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DATE

Thursday, Sept. 10, 2026 at 5:30 p.m. ET

CALL PARTICIPANTS

• CEO - Edward J. Ryan
• CFO - Edward James Gardner
• John Scott Pagan - Title not provided in transcript

TAKEAWAYS

• Total Revenue -- $193.6 million, representing 15% growth from last year driven by record services performance.
• Services Revenue -- $180.5 million, increasing 15% year over year and accounting for 93% of total revenue.
• Net Income -- $48.5 million, up 34% from $36.2 million in the prior year due to revenue expansion and controlled operating expenses.
• Adjusted EBITDA -- $89.8 million, growing 20% compared to $75.1 million last year.
• Adjusted EBITDA Margin -- 46%, a record level reflecting strong operating leverage from organic growth.
• Operating Cash Flow -- $75.1 million, a 40% increase from the previous year driven by solid operating results and efficient collections.
• Organic Services Revenue Growth -- 9%, excluding the impact of acquisitions and foreign exchange fluctuations.
• Cash and Liquidity -- $377 million in cash at quarter-end with no debt and an undrawn $350 million credit line.
• Acquisitions -- $30 million deployed for two acquisitions, including Idelic, which provides AI-powered fleet safety and driver management technologies.
• Share Buybacks -- $21 million spent on share repurchases in the first quarter, with an additional 197,000 shares purchased between May 1 and June 2.
• Q2 Baseline Revenue Guidance -- $169 million, based on exchange rates as of May 1, 2026.
• Q2 Baseline Adjusted EBITDA Guidance -- $66.5 million, representing a 39% margin calibration.
• Gross Margin -- 78%, an improvement from 76% last year due to services revenue scaling.
• Trucking Volume -- 4% decline in US domestic trucking shipments, reflecting broader macroeconomic headwinds in the freight market.
• Capital Expenditures -- $2.6 million for the quarter, with management expecting $4 million to $6 million in total spending for the fiscal year.
• Amortization Expense -- $17.3 million for the quarter, with a projected $53.5 million for the remainder of the fiscal year.
• Stock-Based Compensation -- $7 million for the first quarter, with a forecast of approximately $24 million for the rest of the year.
• Earn-out Payments -- $9 million estimated for contingent consideration payments for the balance of the fiscal year.
• Tax Rate -- 26% for the quarter, with the full-year rate expected to range between 25% to 30%.
• GTI Growth -- Significant services revenue contribution from Global Trade Intelligence, driven by increased demand for tariff and duty content amid geopolitical uncertainty.

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RISKS

• Ryan stated, "The war in Iran effectively closed the Strait of Hormuz and choked shipping in the region," which has caused volatile impacts on shipping rates and logistics reliability.
• Ryan noted that "US regulations have made it more difficult to qualify to be a driver," exacerbating labor shortages and wage inflation within the domestic trucking sector.
• Ryan warned that "there is new regulations from China designed to counteract what they consider to be improper extraterritorial jurisdiction," creating a complex web of conflicting compliance requirements for international shippers.
• Ryan indicated that the US Supreme Court "determined that a freight broker may have liability for the negligence selection of unsafe carriers," which could increase pressure on smaller brokers to perform auditable diligence.

SUMMARY

The Descartes Systems Group Inc. (DSGX +4.33%) reported record financial performance for the first quarter of fiscal 2027, highlighting a trend of organic growth despite a challenging global freight environment. Management stated that the business benefited from increased reliance on its Global Trade Intelligence and e-commerce import solutions as shippers navigated high tariffs and geopolitical disruptions. The company reported record margins and significant cash generation, ending the period debt-free with substantial capital available for its ongoing acquisition strategy. Management indicated that investments in artificial intelligence agents are becoming a core driver of network efficiency and customer adoption, specifically within tracking and compliance workflows.

• Descartes launched an AI agent layer designed to automate repetitive logistics tasks, such as calling drivers for location checks and gathering proof of delivery.
• CEO Ryan stated that AI agents have helped move shipment track rates for the MacroPoint network from 87% to 93% over the past six months.
• The company integrated Idelic’s proprietary database of 40 billion miles of driving data to enhance its safety insights for fleet management customers.
• Management noted that the Supreme Court's invalidation of certain International Emergency Economic Powers Act (IEPA) tariffs has led to customer refunds, potentially creating new capital for technology investments.
• CEO Ryan noted that air cargo has seen a mixed impact from the Iran war, with a temporary 20% decrease in available capacity due to airspace closures.
• Management maintained its long-term target adjusted EBITDA margin range of 40% to 45% despite currently operating at a record 46%.
• The company plans to host an in-person innovation forum in Chicago on Oct. 6 to 8 to showcase its full suite of AI developments to partners and customers.

INDUSTRY GLOSSARY

• GTI (Global Trade Intelligence): A suite of solutions providing data on international trade, including tariffs, duties, and sanctioned party screening.
• NCIB (Normal Course Issuer Bid): A Canadian term for a stock repurchase program where a company buys its own shares from the public market.
• GLN (Global Logistics Network): The proprietary cloud-based platform owned by Descartes that connects logistics stakeholders for data exchange and transactions.
• Type 86 de minimis: A US customs entry type for low-value shipments that was recently modified, impacting how e-commerce goods are cleared through customs.
• Datamyne: A Descartes-owned tool that provides trade data and research on import and export trends.
• IEPA (International Emergency Economic Powers Act): A US federal law that allows the president to regulate international commerce during times of national emergency.

Full Conference Call Transcript

Operator: This call is being recorded on June 3, 2026. I would now like to turn the conference over to Scott Pagan. Please go ahead.

John Scott Pagan: Thanks, and good afternoon, everyone. Joining me on the call today are Edward J. Ryan, CEO and Edward James Gardner, 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 and tariff 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 of revenues and incurrence of expenses potential acquisitions and acquisition strategy, cost reduction and integration initiatives, the approval and potential share purchases under normal course issuer bid, 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 SEC, DOC, and other securities commissions across Canada. Including our management's discussion and analysis filed today. We provide forward looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future. You are cautioned that such information may not be appropriate for other purposes.

We do not undertake or accept any obligation 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.

Edward J. Ryan: Thanks, Scott, and welcome everyone to the call. Today, we are again reporting record quarterly financial results coming off a strong financial year last year. In Q1, we were ahead of our plan, which gives us even more room to make AI and other investments in our business. These are great results that I am looking forward to walking through in more detail. However, first, let me give you a road map for the call. I will start by hitting some highlights of last quarter. I will provide some comments on how the numerous events in the world are impacting our business.

I will then hand it over to Edward James Gardner, who will go over the Q1 financial results in more detail. After that, I will come back and provide an update on how we see the current business environment and how our business was calibrated for Q2. We will then open it up to the operator to coordinate the Q&A portion of the call. Let's get into Q1. Metrics we monitor include revenues, profits, cash flow from operations, operating margins, and returns on our investments. For this past quarter, we again had record performance in each of those areas. Total revenues were at record high $193.6 million. up 15% from a year ago.

Record high services revenues were also up 15% from a year ago, with our continued focus on generating recurring revenues. Record net income was up 34% from a year ago, Record income from operations was up 35% from a year ago. Record adjusted EBITDA was up 20% from a year ago. Our adjusted EBITDA margin was at a record level of 46%. We generated $75 million in cash from our operations, up 40% from a year ago. So strong record results across all of these key metrics. At the end of the year, we had $377 million in cash, and we were debt free. With an undrawn $350 million line of credit.

Remain well capitalized, cash generating, growing, and ready to continue to invest in our business. We have a normal course issuer bid that allows us to purchase up to 8.6 million shares before December 2026. We have made some purchases since last reported, and I will allow Edward to give you those details. in a minute. But especially in light of how the business performed last quarter, we are optimistic about Descartes' future. And a normal course issuer bid is a tool we could use to make further purchases. I wanna touch on 4 areas that helped this business perform well this quarter. The first is global trade intelligence, which is 1 of the largest contributors to our services revenue.

And had a strong growth in the quarter compared to where it was a year ago. that is pretty intuitive if you think about what is happened over the past year. Become increasingly challenging and unpredictable to determine how to ship goods from Point A to Point B. Especially if they need to cross borders. We have seen strong growth across the 4 core areas of our business or of the global trade intelligence business. The first is tariff and duty content. We believe we have 1 of the best real time sources of global tariff and duty information. Past year, there have been huge and frequent swings in the tariffs and duties.

Particularly from large shipping or importing nations like China and The United States. As we have said before, if tariffs and duties are changing, that is usually a pretty good sign for this part of our business. The second is the sanctioned party screening business. Continue to be a leader in sanctioned party screening, and we continue to see strong growth here as we help our customers navigate an increasingly complex sanctioned party environment. Stemming from the global--the current global geopolitical landscape. Third, we have the foreign trade zones or FTZs.

These are facilities where goods can be imported and stored and processed on a tariff free basis until they are ultimately released from the facility for consumption in the domestic market where the facility or zone is. With all the tariff uncertainty for imports in the United States, and more companies have been pursuing this option for their business. This has proven to be a particularly lucrative strategy for those who deferred paying any of the recent IEPA tariffs that were invalidated by the Supreme Court. By not paying the tariffs, these importers do not now need to go through the delayed process of trying to obtain refunds.

So, a stronger grower so far and with continued uncertainty about the legality and amounts of tariffs, 1 that we expect many companies will continue to pursue. Our technology leverage for the operation of the foreign trade zone. And the last 1, No. 4, is Datamyne. Companies have adopted a myriad of strategies for dealing with tariff uncertainty--whether it is different sourcing strategies, consideration of classification of goods, even shipping routes, the best companies are doing as much research as they can to help guide their strategies, and that is where Datamyne comes in. Comprehensive research tool to see how others are dealing with important challenges. This continues to see good traction. And is a good grower for us.

Second area of growth for us was e-commerce entries. We continue to see overall growth in consumers embracing ecommerce, even with the elimination of the tariff-exempt Type 86 de minimis program, imports have continued to grow coming into the United States. We have a premier solution for handling e-commerce imports in the United States using our NetCHB system. With particular strength in high volume and high velocity requirements. We are helping key brokers meet the demands of importers, and these volumes are contributing well to our revenue growth. The third area is fleet performance management and routing. We have market leading solutions to help customers manage their fleets of vehicles.

In particular, we have routing and scheduling solutions that help companies figure out the most efficient way to make deliveries and reduce hours and miles driven to do that. there is always good demand for these solutions. However, demand increases in periods where fuel costs increase, running your fleet becomes more expensive, and customers look to our solutions to reduce the amount of fuel they are using to make deliveries. Cost consciousness for fleet owners is even higher given the inflation that exists in driver wages. This wage inflation is driven in part by driver shortages, New US regulations have made it more difficult to qualify to be a driver. And the final 1 is transportation management where MacroPoint.

MacroPoint continues to be strong for us. MacroPoint provides real time visibility to shipments. Brokers and shippers tell us the loads they want tracked. it is our job to get the tracking information from onboard systems. Transportation management systems, and using our application or old fashioned calls to drivers. Over the past quarters, we have enhanced our system to have AI agents that interact with drivers to encourage adoption of our tracking app, helping us reach a segment of the market that was previously difficult to reach at scale. These agents have helped contribute to a higher percentage of shipments tracked than our peers. Which in turn drives more people to our network.

We have also released some new agents to help brokers manage current workflows on shipments, which I will speak to further in a few minutes. So these were the principal contributors to growth. We were able to help our customers in a challenging freight environment. We generally saw overall shipment volumes down in the quarter with the biggest contributor to that decline being the Iran war. Here's a quick summary by mode of transportation. So in ocean, the war in Iran effectively closed the Strait of Hormuz. And choked shipping in the region. Shipments of oil, fertilizer, and aluminum were among the most impacted imports to United States.

This disruption has had a volatile impact on rates and shipping with many avoiding the region because of the security risk and costs of war risk insurance. This has resulted in longer sailing times, reduced schedule reliability, increased fuel usage, and costs, increased insurance premiums, and additional congestion at transshipment hubs. The fuel cost impact is spread beyond the Middle East with European Far East sailing seeing 25% rate increases. Spot rates for Far East sailings continues to be high. Causing many shippers to rethink their strategy for balancing contract rates and spot bookings. So overall, very challenging ocean shipping market at the moment. Next is Air Cargo. Which has seen some mixed impact.

The war in Iran temporarily closed certain airspace to flights. Some estimating a temporary 20% decrease in available capacity. It also presents an ongoing security risk Fuel costs and availability have also made it a pricier mode of shipment. However, there have been some positives. With ocean shipping struggling and economic conditions volatile, many have elected to leverage their ammo to move goods quickly and or on short notice. It continues to be strengthened strengthen the shipment of semiconductors and AI infrastructure. Which are more appropriate for the air mode given the high value weight ratios and time sensitivity.

E-commerce continues to thrive and air benefits from that because of short fulfillment cycles, Some inventory restocking strategies have shifted smaller, more frequent orders, which switches inventory to air. Promotion. So, overall, despite the volatile impact of geopolitical tensions, air cargo has been relatively strong. Road transportation. So fuel and driver costs and driver shortages having the biggest impact on US domestic trucking. Smaller carriers are struggling. And it is pushing some capacity out of the market, but not enough to counteract the increased to shipping rates caused by fuel costs. So overall, we saw trucking volumes down 4% year over year. With that overview of transportation mode, the general theme is a tough and costly market to ship in.

Our customers are increasingly relying on us and technology to deal with this complexity and uncertainty. A key to our 1 of the keys to our customers managing a more complex world and rising resource costs will be leveraging artificial intelligence technology. Our customers are looking to us to be a leader in AI to help them plan for and operate in the future. Spoke about this last quarter. Here are some of the reasons they are confident in our success. We are a critical logistics network relied on by the world. We connect hundreds of thousands of companies. We solve complex inter enterprise problems for them, that they cannot solve on their own within their own enterprise.

We have scale to process billions of transactions a year. We deliver a reliable and stable solution at scale. We are trusted by our customers. We help them with compliance. A function that is risky to handle solely internally without leveraging a specialist. We have workflow and domain expertise for complex logistics processes. We have unique proprietary data that can deliver fuel that can fuel better answers. Better answers mean increased operational efficiencies. We have a long record of investing in new technologies and businesses to enhance our service offering. We are financially stable and operate our business for the long term.

We have a broad portfolio of solutions that are ideal for those who need integrated logistics and work workflows and processes. Every day, we are advancing on our use of AI technologies for our customers. We have designed our AI agent layer that will accommodate external and external agents accessing their functions and data on the Descartes Global Logistics Network. That layer orchestrates agents and the skills they call and enforces policy, so it says who can do what with whose data and under what approval. It captures audit and observability so that every action is traceable and explainable and it manages the economics--the usage, cost of attribution, and billing.

We believe there is lots of value to be delivered to our customers using AI agents. I mentioned the MacroPoint agent before. However, we have a whole suite of transportation management agents, including calling drivers for location checks, gathering proof of delivery information for billing purposes, arrival and departure confirmation, getting truck rates to help with carrier selection, getting insurance certificates for carriers. We have similar agent development. Agent development in other pillars, including agents gathering service time information, and fleet management, research agents in Datamyne, enhanced denied party screening to manage false positives just to name a few. These agents are automating workflow and work.

They are designed to automate repetitive tasks that do not need the creativity of a human and to surface new opportunities for humans to consider new strategies and opportunities. Some of the agents are sold to our customers, while others are designed to increase adoption velocity, or traffic over the global logistics network. We believe that AI agents, whether they are ours or third party agents with permission to access our network, will play a big role in future efficient supply chain logistics operations. Because of that, we anticipate we will continue to increase our level of investment in AI technologies.

Some of that will come from increased usage of existing AI tools within our business, to build out our AI agent layer. From building and designing new agents, from enhancing the functionality that we have in our existing customer applications, from rapidly accelerating the interoperability of our solutions, from making our network more secure and reliable, and from delivering a better customer experience. However, also anticipate that our M&A strategy will include detailed consideration of how potential partners will enhance how we are using AI to help our customers.

This past quarter, we completed the acquisition of Idelic, brings new AI powered technologies to our fleet management customers Idelic helps our customers with help managing the safety of their drivers, They have proprietary database of over 40 billion miles of data and telemetry on hundreds of thousands of historical accidents, which can then be leveraged to identify drivers or practices that may require further training or remediation to prevent future safety issues. That data is something that non Descartes systems are not trained on. And allows us to provide better safety insights to our customers.

And when combined with Descartes' industry leading routing planning, and execution technology, this enables us to deliver a complete cutting edge fleet performance management solution that uniquely incorporates driver behavior, and safety signals into our robust operational dataset. A big welcome to the Idelic team, and we are excited about what they can do for our fleet management customers. I provided an overview of our approach with AI technologies and some of our investments. However, we are planning a comprehensive description of everything that Descartes is doing with AI in our in-person innovation forum. To be held in Chicago, October 6-8 of this year.

This is a big event we invest in to provide our customers and partners access to our people, our latest developments and plans, and give an opportunity to provide direct feedback on where we are and where we are going. Been a few years since we have done an in person event of this scale, so we are very excited to host everyone and share how excited we are about our future. Please see our website for registration details. So in summary, strong Q1 with additional AI investment and a new acquisition. I am excited about how the business is performing. The opportunity we have in front of us.

So with that, I will now turn the call over to Edward James Gardner to go through the financial results in more detail. Edward?

Edward James Gardner: Thanks, Edward. As Ed mentioned, I will be walking you through our key financial highlights for the first quarter of fiscal 2027. We are pleased to report record quarterly revenues of $193.6 million an increase of approximately 15% from revenues of $168.7 million in Q1 of last year. Our revenue mix in the quarter continued to be very strong, with services revenue increasing 15% to $180.5 million from $156.6 million last year in the first quarter. Services revenue represents 93% of total revenue this quarter, which is consistent with Q1 last year.

Removing the impact of both the recent acquisitions as well as a positive impact from changes in FX rates, we would estimate that our growth in services revenue from new and existing customers that is our organic growth, would have been just over 9% this quarter when compared to the same quarter last year. And this is up from approximately 8% organic growth In Q4. Professional services and other revenue, including hardware revenue, came in at $11.5 million or 6% of revenue, slightly down from $11.8 million in Q1 last year. While license revenues came in at a bit higher this year at $1.6 million versus $300 thousand last year.

Collectively, our professional services and other revenue combined with our license revenues was up 8% this year and together remain approximately 7% of our total revenues. Gross margin came in at 78% of revenues, up from 76% in Q1 of last year. The increase in gross margin for the quarter was primarily due to operating leverage from more organic growth and services revenue. Turning our attention to the bottom line. As a result of solid revenue growth, improved gross margin as well as controlled growth in operating expenses, adjusted EBITDA came in at a record $89.8 million in the first quarter, or approximately 46% of revenue. Up 20% from adjusted EBITDA of $75.1 million in the first quarter last year.

From a GAAP earnings perspective, net income for the first quarter came in at $48.5 million up 34% from net income of $36.2 million last year. With these operating results and strong collections from customers, cash flow generated from operations came in at $75.1 million or 84% of adjusted EBITDA. Up 40% from operating cash flow in the first quarter last year. Overall, as Edward J. Ryan mentioned earlier, extremely pleased with our operating results in the quarter.

If we look at the balance sheet, our cash balances totaled $377 million at the end of April, As I just mentioned, we generated operating cash flow just over $75 million in the quarter, Offsetting that was approximately $30 million in capital deployed on 2 tuck in acquisitions, and approximately $21 million on share buybacks under our normal course issuer bid. As we look ahead, we remain well capitalized and ready to continue to work on potential M&A activities in our space.

And a couple of more points as it relates to the remainder of fiscal 2027, going forward, we expect to continue to see strong operating cash flow conversion north of 80% of our adjusted EBITDA of course, subject to unusual events and quarterly fluctuations, including adjustments related to future earn out payments that exceed our estimates made at the time of an acquisition. After incurring approximately $2.6 million in capital additions in the first quarter, We expect to incur approximately $4 million to $6 million in additional capital expenditures this coming year mainly related to IT equipment purchases.

After deploying approximately $21 million on share buybacks, in Q1 2027, we also note in our shareholder report that we purchased an additional 197 thousand shares during May 1 and June 2. And we may see additional purchases under the NCIB program moving forward. After incurring an amortization expense of $17.3 million in Q1 this year, we expect the amortization expense will come in at $53.5 million for the remainder of fiscal 2027. With this figure being subject to adjustment for foreign exchange changes and any future acquisitions.

We estimate that payments of contingent consideration for earn out arrangements for the balance of this year could be up to approximately $9 million subject to any necessary adjustments resulting from the final earn out calculations. Our income tax rate in the first quarter came in within our expected range at approximately 26% of pretax income in line with our blended statutory tax rate of approximately 26.5%. For the remainder of fiscal 2027, we are expecting the tax rate will be in the range of 25% to 30% of pretax income which means it will be something on either side of our blended statutory tax rate.

However, as always, we should add that our tax rate may fluctuate from quarter to quarter from onetime tax items that may arise as we operate internationally across multiple countries. And finally, after incurring stock based compensation expense of $7 million in the past quarter, we currently expect stock compensation to be approximately $24 million for the remainder of fiscal 2027, subject to any forfeitures of stock options or share units. I will now turn it back over to Edward J. Ryan to wrap up with some closing comments and our baseline calibration for Q2.

Edward J. Ryan: Hey. Thanks, Edward. As I mentioned earlier, it continues to be challenging shipping market in large part because of the Iran war's impact on moving goods. And tariff uncertainty that is ongoing. Expect that to be challenging throughout our Q2. There are also 3 new things impacting the market that I thought I should flag. First is tariff refunds. Earlier in the year, the Supreme Court invalidated the IEPA tariffs that had previously been imposed by the US administration and required the tariffs that have been paid be refunded. That refund process is now in progress with some customers reporting that they are in partial receipt of funds.

Or their businesses receive these funds directly depending on whether they were paid directly or via a broker, they may very much provide money for investments that were not contemplated when the tariffs were in place. So there may be the potential for new technology investment opportunities for us with US importers. The second is broker liability. The US Supreme Court has been unusually active in things that impact shipping. Recently, they determined that a freight broker may have liability for the negligence selection of unsafe carriers. This makes it very important for freight brokers and others selecting carriers to ensure that they are doing due diligence while hiring trucks to drive loads for them.

We are able to help our customers with that using our transportation management systems, and, more specifically, our MyCarrierPortal solution that performs checks on the suitability of potential carriers. Separately, we expect that there will be pressure on smaller brokers in the market as they consider the cost of performing auditable diligence and increased insurance requirements. To something that may ultimately impact the number of brokers that are in the market going forward. And the third is new China regulations. there is new regulations from China designed to counteract what they consider to be improper extraterritorial jurisdiction of the regulations of other countries.

For international shippers with supply chain operations with ties to China, this could mean needing to navigate a web of conflicting regulations between China and other countries. For example, a US regulation against forced labor may prohibit US entities from doing business with certain entities while Chinese regulation prohibit a Chinese organization from complying with The US regulation that China considers to be extraterritorial. So just flagging an area of increased complexity for our customers going forward and 1 that will require even more attention to the importance of global trade compliance solutions. So it is a challenging macro environment for shipping with new things that come in to make it an ever- changing landscape for our customers.

It We keep this in mind as we think about how our business is financially positioned and calibrated. In our quarterly report, we have provided a comprehensive description of baseline revenues, baseline calibration and their limitations. As of May 1, 2026, using foreign exchange rates of $0.74 to the Canadian dollar. $1.17 to the euro, and $1.36 to the pound. Estimate that our baseline revenues for the second quarter of fiscal 27 were approximately $169 million. Our baseline operating expenses were approximately $102 million We consider this to be our adjusted our baseline adjusted EBITDA calibration of approximately $66.5 million for the second quarter of fiscal 27 or approximately 39% of our baseline revenues as at May 1, 2026.

We are currently at excuse me. We are currently operating above our expected adjusted EBITDA operating margin range of 40% to 45%. Our margin can vary in any period given such things as revenue mix, foreign exchange movements, the impact of acquisitions. As we integrate them into our business. For now, we are keeping our target range as 40% to 45%. However, we will monitor how we are performing over the coming quarters to consider when whether any upward adjustment is appropriate. These remain uncertain times for our customers. it is 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 others that 1 thing they can rely on is Descartes. To everyone for joining us on the call today. And as always, we are available to talk to you about our business in whatever manner is most convenient for you. With that, operator, I will now turn the call over to you for the Q&A portion of the call.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press *2. 1 moment, please, for your first question. And your first comes from the line of Dylan Becker with William Blair. Please go ahead.

Jackson Bogli: Hey, guys. This is Jackson Bogli on for Dylan Becker. You know, Edward J. Ryan, I think, you know, what is interesting is we have got so many different things going on with geopolitics, excuse me,, and just changing supply chains overall. I mean, could you maybe try to contextualize at what point would that actually turn into a headwind for Descartes instead of it really driving interest on the platform? Just anything you could say about you know, is there a point where the complexity gets too much and, you know, it starts to become a headwind for your business?

Edward J. Ryan: Well, I think I think it is not so much that the complexity gets to be too much. Most of the complexity helps us regardless of how much there is. The more there is, it tends to be the more they use our software. Where what we have seen in the past, and we will probably see as well if you look back, if the complexity gets so much that it starts to harm the economy, you know, we go right along with the economy pretty well. I mean, the economy's down, people are shipping less stuff, and you know, we do not do as well. And you saw that with the tariffs last year.

I mean, The US put a whole bunch of tariffs in place. They were surprising to everyone. No 1 knew what was gonna happen next. There was a lot of uncertainty day to day in what was gonna happen, and it caused people to freeze. And I think with everything that was going on with AI at the time and today, you know, we did not end up in a recession because there were lots of good things going on in the economy as well. But make no mistake, people were not shipping stuff as fast as they could have because they were not sure what to do about these tariffs.

Tariffs that were now subsequently invalidated and all for not, in effect, ended up having to pay these rates or, in theory, no 1 will end up having to pay them. And, at the same time, you know, that complexity caused them to slow down their shipping decisions. And, while we were benefiting on the 1 side from tariffs and duty, you know, rate provision, We were you know, suffering along with everybody else when there were not as many shipments moving. Around the world. So that is where it fits us. And think it is an increased complexity that necessarily hurt us.

It generally keeps helping us no matter how much there does not But if it leads to, you know, depressed economy, then it hurts us and everyone else.

Jackson Bogli: Got it. I think that makes total sense. Maybe for Edward James Gardner, you know, you guys have a really good capital position. You have the line of credit, really good cash position. You know, it seems like there is multiple areas you could focus on for investment in the business and capital deployment. I am just curious how you are thinking about the M and A landscape with the depressed valuations we are seeing as well as continuing to invest in the platform. Just curious to get any thoughts on how you are thinking about capital deployment going forward this year.

Edward James Gardner: Yeah. I think I do not think it changes that much from other years. Obviously, with the ability to build more stuff faster with AI that changes the calculus. Somewhat. Absolutely, when we are looking at our buy versus build decisions, but the framework remains similar. Right? We are still looking for great businesses that have some sort of proprietary unique data and deep domain expertise and very sticky customer base. So we are looking at capital allocation now. You know, I think we see the opportunity to build more, build faster. Produce more for our customers. And that changes how we look at some of the acquisitions, but there is still a lot of targets out there.

And, I would say we are very busy and actively engaged looking at them. From a value maybe just comment on the valuation side. From a valuation perspective, You know, it is not unusual for the private markets to not necessarily go completely in sync and not necessarily as quickly as the public markets. So, yeah, as the as the prices come down, it is not necessarily at the same pace, but we are certainly seeing them come down a bit, and we remain engaged in a lot of opportunities right now. Lots of discussions.

Jackson Bogli: Got it. Super helpful. Thanks, guys.

Operator: The next question comes from the line of Chris Quintero with Morgan Stanley. Please go ahead.

Chris Quintero: Hey, guys. Thank you for taking my questions here. I wanted to ask about the quarter here. You know, third consecutive quarter of organic growth acceleration, really great to see But you all called out some challenges here, specifically called out Q2. So could you help clarify like do you expect some of these challenges that you have highlighted to impact the growth rate, or are these really more opportunities for you to leverage your network to address some of these additional complexities that your customers are seeing?

Edward J. Ryan: I mean, if you know us, we are we are pretty cautious. We probably spend more time telling investors about the risks than most companies do in the software space. But, you know, you are right. Things are going well right now, and I see a lot of potential for them to continue to go well in the future. But still, I mean, even in this past quarter, I mean, this was this was not--it was a great quarter for us where, you know, 9.5%. Something like that organic growth. On, services. that is great. And we were doing that in a down freight market.

And so, you know, we are pointing out that for the future quarters, I am pointing out that hey. We are still in a down freight market. And, no. I do not I do not, you know, I do not know what is gonna happen exactly either. But, know, we are doing okay considering, and, we are happy about that. But, know, be nicer if everything's coming up roses. So, yeah. Just knowing us to we are always quick to point out the, you know, the risks and stuff and make sure that, we are always doing what we said we would do.

You see that in the number of the way many of the ways that we produce our numbers. You know, we are pretty conservative. So I think that is what you are saying.

Chris Quintero: Got it. Okay. So, mostly just conservatism here highlighting some of the risks, but obviously, the business is doing pretty well here. And as a follow-up, really great to kinda hear more of the momentum around your AI and agents. Are you thinking about the go to market motion as you start to roll some of these solutions out? It seems like a lot more software vendors are starting to pursue more of a forward deployed engineer type of model to help sell some of these solutions into customers. So I am curious kind of how you are thinking about that on the go to market side.

Edward J. Ryan: Well, I mean, we think we have a lot of solutions that we can go out and to customers, and we are. We are starting to get traction doing that. We have a lot of solutions that, improve things for our customers internally without them really having to sign up for anything new. You know, if they are paying me to process a shipment and I have some tool that figures out they need to process a new shipment here because they have a problem with an existing shipment. I already have a contract in place to do it. I do not have to sell them anything new.

The agent that I mentioned in this earlier in the prepared comments I just get more that agent's job is to get more truckers online, and each trucker I get online is gonna pay you know, is gonna going to be able to, help me track a shipment that is gonna get me a couple bucks a shipment. And now that he signed up, every time he gets a shipment, I am gonna be able to track it. So it is the gift that keeps on giving. And, you know, we have agents calling these truck drivers and you have to call them beginning of the call and, you know, beginning of the move.

You cannot call 20 minutes to go on the move. it is dirt. Asking to download the mobile app. You have to get to them quickly. And, you know, frankly, 3 years ago, we just were not able to keep up and at least not cost effectively. And now all of a sudden, we, you know, we can call the guy within minutes of him taking off. Picks up a load, we are calling him right away going, hey. You know, can I track that load for you? Why do not you download the app, and I do not have to call you anymore?

I was supposed to call you every hour, and, if you download this mobile app, I never call you again. And that is pretty compelling argument for the truck driver, especially when he knows he is been tracked by MacroPoint in the past. So he is like, it is a known name to him. And we are the largest in the industry, and, you know, that alone has moved our track rates from 87% 6 months ago to 93% and moving higher. Well, that is you know, each 1 of those percentage points is a lot of $2 shipments. That, that end up producing revenue for us. So that is great. You know?

I do not have to do anything, and I am just I am just helping our customers, and they are paying more, and they are happy about it because they are gonna track more shipments. And then finally, know, there is some stuff internally. Right? We, you know, we are able to put stuff faster. The ideas come out. You heard us talk about this whole AI layer where we can more closely pull people into the network in an organized way, do that. And that saves us money. It saves our customers money. It makes it easier for them to use our network.

It makes us easy it makes it easier for us to provision services to them that they pay for. And you know, I know the market thinks, oh, AI is gonna harm companies. I go, I do not know if I am a software company. I mean, we have software. But I do not know if I am quite the software company the way everyone else is. We think of ourselves as more of a, you know, network data content provision type of business.

And, that means we have a lot of proprietary data that can help customers make good decisions in the future and you know, frankly, if you look at our network, I know where all the shipments are supposed to be over the next month. So that is pretty valuable information when things start getting messed up or screwed up in the in the supply chain and just decisions need to be made quickly that can save a customer a lot of money. And I can use AI to do that because I have all the data, and no 1 else does.

And I go, you know, I know what think is gonna happen to everyone else, but I am pretty sure we are gonna benefit from that. And we are excited about it. So I will leave it at that. Excellent. Thanks so much, Edward.

Operator: Thank you. And the next question comes from the line of Lachlan Brown with Rothschild and Company Redburn. Please go ahead.

Lachlan Brown: Hi, Edward. Edward, thanks for the question. You mentioned that the, Q1 came in ahead of plan, noting the robust organic services revenue growth of greater than 9%. Could you just dive into the drivers in the quarter that led to the delivery above your prior expectations?

Edward J. Ryan: Well, yeah, and I covered it pretty well in the beginning of the call. it is global trade intelligence business did very well, as you might have expected. You know, ecommerce, shipment business, Type 80, what was formerly Type 86 filing. Has been booming lately. I mentioned on previous calls, you know, we it had a lot of we had we had, you know, 40% to 50% of that market, and, when it switched from Type 86 to Type 1, a lot of our competitors could not handle the speed with which those transactions had to be filed. They just they were not really networks.

They were software companies that were making these filings, and when they had to do it a different way, their networks fell apart and had you know, a lot of those customers switch over to us so that we have a lot more market share out of it. And it is been a great business for us in the last year and I suspect for a long time to come. Our fleet management business has, been doing well as it has for many quarters now. And our transportation management business led by MacroPoint has been doing great. You know, in a down market, they were still picking up a lot of momentuM&A lot of new shipments.

Sign both signing customers and that agent that I talked about is, you know, that move from 87% to 93% is significant. it is a lot of money. And, even in a down market, we were able to pick up more revenue than ever. So, all that is that is, you know, added up to pretty good news for us.

Lachlan Brown: that is helpful. Thanks. I wanted to ask. In recent months, we have seen a few of the larger global logistics players double down on their technology investments. And their longer-term AI strategies. I was wondering if you could provide some color on what you are seeing in the mid markets in terms of their pace of AI adoption. You know, how are they responding to these larger players? And just any color on what conversations you are having on how Descartes can support them.

Edward J. Ryan: As you might expect, it is it is very helpful to us. Right? You know? We help the bigger players, in a lot of ways. there is oftentimes our biggest customers, but then the mid-size and smaller players have to keep up. And, while the big players cannot build some of the stuff themselves, like the backup of systems, The medium and small time guys really cannot do that, and they need tools from people like us to help them keep up. And yeah, I would always say to people, you know, customers would say, I want a strategic advantage in my with using software in my in my, in my company, and I go, okay. Great.

Here's a bunch of stuff you could use to do that. But bear in mind, is not gonna last forever. Right? Every you know, it used to be you know, 7 years ago. If you had MacroPoint, you had a big selling advantage. Against the broker that did not. Well, you do not have that advantage anymore. You have to have it now. Right? Everybody has this ability to track a truck. And, you know, they are on to the next thing now. Right? And, that is good for us. Right? And we cannot, you know, kinda keep building tools that help people you know, service the customers properly.

And then when everyone has those tools, it becomes table stakes to a certain extent, and then we have to go give them new tools to help them make the next advancement. I do not know that we are driven that way by big forwarders all the time, and we probably drive the advancements as much as anyone. But, you know, sometimes people could build it themselves. Depends on what we are talking about. You know, if you are talking about network service, it they do not, and they cannot really build it themselves. If you are talking about a back office system, sure they can. They buy some stuff from us. They buy some stuff from other people.

And they put it together, and they, you know, they have their whole back office infrastructure. Soon as they get out to need to communicate with other people, all bets are off. Right? They have to use a network like ours. They will never be able to replicate our network. I think the big guys, the FedEx and the UPS and DHL, even the Amazons, Like to build a lot of stuff themselves. Well, they always end up in this situation where, like, yeah. Sure. But you cannot do it with the network. Right?

The number of connections you need to maintain is not feasible. it is much more cost effective for someone who is neutral like us to do it for everybody. Everyone a low rate to do it as a result. And that is, you know, That advantage has been, you know, the case for 25, 30 years. And I think with AI, it is even gonna be more so. Right? You know? Most of the small AI players that we talk to that seem to be more like features than companies. You know, they are coming to us going, hey. Can I join your network? And I am like, well, not really. You do not have a customer.

You know, that is yeah. Customer needs to join the network. If they are using your software and they wanna do it, no problem. But I am not gonna just help you guys. You know, get business by giving you access to our network. Guess it does not work that way. So the whole thing's interesting, and, you know, I think it is AI is gonna even further separate things to our advantage. But you know, that is how we see the playing field laying out with regard to your question.

Lachlan Brown: Makes sense. Appreciate the call. Thanks a lot.

Operator: And the next question comes from the line of Stephanie Price with CIBC. Please go ahead.

Sam Schmidt: Hi there. it is Sam Schmidt on for Stephanie Price. Thanks for taking my question. EBITDA margins have been tracking towards the top end of Descartes' target range for several quarters. How do you think about this going forward? And can you talk a bit about how you are leveraging AI in internally and how you are tracking progress on those initiatives? Thank you.

Edward J. Ryan: Sure. I mean, we are up at 46% right now. We kind of we said the range is 40 to 45. You know, and you have watched us do this in the past. We are we usually, like, we usually blow through the number a couple quarters before we you start to move it up. You just see the same here. Know, the things that can affect it are the big things are FX and acquisitions. You know, we are up at a pretty lofty EBITDA margin now. We are not gonna find many acquisitions that will be accretive to our Egypt EBITDA margin.

Not that it is a problem. it is just you know, if I buy some company that makes a 25% EBITDA margin with plans to increase it, that is great for our shareholders as long as they pay the 25%. Price for it. But also drags my 46% of the decent sized company down to 44%. I do not wanna opt into a number that we are gonna miss. And, you know, we wanna provide consistent answers to our shareholders and now if we tell a number, we are either in that range or we beat that range. And I am not gonna apologize too much for beating it. We are only beating it by a point right now anyway.

But I do not wanna mislead people. With regard to AI in relation to this, yeah, we are seeing we are way more efficient or let's just say we can produce a lot more stuff with the people we have. And, we will see how this plays out, but I think right now, we are going you know, while I see other people laying, you know, employees off with using AI, and now I do not need as many employees. I think we are inclined to go the other way right now. I am saying I am using AI. And it is producing a lot of productivity enhancements. And I am using that to produce more software.

And, you know, we have that luxury because we are in the 45% range or 46% range right now. If someone's in the 25% range and competing with us, you know, there are significant disadvantages, especially if they are trying to do the same thing we are, which is to use our profits to buy more companies. Well, you are making half of my profit, you are not gonna be able to do that as effectively as we are. And know, we are inclined to take the extra right now and produce more software for our customers and make sure that we continue to be a leader in this space as a result.

And, you know, I do not know if that changes in the future. Maybe, you know, take a look at it over time. But right now, I think, we have a lot of good ideas. And, you know, more good ideas than we have time to produce them. So why would I why would I use it to, to cut any cost? I think I am using it to produce more stuff because I think that is gonna produce more revenue for us in the future. And we are excited about that.

Sam Schmidt: that is good color. Thank you. And then maybe 1 more for me. On market share gains in the quarter. Can you comment on how those contributed to organic growth and how you are thinking about opportunities to shape take share at this point?

Edward J. Ryan: Yeah. I mean, I mentioned this in previous calls. I do not I do not wanna get into to naming competitors and stuff like that. But we, you know, certainly in that TMS space, in the routing space, know, some of the things where we are the market leader, And times have been tough, you know, over the last year for a lot of companies, but, you know, I have 3 hundred and 4 hundred different products. To spread it out over. And, we are not materially harmed even when things got tough. I mean, maybe things were tough a year ago, I went, yeah.

They were tough, but we are still making, yeah, still making that. $90 million a quarter. So it is not kid ourselves, we are we are doing okay. You know, we have competitors out there that. We are only taking business from them. I mean, they are they only have 1 product. I mean, that is their that is their stuff. And a lot of these guys are high flyers. That have never seen a situation where they were shrinking. And all of a sudden, they are and it causes real problems inside the company. The stock's not worth what it was to shareholders, who are furious, and, you know, and the shareholders overpay to be in the business.

And their employee stock's not worth anything anymore. And, they cannot believe that know, they were worth $2 billion at 1 point. And all that happened was their growth rate went from 30% down to, you know, almost zero. But everything else, you know, was still fine. But when it went down, you know, they had to stop growing. They stopped growing. They stopped having the money to buy more you know, buy buying more stuff, and they had to start cutting costs. And, usually, guys that are not good at cutting costs, and, they really struggle to do it. And they just cannot imagine. And you know, all those things add up to help us quite a bit.

You know? That whole company gets demoralized when that happens. And, you know, fortunately for us, we are we are not in a situation where we are facing anything like that. Even when times are tough last year. They were not that tough for us. Most of the business was still looking up. And I think it is a testament to the thing that our guys have built. And they have they have built us something big to solve a lot of problems. And, you know, had the chance to succeed in many areas even when times are tough. We have some of our businesses are doing great.

Sam Schmidt: So not everyone has that leisure, so. Thanks for taking my questions.

Operator: Thank you. And the next question comes from the line of Mark Schappel with Loop Capital Mark. Please go ahead.

Mark Schappel: I was wondering if you could just walk us through the key puts and takes you observed in the Air Cargo business this quarter that you referenced in your prepared remarks. And then also, with respect to that, you also noted that your trucking business is down about 4% percent year over year. And what would that decline translate to in your Ocean Shipping business?

Edward J. Ryan: Oh, okay. I gotcha. Alright. So let's talk about the other 1 first. You know, the Iran war, especially in the beginning, it had a lot of flights not being allowed to fly over Iran and, or the let's say, anywhere over that area. Well, you know, you have got Emirates there. You have got, you have got at the high end, you have got several of the biggest air cargo carriers in that region. And there is, like, a third of the map that cannot fly in that direction. So when they are right there, I mean, in Abu Dhabi, Dubai or whatever. You know? So it is tough for them.

And, you know, they it had a lot of flight cancellations as a result. They started moving planes around and trying to get you know, that is tough. Right? Does not happen right away. And you have passengers that know, that are expecting to be on 1 type of flight, all of sudden, that flight's not available anymore. And the cargo goes along with it. So you know, that was a that was a headwind for your At the same time, you know, some of the stuff that we mentioned in Ocean you know, people get into these situations or companies get into these situations, and they go, oh, there is a lot of cargo that sits in the middle.

Right? Where they I could fly at air or I could move at ocean depending on what is going on. And I think for a while, started gravitating towards air in that in that situation because if I was just describing the air carriers in a bit of a pickle, the ocean carriers were in a much worse pickle. They are we have to avoid that entire region. Okay. Great. Well, the option then is to go around the Cape of Good Hope. Well, Well, that is 10 more days. And, you know, then they started charging more for the stuff, and then they you know, if you are the shipper, you are thinking, well, jeez, the air.

The air shipment is usually way more expensive, and now it is not that much more expensive because the ocean carrier is charging a lot of money. And so that ended up being a little bit of harm to ocean carriage and but also, you know, took some capacity out of the ocean space and helped them raise prices so maybe they did not suffer as much. And the air carriers were able to pick up some business, which is great for that.

Operator: On the truck side, I probably, to answer your question, that 4% down, it probably does not translate that much in the air space.

Edward James Gardner: it is mostly probably related to domestic shipping. I would be guessing if I told you, but I had to guess, I would say something like a half percent. Yeah. Not nothing big. And just to clarify on that, that we were talking about the truck market in The US not the not the Descartes Truck market or transportation management business.

Mark Schappel: Great. Thank you.

Operator: And the next question comes from the line of Kevin Krishnaratne with Scotiabank. Please go ahead.

Richard Chu: Hey, guys. This is, Richard on for Kevin. Thanks for taking my questions. So Amazon, they launched Amazon's supply chain services earlier in May. I was wondering, does this more fragmentation and multicarrier complexity drive more demand for your solutions, or do you see any risk of it potentially displacing parts of your value chain?

Edward J. Ryan: No. I mean, they are a big customer of ours, and, we do not compete with any you know, forwarder or freight management capability. We do not we purposely do not do anything to compete with them. We are we are we are trying to help them, and, you know, we have seen over the years. We have had competitors many times say that they are gonna do something that their customers do, the freight forwarder does, and they, 3 PL does, and they got killed for it. And, we have very aggressively stayed out of that, trying to remain neutral. And we are trying to help them all. And Amazon's a big customer of ours.

And we do business with just about every freight forwarder in the world. So you know, that to me is Amazon getting into this business where I do a lot of stuff with them. I suspect we will end up doing more. You know? Because we do a lot, especially with the bigger freight forwarders. We tend to get big relationships with them, and, we will see how they how they get into it. You know, do they buy someone along the way that oftentimes helps them get going. We saw that with Uber.

And Uber, when they started, was like, oh, we are gonna do all this stuff ourselves, and then year in, they buy, you know, 1 of the bigger players in the industry. And, you know, here we are today 4, 5 years later, and they are 1 of our biggest customers. And, you know, if you had looked into them, 7, 8 years ago, you would have thought they would never do business with someone like us ever. And, of course, they would. And that is it. The reason they do is because there is certain things we do better faster cheaper than they will ever do. So they would be smart to do it with us.

And, I think you will see the same with Amazon.

Richard Chu: Okay. And can you also unpack a little more about what is driving some of this strong GTI growth? So how much of the growth is from new customer wins versus existing customers accessing more databases? Versus price?

Edward J. Ryan: I am not I do not this is not pricing stuff. Pricing largely the same. I do not know if I know the exact breakdown, but it is customers saying I need more information. I need more countries. I need more commodities, and I wanna search more stuff. And, that is largely they are doing that because the tariffs are coming in. You know, tariff changes are coming in as I would always say when we actually joked about it today. Before the call. If they never changed, we would be selling a book. And because they change every day, we are selling access to a database.

And, you know, the when Trump comes in with his AIPA move and changes everything, I mean, people tend to go into that database a lot more and start looking around and going, what do I do about And how do I plan to, to save myself money And, you know, that is how it goes for us. Right? You know? And sometimes they are new customers. A lot of times they are existing customers that are buying access to more of the database. You know, we sell it in chunks. To them by country, by commodity.

And so they buy more and, you know, we give them access to more so that they can make better decisions. that is helpful.

Richard Chu: Thanks for taking my questions.

Operator: Thank you. The next question comes from the line of John Shao with TD Cowen. Please go ahead.

John Shao: Hey, guys. Thanks for taking my question. I understand GTI has been a strong growth driver this quarter, but earlier this year, a key investor's concern is your customer might use AI to replicate the same GTI database. So do you think this quarter's growth effectively derisk that concern?

Edward J. Ryan: Yeah. I did not have a concern about them first place. You know, We heard that and said, I do not think the people that are saying it understand how this works. And I went over it in the last call and some detail. But, you know, we have a massive amount of data that we have to collect and it is from all different countries. And it is not that easy even to train an AI agent to do it. If you look at the way that we have done it, it is using AI strategies that we built ourselves over the last 15 years.

You know, maybe off the shelf tools would help us do it today, but does not matter. We have built them already. And that is how we grab the data. We have to put the data into a database in a similar format for everyone. We have to make Belgium look the same as The Netherlands, look the same as Japan, etcetera and that is hard. Then we have to build ways to disperse it to the customers and you know, you could just say, here's the data, but it is much more convenient for them is if we say, oh, here it is in the Oracle format.

So you can I will just throw it right into your database over there 7 times a day. Right? And that is a whole set of things. And then you have maybe 1 of the more compelling arguments, which is we do not charge that much because we do it for everyone The price per customer is pretty cheap. So there is no 1 customer that is like, oh, for the $50 thousand I pay you a year, I am gonna do this myself. Well, that math does not work. You are not gonna be able to do it better for us. it is cheaper than us and even close.

And if you if you if I can just give you a little like, Amazon uses this. Trust me. If they could replicate it themselves, they would. Anything they have ever been able to replicate themselves with us, they do. This is not 1 of them. it is just not feasible. And then finally, you know, if you get it wrong, it is a real pain in the neck to get your money back. And if you got it wrong because you built your own AI system, the government's not gonna like that answer.

They want to hear that you were trying to do it properly, and oh, I built my own AI tool, and it was wrong. it is not a compelling argument. And, you know, it is not a compelling argument with the tariff stuff. And it is really a bad argument with the sanction party stuff. So, you know, people tend to do those things together with us to make their global trade management system work. And if you add all that stuff up, no 1's you know, people said that to us, and I kinda laughed. I intrinsically knew that was not what is gonna happen.

Because of the what I just described to you. it is it is just too much to overcome. And if someone if my best friend told me that he was gonna do that, I would say, do not do that. You are wasting your time. Go with Descartes. Descartes, it is gonna be better, faster, cheaper. And, you know, you should go focus on your core business, not on building your own tariff database. Not gonna be worth it.

John Shao: Got it. that is great color. Thanks. I will pass along.

Operator: Thank you. And the next question comes from the line of Robert Young with Canaccord Genuity. Please go ahead.

Robert Young: Hi. This is Robert Young. Just a couple of questions on the AI agent layer you are highlighting. I am trying to understand 1, how an external party would access that. Is that like, a model context protocol to use through, like, 1 of the, like, Claude or something like that, or is it something that you are setting up specifically for your larger customers to access your data?

Edward J. Ryan: Oh, and then we wait for a customer. Yeah. Sorry. Yeah. It is that. It is wait for our tools and our customers to say, I want some information out of here. it is it is a set of protocols that you would use to make calls to the to our AI tools to disperse data to you quickly and efficiently. For use in an application, for use know, to answer customers who might be on a automated phone call or into your website. You might be able to quickly call us and I give you an answer that spits right out to your customer in a split second. And you pay for that.

Robert Young: Right. And you said that you put a policy in place that determines what these parties can access, how they access it, and you are auditing it. So there is a monetization strategy. That sounds like a like a foundation for monetization. So is there any additional detail you can provide around that?

Edward J. Ryan: Well, think of it like it is our network has these tools. They are just getting better. They are going to get a hell of a lot better with a hell of a lot more stuff you can request from. Our network already does this conceptually. And it lets you get access to you know, a bunch of things, the ability to get tracking message the ability to make a booking, to get a booking confirmation back, to get a to make a filing. To a government, to get a filing confirmation so that your plane can take off.

Imagine if I add a thousand more services to that I can serve up to people, and they each cost 25¢ or whatever. that is how we imagine it working.

Robert Young: Okay. And then last question. Just you said that there were some strategies to increase adoption and on the GLN with this--yep. This layer. Bring maybe bring new customers into network. It feels as though you have got most of the large customers And so I am just curious what types of strategies How does it get them to do more with us?

Edward J. Ryan: Right? I mean, you know, AI is gonna bring and we see this it is easy for us to see because we do business with all of them. it is gonna bring huge opportunity for them to better service their customers and charge them more. And, you know, hand in hand with that, same for us. I go, our customers could be providing much more information to their customers about what is going on in their shipments and get more money for doing so. And because they are saving them money and finding them more efficient ways to operate. And you know, as a guy that serves that up, I may be charging 25¢ for giving this out.

They may be charged $10. Right? And the and their customer goes, wow. That was really worth it. And I go, wow. I made a lot of money at 25¢. And our customer, well, we have I just made $9.25 on this. Idea that Descartes gave me. Right? And now my customer's happy, and they are paying more money. I go, I think we are gonna see more and more of this all over the place. And because of our network, I think we are in a very, very good position to do it. And we are excited about that. Okay, great. Thanks for taking my questions.

Operator: Thank you. Have a good day. And I am showing no further questions at this time. I would like to turn it back to Edward J. Ryan for closing remarks.

Edward J. Ryan: Hey. Thanks, everyone, for your time today, and we look forward to reporting back to you in I guess, September. Appreciate your time today, and we will talk to you soon.

Operator: Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.