The Descartes Systems Group Inc. (NASDAQ:DSGX) Q2 2024 Earnings Call Transcript - Page 3 of 6 - InvestingChannel

The Descartes Systems Group Inc. (NASDAQ:DSGX) Q2 2024 Earnings Call Transcript

Justin Long: Got it. And I know organic growth in the services business is what’s most important. But Allan, could you share your estimate for all-in organic growth in the quarter? And maybe just going forward, Ed, how do you feel about the sustainability of the organic growth we’ve seen in that services business? It’s held up really well despite a weak freight market. So just wanted to get a sense for your confidence in that continuing?

Allan Brett: Yes. So I’ll take the first part of it. Overall growth was less than the — just over 9% that we saw in services. We certainly saw a lower license quarter, as I mentioned earlier. We had larger licenses in Q2 last year. We’re back to the more basic sort of 1.4 million this quarter. Professional services and other revenue was also flattish, down slightly. So in around the 6% or so currency neutral for the entire business compared to just over 9% on services. Ed?

Ed Ryan: Yes. Thanks, Allan. With regard to sustainability, we’ll see what happens in the long run. But in the quarters coming up here, we think we’re in pretty good shape, right? We think we’re running a strong business, some of the things I went over in the prepared remarks in the beginning of the call we think that puts us in a position to continue to have good organic growth in the business. I’ve probably mentioned this on past calls, but over the past seven or eight years, we’ve tended towards buying higher quality assets as we’ve been forced to pay a little more than we used to for stuff, we tended to pick higher quality assets with higher rates of growth. And that translated into us moving from the mid single digits before the pandemic to after the pandemic coming out in the high single digits. And we’re going to do our best to stick in that range. And obviously, economy has some effect on that. But at the moment, we like what we see.

Justin Long: Great. Thanks for the time and congrats on the quarter.

Ed Ryan: Thank you very much, Justin.

Operator: Your next question comes from the line of Scott Group from Wolfe Research. Your line is now open.

Scott Group: Thanks. Good afternoon, guys. Ed, I think last quarter you were talking about ocean volume starting to improve and customers telling you maybe a little bit more normal inventory replenishment trends coming. Are they now saying something different? I just want to understand sort of what you’re saying on the macro and more broadly just your views around like peak season, if you have any?

Ed Ryan: Well, I don’t know yet. I’ve heard rumors that it’s going to be maybe a muted peak season. I also see stuff going on with the Panama Canal, which probably for us it probably doesn’t matter very much. People tend to find other ways to move the cargo which results in other shipments on our network. So it ends up being fine for us. But for our customers, if that’s what you’re asking, I think disruptions like that tend to cause them some troubles. I don’t have a crystal ball on what’s going to happen in Christmas season. I’ll probably tell you — I’ll know for sure at the end of next quarter. But the rumors I’ve heard is it might be a little muted, but I don’t think it’s something that’s significant and certainly not something that’s probably going to impact our numbers as much as maybe it might impact some of the ocean carriers numbers a bit. But I don’t hear anything horrific going on. I don’t hear anything spectacular going on either. So it looks the same.

Scott Group: Okay. And then you spend some time talking about the parcel carriers and volume shifts with UPS and FedEx and the post office. Does that matter to you? Are you agnostic to where the volume goes? I just want to understand the volumes.

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