Descartes Earnings: Repeat of Last Quarter With Bright Spots Being Subscriptions and Margins

We are raising our fair value estimate to $81 (CAD 110) per share, from $76 (CAD 103) previously, based on modestly higher margin estimates after Descartes reported solid results for its fiscal fourth quarter, including upside to both revenue and adjusted EBITDA relative to our expectations. We continue to see shares as fairly valued. Transaction volumes continue to face macro-related pressure but are performing reasonably well, while software subscription revenue remains resilient. Margins continue to improve and have effectively returned to levels from before the GroundCloud acquisition. The famously conservative management team was as excited as we have ever heard about the firm’s product portfolio, its competitive position, its margin opportunity, and the acquisition environment. Our opinion that the continued evolution of the supply chain toward more complexity and more exogenous shocks benefits Descartes and helps attract more customers to its network remains unchanged.