce seller lifecycle. We have numerous leads in our business that now will find a home with Finale Inventory and opportunities for cross-sell within our broader e-commerce solution portfolio. We've really hit the ground running in the first 30 days and see excitement in the team and the customer base, a great combination with more good things to come. Q2 is a very attractive quarter for us, a very active quarter for us, I should say. Our customers are dealing with a very uncertain market, and we've had strong efforts from our team members to support that. We've been responding to heightened demand across many solutions to help new customers deal with an increasingly complex trade environment.

With finale, joining we believe we have a comprehensive solution set for the e-commerce seller lifecycle.

This leads in our business that now we will find a home with vanilla inventory and opportunities for cross sell within our broader E Commerce solutions portfolio.

We've really hit the ground running in the first 30 days and see excitement in the team and the customer base, a great combination with more good things to come.

So Q2 was a very attractive quarter for us a very active quarter for Russia.

Our customers are dealing with a very uncertain market and we've had strong efforts from our team members to support that we've been responding to heightened demand across many solutions to help new customers deal with an increasingly complex trading environment. We've continued to invest in our business with two acquisitions and we've completed a restructuring of our operations so that our businesses appropriately.

Allan Brett: We've continued to invest in our business with two acquisitions, and we've completed a restructuring of our operations so that our business is appropriately calibrated to deal with the revenue fluctuations that may come from an uncertain economy and trade landscape. I can't say enough about the job our team has done to help us get prepared for this with our customers. As I said last quarter, we're doing what you'd expect Descartes to do. We've got a business prepared for difficult times. We're executing on demand areas in the market. We're investing in new technologies and businesses. Most importantly, we're running our business consistent with our commitment to a 10% to 15% adjusted EBITDA growth. Our business did very well in Q2. We're already hard at work on Q3, as you'd expect us to be.

<unk> to deal with the revenue fluctuations that may come from an uncertain economy and trade landscape.

Can't say enough about the job our team has done.

Help us get prepared for this with our customers.

But as I said last quarter, we're doing what you would expect that car to do we've got a business prepared for difficult times, we're executing on demand areas in the market or investing in new technologies and businesses and most importantly, we're running our business consistent with our commitment to a 10% to 15% adjusted EBIT to grow.

Our business did very well in Q2, we're already hard at work on Q3, as you would expect us to be and with that I'll turn the call over to Alan to go through our Q2 financial results in more to SaaS.

Allan Brett: With that, I'll turn the call over to Allan to go through our Q2 financial results in more detail. Allan?

Jackson Bogley: Okay. Thanks, Ed. As indicated, I'm going to take you through our financial highlights for our second quarter, which ended July 31st. We are pleased to report record quarterly revenue of $179.8 million this quarter, an increase of 10% of revenue of $163.4 million in Q2 last year. Revenue from the acquisitions completed in the back half of last year, as well as the acquisition of 3GTMS completed earlier in the first quarter of this year, contributed nicely to our revenue this quarter, while revenue growth from new and existing customers once again also contributed to our revenue growth in the quarter, including growth in our global trade intelligence, customs and regulatory compliance, as well as our transportation management solutions, as Ed mentioned earlier.

Thanks, Ed as indicated I'm going to take you through our financial highlights for our second quarter, which ended July 31.

We are pleased to report record quarterly revenue of $179 8 million this quarter, an increase of 10% from revenue of $163 4 million in Q2 last year.

Including growth in our global trade intelligence customs and regulatory compliance as well as our transportation management solutions as Ed mentioned earlier.

Jackson Bogley: Our revenue mix continued to be very strong, with services revenue coming in at $166.8 million, or 93% of total revenue, up 14% from services revenue of $146.2 million, or 89% of total revenue in Q2 last year. Licensed revenues were again minor at less than 1% of revenue in the quarter, while professional services and other revenue came in at $12.8 million, down from $15.8 million in Q2 last year. Note that for us, other revenue includes hardware revenue. Last year in the second quarter, we had an unusually high hardware revenue in our GroundCloud business as a result of an AI-focused hardware replenishment cycle. This accounts for the majority of the drop of this revenue category year over year. We should also mention that there was a positive impact on revenue of approximately $2 million from foreign exchange this quarter, as the U.S.

License revenues were again miner at less than 1% of revenue in the quarter, while professional services and other revenue came in at $12 8 million down from $15 8 million in Q2 last year.

We should also mentioned that there was a positive impact on revenue of approximately $2 million from foreign exchange this quarter as the U S dollar was weaker against the British pound.

Jackson Bogley: dollar was weaker against the British pound, the euro, and the Canadian dollar this quarter when compared to the same period last year. Excluding the impact of our recent acquisitions, as well as the impact of foreign exchange, we estimate that our growth in services revenue from new and existing customers or organic services revenue growth came in at around 4% in the second quarter, a similar level to the growth experienced in Q1. Gross margin for the second quarter came in at 77% of revenue, up from gross margins of 75% of revenue that we realized in the second quarter last year. This was mainly a result of the unusual lower margin hardware sales in the GroundCloud business that we recorded in Q2 last year that I mentioned earlier. Operating expenses increased by just over 8% in the second quarter over the same period last year.

Euro and the Canadian dollar this quarter when compared to the same period last year.

Gross margin for the second quarter came in at 77% of revenue up from gross margins of 75% of revenue that would be realized in the second quarter last year and this was mainly as a result of the unusual lower margin hardware sales and the ground cloud business that we recorded in Q2 last year that I mentioned earlier.

Jackson Bogley: This was mainly related to the result of recent acquisitions, including the 3GTMS acquisition, again completed earlier in the first quarter of this year. OpEx expenses in the second quarter also increased due to the impact of foreign exchange from a weaker U.S. dollar. This increase was offset by a partial quarter benefit from the restructuring efforts that were completed throughout the second quarter. As a result of both revenue growth, offset slightly by the operating cost expenses just mentioned, we continue to see strong adjusted EBITDA growth of 14% to a record $80.2 million in the second quarter, up from $70.6 million in Q2 last year. As a percentage of revenue, adjusted EBITDA came in at 44.6% of revenue, up from 43.2% of revenue in Q2 last year, in part due to the impact of the lower margin hardware revenues recorded in Q2 last year.

So as a result of both revenue growth offset slightly by the operating cost expenses. We just mentioned we continued to see strong adjusted EBITDA growth of 14% to a record $82 million in the second quarter up from $70 6 million in Q2 last year.

Jackson Bogley: As a result of the above, net income under U.S. GAAP came in at $38.0 million or $0.43 per diluted common share in the second quarter, an increase from net income of $34.7 million or $0.40 per diluted common share in the second quarter last year. With these solid operating results and strong receivable collections again this quarter, we once again generated strong cash flow from our operations, recording an additional $63.3 million in operating cash flow in the second quarter. I will note that the operating cash flow in the second quarter was negatively impacted by the payment of approximately $5 million in personnel departure costs. While the operating cash flow came in at 79% of our reported adjusted EBITDA, excluding these personnel departure costs, operating cash flow would have been approximately 86% of our adjusted EBITDA.

With these solid operating results and strong.

<unk> collections again this quarter, we once again recorded that.

Generated strong cash flow from our operations recording an additional $63 3 million in operating cash flow in the second quarter.

I will note that the operating cash flow second quarter was negatively impacted by the payment of approximately $5 million in personnel departure costs. So while the operating cash flow came in at 79% of our reported adjusted EBITDA. Excluding these personnel departure costs costs operating cash flow would have been approximately 86% of our adjusted EBITDA.

Jackson Bogley: Looking at our operating results for the first half of the year, revenue came in at $348.6 million, an increase of 11% from revenue of $314.8 million in the first six months last year. For the first six months of the year, adjusted EBITDA came in at $155.3 million or 44.5% of revenue, up 13% from $137.6 million or 43.7% of revenue last year. Net income for the first half of the year also increased, coming in at $74.3 million or $0.85 per diluted common share. This compares to $69.3 million or $0.80 per diluted common share in the first half of last year. Overall, we are again quite pleased with our operating results this quarter and the solid performance from recent acquisitions and continued organic services growth, resulting in a 10% growth in revenue and a 14% increase in adjusted EBITDA for the second quarter.

Looking at our operating results for the first half of the year revenue came in at $348 6 million, an increase of 11% from revenue of $314 8 million in the first six months last year.

For this first six months of the year adjusted EBITDA came in at $155 3 million or <unk> 44, 5% of revenue.

Up 13% from $137 6 million or 43, 7% of revenue last year.

Net income for the first half of the year also increased coming in at $74 3 million or <unk> 85 per diluted common share and this compares to $69 3 million or <unk> 80 per diluted common share in the first half of last year.

Jackson Bogley: If we look over to the balance sheet, our cash balance increased by approximately $64 million in Q2 as we continue to generate strong cash flow from operations, while we used approximately $2 million to complete the smaller PackageRoute acquisition during the quarter and just over $1 million for an earnout payment related to a past acquisition, leaving our cash balances at approximately $240 million at the end of the quarter. We should also note that just subsequent to the quarter, we also used $40 million of our cash balances to complete the acquisition of Finale Inventory, as Ed mentioned earlier. As a result, we currently have approximately $200 million in cash available, as well as a $350 million credit facility that we could draw on, available to continue to deploy towards future acquisitions.

Acquisition during the quarter and just over $1 million.

Or an earn out payment related to a past acquisition, leaving our cash balances at approximately $240 million at the end of the quarter.

We should also note that just subsequent to the quarter.

We also used $40 million, our cash balances to complete the acquisition of <unk> inventory as Ed mentioned earlier.

As a result, we currently have approximately $200 million in cash available as well as a $350 million.

Credit facility that we can drawn available available to continue to deploy towards future acquisitions and.

Jackson Bogley: In short, we continue to be well capitalized to allow us to consider all opportunities in our market consistent with our business plan. As we look to the second half of our fiscal 2026, we should note the following. After incurring approximately $3.1 million in capital additions in the first half of the year, we expect to incur approximately $3 to $4 million in additional capital expenditures for the balance of this year. After paying approximately $1.2 million in earnout payments during the first half of the year, we currently expect that we will make an additional earnout payment of $1.1 million in the second half of this year.

In short, we continue to be well capitalized to allow us to consider all opportunities in our market consistent with our business plan.

So as we look to the second half of our fiscal 2026, we should note the following.

Jackson Bogley: After incurring amortization costs of $39.6 million in the first half of the year, we expect that amortization expense will be approximately $39.7 million in the second half of the year, with this figure being subject to adjustment for foreign exchange rates and future acquisitions. Going forward, subject to any unusual events and quarterly fluctuations, we expect that we'll continue to see solid cash flow conversion and generally expect that cash flow from operations will come in between 80% and 90% of our adjusted EBITDA in the quarters ahead. Our tax rate for the first half of the year came in at approximately 24% of pre-tax income, which is just slightly lower than our estimated blended statutory tax rate of 26.5%. This was due to some small one-time tax benefits recorded in the first half.

Going forward subject to any unusual events and quarterly fluctuations. We expect it will continue to see solid cash flow conversion and generally expect the cash flow from operations will come in between 80% to 90% of our adjusted EBITDA in the quarters ahead.

Jackson Bogley: Looking to the second half of the year, we currently expect that our tax rate will continue to be in the range of 24% to 28% of our pre-tax income or somewhere on either side of our blended statutory tax rate. However, as always, we should state that our tax rate may fluctuate quarter to quarter from one-time tax items that may arise as we operate internationally across multiple countries. Finally, after recording stock-based compensation expense of $8.8 million in the first half of this year, we currently expect stock comp will be approximately $12.2 million for the balance of this year, subject to any forfeitures of stock options or share units. With that, I'll turn it back over to Ed, who will wrap up with some closing comments and our baseline calibration for Q3.

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

Just any forfeitures of stock options or share goods and with that I'll turn it back over to Ed who will wrap up with some closing comments and our baseline calibration for Q3.

Allan Brett: Great. Thanks, Allan. As I said earlier and also last quarter, these are challenging business conditions for our customers. Just some of those most recent changes include new reciprocal tariff frameworks between the U.S. and various countries, new baseline reciprocal tariffs of 15% on many other countries, a 90-day reciprocal tariff truce between China and the U.S. that expires in November, steel and aluminum tariffs increased to 50%, pending court challenges to the legality of tariffs. De minimis tariff-free U.S. import exceptions have been eliminated. Various countries and postal authorities have suspended parcel and postal deliveries to the United States as they understand the new tariff collection intermittent regime and heightened tensions and conflicts in Ukraine and the Middle East and corresponding sanctions that go along with it. The economy has shown a degree of resilience so far.

Okay, great. Thanks Alan.

Said earlier and also last quarter. These are challenging business conditions for our customers.

Just some of those most recent changes include new reciprocal tariff frameworks between the U S and various countries new baseline reciprocal tariffs of 15% on many other countries.

Our 90 day and reciprocal tariff truce between China, and the U S that expires in November.

Steel and aluminum tariffs increased to 50% pending court challenges to the legality of tariffs.

De Minimis tariff for U S import exceptions have been eliminated.

<unk> countries in postal authorities have suspended parcel in postal deliveries to the United States as they understand the new tariff collection year maintenance regime.

And heightened tensions and conflicts in Ukraine, and the middle East and corresponding sanctions that go along with it.

So far the economy has shown a degree of resilience. However, as we enter the second half of the year and the <unk>.

Allan Brett: However, as we enter the second half of the year and the holiday buying period, there's uncertainty as to the impact of new tariffs on pricing and inflation and even more the consumer buying reaction to increases in pricing. This buying reaction will have a big impact on general economic activity and shipping related to inventory replenishment in 2026. An important period is upcoming with the economic and tariff uncertainties. As I mentioned last quarter, change is better than uncertainty for our customers. Our business thrives on helping customers adapt to changes and managing complexity. However, uncertainty puts our customers in a position where they don't know what decision to make or whether they should make any decision at all. Uncertainty can impact the shipping market, and deadlines for tariff changes can as well, regardless of whether the deadlines are ultimately adhered to.

Holiday buying period, it's uncertainty there is uncertainty as to the impact of new tariffs on pricing and inflation and even more the consumer buying reaction to increases in pricing.

<unk>, however, uncertainty puts our customers in a position where they don't know what decision to make or whether they make should make any decision at all.

Uncertainty can impact the shipping market and so can deadlines for tire changes regardless of whether the deadlines are ultimately here too we've seen broad tariff change deadlines in early April and July most recent tariff delay between the U S and China kicking in in early August often will see shipping upticks in advance.

Allan Brett: We've seen broad tariff change deadlines in early April and July, the most recent tariff delay between the U.S. and China kicking in in early August. Often, we'll see shipping upticks in advance of tariff increase deadlines. Each month, we prepare a global shipping report that monitors ocean imports into the United States with data obtained from U.S. Customs and Border Protection. Our report for August will be coming out in the next few days. However, the July report showed record high ocean imports with strong levels of shipments to the U.S. from China. We expect those elevated shipments were highly impacted by the tariff deadlines. Subsequent to July, we've seen the prices to ship ocean containers come down, which may be indicative of less demand of ocean shipping once that tariff deadline has passed and is also influenced by typical seasonality. We've had an early look at August U.S.

<unk> increased deadlines.

We prepare global shipping report that monitors ocean imports into the United States with data obtained from U S customs and border protection.

Subsequent to July and we're seeing the prices to ship Ocean containers come down which may be indicative of less demand of ocean shipping once that tariff deadline has passed and is also influenced by typical seasonality.

We've had an early look at August U S. Ocean imports based on public data imports are up about 3% from a year ago, but down 4% from July the same seasonal drop as last year and ports from China were down 10% from a year ago and 6% from August with.

Allan Brett: ocean imports based on public data. Imports are up about 3% from a year ago, but down 4% from July, the same seasonal drop as last year. Imports from China were down 10% from a year ago and 6% from August, with a notable impact of a 44% decrease in aluminum imports from China. There was an import strength in other Asia-Pacific countries such as Vietnam, Thailand, Indonesia, Malaysia, and Cambodia. U.S. domestic truck volumes remain depressed year over year. Though we've seen a slight increase since last quarter, which may also be attributed to seasonality, air shipments have been trending with modest growth but look to be under pressure, in particular with some overseas parcel shipping to the United States being suspended. For Descartes, we've grown during challenging business conditions in the past. Our plan is to continue to do so now.

With the notable impact of a 44% decrease in aluminum imports from China.

There was an important strength in other Asia Pacific countries, such as Vietnam, Thailand, Indonesia, Malaysia, Cambodia.

Descartes grown during challenging business conditions in the past our plan is to continue to do so now some of these things. We believe continue to put us in a good position to do that include.

Allan Brett: Some of these things we believe continue to put us in a good position to do that include 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 last-mile businesses. We're particularly strong in global trade intelligence. 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. Continually updating sanctioned parties lists, thirsting for competitive intelligence, dealing with increased export license complexity, and in implementing new duty-deferred foreign trade zones. The next is we're diversified globally.

We're diversified in domestic logistics of 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 last mile businesses were particularly strong in global trade intelligence.

And 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.

Updating sanction parties list thirsting for competitive intelligence dealing with increased export license complexity and implementing new duty deferred foreign trade zone.

Allan Brett: We've got domestic transportation solutions that can be used around the world, and where there's shifting international trade relations, we have an established global logistics network that can be leveraged by our customers. We've proactively taken steps to reduce our cost base to address potential revenue uncertainty. 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. Finally, we're a well-capitalized, cash-generating business. At Q2 quarter end, we had more than $240 million of cash and a $350 million undrawn line of credit. Ultimately, regardless of how well Descartes is positioned, our success is determined by our ability to help our customers. Our customers remain uncertain about how these market conditions will impact their business.

We have proactively taken steps to reduce our cost base to address potential revenue uncertainty.

And finally, we are well capitalized cash generating business at Q2 quarter end, we had more than $240 million of cash and a $350 million Undrawn line of credit.

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 business. We're mindful of this and the impact of changing global trade and foreign exchange environments, and setting our calibration and considering what our final quarterly financial.

Allan Brett: We're mindful of this and the impact of the changing global trade and foreign exchange environments in setting our calibration and considering what our final quarterly financial results may be. In our quarterly report, we provided a comprehensive description of baseline revenues, baseline calibration, and their limitations. As of August 1, 2025, using foreign exchange rates of $0.72 to the Canadian dollar, $1.15 to the euro, and $1.32 to the pound, and including estimated contribution from the acquisition of Finale Inventory, we estimate that our baseline revenues for the third quarter of fiscal 2026 were approximately $157.5 million, and our baseline operating expenses were approximately $96.5 million. We consider this to be our baseline adjusted EBITDA calibration of approximately $61 million for the third quarter of fiscal 2026, or approximately 39% of our baseline revenues as at August 1, 2025.

<unk> may be.

And our quarterly report, we provide a comprehensive description of baseline revenues baseline calibration and there are limitations.

As of August 1st 2025, using foreign exchange rates up 72 cents to the Canadian dollar.

<unk>.

$1 15 to the euro.

We consider this to be our baseline adjusted EBIT, the calibration of approximately $61 million for the third quarter of fiscal 26 or approximately 35.

39% of our baseline revenues as at August <unk> 2025.

Allan Brett: We continue to expect that we'll operate in an adjusted EBITDA operating environment, operating 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. These are uncertain times for our customers. It's a challenge for them to know what they can rely on in this global trade environment. Our goal is to continue to show our customers and other stakeholders that the one thing they can rely on is Descartes. Thanks to everyone for joining us on the call today. As always, we're available to talk to you about our business in whatever manner is most convenient for you. With that, operator, I'll now turn it over to you to handle the Q&A portion of the call.

We continue to expect that we'll operate in an adjusted EBITDA operating environment.

Scott Pagan: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to cancel your request, please press star followed by the two. If you're using a speaker phone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. Your first question comes from the line of Dylan Becker from William Blair. Please go ahead.

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your telephone keypad, you'll hear a prompt that Johanna is minimized and should you wish to cancel your request. Please press star followed by the team.

You're using a speaker phone please lift the handset before pressing any Keith one moment. Please for your first question.

Thank you and your first question comes from the line of Sheila <unk> from William Blair. Please go ahead.

Stephanie Price: Hey, gentlemen. This is Jackson Bogley on for Dylan Becker. I was wondering about the transactional side of the business. How do you think about the recovery there, and how that shape of the recovery evolves now that we've kind of moved past the peak uncertainty? I know it's still out there, but how does that recovery look like on the transactional component, especially considering the impact of de minimis going away as well?

Hey, Jonathan This is Jackson boldly on for Dylan Becker I was wondering about the transactional side of the business.

Yes.

How do you think about the recovery there.

And how that shape of the recovery evolves now that we've kind of moved past the peak uncertainty I know, it's still out there but.

How does that recovery look like on the transactional component and especially considering the impact of de minimis going away as well.

Allan Brett: On the de minimis side, we've done quite well, actually. We thought there was some risk there for us six months ago, and it's turned out to be a great opportunity for us. We're happy about that. On the tariffs impact on our network, you saw we had pretty good results this quarter. That's in large part because those volumes started to tick up as there was some certainty about what was going to happen all the way through the early August. Now we've hit that August 9th date, and you would think that's created more certainty, but then a federal appeals court judge said that he would invalidate the tariffs. The Trump administration comes back and says, we'll find a way around that. It's probably going to end up in the Supreme Court.

Well.

MS side, we've done quite well and so we thought there was some risk there for us six months ago, and it's turned out to.

To be a great.

Fortunately for US we're happy about that.

On the tariff or excuse me on the tariffs.

Tariffs impact on our network.

<unk> had pretty good results this quarter so.

That's in large part because of those volumes starting to tick up as there were some certainty about what what's going to happen all the way through.

Early August.

Now we've hit that August 9th date in <unk>.

You would think thats created more.

More certainty excuse me, but then a federal Appeals court judge said that he would invalidate the tariffs and the Trump administration comes back and says we'll find a way around that and it's probably going to double the sprint Gordon.

Allan Brett: My gut is it's probably that they're going to continue to give the president the ability to handle the tariff regime as he sees fit. We'll see. I agree with you that there's less uncertainty than there was a month or two ago, but still plenty left, I think, that we're cautious of.

My gut is it's probably that they are going to be able to.

We're going to continue to give the president of the ability to two to.

To handle the tariff regime as he sees fit but we'll see.

I agree with you that there is less uncertainty than there was a month or two ago, but.

Still plenty left I think.

Sure.

Cautiously.

Stephanie Price: Great. That's helpful. Maybe going back to that network piece and thinking about your AI positioning and how well positioned you are to use that, what does the opportunity look like to lean into the data across this network and maybe to drive more operational decisioning and performance? Maybe also, what you think monetization could look like over time as you continue building out your AI capabilities?

Great. That's helpful. And then maybe going back to that network piece in thinking about your AI positioning and how.

How well positioned you are to use that what does the opportunity look like to lean into the data across this network and maybe to drive more operational Decisioning and performance and maybe also.

What you think monetization could look like over time as you continue building out your AI capabilities.

Allan Brett: Sure. I mean, there's a lot of unknowns in what you asked there, but we do believe we're in a very attractive position in this regard in that, you know, we process a large number of the world's shipments. What that means is we know where a large number of the world's shipments are supposed to be days, weeks, and months from now. The fact that that's in our network, combined with IoT devices out there that continue to collect more and more information about what's going on out in the field, and then AI gives you the ability to sort through it very quickly and make good decisions considering everything you know right now.

There are a lot of unknowns in what you asked there, but we do believe we're in a very attractive position.

In this regard.

We process a large number of the worlds shipments and what that means is we know where a large number of the wealth shipments are supposed to be days weeks and months from now.

And that's in our network combined with.

Iot devices out there to continue to collect more and more information about.

What's going on out in the field and then AI gives you the ability to sort through it very quickly and make.

Good decisions considering everything we know right now.

Allan Brett: We think the guy that has the network that is the record of what's supposed to happen is in a very good position to help make modifications to those shipments, which would enable our customers to operate more efficiently. You know, something goes wrong on every shipment. It's really about what do you do about it? To the extent we can use IoT and AI to figure out something went wrong and what we're going to do about it quickly puts us in a very good position as the guy that's already managing the shipment to take advantage of that better than anybody else. We're excited about that in the long run.

I think the guy that has the network that.

That is the record of what's supposed to happen is in a very good position to help make modifications to those shipments.

Which would enable our customers to operate more efficiently.

Yes.

Nothing goes wrong on every shipment, it's really about what do you do about it.

To the extent, we can use Iot and AI to figure out something went wrong and what we're going to do about it quickly.

Puts us in a very good position as the.

The guidance already managing the shipment to take advantage of that better than anybody else. So we're excited about that and the warmer.

Stephanie Price: Great. Thanks, Scott.

Great. Thanks, guys.

Allan Brett: Thank you, Jackson.

Thank you Jackson.

Scott Pagan: Thank you. Your next question comes from the line of Chris Quintero from Morgan Stanley. Please go ahead.

Thank you and your next question comes from the line of Chris <unk> from Morgan Stanley. Please go ahead.

Chris Quintero: Hey, Ed. Hey, Allan. Thanks for taking the questions. Really nice to be on the call here with you today. I wanted to ask on organic services growth. Is there any way you can kind of contextualize the impact from that, you know, record shipping volumes in the quarter? What were maybe some of the softer areas that they attracted from that and were a drag on organic growth?

Hey, Ed Hey, Alan Thanks for taking the question and really nice to be on the call here with you today.

Wanted to ask on organic services growth.

Is there any way you can kind of contextualize the impact from that record shipping volumes in the quarter and what were.

Or maybe some of the softer areas that detracted from that and were a drag on organic growth.

Jackson Bogley: Yeah. We obviously estimate all these numbers and breaking down estimated organic growth. I think, as Ed indicated in the prepared comments, we had some good strength in our global trade intelligence solutions. We had good strength in regulatory compliance solutions, as well as in transportation management solutions. Those areas were certainly strong for us. The volumes themselves, as much as they came back a little bit, are still not at, we're still in depressed levels of transactional volume. Certain other transactional services continue to limp along a little bit, flattish or even down slightly. Those were the areas of strength that we had, those areas that we mentioned earlier.

Yes, so we I mean, we obviously estimate all of these numbers with breaking down the estimated organic growth I think as Ed as Ed indicated in the prepared comments that we had some good strength in our global.

Global trade intelligence solutions, we had Jeff.

A good strength in regulatory compliance solutions as well as in transportation management solution. So so those areas we're certainly.

Strong for US we had some.

Volumes themselves as much as it came back a little bit we're still we're still not.

We are still in depressed levels of transactional volume so certain other transactional services continue to limp along a little bit flattish or even down slightly but those were the areas of strength that we had.

As areas that we mentioned earlier.

Chris Quintero: Got it. That's super helpful. I was wondering if you could update us on the restructuring and how that's progressed versus your expectations so far, and how you're thinking about that in context with your 10% to 15% EBITDA growth targets?

Got it that's super helpful and then.

I was wondering if you could update us on the restructuring and kind of how thats progressed versus your expectations. So far in.

How youre thinking about.

That in context, with Europe, 10% to 15% EBITDA growth targets.

Jackson Bogley: Yeah. As we said last quarter when we came out, we, you know, we'd started, we made some plans. We saw a change in some businesses, business product revenues, et cetera. We said we made some changes. We've implemented those plans for the most part. We're fundamentally complete on the restructuring plan. It's worked out, you know, pretty much as we expected. There's savings of approximately $2 million in the quarter. There'll be some additional savings as we get to a full quarter of run rate of savings from those changes. If we look back, we think they were unfortunate decisions, but decisions that had to be made given the, you know, the weakness in transaction volumes that we were experiencing. For the most part, complete the restructuring, and that's the kind of metrics as far as numbers.

Yes, we said last quarter, when we came out of <unk>.

Pretty much as we expected.

The savings of approximately $2 million in the quarter there'll be some additional savings as we get to a full quarter of run rate.

Savings from.

From from those changes, yes, we look back we think we are at.

Unfortunate decisions, but the decisions that had to be made given given the.

Weakness in transaction volumes that we're experiencing so.

For the most part complete the restructuring and Thats, the kind of metrics as far as as far as numbers.

Chris Quintero: Excellent. Thanks, Allan.

Excellent thanks Alan.

Allan Brett: Thanks, Chris.

Okay. Thanks, Chris.

Scott Pagan: Thank you. Your next question comes from the line of Stephanie Price from Scotia Bank. Please go ahead.

Thank you and your next question comes from the line of Stephanie price from CIBC. Please go ahead.

Stephanie Price: Hi. Good evening. Last quarter, you mentioned that you weren't seeing customers tripping their minimums on transaction revenue. Just wondering if that's still the case and what customers are kind of thinking about here and talking about in the current environment.

Hi, good evening.

Allan Brett: Yeah. Thanks, Stephanie. Hi. No, I mean, the numbers ticked up, especially in the network this quarter. We're not having a whole lot of discussions about people not hitting their minimums. I think most of our customers are looking for help to figure out what to do about all the changes that are coming at them. You can see our tariff businesses and some of our visibility businesses are doing very well as a result. We had record sales in our subscription area this quarter. I think that's in large part due to people going, "All right, I know some, I have a little more certainty, but certainly, it's still not enough. What can they, you know, buy from us to help them figure out how to better manage through that?" The good news for us is, even the network struggled a couple of quarters ago.

Yes, Thanks Stephanie.

No I mean, we the numbers ticked up especially in the network. This quarter. So we're going to have a whole lot of discussions about.

People are not hitting their minimums.

I think most of our customers are looking for help.

To figure out what to do about all the changes that are coming at them and you can see our tariff businesses as our visibility businesses are doing very well as a result, we had record sales.

Our subscription area.

This quarter and I think that's in large part due to people going alright, I know some have a little more certainty, but certainly it's still not enough and what can they buy from us to help them.

Figure out.

Better manage through that.

Yes.

The good news for Us as you know.

Even.

The network struggled a couple of quarters ago, now, it's getting a little better but.

Allan Brett: Now it's getting a little better. Subscription sales held off through all of that at a very high level because of what I just discussed there. People need more information to deal with the complexity and change that's being thrown at them. We're in an enviable position where we have a lot of other tools that can help them deal with that.

But the subscription sales held up through all of that at a very high level because of what I just discussed there.

People need more information to deal with the complexity and change just being thrown at them and.

No.

In an enviable position, where we have a lot of other tools that can help them deal with that.

Stephanie Price: That makes sense. In your prepared remarks, you mentioned fraud prevention as a growth area. Just curious about the size of that fraud prevention business today and whether it's an area of potential future M&A.

Allan Brett: It's not a gigantic business. It's a little less than 1% of our business. It is an area that's growing nicely. As we pick it up and we have a whole lot more customers to bring it to, it happens to be a hot topic right now. We're seeing it grow nicely. Still, relative to the overall size of our business, it's still relatively small. As for acquisitions in that space, maybe. We'll see how this one goes, but it's looking all right so far.

It's not it's not a it's not a gigantic business.

That's a little less than 1% of our business. It is an area that's growing nicely.

As we pick it up and we have a whole lot more customers bring it to bring it to.

And it happens to be a hot topic right now.

We're seeing it grow nicely, but still well off relative to the overall size of our businesses.

So relatively small.

For as for acquisitions in that space.

Maybe.

Let's see how this one goes but it's looking all right so far.

Stephanie Price: Great. Thank you very much.

Great. Thank you very much.

Allan Brett: Thank you.

Thank you.

Scott Pagan: Thank you. Your next question comes from the line of Paul Treiber from RBC Capital Markets. Please go ahead.

Thank you and your next question comes from the line of Paul <unk> from RBC Capital Michael. Please go ahead.

Chris Quintero: Hey, good afternoon, and thanks for taking the question. A question for you, Ed. Just, you know, what was the biggest surprise of the quarter compared to when you gave your report of the last quarter? What are you looking to hear or see going forward that would give you more confidence in the underlying environment?

Hey, good afternoon, and thanks for taking the question.

Just what was the biggest surprise of the quarter.

Compared to when you gave your.

Reported last quarter.

And then what are you looking to your fee going forward that you give you more confidence in the underlying environment.

Allan Brett: I'm sorry, this is going to be a very simplistic answer, but the pleasant surprise was that the networks picked back up. What I'd like to see is that continue. I know that's probably a bastard for a simplification of it, but that is the biggest issue going on for us right now. To be it, you know, when customers didn't know what was going to happen next, they bought a lot of subscription services from us to figure out how they might handle those things and stop shipping stuff. When they got a little more certainty, they started shipping more stuff. We get paid by the shipment. So 30% of our business was, you know, not a whole lot we could do about it other than help our customers figure out what to do.

Hi, I'm sorry, this is going to be a very simplistic answer but the.

The pleasant surprise was that the networks picked back up.

<unk>.

What I'd like to see that continue.

And I know Thats probably.

Faster for simplification of it but that is the biggest issue going on for us right now.

Yes.

What customers do.

Didn't know what was going to happen next they've bought a lot of subscription services from us to figure out how they might handle those things and stop shipping stuff.

And.

Then when they got a little more certainty they started shipping more stuff and we get paid by the shipment so 30% of our business.

Not a whole lot we can do about it other than to help our customers figure out what to do.

Allan Brett: That turned around this quarter, as you can see in our numbers, and it performed very well. What I'd like to see is that continue, to answer your question. Whether it will or not, I don't know. They definitely got more certainty the other day on the 9th. At least we know what's going to happen. You know, might that make people ship more stuff? Maybe. A field court judge kind of throws a little more uncertainty in it and says, "Hey, you know, I'm not sure Trump's allowed to do this." I don't know that I buy that. I suspect that's either going to be overturned by the Supreme Court, or even if it's not, the Trump administration is going to come up with five other ways to do the same thing. What we're looking for is a little more certainty out of people like that.

And.

That turned around this quarter as you can see in our numbers in.

It performed very well in what I would like to see that continue to answer your question.

They are rolling out I don't know they definitely got more certainty of yesterday the ninth.

At least we know what's going to happen and Mike.

Might that make people shipping more stuff maybe.

Then it feels projects.

There was a little more uncertainty in and says hey.

Im not sure trumps a lot to do this and I don't know that I buy that I suspect that these are going to be overturned by the Supreme Court or even if it's not Trump administration is going to come up with five other ways to do the same thing.

So.

Yes.

What we're looking for is a little more certainty out of people I think I think most of our customers.

Allan Brett: I think most of our customers would say, "I kind of don't really care what the tariffs are. I just want to know what they are, and then my competitors are going to have to pay them too. We'll, you know, get going again and see what the consumer thinks of it." He used some new higher prices.

Don't really care, what the tariffs are I just want to know that what they are and then my competitors are going to have to pay them to enroll.

Get going again, and see what the consumer thinks of Houston, new higher prices.

Chris Quintero: One of the things you mentioned is the pickup in services, or sorry, subscriptions. I imagine a portion of that is related to the GTI business. Do you have a sense for how sustainable that uplift is? Do you expect that sort of the way of doing business is taking into account tariffs much more than companies have done in the past and using tools like your GTI to help manage it?

One of the things you mentioned is it pick up in services.

Sorry subscriptions.

I imagine a portion of that is related to the GPI business.

Do you have a sense for how sustainable that that uplift is.

It's sort of like we are.

Doing businesses is taking into account.

Tariffs much more than companies have done in the past and using tools like GTI.

To help manage it.

Allan Brett: Yeah, that's playing a role in it for sure. I think once they buy additional countries and additional commodities from us, which is how the amount they pay goes up and is what's happened in most cases during this, let's say, last year of high tariff increases, I think they probably won't turn those things off. They'll probably keep them. It's probably going to end up being a nice recurring revenue stream for us. You had the whole de minimis thing that, you know, we were wondering six, eight months ago if that was going to, you know, go well for us. I think we've been pleasantly surprised that it went great for us. We were always a big provider. The customers started to say, "Hey, you know what? I'm just going to pay tariffs.

Yes, that's fine that's playing a role in it for sure.

I think once they buy additional countries and additional.

Our commodities from us which is how the.

The amount they pay goes up and that's what's happened in most cases.

During this let's say last year of high tariff increases.

I think they probably will turn those things off the probably keep themselves struggling at the pin less recurring revenue stream for US and then you have the whole de minimus thing.

We were.

Wondering six to eight months ago that was going to.

Go well for us and.

Yes.

I think we've been pleasantly surprised that it works great for us.

We were always a big provider.

The customers started to say Hey, you know what I'm, just going to I'm, just going to pay tariffs.

Allan Brett: You know, I have plenty of consumers that are willing to buy this, whether this charger cord is $3 or $3.50. I don't care. I'll just pay the tariffs." That put them in a situation where they had to do millions and millions of type 1 and type 11 filings. We were prepared for that because of the number of filings we already managed. Fortunately for us, our competitors were not, and that shifted a lot of traffic our way for good, which is nice.

I have plenty of consumers that are willing to buy this whether this.

Charge recorded $3 or $3 50.

Care and I'll just pay the tariffs.

And that put them in a situation where they had to do millions of millions of type one and type 11 filings and where you were.

Prepared for that because of the number of filings we already manage.

And unfortunately for us our competitors are not in that shifted Nevada traffic our way.

Richard.

Which is.

Thanks.

Chris Quintero: All right. Thanks for taking the questions.

Alright, thanks for taking the questions.

Allan Brett: Thanks, Steve. Thank you, Paul.

Thank you Paul.

Scott Pagan: Thank you. Your next question comes from the line of Kevin Krishnaratne from Scotia Bank. Please go ahead.

Thank you and your next question comes from the line of Kevin <unk> from Scotiabank. Please go ahead.

Chris Quintero: Hey there. Good evening. Thanks for taking my questions. It's nice to see the continued strength in MacroPoint. I know you're doing well there, even despite seeing declines in trucking. Can you remind us what's driving that strength? Are you winning share? There's other competitors like FourKites, Project44, maybe there's others. Are you winning share from them? The pricing, just sort of, can you talk about what's driving the strength there?

Hey, there good evening, thanks for taking my questions.

To see the continued strength in macro point.

I know youre doing while they're even.

Despite seeing declines in trucking can you remind us.

What's driving that strength are you are you winning share there is other competitors like for project 24, maybe theres others are you winning share from them the pricing just sort of talk about what's driving the edge out there.

Allan Brett: Largely winning market share from our competitors in the past year. You could see the transportation volumes are relatively flat in the truck space, maybe even down in some months, some quarters. Yet we continue to go up every month and continue with a relatively high growth rate considering that the market's otherwise flat. We have an ability, and we've spent a lot of time and effort on an ability to track every trucker that's out there. We continue to spend most of our time and energy looking at the MacroPoint business that way. That's because we're, you know, in our lifetime, network operators. We understand the network effect. You have to have two people that want to talk to each other, and you have to be able to talk to both of them to get them communicating with each other. We spend our time and energy on that.

Largely winning market share from competitors in the past year.

See the transportation volumes are relatively flat in the truck space, maybe even down in some months some quarters.

And yet we continue to go up every month.

And continue with a relatively high growth rate considering that the market's otherwise flat we have.

And our ability and we spent a lot of time and effort and ability to track every trucker that's out there and we'll continue to spend the most of our time and energy looking at the macro point business that way.

That's because we're.

And our lifetime network operators.

Understand the network effect you have to have two people that want to talk to each other.

Allan Brett: I think some of our competitors spend a lot of time and energy building software that their customers told them to build that is of very little use if you can't get in touch with the trucker to track a shipment. I think that's worked out very well for us in the MacroPoint business. We have track rates approaching 90%, and our competitors are nowhere close.

I think that's worked out very well for us in the macro point business.

If truck rates approaching 90% and our competitors are nowhere close.

Chris Quintero: Yeah. Makes sense. Thanks for that. Appreciate it. The second question, good to see the, you know, sort of stability here, the 4% services growth, the transaction element helped there. On the software side, you're, you know, positive on what's to come there. I know there's a lot of uncertainty, but at some point, I think customers might have no choice but to eventually, you know, buy and deal with the uncertainty. Is there any sort of underlying metrics that you're looking at, whether that's pipeline, demo activity, conversations with customers that you can kind of point to that's maybe a leading indicator to what could be coming at some point? Thanks.

Yeah makes sense, thanks for that I appreciate it.

The second question good to see that sort of stability here, the 4% services growth.

The transaction element helped there.

On the software side here.

Positive what's to come there I know, there's a lot of uncertainty, but at some point I think customers may have no choice, but to eventually.

Bye and deal with the uncertainties. So is there any sort of underlying metrics that youre looking at whether that.

Blind double activity conversations with customers that you can kind of point to that sort of maybe a leading indicator to what could be coming at some point. Thanks.

Allan Brett: Thanks. No, I mean, I think we are going to know pretty soon as you are going to see it in the volumes. I mean, if they think there is enough certainty and they are going to, okay, here are the new tariff rates, they are probably going to stay in effect. Let me ship stuff without thinking about changing the tariffs. That is going to be great news for us. If they pause again or something new happens in the coming days that causes them to pause again, that would be bad news for us. The subscription side continues to sell at a pretty rapid clip. We are pretty happy with that side of the business. It is 30% that ends up in decreased bookings, decreased bills of lading, decreased status messages, decreased customs filings.

Thanks, Tom and I think we're going to know pretty soon youre going to see it in the volumes.

If they can if they think theres enough certainty and theyre going to okay. Here's a new tariff rates. They are probably going to stay in effect, let me shift stuff without thinking about change in the tariffs.

Thats going to be great news for us.

Pause again or or something new happens in the coming days that causes them to pause again that would be bad news for us the.

The subscription side continues to sell at a pretty rapid clip, we're pretty happy with that side of the business.

30% that ends up.

Decreased bookings decrease both awaiting for status messages.

Customs filings, if there's uncertainty where they think maybe I should shift now or increases to all of those areas. If they think.

Allan Brett: If there is uncertainty where they think maybe I should not ship now or increases to all those areas, if they think that, you know what? I know what the tariff rate is going to be, the same rate my competitors are paying, and let us just ship the stuff, pass it on to the consumers and see how they react. That would be the last thing. How do consumers react to this over time? Now, that we are probably not going to know. It is not going to be a day in time where we know, hey, this is over. We are going to have to watch for several months here and say, hey, the consumer is getting some item that is 15% more than it used to be. Do they still buy it? If they do, I think we are fine.

Yes.

I know what the tariff rates going to be the same rate my competitors are paying and let's just.

<unk> passed on our consumers and see how they react to that would be the last thing out of consumers react to this over time.

That will probably aren't going to know with aggregate day in time, where we know hey.

This is over we're going to have to watch for for several months here and say hey, the consumers getting.

Some item that <unk>.

15% more than it used to be do they still buy.

And if they do I think we're finding that they don't I think we are.

Allan Brett: If they do not, I think we are, not just us, but everyone is headed towards recession. I do not know how far it goes.

Yes, not just us, but everyone is headed towards.

Yes towards the recession cargos.

Chris Quintero: Appreciate it.

And I appreciate it.

Allan Brett: Yeah. Thanks.

Yes, yes.

Chris Quintero: Yeah. Thanks, Pastor Line. Thank you.

Yes, Thanks best of luck. Thank you.

Scott Pagan: Thank you. Your next question comes from the line of Lachlan Brown from Redburn Atlantic. Please go ahead.

Thank you and your next question comes from the line of Blackman Brown from Rothschild and go Redburn. Please go ahead.

Chris Quintero: Hi, Ed. Allan. Hope you've been well. The Finale acquisition, could you talk to us a little bit about the competitive bidding process? How should we think about the relative multiples that you're paying for acquisitions in this environment when compared to prior years? Maybe more broadly talk to the strategic rationale and how it complements, dive into how it complements SellerCloud.

Hi, Ed Ellen Barnwell.

The finale acquisition could you talk to a fairly competitive.

Competitive bidding process and how should we think about the relative multiples that you're paying for acquisition and.

And if environment when compared to prior years.

And maybe if you're just not maybe more to hopefully more broadly talk to the strategic rationale and pallet compliments dot and tab complement sell cloud.

Allan Brett: Yeah. I mean, it's inventory management and, you know, to a lesser extent, warehouse management in that space. It's a good complement to SellerCloud. That's why we bought it. There was some competition for it, but I'd say across all the deals we're doing now, there's less competition. There's less private equity firms showing up and things. A good friend of mine in the private equity business told me long ago, we were either buying or we're selling. We were never doing both at the same time. I think right now they are all selling. They have investors that are clamoring, principals that are clamoring to get some of their money back and see if those multiples that they have on their books are actually accurate because they just keep telling them every time that they go up and up and up. That's not always true.

Yes.

Inventory management and.

To a lesser extent warehouse management in that space. It's a good complement to SAR cloud Thats why we bought it there was some competition for it but.

I'd say across all of the deals we're doing now theres less competition, there is less private equity firms showing up and things.

Good friend of mine and the private equity business told me long ago, we were either buying or selling we are never doing both at the same time and I think right now they are all selling.

They have investors that are clamoring principles that are clamoring to get some of their money back.

And see if those <unk>.

Multiples that they have on their books are actually accurate because they just keep telling them every time that they go up and up and up and.

That's not always true.

Allan Brett: I think, you know, a lot of their principals are saying, "Hey, let's get some returns here before I give you more money." We're seeing signs of that in the market. They're selling assets versus buying assets. It means they're putting more up for sale, whether we buy them or not, immaterial. They put more up for sale. There's only so many dollars available for everyone to buy companies with. The more companies that are for sale, the less people and companies that are, you know, looking at them are in the market. You know, that's helpful for us. Three, four years ago, it was us versus two private equity firms in every deal we were looking at. Now it's, you know, us versus, you know, maybe a private equity firm, maybe a strategic, something like that.

A lot of their principals are saying, hey, let's get some returns here before I give you more money.

And we're seeing signs of that in the market they are selling assets versus buying assets that means they are putting more up for sale.

We buy them or not immaterial they put more of herself theres only so many dollars available for everyone to buy companies with more companies that are for sale.

People in.

Companies that are looking at are in the market.

That's helpful for us.

Yes.

Three or four years ago was us versus two private equity firms in every deal we were looking at now.

Us versus.

Maybe a private or maybe a strategic something like that but some of them, where we go hey, we actually might be the guy that can make the most of this acquisition and we'd be willing to pay the most for it because the other people that used to show up in what we thought made bad decisions are no longer there.

Allan Brett: Someone where we go, "Hey, we actually might be the guy that can make the most of this acquisition and be willing to pay the most for it because the other people that used to show up and what we thought made bad decisions are no longer there." We're trying to take advantage of that as best we can. You see us doing more deals now probably than ever. That's good. I don't think we would have gotten that Finale Inventory deal a few years ago. Somebody else would have overpaid for it.

And so we're trying to take advantage of that as best we can.

You see us doing more deals now probably than Emerson.

That's good I don't think we would've gotten a finality deal two years ago.

Somebody else would have overpaid for it.

Chris Quintero: Interesting. That's very clear. Thanks. Maybe another M&A question. AI was mentioned at the start of the call. Do you see acquiring AI-native technologies as a potential part of the AI strategy, or are you comfortable with capturing this organically through investing internally?

Interesting alright. Thanks.

So on the M&A question Amit.

Todd the call sorry, DC acquiring AI native technology potential product VII strategy or are you comfortable with that capturing.

Janet we're investing internally.

Allan Brett: I mean, we always buy stuff, don't we, Digit? If it has customers and profits and is growing and things that our customers want, we usually, well, we always consider, should we build something ourselves? Usually, that decision comes down to, I think we'd be better off buying a profitable company that we think is going to be the winner in that particular space. I see a lot of AI functionality in our space right now that looks to me like features on products that we have, and those would be potential acquisition candidates. You said naked. I don't think we're going to, you're going to see us buying any native or naked pure play AI tools that could be sold in other industries. We are focused on logistics and supply chain and don't really want to get out of that anytime soon.

I mean, we're always.

You always buy stuff, we piggish, if and as customers and profits and growing and adding things that our customers want.

We usually while we always consider should we built up on ourselves.

Usually that decision comes down to I think we'd be better off buying a profitable company that we think is going to be the winner in that particular space.

I see a lot of AI functionality in our space right now.

It looks to me like features on products that we have and those would be potential acquisition candidates.

You said it I don't think were going to youre going to see us buying any major of our nation.

Pure play.

AI tools that can be sold in other industries.

We are focused on logistics and supply chain.

Really wanted to get out of that anytime soon.

Yeah.

Allan Brett: I'd also add that a lot of this AI stuff is, and you see these startups come out fast. A lot of it's pretty easy to do. When we see a new idea, whereas five years ago, we'd say, I don't know that it's worth it for us to code that new idea into our system. We should buy a company to do it and merge them in. We could, we can go further faster that way. I would say more frequently now, we are looking at some AI functionality and going, we could do that too. It's not going to be that hard. It's just a feature in a system like we have, and we should do that ourselves. We'll see what happens. I wouldn't be surprised if it was a little bit of both.

I'd also add that.

A lot of this AI stuff as you see the startup from our fast a lot of it's pretty easy to do so when we see a new idea.

Whereas five years ago, we'd say now I don't know that its worth it for us to code that new idea into our system, which by our company to do it and merge them in particular.

We can go further faster that way I.

I would say.

More frequently now we're looking at some AI functionality and going we can do that too with lack of review that hard and it's just a feature in a system like we have and we should do that ourselves.

Yeah.

We'll see what happens but.

I wouldn't be surprised if it was a little bit of both.

Chris Quintero: I appreciate it. Thanks for the question.

I appreciate it thanks for the question.

Allan Brett: Yeah.

Yes.

Scott Pagan: Thank you. Your next question comes from the line of John Campbell from National Bank. Please go ahead.

Thank you and your next question comes from the line of John shall from National Bank. Please go ahead.

Chris Quintero: Hey, guys. Thanks for taking my question. On AI, some investors ask about the risk of, you know, Descartes being disrupted by startups using AI to develop similar software potentially to take the market share. From your perspective, what are some of the entry barriers to reduce that risk?

Hey, guys. Thanks for taking my question on AI, some investors ask about the risk of <unk>.

Descartes has been disrupted by startups using AI to develop similar software potentially take the market share. So from your perspective, what are some of the inter barriers to reduce that risk.

Allan Brett: Our network, it's connectivity that connects to all these people. You can say you're going to do that with AI, but you still got to create all the connections. Those connections change so quickly, and the mechanisms they use to change change so quickly. By the time you're done, you'll have to start all over again and redone. That's a pretty big barrier to entry. There are all these governments that we file to that we have certifications in and tools that handle every little thing that make it hard for people to compete. If you think about someone, if they want to compete with our network, you can't walk in and say, "I can connect to these five trucking companies." That's not good enough. You need to be able to connect to everyone that we connect to.

Well our network with connectivity that connects to all of these few please you can say youre going to do that what they are.

Still got great health connections.

Lets connections changed so quickly in the mechanism they use the changes.

So quickly by the time, you're done you'll have to start all over again, and we don't and that's a pretty big barrier to entry.

There's all these governments that we filed two that we have certifications in that.

And tools that handle every little thing.

That make it hard for people to compete thinking.

Think about someone if they want to compete with our network you can't walk in and say I can connect to these five trucking company. That's not good enough you need to being able to connect to everyone that we connected or I have all this tariff data, but I have it from 20 countries <unk> got it from 140 countries, who do you think the customers want to buy this stuff from <unk>.

Allan Brett: Or, "I have all this tariff data, but I have it from 20 countries." I've got it from 140 countries. Who do you think the customers want to buy this stuff from? I do customs filing. I do it in three countries. Great. My vendor does it in 100 countries. I want to do it with them because it's just easier. I don't feel like signing up with 50 of you to get the same job done. Those types of things are the barriers to entry to us. It's not like I just mentioned one there, and I could go on and on and on about it too, by the way. There are a lot of barriers to entry, and they start to build up pretty quick.

Customs filing I do it in three countries at great.

Mike vendor does it in 100 countries. So I want to do with them because it's just easier I don't feel excited out with 50 of view to get the same job done.

And those types of things are the barriers to entry.

And it's not like I, just mentioned, one there and I could go on and on and on about it too by the way. So theres a lot of barriers to entry and they start to build up pretty quick and.

Allan Brett: You might be able to convince my mom you could do this quickly, but you're probably not going to convince our customers that you could do it pretty quickly. It's a lot of work, and you'd have to be done all of it to put yourself in a position to actually be competitive with us. At a high level, that's our barrier to entry. You got a lot of stuff that you'd have to figure out how to do at the same time to steal customers from us.

You might be able to convince my mom you can do this quickly, but you're probably not going to miss our customers that you can do it pretty quickly.

It's a lot of work and you have to be done all of it to put yourself in a position to actually be competitive with us.

At a high level, that's our barrier to entry we have a lot of stuff that you'd have to that you would have to figure out how to do at the same time to steal customers from us.

Chris Quintero: Got it. That makes a lot of sense.

Got it.

Allan Brett: Let me add one more thing to that, just because I've been doing this a long time and watching it go down. We have to stay on top of our game, and we always have, right? There's always going to be someone trying to do something that we do and trying to sneak in and find some other angle to do it. We have to keep doing a good job for our customers and looking at what we do for them and saying, "How does this need to change over time so that we stay the leader here?" This is one of the reasons I like recurring revenue because there's always a gun to our head to do that because if the customer pays you every month, you better be the best solution every month.

Yes.

Let me add one thing to that just because I've been doing this a long time and watching it go down.

Yes, we have to stay on top of our game and we always have right. There's always going to be someone trying to do something let me do in trying to sneak in and find some other angle to do it and we have to keep doing a good job for our customers in and looking at what we do for them and saying how does this need to change over time, so that we stay the leader here.

And this is one of the reasons I like recurring revenue because there's always a gun to our head to do that because of the customer page every month you better be the best solution every month.

Allan Brett: I think you could argue recurring revenue is really good for us, but I also go, it's really good for the customer too because when you're paying per month, you always know that you're paying for the best solution because if you're not paying for the best solution, you will switch to the best solution quickly when you can add it relatively quickly because you're on a month-to-month basis with everyone. It's a little harder when you gave this guy $20 million for your license to leave the SAP system. People get stuck on it because they put so much money into it. That pressure is always there for us, and I think it's healthy for us to have it too, right? We better be the best or someone will beat us and the customers will leave.

And I.

I think it.

You could argue recurring revenue is really good for us, but I also go it's really good for the customer because euro when you are paying per month, you always know that you are paying for the best solution because if.

Youre not paying for the best solutions, you will switch to the best solution quickly. When you can out of it relatively quickly because youre on a month to month basis. It's a little harder. When you gave this got $20 million for your license to lead the SAP system people get stuck on because they put so much money into it.

And that pressure is always there for us and I think it's healthy for us to have it too right, we better be divest where someone will beat us and the customers will leave.

Allan Brett: That's the mentality we have around here that's kept us on top for 25 years and hopefully for a lot more time to come.

And.

That's the mentality, we have around here that that's kept us on tap for 25 years and hopefully for a lot more time to come.

Chris Quintero: Got it. Thanks for the colors. I just want to revisit one of the earlier topics. My understanding is there has been a rebound in freight volume this quarter, which is a tailwind for you guys, but your service organic growth is flat quarter by quarter. Just curious.

Got it thanks for the color. So maybe maybe I just want to revisit one of the earlier topics. If my understanding is there has been a rebound in freight volume this quarter and which is a tailwind for you guys, but Europe services organic growth was flat quarter over quarter I'm, just curious what the offsets.

Operator: that is.

Okay.

Scott Pagan: We were concerned that it was going to be going down, and you know the fact that it's 4% again this quarter and looking pretty good is something we thought was pretty good for our business under the circumstances. I'm not disappointed in any way in the numbers. You put a spin on it that made it sound like it's not good. As someone who's been working here for most of their life, I think what just happened was pretty good.

We were concerned that it was going to be going down and.

The fact that it's 4% again this quarter and looking pretty good as supplement we felt was.

Pretty good for our business under the circumstances.

So im not disappointed in any way in the numbers, how should we put a spin on it they made it sound like it's not good.

It's been working here for most of their life.

I think what just happened it was pretty good.

Operator: Okay, sounds good. Definitely good to see the stabilization out there. Thank you so much. I'll pass it along.

Okay. It sounds good definitely good to see the stabilization out there. Thank you so much and our poplar.

Scott Pagan: Thanks.

Thank you.

Ed Ryan: Thank you. Your last question comes from the line of Robert Young from Canaccord Genuity. Please go ahead.

Thank you and your next question comes from the line of Robert Young from Canaccord. Please go ahead.

Hi, Yes, good evening another de Minimis question, if I could.

Trying to understand if the I.

I guess customers are swapping a type 86 for type one and type two or type of 11 is that a wash is it better than you expected or is this now a bigger business than it would've been under the previous de Minimis I'm, just trying to understand that.

Scott Pagan: It was a wash to start in that the customer said, "Hey, just pay me this. I'll just pay the same way." Instead of making a Type 86 filing, you'll make these gigantic Type 1 or Type 11 filings, mostly Type 1, by the way, with millions of records in it. The really good news happened for us, which was, on top of that, our competitors struggled to process those transaction files with millions of transactions in it. We had a lot of experience doing this because we've been dealing with the likes of DHL, FedEx, and UPS for a long time that have very large transactions in Type 1 and Type 11 filings. Our systems had the scale and scope to be able to deal with it, and our competitors did not.

It was a wash.

Start and that the customers said, hey, just payment. This out is paid the same way, but instead of making it diabetes six filing youll make these gigantic type one or type 11 funds most of the type one and by the way.

With millions of records in it.

Then the really good news happened for us which was.

On top of that our competitors struggled to process those transactions files with millions of transactions in it.

We had a lot of experience doing this because we've been dealing with the likes of DHL and Fedex.

EPS for a long time that have very large transactions in type one and type 11 funds.

Our systems had the scale and scope to be able to deal with it than our competitors did not.

Scott Pagan: They had a bunch of their largest customers come to us and say, "I need to switch, and I need to switch now. Show me you can do this." We did a day of filings for them, and they went, "Let's switch now." In fact, several of them talked about, "Let's switch over a couple of weeks." After day one, they called and said, "We're going to switch everything to you tomorrow.

They had a bunch of their largest customers come to us and say I need to switch and I need to switch now showing you can do this.

A day a filings for them and they went let's switch now.

<unk> several of them talk about like let's switchover, a couple of weeks and after day, one they called and said we're going to switch everything to you tomorrow.

Operator: Okay, that's clear. Okay. The second question, maybe just a continuation of the volumes question. You said truck volumes were up quarter to quarter. You said the network was up. I'm just trying to understand. I think you noted something about seasonality. Is that just holiday season build, or is it, I mean, maybe we just parse that out a little better just to understand if that's something that might continue to grow through the back half of the year.

Okay.

That's clear Okay and then the second question, maybe just a continuation of that the volumes question. You said truck volumes were up quarter over quarter is that our network was up and I'm just trying to understand I think you noted somebody about seasonality or is that just holiday.

Season build or is it I mean, maybe you could just parse that out a little better just to understand if that's something that might continue to grow through the back half of the year.

Scott Pagan: Truck wasn't really growing. We just had growth in truck volumes because we continue to pick up business from our competitors in the MacroPoint space. Otherwise, you know, Christmas season's upon us. That has different meaning in each of the modes of transportation. In ocean right now, you're seeing that.

Truck rather than really growing we just had broken truck volumes, because we continue to pick up business from our competitors in the <unk> space.

Otherwise.

Christmas season is upon us that has different meaning each of the modes of transportation by the notion right now youre seeing that.

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