Welcome to the quarterly results call. My name is Anna, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session [Operator Instructions]. Please note that this conference is being recorded. I will now turn the call over to Scott Pagan. Scott, you may begin.

Thanks, and good afternoon everyone. Joining me on the call today are Ed Ryan, CEO and Allan Brett, CFO. 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 Descartes’ operating performance, financial results and conditions; Descartes’ gross margins and any growth in those gross margins, cash flow and use of cash, business outlook; baseline revenues, baseline operating expenses and baseline calibration; anticipated and potential revenue losses and gains, anticipated recognition and expensing of specific revenues and expenses; potential acquisitions and acquisition strategy; cost reduction and integration initiatives and other matters that may constitute forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of Descartes to differ materially from the anticipated results, performance or achievements implied by such forward-looking statements. These 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 OSC and other Securities Commissions across Canada, including our management’s discussion and analysis filed today. We provide forward-looking statements solely for the purpose of providing information about management’s current expectations and plans relating to the future. You’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 is required by law. And with that, let me turn the call over to Ed.

Great, thanks, Scott. Good afternoon, everyone, and welcome to the call. Thanks for joining us today. We're looking forward to talking you through some of the highlights of what was a very busy summer here at Descartes. We had another great quarter of results, fueled by continues growth in shipment volumes on our global logistics network. Our vision to build one place for all participants in the supply chain to collaborate, to manage the lifecycle of shipments is unique and it continues to gain traction as we add more and more solutions and participants to our network. Today's global trade environment is demanding and extremely complex and it's not getting any easier. Every day the leading news stories related to shipping and logistics and the changing landscape with increased complexity as a result of trade deals, tariffs, sanctions, fuel prices, mergers, et cetera. Our solutions and our network are more important than ever to our customers. Our customers continue to look to us to help them manage more and more logistics and supply chain processes. And we're committed to adding more solutions to help our customers to do more. We continue to build new solutions on our network and we continue to acquire complimentary businesses. Since our last call, we combined with two businesses and we're well positioned to add more complementary businesses moving forward. As you saw over the summer, we increased the size of our shelf perspectives to $750 million, putting us in a position to move quickly on larger opportunities with more capital capacity. I'll provide an update on those acquisitions on this call and I'll also provide some commentary on how we're positioning ourselves in the market to be the long-term choice for our customers. After that, Alan will go through our quarterly and half year…

Okay, thanks Ed. As indicated, I'm going to walk you through our financial highlights for the second quarter, ended July 31st. As mentioned earlier, we are pleased to report record quarterly revenues of $67.1 million this quarter, up 17% from revenues of $57.3 million in Q2 of last year. The impact from foreign exchange was very minor when looking at revenue results so far this year compared to the same period last year. However, when looking at the second quarter sequentially compared to the first quarter of this year, mainly as a result of a stronger U.S. dollar against the Euro and the Pound and the Canadian dollar, revenue was negatively impacted from FX by approximately $1 million when compared to the first quarter of this year. Excluding this impact of FX, revenue would have increased by just over 1.5% on a sequential basis in the second quarter. For the six months year-to-date period, revenue came in at $134.1 million, which is up about 20% from revenue of $111.8 million in the first six months of last year. In keeping with recent trends, our revenue mix continues to be strong with services revenue representing 89% of our total revenue or $59.7 million in the quarter, an increase of 21% over the second quarter of last year. License revenues came in at $1.3 million or 2% of total revenue in the second quarter and $3.2 million or 3% for the six-month year-to-date period. And although license revenues will fluctuate from quarter-to-quarter, we continue to expect that license revenue will remain a small portion of our revenue going forward. Professional service and other revenues came in at $6.1 million or 9% of revenue in the second quarter compared to $5.8 million or 10% of revenue in the same period last year. Gross…

Thanks, Allan. Before talking about calibration, I just want to highlight to everyone that we now have set up the conference Web site and registration site for Evolution 2019, our Annual User and Partner Conference. As a reminder, we're moving the event to Naples this year to accommodate a larger group of people coming off with success of last year's record attendance. It’s a great opportunity to meet the people that build and deploy our solutions, as well as the customers that use them. If you want to learn about Descartes, it's a really good investment of your time and I will encourage you to book early. Conference will be held at the Naples Grande Beach Resort in Florida from Tuesday, March 26th to Thursday, March 28, 2019. So let's talk calibration for Q3. Similar to previous quarters, we don’t provide guidance, but we use our baseline calibration as a key metric relating to the ongoing health and strength of our business. Our calibration for Q3 assumes the following exchange rates; CAD$0.77, €1.16 to the U.S. dollar and £1.29 to U.S. dollar. Our calibration also includes the addition of the PinPoint business from the date of acquisition. Our calibration for Q3 is $65.5 million in visible recurring contracted revenues or otherwise our baseline revenues. Our baseline operating expenses are $46.7 million. This gives us a baseline calibration of $18.8 million of adjusted EBITDA for Q3. Some other key points related to how we're positioned for the remainder of fiscal 2019; we're very well capitalized; we've a healthy balance sheet that is well calibrated; and as Allan mentioned, we also have a healthy balance sheet. We're profitable and cash generating; and we have low capital needs within our organic business; our primary uses of capital are for continued use in acquisitions;…

We have a question from Phillip Huang from Barclays. Please go ahead.

Just wanted to ask you guys just on the microenvironment, you currently seem to be enjoying a pretty healthy one for both e-commerce and trade. I was wondering what are some of the major things you're currently monitoring that could really shift the current tailwinds, say over the next 12 months, or so?

Well, I think a lot of this is based on the success our customers having. When our customers' businesses are doing well, transportation providers and their customers and then the big retailers and manufacturers around the world are doing well, that ends up being a benefit to our network, because they need to move more stuff around the world because they're selling more stuff around the world. And we end up processing a lot of those transactions and it's a nice tailwind to our business. If that flows just like every other business, it will have an impact. Healthy customers tend to buy more stuff too, so we're getting some impact from that as well. They're going on for a long-time right now, last five or six years but it continues to show -- drive strong results not only for our customers but for us, we're happy about it.

It seems to be better this year than last. And I'm just wondering if you see some of these trends sustaining beyond 12 months, or do these things based on what you're watching the visibility, is not always…

I don’t have a crystal ball anymore than you do. I hear our customers talk about it, they think this is going to continue for some time, but let's face facts. There will be a day when it stops. I don’t have any better insight into when that day is than you do.

And then maybe a dumb question, I'm just -- for an acquisition like PinPoint. I was just wondering if there is any potential restriction in how you might leverage this technology across your footprint. Any geographical limitations on how you can leverage this across your entire footprint?

Well, right now, you heard me talk about a minute ago. It's focused on the Geotab and SkyBitz businesses, they have some exposure internationally but certainly their strength is here in North America. So we're following and working with them so where the markets where they are strong, we have a great business. I do think it’s applicable to other parts of the world as they expand it's also potentially opportunity for us to work with other partners beyond SkyBitz and Geotab. But for the moment, we're focused on those two businesses and they seem to both be doing very well. And that’s been a big growth driver for PinPoint over the last few years. It's expected to be that way for some time to come.

So sounds like it's more a matter of relationship as opposed to any legal compliance reasons why you might not be with copywriter or is something of that nature that would prevent you from leveraging that technology more broadly. Is that correct?

That’s correct. We're going around with various Telematics providers in helping their customers to get results by implementing their solutions and operating their solutions for those customers in the long run.

And then a final one for me, MacroPoint, I think there has been talks in the past about -- its revenues in the few years. I was wondering if you might give a bit more of an update on just on the progress on that. Thanks.

Yes, the MacroPoint business is going great. You heard me talk about it for a few minutes towards the end of my prepared comments, real happy with how it's going. We're very excited about the opportunities in capacity matching add to the equitation. We bought it for the tracking business, the ability to track trucks in North America on behalf of the big retailers and manufacturers and freight brokers that want to track them. We treated the capacity matching opportunity, our backhaul as I called out in the past, as upside opportunity. And we're starting to see that that might be a business so we're pretty excited about it.

And we have a question from Paul Steep from Scotia Capital. Please go ahead.

First one, Ed, maybe you could talk a little bit about just, I guess, the comfort and you referenced the M&A environment there already. But what the comfort would be with taking leverage maybe to the upper limit, and what you'd see at there? We obviously saw super active environment year-to-date. So any thoughts there are useful.

Yes, I mean we have I mentioned on the call earlier a few minutes ago, the capacity that we do have I think we're $59 million right now with capacity up to $150 million with an ability to expand that to $225 million with an accordion future. I think if we saw the right opportunity, I mean we have it for a reason we have it so that we could use it if we need it. And I don’t think you'd see us has them at all to use if the right opportunity came along. And given the rates that we're getting on debt right now, you can see us go there first just because -- relative to doing the equity financing it's a pretty affordable.

And just to add to that, Paul, just to put that in terms of a multiple. I mean we've talked to numerous times before. But up to 3 times of adjusted would seem reasonable given the business we have, a business that generates cash on a quarterly basis. So we might be able to flex up to that level and possibly slightly beyond for periods of time. But you can see us operating with some level of debt comfortably.

And then the quick follow-up I had, again for you, Ed. I guess as we talked over the years about the Telematics business maybe being less attractive. What drove you to go for PinPoint now? We've seen a number of big deals in that space and you chose not to be there. Why make a bigger movie into Telematics on to the core that you already have the business.

I'm glad you asked that, because let me draw a distinction there. The part of Telematic that we've had a problem which is the actual manufacturing of hardware, because so few hardware manufacturers seem to be able to make money, and it's not that we don’t want the Telematics business. I don’t like manufacturing a box for $500 or $600 and then having a customer tell me they want to pay $500 or $600 for it and we can't make any money doing, in fact, lose money doing. PinPoint is a different business. They're managing -- reselling, managing and operating Telematics devices on behalf of customers and not dealing with the manufacturing process. So what you see us doing there is going after what we consider to be the attractive part of it. We've always like the idea of being able to tell people where their trucks are. Our routing and scheduling solutions are much more valuable to our customers if we know where their trucks are all the time. We got into the Telematics business and started 10 years ago manufacturing our own hardware, because we wanted to help our customers to deal with that problem. While as we got into it, we realized we would have to operate that business at a lost to help the customers solve that problem and that wasn’t very attractive to us. So like we did with mobile handset long before that, we started looking at another device that we can sell and we came across the Geotab over the last several years that we're pretty excited about. And thought that -- they did a very good job with a simple device that’s helping our customers figure out where their trucks are. As we started to do sell more and more of their stuff, we thought it was pretty good and wanted to get more expertise, and in PinPoint with an opportunity to do that and that's why you see us making this move, which I don’t think you're going to see us do it get back into the manufacturing of hardware we think, because that's not something we should focus on. And we think there's lot more opportunity in the software side of helping our customer track where their fleets are.

Just one clarification as well that you made me think of. Is there only a preexisting integration, I know Geotab was and is a partner. Is there a preexisting integration between the PinPoint Solution and MacroPoint to pull from the Geotab data? Thanks.

There is, because PinPoint is really implementing a solution that Geotab built for them, and they're configuring for the customers. And we immediately started with PinPoint using that service for our customers. Our routing customers are two days after the deal. In effect they're Routing and Telematics customers that was a pretty seamless transition from that perspective.

And we have a question from Matt Pfau from William Blair. Please go ahead.

I wanted to hit on MacroPoint a little bit more. First, maybe Ed, can you give us an update on the partnerships there and any more progress with an SAP partnership specifically?

We just agreed with them on having them go out and sell our solutions with their primary salesforce, it's something we were talking about for several months after the MacroPoint deal was done. And I think in the coming months, you're going to see their salesforce out in the street being able to sell our solution, being able to get paid commission on selling our solution and that's pretty exciting, we'll see how that goes. But I am optimistic, because they tell me they have a lot of customers are asking for it, and they're pretty big customers. So I think it's a great opportunity for us, it's a great opportunity for MacroPoint to have an additional sales channel like an SAP. We're really excited about it.

And then maybe just on MacroPoint, I know that the business was low margin at the time of acquisition compared to your core margins, and you expected to ramp over time. Where are you at with getting some leverage on that business, has it been ramping with your expectations?

I think we're very happy with the way it's progressing, not only on the revenue side but on the profitability side. We made some initial cuts the daily bought the business and then decided that we were going to look -- let's see how the growth goes from there to drive continued profitability. Maybe Allan can go into another level of detail with you for a second or two.

Yes, we knew this business had to grow to grow into the profitably expectations we have, and we are a year into it. And so far everything we expected and then some but we need to continue that growth and expect that to happen. So also go from a financial model on that business.

We have a question from Paul Treib from RBC Capital Markets. Please go ahead.

Just in regards to MacroPoint, there has been some debate on privacy regarding cellular tracking technology. Just wondering if you could speak just in terms of how MacroPoint uses the technology? And how you see that privacy regulations playing out in regards to MacroPoint?

Yes, so there's three ways that MacroPoint collects data, and one of them is the way that you mentioned it, it's the smallest of the ways that I'll get to that in a second. So the largest way is that they go out and collect data directly from large transportation providers. Those larger transportation providers have their own ELD blogging devices in the trucks, Telematics devices in the truck. And they tell MacroPoint or Descartes now where those trucks are upon requests on behalf of big retailers and manufacturers that are asking. The second way, and then the second most prevalent way, is a mobile handheld app that MacroPoint has that they give to individual truck drivers, small trucking companies, one truck, two truck companies that don't have any ELD solution, but have an Amazon or a Wal-Mart or whatever asking them to tell them their whereabouts as their delivery freight for that. And they can sit in the macro point application and that application extracts the GPS location from their smart phones and provides it back into the MacroPoint services and then goes on to the big retailer or manufacturer to tell them where the truck is. The third way is again focused on the small truck drivers. They don't have a large fleet and also don't have a smart phone. Those drivers, MacroPoint has service that goes and that get the drivers permission to use cell phone triangulation to determine its whereabouts, and that’s the area what we’re talking about here, several months ago couple different what I call aggregators or what the industry calls aggregators. And I said aggregating aggregators because they are aggregating data from cell phone providers, cell phone networks specifically. And they are telling people the whereabouts of trucks MacroPoint is a customer of…

Okay, that's for that clarification. That was very helpful. Just in regards to just moving onto PinPoint, you mentioned that they do resell some telematics devices. Could you clarify if that has a material -- if that comes from a material portion of their revenue or if it’s rather trim and then also the margins on that, if it’s just pass-through revenue or through the positive margin on that reselling revenue?

Yes, they're reselling largely Geotab telematics devices, not involving manufacturer, but at all I don’t know what their margin around.

Yes, first off that the hardware piece of the business is very small roughly 10%. Margins on that are weaker than what our normal margins are. But overall that business has an EBITDA multiple or EBITDA profile that’s similar, not materially different from ours Paul.

Our next question is from Steven Li from Raymond James. Please go ahead.

On the MicroPoint backhaul opportunity, can you talk a bit about some of the customers that are live? Have you been able to get any of the bigger players enrolled?

We went after midsize players on the MacroPoint network. So, we went after existing customers on MacroPoint, not the biggest guys yet. I think we talked about a lot before we went into the pilot several months ago and decided to not go and try to get the biggest guys enroll to do this yet to target this and the midsize guys get the solution working. I think there is still lots of things we want iron out with the solution and make it work better before we turn to our biggest customers and ask them to use it. What I can tell you is we completed the first phase of the pilot. We signed almost all of the customers up that were in that first phase of the pilot, two big customers of ours and start paying for it in the second phase. And I think you will see as we get these kings ironed out in it. They will start to grow after larger and larger customers on our network.

Given, this is a network do you -- would you need the bigger players for this opportunity to really take off?

Sorry, what I need to what?

Would you need the bigger players for this opportunity to really take off?

I guess it depends on what you mean by really take off. I think it could be a successful business that we didn’t get the larger players. Obviously, if we could get some of the largest and we have mostly larger freight brokers in North America are on the MacroPoint network. They almost all do business with MacroPoint. I think it would be more successful, if they did it. Certainly, it could be a successful business which is midsized and small guys. There is a lot of opportunity even within that market. Remember, there is a ton of freight workers in 3PLs in North America. They are not all gigantic. But yes, we can get the biggest guys enrolled on it all the better.

And then, Allan, just a quick one for you. You gave us the FX impact quarter-over-quarter. How much was the FX benefit year-over-year?

Yes, so it's not a huge impact on our year-over-year numbers. I think just under 200,000 or around there as far as FX impact on revenue and negligible on the EBITDA. The FX impact, the negative impact that I talked about of just under a 1 million was related to the sequential Q2 to Q1, where we did face a bit of a headwind on the U.S. dollar strength. So hopefully that clarifies that. It's not a big number year-over-year and it's just under $1 million headwind sequentially.

And we have a question from Deepak Kaushal from GMP Securities. Please go ahead.

Ed, correct me, if I'm wrong, but it seems like it hasn’t been since the Datamyne acquisition that you have done, the material acquisition focused on trade data or content. Most of the acquisitions since then have been focused on e-commerce. Is this a function of valuation or opportunities, or focus in the market, any other color you can offer on that?

We continue to look for areas to expand in that market. There’s probably less opportunity in that market, not nearly as big a market as some of the other ones in terms of ecommerce ones that we -- that you’ve seen us do a bunch of acquisitions in lately, but we love the business, continue to look for good acquisitions there, just haven’t been able to come to terms with anyone in the last what year or so on that. So I certainly still a big area of focus for us. The businesses that we’ve there are performing really well. And if we see other ones that come along that we think we can get a good deal for our shareholders on, we kind of almost try to execute on it.

And when you think back about Datamyne and MK Data, and at the time the opportunity to expand into new market areas, how would you kind of rate your performance in those areas? Have you been able to successfully expand those markets or really just harvesting [indiscernible]

Those businesses, I mean, they all had growth profiles when we bought them. That continued to this day. We’ve been very happy with how those businesses have grown. They’re very profitable businesses for us. They’re growing nicely. They’ve -- excuse me, a relatively fixed cost to operate the businesses so our margins continue to go up in those businesses, which makes it very attractive for us. The customers also love them. So I mean the customers in all three of those businesses really seem to think the world of service that we provide, so that’s a nice business to run.

And if I remember correctly on the customs and regulatory compliance front, mostly that business was focused on import filings with an opportunity to expand to things like export filings and the on shippers into the carriers and they're part of the logistics were held broadly in [indiscernible]. Any color or update you can give on those opportunities there?

Just the most recent stuff, Single Window went live in Canada in the last couple of months. ACAS is now live in the United States, that’s the freight forwarder. The freight forwarder filings just similar to the way the carrier has been required to follow for a long time. Sweden, Belgium, Netherlands have all gone forward with either finding the warehouse or [fiscal filing] solutions or requirements that we’ve integrated too. So I mean we really -- we like that business we think as you probably heard me say a couple of years ago, it’s a long runway on those businesses and we’re in it for the long run. We are trying to be the biggest and the best in that business and use our breadth to be an attractive solution for our customers in those markets. And I think that’s working and we always do the governments, we are going to take their time. They continue to do that, but they keep going. Every quarter, a couple of more go live with solutions in -- that makes it for a good long-term healthy business for us.

So when I step back and I think of these opportunities global trade e-commerce, the MacroPoint backhaul opportunity, the expanding partnership with SAP. If you were to -- and maybe I am missing a few, I am sure. What would you say is the biggest opportunity that has the most potential to change the 10% to 15% EBITDA growth [indiscernible]

[Indiscernible]

I know that you’ve managed towards that, but if we were to look for something that could be bigger than we think?

Well, listen, the short answer is I don’t know exactly. I like every one of the opportunities you mentioned depending on the year that you've asked me. I might feel better about one and the other. I’d tell you right now we’re really excited about what we see at the MircoPoint. And all of the excitement that we had when we acquired, I think we continued to have and continue to get more and more confidence as we see that it's delivering on some of those things. So, you are asking me right now, so I guess that’s my answer for the moment. But really I like all of those businesses, everyone you mentioned is growing profitable happy customers, things that make it attractive to us to be an operator of it and make our network more attractive because they are here. So, in reality, we are excited about all.

And we have no further questions at this time. I would like to turn to call over to Ed Ryan to for closing remarks.

Great, thanks everyone. Appreciate your time this afternoon and we look forward to reporting back to you on our Q3 results in a couple of months. Have a great evening.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.