Good afternoon, ladies and gentlemen, and welcome to the Descartes Systems Group Quarterly Results Conference Call. At this time, all lines in listen-only mode. Following the presentation, we will conduct the question-and-answer session. [Operator Instructions] This call is being recorded on Wednesday, March 5, 2025. I would now like to turn the conference over to Scott Pagan. Please go ahead.

Thanks, and good afternoon, everyone. Joining me remotely on the call today are Ed Ryan, CEO; and Allan Brett, CFO. And I trust that everyone has received a copy of our financial results press release that was issued earlier today. 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 tariffs and economic uncertainty on our business and financial condition; Descartes' 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 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 Ontario Securities Commission, 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 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. And with that, let me turn the call over to Ed.

Hey, thanks, Scott, and welcome, everyone, to the call. Today, we're reporting record fourth quarter and annual results and continued strong services revenue and adjusted EBITDA growth. We're excited to go over these results with you and give you some of our perspective on the current business environment. But first, let me give you a road map for this call. I'll start by hitting some highlights of last quarter and the fiscal year and some aspects of how our business performed. I'll then hand it over to Allan, who will go over the Q4 and FY '25 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 FY '26. And we'll then open up to the operator to coordinate the Q&A portion of the call. So let's start with the fourth quarter that ended on January 31. Key metrics we monitor include revenues, profits, cash flow from operations, operating margins, and returns on our investments. For this past quarter, we again had a very good performance in each of those areas. Total revenues were up 13% from a year ago with services revenues up 15% from a year ago. Net income was up 27% from a year ago with adjusted EBITDA up 14%. Our adjusted EBITDA margin climbed 2 points to 45% from Q3 and 1 point from a year ago. We also generated almost $61 million in cash from operations in Q4 or 81% of adjusted EBITDA, in line with how we would expect the business to perform. That quarter topped off a great year with record results. For the year, revenues were up 14%, net income was up 24%, and adjusted EBITDA was up 15%. Our headline targets are…

Hey, thanks, Ed. As indicated, I'm going to walk you through our financial highlights for our fourth quarter and year ended January 31, 2025. We are pleased to report quarterly revenues of $167.5 million this quarter, an increase of just over 13% from revenues of $148.2 million in Q4 of last year. Our revenue mix in the quarter continued to be very strong. Despite a negative headwind from foreign exchange, service revenue increased over 15% to $156.5 million from $135.7 million last year in the fourth quarter with services revenue coming in at 93% of total revenues this quarter, up from 92% of total revenue in Q4 last year. Removing the impact of both recent acquisitions as well as the negative impact from changes in FX rates, we would estimate that our growth in services revenue from new and existing customers would have been approximately 6% this quarter when compared to the same quarter last year. Professional service and other revenue, including hardware revenue, came in at $10.7 million or just over 6% of revenue for the quarter, down slightly from $11.1 million or 7% of revenue in the same quarter last year, mainly due to lower -- slightly lower hardware revenue this quarter when compared to the same quarter last year. Note that as planned for and as messaged last quarter, hardware revenue was down more than $3.5 million in the quarter from Q3, where we had just completed a replacement program of certain AI-enabled cameras in our GroundCloud business. In addition, after a larger license revenue quarter in Q3 of approximately $3.5 million, license revenue came in at $300,000 in the quarter, which was also a drop from $1.4 million in license revenue recorded last year in the fourth quarter. For the year, revenue was a record $651…

Hey, great, Allan. These are challenging business conditions for our customers. Just some of the changes from the last 30 days are as follows. U.S. imports -- U.S. has imposed tariffs on imports from China, Canada, and Mexico ranging from 10% to 25%, though just this afternoon, the White House announced a one-month exception for automakers that comply with the USMCA. Canada and China have responded with their own tariffs, with Mexico planning on tariffs starting later this week. The U.S. has announced it will impose reciprocal tariffs on products from other countries to restore perceived trade imbalances. The U.S. has indicated it may impose tariffs on the EU. The de minimis tariff exemption for low-value imports was suspended but that suspension has been temporarily lifted. The U.S. administration is also considering changes to the USPS that could include it no longer being an independent agency and changes to its economic structure. The U.S. is revisiting its sanction regime that has opposed in connection with the war in the Ukraine. The International Longshore and Warehouse Union reached a labor deal with the ports to remove labor uncertainty. Supplemental U.S. port fees have been proposed for vessels that aren't U.S.-made. Some shipping has resumed in the Red Sea, and there's new ownership of the ports in the Panama Canal. That's a lot of change that has come very quickly. For tariff changes, our customers often have open questions about if they will come into effect, and if so, for how long. These types of business conditions cause a ton of uncertainty that make it very hard for our customers to make decisions. Businesses have been somewhat paralyzed as they consider decisions for the short and long term. They've got to consider how to restructure their supply chains and logistics operations. With…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Dylan Becker of William Blair. Your line is already open.

Hey, Ed, Allan. You kind of hinted at this on the tail end of your remarks, Ed, but wondering what obviously global complexity uncertainty is going to look like for Descartes this year? I mean, if anything, that's probably the new certainty and it's driving a lot of decisioning questions, I'm sure, from customers. There's a lot of variables. Some may be speculative in nature at this point in time. But how should we think about kind of a simplified netting out? Because historically, complexity has served as a net positive for Descartes.

Yeah, we think it will be here as well. But for our customers, there's a lot of uncertainty and things are changing and changing back quite frequently just in the past month or two. Obviously, I mentioned we operate our Global Trade Intelligence business is a big beneficiary of people needing to pay close attention to this information. So that's great for us. To the extent it affects trade flows, we can benefit and suffer right along with our customers depending on what it does to their business as they move stuff across borders and the challenges they may face when they do that. There's net positives in there for us. There's net negatives if they reduce the amount of goods that they ship across borders. You probably heard it in my prepared remarks, we don't really know what's going to happen next. We just want to be prepared to help our customers where they need help, and we want to be prepared to manage our business consistently where we need to pay attention to things that are changing. So I think we've done a very good job in that in the past. I'd expect us to continue to do a good job of that. We're pretty conservative. That's why I'm bringing all this up on the call. But the big answer to this is we don't know what's going to happen next and I don't think anyone else does either.

Sure. Yeah, I think that's totally fair. And to your point, probably a good place to be, at least for an area of customers to continue to lean into and look for some level of clarity, if there is any. Maybe on the AI front, right, you do have a substantial data set that you can leverage and help kind of drive some efficiency despite some of this uncertainty. I guess, maybe how are you guys thinking about incremental areas for external monetization connection points throughout that data as well as maybe, Allan, anything you guys are seeing internally in your ability to kind of deploy and manage and service your customers that can drive incremental kind of operating leverage across the business? Thanks.

Thanks, Dylan. Yeah, we're seeing a ton of opportunity with AI. I've mentioned a bunch of them on previous calls, both in our own internal operations and development, customer support, and marketing ability for us to be more efficient in delivering services and also provide better service to the customers, which is all great news. In addition to that, we have the ability for AI in our actual products to deliver, and that's probably what we're most excited about in the long run. I mentioned a bunch of them on previous calls and the global trade intelligence pillar and the transportation management pillar and the fleet management pillar. But just some examples, we have an AI model for improved party screen, the DTI pillar. We've seen significant productivity improvements over the last six to eight months as we're doing that and rolling out to customers. We've released a beta chatbot for the data mine service to interact with our trade data, which will help customers gain better usability of that information. In the fleet pillar, we're using machine learning models to improve ETA calculations, which then in turn, improves the customer's planning process. So there's lots of examples of this in the business and keep coming up with new ones almost every day. We've separated out an AI team that's able to go in and help any of the pillars with ideas that they have. And so I think this is going to be a big business for us in the long run. If you think about it, people are increasingly putting IoT devices out in the field to tell you what various trucks, planes, ships, and engine components, tires, et cetera, all these things that are reporting back to us about what's going on in the field. And right at the same time, AI comes out and gives us the ability to go through that information very rapidly and help our customers make better decisions. I think 10 years from now, that's going to be a very big part of our business. So we're excited about that opportunity.

Very helpful, thanks, guys.

Thanks.

Your next question comes from John Campbell of Stephens Inc. Please go ahead.

Hey, good afternoon.

Hi.

On the margin front, I get there's a lot of uncertainty here still. But if I kind of put these puzzle pieces together, I mean, the revenue mix shift was clearly helpful this quarter. It seems like that probably continues. You've done the cost reduction plan that's going to add a little bit of savings next year. And then you've got a couple of acquisitions in the mix. And if history kind of holds, you've had past acquisitions, you have worked margins up over time. So it seems like you've got some tailwinds as you get into next -- or get into the fiscal year. I know a lot is going to hinge on the pattern or is kind of the phasing of revenue if that holds up. But Allan, if we assume that the normal cadence of revenue kind of holds up here, it seems like you're going to be kind of pushing north of that 45%, the high end of your current target. I know you want to see a couple of quarters in the bag and I know you're going to see some of this resolution kind of come about. But I'm curious about your thoughts on the range and how we should be thinking about just broadly about margin this year.

Let me take this one. So John, if you watched us in the past, we usually bump up against even a couple of times through that range before we adjust it up. We're pretty cautious about this kind of stuff, and there's a couple of reasons. One, foreign exchange can change it quickly. You're seeing that right now. The foreign exchange movement going on at the moment that's strengthening U.S. dollar, which changes the numbers around. We don't really care so much. We run the whole business but it's out there and it would affect the percentages that we provide to you. Two and maybe more importantly, most of the businesses that we buy and you know we're pretty acquisitive and a lot of good deals going on right now, and if there's a lot of uncertainty in the market and we're a stable business or at least a lot more stable than other companies in our industry, we might be in a very good position to buy companies. And when we do, oftentimes, those companies don't have nearly as high an EBITDA margin as we do. So for me to tell you that it's going to keep going up, I would have to assume that all things are going to stay the same and I don't believe they will. We buy a business that makes 25%, 30% product margin with an expectation that we're going to grow it over time to more of our levels. But the day we buy it, it drags our EBITDA margin down considerably, and we always have that in the back of our mind when we're putting out these numbers. So now it's possible that we'll bump up against it again. It's possible that we'll go over it. I'm not going to apologize for that when it happens. But at the same time, I want to be conservative when we're putting it out there. It's very possible we go buy some other businesses, and that temporarily drags our EBITDA margin down. And that's a good thing in our mind. But I also don't want to miss a number that I told you would take.

Yeah, totally makes a lot of sense.

Actually, let me add one more thing. Let me add 1 more thing to that. We, over time, we have a core business that as it grows, it keeps getting more profitable, meaning it has a very low cost incrementally. And as our business grows, we have -- and all things being equal, which we know that they're not going to be, but if all things were to remain the same, we do believe that we would keep driving that number up. Because the core business does have some relatively fixed cost components to it that the revenue goes up and the cost stays the same, and that's a constant driver upwards on that number. And at the same time, some of the things I mentioned like acquisitions have the potential to drag it down, and that's why we're conservative about it. I'm sorry.

Okay, that's helpful. And then you kind of hinted at this but on the M&A front, I mean, lot of market uncertainty out there. I mean, if you guys are starting to feel that, I can only imagine kind of the subscale players, what they're feeling right now. So maybe if you could talk to whether that's made its way -- starting to make its way into the multiples? Have you seen any change there? And then any change as far as new opportunities, are they coming to you organically or being shown to you?

We've seen it over the last year and you see that's helping us get deals done. We've got five deals done this year. We think we're in a pretty good position to get more done in the future. At the same time, I think the real question you're asking is, am I seeing it right now because of the uncertainty that's going on in the last month? And the answer to that is no, it doesn't go that fast. It'd be a couple of months before people go, boy, this is going to be a problem. Maybe I should sell my business for less. There's usually a lag, and I wouldn't be surprised if there were this time, if, in fact, things turn out not positive that they're going to. If the world runs into trouble, we're probably going to fare better than most. And some of those companies are going to be in a position where they feel like they have to sell and that's going to affect the purchase price, and that will be good for us.

Excellent, thanks, guys.

Yeah, thank you.

Your next question comes from Stephanie Price of CIBC. Your line is already open.

Thank you. Just circling back on the tariff discussion. You mentioned 2008 in your prepared remarks. Can you dig into that historical precedent a little and just talk a bit about what the typical consumer behavior was in those volatile times and if you're seeing the same thing this time around?

I can only talk about it, '08, I haven't seen much of it yet, but I wonder what's going to happen if prices go up. Certainly in '08, when you saw -- it was a moment in time, October 2008 were, everything ground to a halt and Christmas slowed down, and the next year, we were on the verge of a depression. And we definitely saw consumer spending go down. You probably heard me talk about this before if you've been with us for a while. Our shipment volumes were down about 8% that year, which has always been shocking to me, right, when you think of it down even worse. I think what you see is people still have to get certain things. They have to get food. They have to get diapers. They have to get certain basic things. They might not be buying boats and jet skis, but they're still running their life as soon as they -- or assuming they still have a job, they make bigger changes if they don't. But most people kept their jobs during that time. At the same time, it was tough times for people. And just you see why it was only down 8%. I can go, you might not buy [indiscernible] but you still have to buy chicken, and the chicken costs the same amount of money to move as the [Indiscernible]. So for us, there's similar transaction numbers. They were down 8% but they weren't down 30% to 40%. And I don't think we're in a time like that. It certainly doesn't feel like that right now to me. Just feel like there's a lot of uncertainty in that right now, and that maybe makes people freeze for a little bit before they figure out what to do next. We really benefited during that time. When I look back on it, I think it wasn't fun to go through it, but when I look back, we picked up some of the best acquisitions at very good prices in the coming three or four years because of that recession. And I don't know what we're heading into right now and we know that we are in a recession. But if we are or we head into one, part of me goes, well, this isn't going to be that much fun. But another part of me goes like, we may end up doing pretty well in this. When we look back on this time, laughing out and coming. This is a set of things that propelled the next stage of growth at Descartes. So we probably have a different outlook on it than most businesses just because of who we are and what we do and all the things I mentioned in the prepared remarks on the call, but those are some of the thoughts we have about it.

That's good color. Thank you. And then just on MacroPoint, you also mentioned that in the prepared remarks. Can you talk a little bit more about the growth you're seeing there, the growth rate of the business? And what sort of additional investments you're looking to make in the business?

Yeah, that continues to do very well for us. We've become the leader in the brokerage space and really starting to move in even the shipper space because of our track rates. And our competitors are tracking 55% to 60% of the shipments that they have, and we're tracking 85% to 90% of the shipments. That means if I give you a shipment to track, half the time, you're not going to be able to find it. And you're not going to give me any tracking on it. That is one of the broker market where there's high volume and they really need to track as many of the shipments as possible. And that's put us in a very good position because we have a lot of the truckers on our network. We have competitors there that run this like a software company and we run it like a network, and that's, I think, been very helpful for us. And then -- so we're taking customers from them and breaking into the shipper market, which we haven't paid as close attention to over the years as they have. But I think we're heading in that direction as well, and I think they're going to appreciate higher track rates as well as we start to move into it. So we're making investments to make the software better and better for big retailers and manufacturers, and I think you're going to see us head in that direction over time.

Great. Thank you very much.

Thank you.

Your next question comes from Paul Treiber of RBC Capital Markets. Your line is already open.

Thanks so much. And good afternoon. You mentioned the uncertainty in the environment and potentially that customers could pause what they're doing to evaluate that. The professional services in the quarter and license revenue were lighter than the previous quarter. Is that related to seasonality or did you begin to see some of that pause impacting the revenue there?

No, no. In fact, let me frame that. We're mostly looking at the services number at the time, and that recurring number is the way that we drive our business. I'd like to have no professional services revenue, meaning that everyone can just get our software and use it right away. I don't think it's ever going to be that simple. In some of the software packages, some of them are [indiscernible] but not all of them. And they need people to go in and install them and make sure that they get what they're paying for. And we want to be there to do that for them. But I'm not as focused on those two numbers. I mean, we want growth in recurring revenue, and we sell professional services so that we can install our products that need to be installed over a period of time still a little more complicated to run. The licenses, I'd rather themselves recurring now software fees, but some customers have old deals with us where they're able to get license fees that they do. But now, we're price selling as well as we've sold in this past quarter, so no, nothing there.

And shifting and looking at service revenue, Allan mentioned, I think it was 6% organic or constant currency or organic service revenue growth. I think it was down a little bit from the prior quarters. Any moving parts there to call out just in terms of the comparison to the last couple of quarters?

Nothing big. I mean, it's all related to volumes on individual across a lot of little customers and nothing that -- I understand everyone who's not working at our companies, 6%, 6.5%, 7%, 7.5%. What's the difference between them? And to us, it's probably more. We just want to keep them -- see them keep growing. There could be lots of little reasons up and down and a lot of it outside of our control. It is important to us that it keeps growing. We keep telling everyone we're going to grow EBITDA 10% to 15%, and that's what we're focused on. And it truly is what we're focused on, but at the same time, we're aware that growing revenue is important in that mix and 6%, 7%, those are fine numbers as far as we're concerned. Remember, the guys that run this company have been here for 30 years. I've seen 1%, I've seen 0.5% growth. So 6%, 7%, 8% all sounds great to me.

And then just a bigger picture question. You mentioned there's a lot of interest in your global trade intelligence products because of the tariff uncertainty. How much is that, first of all, getting you in the door? And then once you're in the door, is it opening up the discussion around broader digital transformation of supply chains?

Yeah. Sometimes, I mean, the biggest driver of that is our network, right? So people sign up for a network and then we start now that you're on the network, here's what else you can do. That's certainly the biggest way and the best way that we get people in the door and sell them more stuff. But yeah, it happens from time to time with global trade intelligence. People get in trouble. They get fined. Their lawyers say, hey, how do you prevent this from happening in the future? And they said, we didn't know we weren't, that's not a good answer. And they refer them to us and we'll help them with sanction parties. People have global trade issues were they overpaid or underpaid. And if you underpay, there's a big fine, and if you overpay, it takes a long time and a lot of work to get your money back. It's kind of odd that way. So more and more people, especially as the tariffs are changing every day, tend to look to us for our DTI solutions. We're now the biggest in the business, and certainly, we think the best. And it's absolutely a way in the door for us. Probably the second or third biggest lane, biggest way being the network. So it's nice to be in a position we're in right now, with all the tariff talk, to be able to help our customers deal with it and come up with more innovative solutions to help them deal with it more accurately and more efficiently. But there's a lot of other stuff we do. And if customers come in and buy that, we'd love the opportunity to show them all the additional things that we can do for them.

Thanks for taking the questions.

Thanks, Paul.

Your next question comes from Kevin Krishnaratne of Scotiabank. Please go ahead.

Hey, there. Good evening. Maybe kind of on back to Paul's question, can you remind us again the sort of structure of your sales team? How big is sort of the upsell/cross-sell team? I can imagine you're probably getting a lot of inbounds, but talk about how you might be being proactive in looking at your realistic customers, looking at what products they've got and just trying to help educate them on what they should be buying that. And maybe you can also talk about some of the feedback from your innovation forum that you've had with customers.

Yeah. So I think sales force is in around 300 now. And they're all able to cross-sell and they're all able to sell the stuff. We break them into two groups, MRDM, manufacturers, retailers, distributors, mobile service providers, and then the other group being logistics and transportation providers. And they're all doing both, really. They're all selling new products to new customers and more often cross-selling. It's probably 65%, at times up to 70% cross-sell. We have 26,000 customers and that results in a lot of cross-selling. We used to have pretty low cross-selling numbers 15 years ago, but we really focused on it. And as we've gotten bigger, it's become a very big part of what we do. Innovation forums, we had one in D.C. and a couple of Chicago a few months ago. Very well received. Coming out of the pandemic, we used to have one big user group. With a lot of different kinds of companies, they are doing a lot of different things and a lot of different tracks. And after the pandemic, where we weren't able to have the user group, we decided to start doing it this way, which is a little more focused and we can go in and maybe, partially for our own people's time and partially for the customers, to make sure we're very focused on them while they're there. We've broken it into smaller chunks and around the country that do it in different locations where maybe more of the users are. So we had a lot of success doing it. I think customers get a lot from us. We certainly get a lot from them. If you've heard me mention before, a lot of our ideas about what to buy next and what business to get into come from them and come to them specifically at these forums. And maybe the most important thing and I mentioned on the call earlier today, they get to talk to each other, right? Because they're all solving problems and similar problems in different ways, and they get to hear how other people are doing it. And I think their businesses benefit from that. It makes it a somewhat unique event for customers to come to and get great information. So we're excited about it.

Got it. Second question for me is on de minimis. You brought it up. I know it's been back and forth and back and forth here. But can you talk about how you see any changes there impacting your business? I can think on the positive, I mean, e-commerce, a bit of a boon for you. You've also got a business net that sort of plays in that space. But on the other hand, if it goes away completely, does that mean better business for the more traditional customs brokers who are also your customers and tools for them as well? I'm just trying to think about --

It does, you actually said it all pretty well. We don't know what's going to happen yet. The de minimis may go down. It could go away, it could stay the same. We do a lot of the de minimis transactions. They go at very low fees per transaction. We do even more of the customs -- regular customs filing transactions. They go at higher fees per transaction because they're for entire container or something like that. It really depends. What the rule comes out as. We have a lot of confidence that if it lowers, that we are going to lose those de minimis transactions that are very, very low transaction fee and pick up a lot of new customs filings at higher transaction fees because they're a more sophisticated transaction, maybe I should say, much more sophisticated transactions. So I don't know how it's going to work yet. I don't know what the impact will be. If a customer puts all of a particular commodity in one container, that's only going to be one customs filing, which might have been hundreds before. They also might put 30 different types of packages in those containers, and then it'll end up being 30 different customs filings, which would end up being a lot better for us. So not only do I see what the rules are but I got to see how the customers react to it. And if I just spend too much time worrying about it, it's probably going to be good for us, and we'll just have to see what happens when the government then or decides that they're not going to.

Got it. Okay, great. That’s it for me. I’ll hop back in queue. Thanks, guys.

Thanks.

Your next question comes from Cole Couzens of Wolfe Research. Your line is already open.

Hey, guys. This is Cole on for Scott Group. I know you called out some pull forward ahead of tariffs in the quarter. Is there any way to quantify how much that helped you guys? And unrelated, maybe coming out of the Chinese New Year, what kind of activity are you seeing so far to start the year?

I don't think -- to the first part of your question, it helped but I don't know, nothing material. Second part of your question, I can't really answer because it's talking about a period of time that we're not reporting on. So I don't see any big changes. If you look at our global, our monthly global shipping report, it'll give you some information about it. But without saying too much, it's similar stuff, similar stuff to prior years at the moment.

Okay. And there's been a lot of uncertainty about the potential charges on Chinese-built ships and shipping companies. And how do you guys see that kind of playing out as we go into 2025?

I don't think it's going to be a big deal for us. Almost every container ship in the world, minus the Jones Act ships that are here in the United States going to Puerto Rico, Alaska, and Hawaii are foreign-built. So if they're going to charge for foreign-built ships, every ship bringing containers to the United States pretty much from another country. In fact, every ship from another country, I believe, will be in a foreign-built ship. So I don't know what to say about that other than I don't think that's going to matter much to us, but it will certainly matter to our ocean carrier customers.

Okay. And if I could squeeze 1 last question in. Obviously, EBITDA growth was strong in the quarter and then for the full year. And I know you guys said that quarterly patterns might be a little bit different here in 2025. Can you expand on what exactly you meant by that? And I know you're focused on continued 10% to 15% EBITDA growth going forward. But maybe there's a lot of uncertainty right now. Kind of what's your confidence that, that can continue kind of into fiscal 2026?

We're confident we're going to deliver that in 2026. We put the caveat in there because I don't know if you've been watching us, but we're pretty cautious operators. If we see something going on in the business, we'll make changes to deal with it. We don't know what's going to happen next. We're not making changes right now because we don't know what's going to happen. But if stuff started to happen quickly and it started to make changes -- negative changes to our business, we're going to need a little bit of time to deal with that. And if it goes the other way around because it's great for our business, we don't have to worry about it, but we just wanted to tell people with the uncertainty that we're seeing, that even if we didn't do it quarter-to-quarter, we plan on doing it year-to-year. And that's maybe just a commentary on how we've always operated the business. When things go bad, we react and we do stuff about it. And if they go great, I'll be happy. Maybe I don't want to do too much, but want to warn people that that's how we're going to handle it.

Okay, thanks. I’ll turn it back.

Your next question comes from John Shao of National Bank. Your line is already open.

Thanks for taking my questions. So there are some articles online about the tariffs on Canadian software that technically doesn't sound realistic. So what's your take on this?

I don't have a lot of comment on it. I don't think it's charged now. We don't know what's going to happen in the future, but look, a lot of our stuff's down in other locations so I don't know if that's going to be part of the issue or not. But we don't believe it's going to have any impact on us at the moment.

Okay, got it. And Ed, you also mentioned a couple of drivers of organic growth in your prepared remarks. But I'm just curious about the other side of the balance. Any example of your business that might potentially be under pressure if the trade environment starts to get worse from here?

Well, I don't know that this is going to happen, but I think if less stuff starts shipping internationally because tariffs are high and certain products that are kind of forced out of the market because of that, that's a possibility. If that happens, we'll suffer along with everyone else who gets -- who has a lot of shipment by I don't get paid by the shipment for stuff and there's less stuff coming across the border, we get less transaction volume from it. That's the area where we would be impacted. I mean, everything else is almost good for us, right, and think about it. Increased complexity, always talking about that, and we're certainly facing increased complexity right now. In the long run, I believe this will benefit us no matter what happens in the And it's putting a lot of focus on supply chain and logistics, which means money is going to start -- more money is going to flow to supply chain and logistics to help solve the problem in the first place. The people usually put their money is in a technology because that's where they get their biggest bang for the buck. So in the long run, I'm very optimistic about it. In the short run, if less stuff starts moving across a particular border because the tariffs went up, and I get paid to move that stuff or to process the transactions about that stuff, we're going to have a short-term issue along with everybody else. And we're not immune from that. At the same time, overall, I think this is probably going to end up being very good news for us because it plays into the things that we're best on.

Thanks for the color. I’ll pass the line.

Your next question comes from Mark Schappel of Loop Capital Markets. Your line is already open.

Hi, thanks for taking my question. Ed, during your prepared remarks, you called out areas of your business where you saw strength in the quarter, particularly MacroPoint, global trade intelligence. Could you just talk a little bit about maybe parts of the business that were not quite as strong in the quarter?

I don't know if we had any areas that were, what I would call, weak. Shipment processing was maybe a little slower than normal. You can see that in the trade flows but made up for in other areas like MacroPoint. That's shipment the processing business that was doing very well at the same time, had anything that we thought was doing badly at the moment. We put up pretty good growth numbers and most of the stuff was performing pretty well. Global trade intelligence was doing better than normal because of what you see going on. But I didn't really have anything that was, I would say, down significantly.

Great. Thanks. And then as a follow-up, could you just comment a little bit about what you're seeing on the pricing front? Are customers becoming more aggressive trying to get price concessions? Are you seeing some of your competitors giving up something on the pricing front?

Not really, no. Pricing issues tend to crop up more when you get into a deeper kind of recession environment. We're not in that and then stress right at the moment. I think our customers are mostly focused on how to deal with these tariff issues and what changes it, brings our business, and they're probably trying to buy more stuff from us. And usually when they're trying to buy more stuff from us, they're not sticking it to us on price. They're trying to figure out how to get to the best software to solve the problem that they're having. So at the moment, we're not seeing that.

Thank you. That’s all for me.

Thanks.

Your next question comes from Steven Li of Raymond James. Your line is already open.

Thanks, hey. Any thoughts on Amazon getting into LTL? And if it impacts your customers, does it hurt you in a similar way or are there offsets?

We do a lot of business in Amazon. It's probably good to have more competition there. And no, I mean, as with all the LTL providers, we see a bunch of them go out of business, we usually pick them up with the other one. So I think you might end up seeing the same thing here.

Okay. Okay, helpful. And on your calibration your baseline revenues and operating expense is very similar to last quarter. Can we expect Q1 to be similar to Q4 in terms of revenues and EBITDA?

You mean absolute numbers or percentages?

Yeah, actual numbers, yeah. [Multiple speakers]

Yeah, Allan may step in and give you more here, but I believe there's a headwind of FX going on right now that may end up making the absolute numbers closer than they normally are. I don't know that they're going to be. The will be higher, but Allan, I don't know if you have anything to add to that.

Yeah, Steven, there's certainly an FX headwind that's sitting in those numbers. You see it in the exchange rates that we gave you in calibration that definitely are different from Q3 and what we experienced in Q4. So keep that in mind. At the same time, I think back to Ed's points earlier, it's an uncertain set of times so I think our calibration reflects some level of that uncertainty.

Got it. And Allan, I've got you on. You said services plus 6% constant currency organic. What would that number be for overall revenues, constant currency and organic?

Yeah. We had lower license revenue. We had slightly lower hardware revenue in the professional services and other bucket, so slightly less than that. The FX headwind was over $2 million year-over-year and sequentially. So we certainly had some compression there that was purely FX, but overall growth is slightly lower than that 6%, just given the lower numbers in license and revenue.

So something like 5?

In that range, yes, Steven.

Okay, thank you.

Your next question comes from Robert Young of Canaccord Genuity. Your line is already open.

Hi. On the trade intelligence, you said lots of demand, especially recently. And the biggest driver, I think you said at the current network, so existing customers and you really focus on cross-sell. Is there any metrics or maybe even a rough idea that you can share with us on penetration there and whether you expect that penetration obviously to move forward pretty quickly in this environment to look so complex?

Well, I expect us to keep picking up new customers there, expect us to keep selling more stuff to existing customers there. And probably something that may not be so obvious, more and more people will buy that never needed it before. There's more and more e-commerce businesses popping up that need this information. We tend to pick up a lot of the new guys. So I don't see any real end in sight to that growth.

If you look at the 26,000 customers, I may imagine there's a lot of really small ones, freight brokerage and stuff. Like do all of those customers, is there a use case for all of your customers to use trade intelligence? Or is this something more just in the larger customers where they'd be that complex?

Yeah, it's mostly midsized and larger guys. If you have one product that's going to one country, you can probably watch the tariff rate yourself. If you have 10, maybe you can go watch it yourself. When you start having 50 that go to 50 countries, 500 that go to 50 countries, there's no way you're going to do that properly yourself. And those are the people that need to buy it. So not every customer needs to do it. A lot of our customers only do domestic. But as soon as they start buying or start making some product that goes to a lot of different countries, they end up needing the solution to solve the problem or they end up paying the wrong rate and that's a real problem for them.

Yeah, thanks for the color.

Thanks, Robert.

Your next question comes from Lachlan Brown of Redburn Atlantic. Your line is already open.

Hi, Ed. In the interest of time, I'll just keep it to the one question. Allan mentioned the reduction of the 45 personnel in the fourth quarter in his remarks. Just the areas of the business that these reductions came from?

Yeah, Lachlan, it came across the business. When we look at our business, we do this all the time. We're constantly assessing our business. We just looked across the business. And for the most part, these are role eliminations as we streamline our business and something you can expect from Descartes on a fairly regular basis but spread out across the entire business.

That’s clear. Thanks.

There are no further questions at this time. I would hand over the call to Ed Ryan for closing remarks. Please go ahead.

Hey, everyone. Thanks very much for your time on today's call, and we look forward to reporting back to you on Q1 results in June of this year. And otherwise, we look forward to seeing you guys out on the street with your customers. So have a great day. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.