The Descartes Systems Group, Inc. Q1 FY2024 earnings call

• Acquisitions: Completed OCR Services and ASD (Thyme) acquisitions. OCR strengthens global trade intelligence with sanctioned party screening, export compliance, and AI solutions. ASD enhances customs services in Europe and air asset visibility.
• Organic Growth: Driven by global trade intelligence (compliance, tariffs, trade routes), real-time visibility (shipment tracking), routing and scheduling (fleet efficiency), and e-commerce (shipping/fulfillment).
• Financials: Record revenues, services revenue up 11%, adjusted EBITDA up 16%, strong cash flow from operations with $63.7 million generated, 95% of adjusted EBITDA.

Total revenues for the first quarter ended April 30 were a record $153.1 million, up 11% from $136.6 million in Q1 last year. Services revenue increased 11% to $137.8 million, representing 91% of total revenue. License revenue was $500,000, down from $1.4 million in the prior year. Professional services and other revenue was $13.0 million, up 17% to 9% of revenue. Gross margin was 77% of revenue, up from 76% in Q1 last year. Adjusted EBITDA was $67.0 million, up 16% to 44.3% of revenue.

• Baseline revenues for Q2 2025 estimated at $136 million, baseline operating expenses at $84 million, adjusted EBITDA calibration at $52 million.
• Target adjusted EBITDA growth of 10%-15% annually, focusing on organic growth and acquisitions.
• Expect margin to vary between 40%-45%, aim to overachieve growth targets.

• Geopolitical, trade, and economic uncertainties impacting business.
• Initial margin impact from acquisitions similar to past deals like GroundCloud.
• Fluctuations in shipment volumes, domestic trucking, and parcel volumes affecting revenue.

Q: Justin Long asked about moderation in organic services growth and impact of acquisitions.

A: Allan noted slight moderation due to prior year adjustments, Ed mentioned ocean volume pickup expected to translate to domestic volume increases. Re acquisitions, they're in growth areas below current margins but expected to improve over time.

Q: Paul Treiber asked about ocean volumes not translating to domestic trucking.

A: Ed said ocean volumes picking up expected to translate to domestic volumes in coming months, not reflected in baseline as it's visible and recurring at quarter start.

Q: Stephanie Price asked about e-commerce.

A: Ed said e-commerce growth continues with small and medium e-tailers, Amazon Logistics is a growth vector, and they benefit from helping with shipping processes.

Q: Steven Li asked about growth rates of OCR and ASD.

A: Edward Ryan said both are high single digits to low double digits, close to company's growth rates in similar areas.

Q: Scott Group asked about M&A activity.

A: Edward Ryan said they have bandwidth for more acquisitions, see many opportunities, and don't plan to pause after recent large deals.