Descartes Systems reports record quarterly revenue and EBITDA

On Thursday, Descartes Systems Gr (TSX: DSG ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

8 million, up 20% year-over-year. The company highlighted its strategic focus on AI investments and a new acquisition of IDELIC, which enhances fleet management through AI-powered safety technologies. Descartes Systems Gr is optimistic about its future, supported by a robust cash position of $377 million, no debt, and a $350 million undrawn line of credit, enabling continued investments and potential acquisitions. Key growth drivers included strong performance in Global Trade Intelligence, e-commerce entries, fleet performance management, and transportation management with MacroPoint showing significant gains.

Management expressed confidence in leveraging AI for operational efficiencies and customer solutions, and plans to increase AI investment, looking at both internal development and potential acquisitions. The company noted challenges in the macro shipping environment due to geopolitical tensions, specifically the war in Iran, which impacted ocean and air shipping, but sees opportunities in navigating these complexities with technology solutions. Full Transcript OPERATOR Good afternoon, ladies and gentlemen, and welcome to the Descartes Systems Gr quarterly results conference call. At this time all lines are in listen-only mode.

Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on June 3rd, 2026. I would now like to turn the conference over to Scott Tegan Tiskahead.

Scott Tegan Tiskahead, Investor Relations Thanks, and good afternoon, everyone. Joining me on the call today are Ed Ryan, CEO, and Ed 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, and economic uncertainty on our business and financial condition; Descartes Systems Gr 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 a 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 Systems Gr 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, OSC, and other securities commissions across Canada, including our Management's Discussion and Analysis filed today.

We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future. You're cautioned that such information may not be appropriate for other purposes. We don't undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions, or circumstances on which any such statement is based, except as required by law. And with that let me turn the Edward Ryan, Board Member 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'm looking forward to walking through in more detail. However, first let me give you a roadmap for the call.

I'll start by hitting some highlights of last quarter. I'll provide some comments on how the numerous events in the world are impacting our business. I'll then hand it over to Ed Gardner, who will go over the Q1 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 Q2.

We'll then open it up to the operator to coordinate the Q and A portion of the call. So let's get into Q1. 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 record performance in each of those areas.

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 is 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 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. We remain well capitalized, cash generating, growing, and ready to continue to invest in our business. 6 million shares before December 2026. We've made some purchases since last reported, and I'll allow Ed to give you those details in a minute.

But especially in light of how the business performed last quarter, we are optimistic about Descartes Systems Gr future, and the normal course issuer bid is a tool we could use to make further purchases. I want to touch on four areas that helped this business perform well this quarter. The first is Global Trade Intelligence, which is one of the largest contributors to our Services revenue and had strong growth in the quarter compared to where it was a year ago. That's pretty intuitive if you think about what's happened over the past year.

It's 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've seen strong growth across the four core areas of the Global Trade Intelligence business. The first is tariff and duty content. We believe we have one of the best real-time sources of global tariff and duty information.

This 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 said before, if tariffs and duties are changing, that's usually a pretty good sign for this part of our business. The second is the sanctioned party screening business, where we 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 current global geopolitical landscape. Third, we have the Foreign Trade Zones, or FTZ.

These are facilities where goods can be imported and stored and processed on a tariff-free basis until they're 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, more and more companies have been pursuing this option for their business. It has proven to be a particularly lucrative strategy for those who deferred paying any of the recent IPA 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, stronger growers so far, and with continued uncertainty about the legality and amounts of tariffs, one that we expect many companies will continue to pursue with our technology leveraged for the operation of the foreign trade zone. And the last one, number four, is Data Mine. Companies have adopted a myriad of strategies for dealing with tariff uncertainty. Whether it's different sourcing strategies, consideration of classification of goods, or even shipping routes, the best companies are doing as much research as they can to help guide their strategies.

And that's where Data Mine comes in: a comprehensive research tool to see how others are dealing with importing challenges. This continues to see good traction and is a good grower. Second area of growth for us was the e-commerce entries. We continue to see overall growth in consumers embracing e-commerce.

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 into the United States using our netCHB system, with particular strength in high-volume and high-velocity requirements. We're 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's always good demand for these solutions. However, the 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're 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. S.

regulations have made it more difficult to qualify to be a driver. And the final one is transportation management, where 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's our job to get the tracking information from onboard systems, transportation management systems, and using our application or old-fashioned calls to drivers. Over past quarters, we've 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've also released some new agents to help brokers manage current workflows on shipments, which I'll speak to further in a few minutes.

So those 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 a quarter, with the biggest contributor to that decline being the war in Iran. 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 the United States. This disruption has had a volatile impact on rates and shipping, with many avoiding the region because of the security risk and cost 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 has spread beyond the Middle East, with the European—Far East sailings seeing 25% rate increases. Spot rates for Far East sailings continue 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 airspaces to flights, with 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.

For those who are shipping, struggling, and economic conditions volatile, many have elected to leverage their air mode to move goods quickly and/or on short notice. There continues to be strength in the shipment of semiconductors and AI infrastructure, which are more appropriate for the air mode given 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 to smaller, more frequent orders, which switches inventory to air promotion.

Overall, despite the volatile impact of geopolitical tensions, air cargo has been relatively strong. S. domestic trucking. Smaller carriers are struggling, and it's pushing some capacity out of the market, but not enough to counteract the increase to shipping rates caused by fuel costs.

So overall we saw trucking volumes down 4% year over year. With that overview of transportation modes, 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. One of the keys to our customers managing a more complex world and rising research 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 the future. I spoke about this last quarter, but here are some of the reasons they're 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 can't solve within their own enterprise. We have scale. We process billions of transactions a year. We deliver a reliable and stable solution at scale.

We're 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 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're 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 workflows and processes every day.

We're advancing on our use of AI technologies for our customers. We've designed our AI agent layer that will accommodate external and Descartes agents accessing the 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, 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, attribution, and billing. We believe there's 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 in other pillars, including agents gathering service time information in fleet management, research agents in Data Mine, enhanced denied party screening to manage false positives, just to name a few. These agents are automating workflow and work. They're designed to automate repetitive tasks that don't 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're ours or third-party agents with permission to access our network, will play a big role in future efficient supply chain and logistics operations. Because of that, we anticipate we'll continue to increase our level of investment in AI technologies.