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What factors drove the changes in The Descartes Systems Group's revenue and profit?

- **Revenue Records**: Q3 revenue up 11% to $187.7M, with services driving 93% of total. Adjusted EBITDA rose 19% to $85.5M.
- **AI Impact**: AI boosted shipment tracking rates to 90% and enabled new automated services, like tariff classification.
- **CFO Transition**: Allan Brett retiring in March 2026, succeeded by Ed Gardner, ensuring continuity.
- **Profitability**: Gross margin 77%, net income $43.9M ($0.50 EPS), up 20% YoY.
- **Growth Drivers**: 7% organic services growth, AI adoption, and e-commerce expansion (12% of revenue).

**【CEO Summary Section】**
- **Record Performance**: Q3 revenue reached $187.7M (11% YoY), with services revenue up 16% to $173.7M. Adjusted EBITDA rose 19% to $85.5M, and cash flow from operations hit $73.4M (22% YoY). 
- **AI Growth Driver**: AI enhanced solutions like MacroPoint shipment tracking, adding 180,000 drivers via AI agents. AI also enabled new services, such as automated tariff classification and competitive intelligence searches.
- **CFO Transition**: Allan Brett will retire in March 2026, succeeded by Ed Gardner. Allan will remain as advisor, ensuring seamless transition.

**【CFO Financial Commentary】**
- **Revenue Breakdown**: 93% of Q3 revenue from services, with organic growth (FX-neutral) at 7%. Key drivers: Global Trade Intelligence, e-commerce customs, and Transportation Management solutions.
- **Profitability**: Gross margin improved to 77% (vs. 74% YoY), driven by reduced hardware sales. Operating expenses rose 11%, partly offset by restructuring savings. Net income was $43.9M ($0.50 EPS), up 20% YoY.
- **Cash Position**: $279M in cash, debt-free, with $350M credit line. Q4 baseline EBITDA expected at $62.5M (39% of $161M baseline revenue).

**【Q&A Highlights】**
- **Organic Growth**: 7% organic services growth (FX-neutral), driven by market share gains in customs filings and FTZ solutions. AI tools like MacroPoint boosted tracking rates to 90%.
- **AI Monetization**: AI used to automate complex tasks (e.g., shipment rebooking) and deliver new value-added services, with potential for future pricing.
- **Market Share**: Competitors' inability to match Descartes' network scale and data breadth enabled share gains in customs, TMS, and shipment visibility.
- **Capital Allocation**: NCIB approved for share buybacks, but acquisitions remain priority. E-commerce pillar (12% of revenue) growing via Finale Inventory and SellerCloud integrations.

Descartes Systems Group Inc (DSGX) Q3 2026 Earnings Call Transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

Deferred Income Tax

Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

Total Comprehensive Income

Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

Basic EPS from Continuing Operations

Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

DSGX

DSGX fundamentals

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