Currency Masks Solid Results for Descartes; FVE Down Slightly to $67

Descartes produced a mixed third quarter, with revenue short of our expectations and adjusted EBITDA margin slightly ahead. Management noted the demand environment remained good even as the tone among its customers was increasingly cautious. Management previewed adjusted EBITDA margin for fiscal 2024 at 40% to 45%, which, while positive, is where it has been operating at over the last two years and inspires little change to our estimates. Based on results and commentary, we are lowering our growth assumptions modestly for fiscal 2024 and accordingly are lowering our fair value estimate to $67 (CAD 91) per share, from $69 (CAD 91, no change due to currency moves) previously. Shares remain fairly valued, in our view. We see supply chain conditions persisting throughout the rest of the year, given the conflict in Ukraine and easing of China lockdowns, which may help near-term results but do not affect our long-term forecast. We continue to view Descartes as being well positioned to address the heightening complexity of global transportation networks, especially as the firm's portfolio expands and geopolitical issues flare up.