J. Scott Pagan – President & COO Edward J. Ryan – CEO Allan Brett – CFO.

Phillip Huang - Barclays Capital Steven Li - Raymond James Michael Urlacher – GMP Securities Richard Davis – Canaccord Genuity Scott Penner – TD Securities Gabriel Leung – Paradigm Capital Pardeep Sangha – PI Financial Unidentified Analyst - William Blair Stephanie Price - CIBC Blair Abernethy - Cantor Fitzgerald.

Welcome to the quarterly results call. My name is Lorraine and I will be your operator for today’s call. At this time all participants are in a listen-only mode. (Operator Instructions). Please note that this conference is being recorded. I will now turn the call over to Mr. Scott Pagan. Mr. Pagan, you may begin..

Thanks and good morning everyone. Joining me on the call today is Ed Ryan, CEO; Allan Brett, CFO; and Mike Verhoeve, EVP Legal and General Counsel. 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 Descartes’ 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 and expensing of specific revenues and expenses, potential acquisitions and acquisition strategy, cost reduction and integration initiatives, 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 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, the OSC, and other security 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 are cautioned that such information may not be appropriate for other purposes.

We do not 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 statements is based, except as is required by law.

And with that let me turn the call over to Ed..

Hey, thanks Scott and thanks to all of you for joining the call today. We are excited to be able to present another set of outstanding financial results including our Q2 operating performance. We have been very busy here at Descartes over the last few months.

In April we combined with Computer Management adding to the breadth of security filing solutions we offer over the Global Logistics Network. In May we added some new high quality members to our team with Allan Brett joining as CFO and Mike Verhoeve joining as General Counsel.

And we also extended our debt facility in May from $50 million to $77 million. In June we combined with Customs Info bringing in trade, data, and content to the menu of services we offer over the Global Logistics Network, and finally in July we closed on a share offering raising approximately $141 million in net cash to help grow our network.

As a result of that offering we have a number of new shareholders joining us on the call today. It was great to meet you during the process and we welcome you to our quarterly call. I’ll go through the agenda in a minute but, I’d also like to offer a warm welcome to those of you that have been around for a while.

We pride ourselves on delivering consistent results and hope our new shareholders are also here for many years to come. While we had another incredibly busy quarter and things continue to heat up, on today’s call, I’ll start by talking about highlights from the business this past quarter.

Then I’ll hand over to Allan who will talk through our financial results in more detail and I’ll finish up the call by talking about our business calibration and some of the initiatives we see in front of us for Q3 and beyond. So let’s start by going over the financial highlights for the past quarter.

As I said at the beginning, we pride ourselves on operating a strong and consistent business, and this quarter was no exception with another set of record results. Our revenues continue to grow hitting $42.7 million for the quarter up 12% from Q2 of last year. Revenues for the first half of the year were up 16% to $83.5 million.

Adjusted EBITDA was up 18% year-over-year to $12.7 million and up 17% to $24.8 million for the half year period. We continue to generate a ton of cash. Our cash from operations for the quarter was a record $16 million and for the first half of the year we converted 98% of our adjusted EBITDA into cash from operations.

We believe one of the signs of high quality company is the ability of the business to generate cash, that can continue to invest in its business and we think we are doing pretty well with that right now. And finally our DSOs have dropped back down to the bottom of our target range ending at 45 days.

As we said before happy customers pay quickly, and having DSOs in this range is a testament to our ability to deliver results for our customers. These great results are driven by consistent execution to our strategy. Some people may wonder if that strategy has changed as a result of our recent fund raising, it has not.

We plan to continue executing to our strategy and I will recomp that strategy again right now. So let’s go over what do we do, where we are going, how we are going to get there and our progress with regard to these initiatives during the quarter.

So what does Descartes do? We use technology and networks to unite transportation carriers, logistics intermediaries, shippers, government agencies, and financial institutions. We execute with the view of being global, neutral network encompassing multiple modes of transportation and logistics functions.

We invest in innovations that empower each logistic stakeholder with the data, content and tools necessary to efficiently and effectively manage the movement of inventory, assets and mobile workers. And we do all that in a way that allows us to grow the business profitably. We plan to continue to grow profitably and at a manageable pace.

We don’t grow revenue for the sake of growing revenue. We want to grow it, in a way that creates profits. We target 10% to 15% adjusted EBITDA growth per year over the long term, and we will reinvest any over performance back in our business. We grow through a combination of organic and inorganic activities and we continue to be inquisitive.

We calibrate our business with a high degree of recurring revenue and a focus on decreasing onetime license sales particularly as we look to integrate new acquisitions. We run our operations in the 25% to 30% range of adjusted EBITDA to revenues, with the focus on cash generation.

And we use the cash generated and available debt to pie businesses to expand our network's geographic presence, our functional footprint, our trade, data and content and our community of participants. So let’s talk about a few trends that we are seeing in our business that are driving the growth.

First thing we are seeing is a convergence of a logistics network transaction with trade, data, and content. Our Global Logistics Network is a logical place for customers to consolidate their logistics and supply chain needs, not only through automation of processes, but now also as a source for trade data content.

We continue to see customers looking to do more on the GLN, signing up for services in different countries and our different modes of transportation and thus increasing the number of transactions on our network.

And increasingly they are looking to Descartes to be a trusted source for logistics, data, and content to support their decisions on those transactions. As a result in June we combined with Customs Info. Customs Info provides comprehensive trade data and related research tools for more than 160 countries around the world.

By making that another content available over the GLN, so we can help our customers make better decisions about how to move and document the goods associated with the shipments on our network. Second trend we are seeing is focused on home delivery and Omni-channel retailing. This is a continued growth area for us.

As we all know the game has changed with respect to how consumers expect to buy goods and services and how brick and motor retailers are trying to respond to the threat of Amazon, Google, eBay, and many others. Consumers are putting a higher value on the choice about how and when a purchased product or service is delivered to them.

We believe we are well ahead of the market here with solutions to address this growing expectation and every quarter we continue to have interest from retailers looking to us to help them reinvent their supply chains and delivery processes. This is a global issue and we are helping people around the world to solve these problems.

This past quarter we hosted an Omni-channel summit in Japan with our partner CTC and we had over 200 attendees. If you are looking to learn more about this particular Omni-channel retail solution there is a great video on our website with a leading UK retailer John Lewis Partners.

Just pop on the website and type in John Lewis video on the search bar and you should get to the video quickly. Third trend we are seeing in our market is around heightened regulatory requirements that continue to create a tailwind for our business.

The biggest impact on our business resulting from these requirements relates to customs and security regulations.

There are two principle types of customs regulations, there is tax and tariff regulations focussed on making sure governments collect their rate duties and taxes on shipments and the security regulations that help governments ensure that their homeland is protected through the screen of shipments going in and out of its borders.

On the last call I spoke to the recent security regulation example in Japan with ocean, air security regulation designed to address ocean imports into Japan. For those less familiar with the history behind security regulations, it all started in the U.S. after 9/11 when the U.S. government wanted to know what was coming into the country.

Over the years additional jurisdictions Canada, Australia, the EU, etc. have added regulations. Most recently Japan followed suit. So, now when a country comes out with security initiatives we are the logical place for our customers to go.

In the case of Japan we spent time to get a solution ready for our customers to meet this regulation and 150 new recurring revenue customers are ready to go by the time the enforcement date came into effect a few months ago. Fourth trend is centred on growth in our network through partnerships.

We continue to work with partners around the world to help us drive our business. Our resellers in Asia and South America continued to pick up steam. Some of our biggest deals this past quarter were with our resellers in Asia and it has been a great set of relationships with us.

We strengthened our relationships with SAP and Oracle as well over the last couple of quarters through our acquisition of Customs Info and we think we have got a lot to offer these guys.

We think the global logistics network with the scope of connections and trade content can help them drive their global trade management businesses and help us drive transactions on our network. We look forward to expanding those relationships in the coming months and years.

So just to wrap up on the trends that we see in our market that are driving growth, we have won the convergence of logistics networks and content; two, Omni-channel retail and our ability to address the mounting challenges facing brick and mortar retailers; three, heightened regulatory requirements being imposed on our customers and our ability to help them address these new requirements; and four, extending our network through strong partnerships.

Given all this we believe we are in a very strong position to capitalize on these trends and in the process help our customers save money and operate more efficiently. So, anyway to wrap up this is another very successful quarter for Descartes and it is due to the efforts and support of many people. So let me take a few minutes to thank people here.

I would like to thank our employees for all the hard work they put in to make sure our customers get results. I would like to thank our customers for continuing to place confidence in Descartes, their network of choice. I would like to thank our partners for helping us rapidly expand our acreage (ph) system.

I would like to thank our Board of Directors for the resolve and helping us stick to a consistent strategy. And finally I would like to thank our shareholders for continuing to have confidence in Descartes as a great long-term investment.

So with that let me turn the call over to Allan who will walk you through some of the details on our financial performance.

Allan?.

Thanks Ed. Let me quickly walk you through a few financial highlights for the second quarter. As previously mentioned we had record quarterly revenues of $42.7 million this quarter, up 12% from the second quarter of last year.

We should note that as expected service revenues continued to grow comprising 94% of revenues in Q2 up from 93% in the second quarter last year. Our most recent acquisition Customs Info has been integrated and contributed nicely with just under $1.6 million of revenue in the second quarter coming from this acquisition.

Gross margins continued to be strong at 68% of revenue up from 66% of revenue in the second quarter last year. We also continued to see solid adjusted EBITDA growth with adjusted EBITDA coming in at $12.7 million in the second quarter, an increase of 18% over the same period last year. And this is well ahead of our 10% to 15% target range.

As well as continued growth and with the continued growth of adjusted EBITDA and solid receivable collections, cash generated from operations was extremely strong in the second quarter coming in at $16 million, up 43% from the same period last year.

As Ed mentioned for the first half of fiscal 2015, cash flow from operations came in at 98% of adjusted EBITDA, indicating continued strong cash conversion. In fact looking on beyond the half year, for the past eight years we’ve consistently had high cash conversion levels, averaging 85% of adjusted EBITDA over this period.

After deducting $5.3 million of amortization of intangible assets, $400,000 of executive retirement charges, $300,000 of acquisition related expenses, $400,000 of stock based comp as well as interest expense, depreciation of capital assets, and income tax expense at 32% of pre-tax income, the resulting net income for the second quarter came in at $3.6 million or $0.05 per diluted common share up 112% from $1.7 million or $0.03 per diluted common share in the second quarter of last year.

If we look at the results of operations for the six months ended year-to-date revenue came in at $83.5 million up 16% from $72.2 million for the same period last year. Adjusted EBITDA for the six months year-to-date is $24.8 million this year compared to $21.2 million for the same six month period last year, a 17% increase.

Finally net income for the six months ended July 31st 2014 came in at $7.3 million or $0.11 diluted earnings per share compared to $4.5 million or $0.07 diluted earnings per share for the same period last year, an increase of 62%. Turning to the balance sheet quickly, we ended the quarter with $141.4 million of cash available to the business.

As previously announced we issued approximately 10.9 million common shares during the second quarter for net cash proceeds of $140.7 million. We also repaid the entire balance of approximately $16 million -– $60 million that was outstanding on our $77 million acquisition line of credit. And this undrawn line of credit remains available to us today.

As we look ahead to the second half of 2015 and beyond we note the following. We expect to incur approximately $1.5 million of additional CAPEX for the remainder of 2015, still on pace for about $600,000 to $1 million per quarter.

We expect the amortization expense will come in around $11.2 million for the remainder of 2015 subject to foreign exchange fluctuations. And we expect stock based comp will come in between $800,000 and $1 million for the remainder of 2015 subject to the forfeitures of existing stock options. Back over to you Ed..

Hey great, thanks Allan. Alright so let's talk calibration? Some of our newer shareholders may be less familiar with our calibration metrics so let me just talk about it here for a second. We don’t provide guidance but we use our base line calibration as a key metric relating to the ongoing health and strength of our business.

Heading into Q3 we have $39.9 million visible recurring contracted revenue or otherwise our baseline revenues. We have $30 million in baseline operating expenses which gives us a $9.9 million of baseline calibration for adjusted EBITDA heading into Q3.

Our baseline revenues have been impacted by the additional full quarter of Customs Info and though we generally see a dip in the ocean volumes on our network after peak season, the networks in general pickup a bid in Q3.

On the flip side we continue to deemphasize licensed transactions in our business and accordingly are planning for less license revenue as we calibrate our business. Our calibration for Q3 assumes exchange rates of $0.92 Canadian dollar and $1.34 Euro to U.S. dollar. We are very well capitalized.

As you probably all saw we have a $141.4 million in cash at the end of the quarter plus we have a $77 million undrawn acquisition line of credit available to the company.

We have a strong acquisition pipeline, there is no shortage of opportunities to expand the geographic reach, functional capabilities, trade data and content or community of participants on our network. We are looking for businesses that process, leverage or supply logistics data or create related content.

The general market conditions mean both premium and non premium assets are up for sale. Our job is to identify the keepers and look for businesses that will continue to add content and transaction or subscription services to our Global Logistics Network. The fact that we have raised money doesn’t change how we view acquisitions.

We intend to continue to be prudent. We don’t intend for market conditions or our current cash situation to put us in a situation to do otherwise. So let's talk about our plans for the remainder of the year. It should be no surprise to anyone our plans remain the same. We continue to target 10% to 15% adjusted EBITDA growth per year.

We are continuing to target investing all the performance on those metrics back into the business. This growth will come through a combination of organic and inorganic activities and acquisitions are not incremental to this plan. Our focus is on recurring revenue.

We will continue to deemphasize one time license sales and you can see the results of these efforts over the past several quarters. And finally we will make ourselves available to our shareholders. We have got a great business, we will be spending time and resources to get the word out. We hope you will do the same.

We want to be available to help the people learn about our business and this is often through answering questions that they may have. So with that let me open it up to your questions. Operator if you could open the lines..

Thank you. We will now begin the question and answer session. (Operator Instructions). And our first question comes from Phillip Huang from Barclays. Please go ahead. .

Yes, thanks, good morning. I was wondering if you could expand a bit on the evolution of your partnership with SAP and Oracle after acquiring Customs Info.

You mentioned upside opportunities from just driving their global trade management business, can you give us some colour around the magnitude and timing of upside opportunities from these relationships by including the trade data and research tools on the GLN?.

Yeah, sure, thanks for asking and welcome to the call. .

Thanks..

Yes, so our relationship with SAP and Oracle have been improving over the years, SAP in particular. We bought Customs Info, these guys had really strong relationships. A lot of their sales come through those two channels.

And we went to meet with them right after the deal closed, as soon as we were able to announce it and we were very pleased to see that they were both very happy about a bigger company like Descartes coming in and all the possibilities that could create. For SAP who is a very strong Customs Info partner, I don’t think it changed a lot.

It probably didn’t change our relationship other than to expand it naturally through the new business they do together. We were already on a nice trajectory with them.

With Oracle, we were probably just getting started here at Descartes and with Customs Info who had a very strong relationship with them it probably helped us to get their attention quite a bit.

They -- Customs Info sells trade and content data to Oracle customers and when we got to talk in Oracle we started talking about all the other things they could do on our network and I think that’s really going to help us in the coming years to expand our relationships.

So the Oracle customers that buy their transportation management system can take advantage of our network to get them connected to all their carriers. I think that's going to be a big benefit not only for Descartes but for Oracle and its customers as well. So we are excited about the prospects for that. .

Right, just a quick follow on that, do you expect it to be sort of a gradual ramp up or do you think that it will pretty much light up services that you haven’t been doing with them in the past pretty immediately and are there any sort of investments that need to be made before some of those kind of opportunities become monetized?.

What we -- one, I do think it will take some time to ramp up to be significant. It certainly has taken us several years with SAP and to get to work at the same place it is probably going to take some time. The Customs Info thing moved it up a big level because they had pretty significant relationships with both of those guys.

And if you look at what we do with them we really are connecting our network to their applications so that their customers can use our network to get to their trading partners, largely big transportation providers and third party logistics providers. That work has already been done.

We did it with handful of Oracle customers four to five years ago and have continued to pickup Oracle customers over the years. And so it is happening already, it is just it is happening really without Oracle saying much about it.

We think if we can start working with them together we can go and get Oracle sales guys talking about that with the customers. We think we can go faster in the future and that's exciting to us.

I don’t think it is going to see, you are not going to see a jump quarter-over-quarter and that's something that's going to take some time but we continue to pickup more Oracle and SAP customers as customers on our network and I think that’s great news for us. Its great news for those customers and it is great news for SAP and Oracle.

So we are excited about it..

Great, thanks very much..

Great, thank you Phillip..

Thank you. And our next question comes from Steven Li from Raymond James. Please go ahead..

Thanks, hey guys.

Just on the new filing rules in Japan, are you seeing -– your customers are they buying more licenses or is it mostly subscription?.

It is all subscription. .

It’s really transaction services if you think about it. Our customers when they do customs and security filings they typically pay by the transaction. Every once in a while with a new initiative there is a small start up fee but its inconsequential.

The bulk of the money for us is getting paid by the transaction to make filings on behalf of our customers. .

Okay, great and for next quarter should we expect continued strong sequential growth for Asia Pac because of this new requirement?.

Well there is a bunch of big deals in Asia Pac I mentioned earlier through our resellers so, that's kind of skew the results because you have license dollars in there. I think you should see Japan results already in our Asia Pac numbers. The thing went live in March so, most of the Japan numbers is in our banks already..

Okay and just on the calibration, historically your baseline starting the quarters at least your services revenues the prior quarter, the previous quarter, which quarter your baseline is slightly smaller than you reported services revenues any reason for that?.

No, nothing in particular..

So is it -- could it be just FX?.

Possibly, I don’t know, Allan do you?.

Yes, FX is part of it but there is no other major reason..

Okay, great. Thanks guys..

Thank you and our next question comes from Michael Urlacher from GMP Securities. Please go ahead..

Good morning. Thank you. I just have a couple of small questions because the results are strong and I think the business is pretty clear here.

Cash from ops was especially strong with very strong collections, is that a seasonal thing or are we kind of achieving a new higher level of sustained cash from ops do you think?.

Michael it’s a function of a couple of things I think the first quarter was may be a little bit weaker than we would have liked so I think if you look at the first six months its 98% just like last year. We also collected some other receivables in the quarter that added to it so nothing unusual other than those facts..

Okay and then if I can maybe share a hypotheses, in the past year or so I was kind of enthusiastic about Omni-channel service and the increased importance of better home delivery by many U.S. retailers, my thinking at the time was that this was kind of likely to be maybe a one year bump up of accelerated spending in that sector.

You are seeing good results, is there any evidence that maybe this would be a more sustained spend by those retailers do you think?.

Yes, I absolutely think it’s – this is going to go on for a long time and then there will be evolution of that overtime too.

Right, they are all getting started right now and they are putting tools in place to help them compete with a lot of the online retailers but I think that’s going to continue to evolve over the years and the guys that just going from phase one of a roll out or a revamp website right now in phase 2 and phase 3, we have more ideas about how we can help them going forward as well.

So I think this is going to go on for quite some time..

Okay and I remember speaking to some resellers several months ago and they didn’t use these exact words but they gave me the impression that it was very much a seller’s market for the kind of services that Descartes offers to improve delivery that, you know, speed of adoption was really the pressing issue for the retailers, is that generally speaking still the kind of market dynamic you are seeing?.

Yes, I mean there is a lot of people that need these type of solutions right now and we think we are the best at it and we think if they take the time to look at the markets for these types of services they will agree. And so yes it’s been a good time for us in this particular market and I think it’s going to continue for a while..

Okay and do you want to highlight any projects that you are allowed to talk about that the customers have launched?.

You can see the ones we closed over the last couple of quarters and there is more on that and as we get them to agree, the press releases will announce them as soon as we can. .

Okay..

Generally going pretty well. Thanks..

Excellent, thanks very much. .

Yeah, thank you. .

Thank you. And our next question comes from Richard Davis. Please go ahead. From Canaccord, please go ahead. .

Thanks for letting me on the call. I remember a couple of years ago you guys were rolling an hours of service system, that is I recall among other things going to help your customers keep CSA scores up, etc.

so what kind of demand have you seen on this front and more broadly what are your thoughts on kind of was hot topic a few years ago with mobile fleet management functionality and things like that and you have done some acquisitions there, I am just kind of curious as to how that's layered into the business, thanks?.

Hey, thanks a lot Rich. Good to hear from you. The hours of service that we were talking about a couple of years ago, probably are talking about a couple of years ago the government was supposed to go live couple of years ago with 2013 and then it became 2014 and now people are telling us 2015 to 2016 requiring this.

We do think eventually we will go live and that our customers will need to track their driver's time. I think the Tracy Morgan accident that you saw a couple of months ago, a terrible accident but I think that's going to put an emphasis on this overtime.

I think the trucking companies are pretty powerful lobby and you have to push back historically on this, just saying hey, it is one thing to say our drivers can work this number of hours that's fine but requiring us to have an electronic instrument in the truck to do that is overboard. And so that fight continues to this day.

There is no government requirement that says you have to do this electronically. You have heard our comments on the Telematics business over the past year or two. We believe everyone is going to track their trucks one day. We also believe that there is not much money to be made in selling hardware in that business.

You have produced a box for 1000 bucks and the customers want to pay 900 and that is not a great business to be in.

And our belief is in the long run that the truck manufacturers are going to install this stuff in the truck and that will be a very happy day for us because then I can stick to the software -- recurring software business that we think we are really good at. And so that's where our focus has gone.

It is building better software to help people manage their fleets while they are in motion, knowing where their trucks are. Sometimes using our hardware, sometimes using a competitor's hardware and hopefully in the long run using hardware that was installed in the truck by the manufacturer. .

Got it, thank you. .

Thank you, Richard. .

Thank you. And our next question comes from Scott Penner from TD Securities. Please go ahead. .

Thanks.

Just -- first of all I just want to touch on the acquisitions, I know your strategy has not changed there, but just in terms of the areas, high priority areas for where you think acquisitions could accelerate some of the growth, I mean you have talked about the customs side, you have talked about the Omni-channel delivery, what should we think are the biggest areas for potential?.

Well, yes that was what I was going through when I was stating the trends, you can think of it in the same way. Right in the beginning of the call I was talking about trading and data content.

I was talking about Omni-channel re-paneling and growth in our business through increased regulatory requirements going forward and I think you will see us focus on those areas in terms of acquisitions.

We are really looking for new subscription in transaction services where we can add our network of carriers and third party logistics providers and big retailers and manufacturers.

We connect those people together today and we think that there will constantly be a steady flow of new requirements coming onto them that will make them use our network more and that we should be kind of either building those requirements or do those requirements ourselves or buying companies that help us meet them.

You saw what we did this past quarter buying Customs Info that gets us into a new area. If you look at our marketing materials now, there is a sixth pillar out there that is trade content and you could see us do more in that area in the future as well. .

And on the Customs Info acquisition, it seems like there is obviously a big opportunity to introduce those guys or have your guys introduce members of the GON to Customs Info is there any way to quantify or talk about, what is the amount of common customers are, or what that opportunity is?.

We think the opportunity there will take a while to unfold. We have to yet think about what has to happen to make that work. You have to get the Customs Info reps knowledgeable about our products in the process of doing that right now.

We have meetings right after we bought them to train our reps and their reps about what each other, you know, what each company does so that when they walk into customers they can at least give the elevator pitch to say hey you know, we also do this now. And you know, now you could buy this stuff from us too, this Customs Info stuff from us too.

That’s our reps talking to our customers to the Customs Info reps it's probably a little harder job because, they have a product line they have been selling for a long time. We just added 60 or 70 new products there so they are obviously not going to be experts on it on day one.

But we want them to have a basic understanding there so they can at least explain it to their customers and say hey, would you be interested in hearing more about this. About the Global Logistics Network or about you know route planning and handheld solutions and Telematic solution.

You go in and you say those things to customers and see what sticks right. So you say it to 10 customers the first time and two of them say yes, I would be interested in hearing more and then you will get to day cart sales rep and you will start working on our account together.

I think that will unfold as it does with all of our acquisitions over a longer period of time, a year or two and you will eventually see it in our results..

Thanks for that.

One last topic Ed and I just wanted to touch on any extensions back up let's say into the supply chain with products that you have right now, the supply chain visibility and some of the recent acquisitions, is this another focused area for growth and potentially for acquisitions?.

I am sorry what another folks here?.

Just that the whole supply chain visibility?.

Oh yes, sorry. Yes I think that is related to TM. I think people historically have always wanted visibility. It is a tough thing to get, it’s a tough thing to build ROI around. I do think it's something we do quite well.

But unlike transportation management or reps scheduling or even our Global Logistics Network it is hard to build a ROI argument for someone around supply chain visibility.

We have a great supply chain visibility product as we get into sophisticated relationships with our customers, they tend to buy more of it overtime but it’s a hard thing to go in and open the door with.

It's much easier to go in and say hey, let me tell you how to efficiently route your trucks and I’ll save you $10 million or $20 million a year if I do that. With visibility it's hard to build that argument and so it tends to be a follow on sales for us more than a foot in the door..

Okay appreciate. Thank you..

Thank you Scott..

Thank you. And our next question comes from Gabriel Leung from Paradigm Capital please go ahead..

Thanks good morning.

Two questions, maybe Allan can help out with first, I didn’t maybe I missed it but do you expect to incur any restructuring cost in the current quarter with the Customs Info acquisition?.

Sorry, this quarter or going forward?.

This quarter or going forward, whatever you can provide..

Well, you know what, there is nothing in this quarter and we don’t expect anything significant going forward..

Alright it is great. The second question is just around the U.S. business, I know the revenues were down getting on year-over-year basis despite having Computer Management and I guess Customs Info in there as well.

Anything we should read into that or is that just a function of maybe they just had higher license sales last year versus this year?.

I think you are probably looking at as a percentage of revenue and yes, we had probably higher license sales last year there and then this past quarter higher license sales in Asia which bring the other percentages down.

Not necessarily that they were lower but as a percentage of our total revenue they go down which I actually think will likely continue as other areas will expand for us, those percentages will start to even out overtime..

It is great, thanks..

Thanks Gabe..

Thank you and our next question comes from Pardeep Sangha from PI Financial. Please go ahead..

Thank you, good morning and thanks for talking my call. Just with regards to can you give us some sense of Q3 quarter-over-quarter volumes and seasonality and like last quarter I think you gave baseline guidance of $38 million and this quarter it is $39.9 million.

I mean kind of assume the delta there is Customs Info so then sort of what kind of leads us to believe that there is kind of flat for the rest of those transaction and volumes from Q2 to Q3, give us a sense of that?.

Yeah, I mean our -- we have organic growth, you can probably -- if you look at the numbers carefully, you can see it in the last quarter. I hadn’t thought about how much we are adding from Customs Info to our calibration but we gave you our accurate calibration for the quarter.

There is -- we continue to have pretty strong organic growth and certainly with Customs Info coming in this past quarter we have very strong acquisition growth as well. And I expect both of those will continue. .

Allan Brett, anything -- Allan in terms of number of places can you give us that number again or no?.

Number of places, they are currently around 900. .

Okay, and tax rate?.

Tax rate came in the quarter at 32%, very similar to first quarter which was 34%. .

Going forward tax rate assume similar?.

Assume similar for now. Yes. .

Okay, thanks guys. .

Thank you. And our next question comes from Matt Piffel (ph) from William Blair. Please go ahead. .

Hi guys, thanks for taking my question.

Could you comment a bit on what you are seeing out there and the acquisition pipeline and how multiples have been trending over the past quarter?.

Yeah, sure. It continues to be a strong acquisition market for us. We see a lot of opportunities out there. Some of them dragged in because people are paying a lot for companies right now so everyone wants to sell while the going is good. We don’t particularly like that other than it does chase a lot of people into the market.

And once they get the idea in their head that they are going to sell their company, it is hard to stop that train which creates an opportunity for us.

We are always trying to be prudent, right, so if we can get a deal done at a number that we think is a reasonable price and something that we think is going to be added to our network, we are going to do it and if we don’t see that opportunity we won't.

I expect you will continue to see us be inquisitive both doing the kinds of deals that we have historically done which is smaller tuck-in acquisitions and maybe some mid-size to larger type deals as we get more ability to do that financially and also an ability to digest those types of acquisitions into our company quickly.

And I think you will see us more of that in the future. .

Got it and the deals that are -- potential deals that are out there in your pipeline are they more skewed towards geographic expansion of your network or are there a bunch of tuck-in product acquisitions out there as well?.

We are focused on growing our network and if that is geographically great, if that is functional, that's great too.

We see things come along, we look at them, we are trying to evaluate them on their merits and go will this be a good addition to our network, would our customers want this, do they want us to expand into another geography or do they want us to expand into another functional area and we are trying to evaluate them either on that basis and make the best decision we can for our shareholders.

.

Got it and then could you tell us how should we think about events like what's going on Ukraine in packing your business.

Does that have any impact at all or does it slightly trend down some volumes of your customers?.

I mean, I don’t think it has much of direct impact and I don’t think we have a lot of customers shipping stuff in and out of the Ukraine that's where our actual transaction volumes will go down. I think like every business it will be better if everyone weren’t fighting. That never helps really transaction volumes around the world but it is what it is.

I can't change that, I just see what goes on just like you do. At the same time the more people that are fighting, the more people are concerned about protecting their borders, and that probably helps our security business in the long run. So, we are seeing what happens.

There is nothing out there that scares me from the perspective of our how is it going to impact our business, there is nothing gigantic going on. But no more -- just like everybody else is. .

Got it, thanks for taking my question guys..

Thank you..

Thank you. And our next question comes from Stephanie Price from CIBC. Please go ahead. .

Good morning. .

Hi, Stephanie..

You mentioned several times the partnerships in Asia were strong this quarter and you mentioned some license growth from there as well? Can you talk a bit about what’s driving this growth and what are you seeing there, is it the Japanese regulations or is it something else?.

No it’s something else. The Japanese regulations actually it came a little bit through partners but largely our customers signing up for that service.

What I was referring to is you know transportation management, route planning sales that are going on and with some of our bigger resellers in Japan and China and Australia you know we have best trained who signed up as a reseller of ours four five years ago and is here now one of our biggest resellers in the Australian market.

You have CTC which we got through the Telargo acquisition four or five years ago.

And they have turned into -– they were a reseller of Telargo selling their Telematic solution, got to hearing about our route planning solutions started selling several of those deals in Japan and then more recently they have been focusing on some of our transportation management applications in Japan as well which is exciting to us.

And then in China we have a very good reseller there as well so, it’s been going well and I hope it continues..

And in terms of the transportation management, can you give us sort of any metrics around the Omni-channel and the home delivery and how many customers are using the service and the sort of growth you are seeing in the business?.

I don’t have a number off the top of my head in terms of number of customers but we have thousands of route planning customers. A lot of them and more specifically a lot of the ones that have come on in the last couple of years have been focused on Omni-channel retail problems and our ability to help them solve them.

So I think if you looked at what’s going on in the last two or three years, a lot of our sales have been focused on that. Whereas five to six years ago more of the sales were just focused on taking trucks off the road.

Now there is another dynamic to it with the reservations capability we built into our route planning tools few years ago that our customers are going.

But I want to have the ability for my customer to pick their delivery time while they are on the website or while they are in front of the sales rep in the store and Descartes solution puts me in the best position to do that..

Okay, great and on the acquisition front, you mentioned in response to an earlier question that potentially you may look at midsize and larger deals.

Could you kind of give us some metrics I mean in terms of Customs Info would you kind of consider that a midsized deal?.

Yes, that’s what I mean when I say that. You have seen us do a couple of deals in the $30 million to $40 million range lately and I think there is lots of opportunities for us to do things like that. There is always the small tuck in acquisition.

I think they are less affected by the broader market dynamics with private equity firms come in and in our opinion over paying for stuff. But the midsized deals start to get impacted by that but maybe not get the full attention of some of the private equity guys which gives us an opportunity to find more deals like that.

And I think you will see us try to do that. .

Great, thank you very much..

Thank you, Stephanie..

Thank you. And our next question will come from Blair Abernethy with Cantor Fitzgerald. Please go ahead..

Thanks very much.

Hi, Ed you haven’t touched on the Descartes social communities in little while, just wondering how that initiative is progressing and have an impact or are you on a road to monetization of that at all?.

Yes, listen, our network is a community. So while we were watching it we spent a lot of time talking about it and trying to get customers to think of the Global Logistics Network in that way. I think that’s largely been achieved and you’ll see us continue to add things to that. What the Customs Info acquisition is a perfect example.

Right, that is a community that we are adding to our network and bringing all of this extra data and content to our network so that the community that’s on there can figure out the tariffs and duty rates on shipments as they are processing those transactions on our network.

And that’s exactly the kind of affect we want to create with new acquisitions or new functionality that we build which is to say, we have a whole bunch of people on our network doing something specific. In this case processing transportation transactions, what else do they need to do while they are here.

Then you look at Customs Info and you go geez, these guys tell people how much it cost, or how much you owe the government when you move a shipment across their border. What better place to do that than the network that is already processing that shipment.

So when we were looking at Customs Info and some people may scratch their head and go why did Descartes want to buy Customs Info and I look and go people are processing shipments on our network every day.

Those shipments need to be rated so that you can determine what you are going to owe the government in terms of tariffs and duties when you go across that border. What better place to do it than on the Global Logistics Network and we believe that and now as we are going around to our customers, we are finding out that its true. .

Okay, great and on the partnership front any traction with NetSuite in the last six months or so?.

Yes, we build into their solution. NetSuite is growing rapidly in the this space and we believe they are going to be one of the big players in hosted earpiece solutions in the long run.

And as that grows, their customers are going to get into deeper and deeper functionality on that NetSuite tool and eventually get around to I would like to manage my transportation there as well. And we think that will eventually be a great partnership for us when that happens. It’s going to take a while.

They are growing a fraction of the size right now of SAP and Oracle. So it’s harder for them to hit the radar screen but at the same time we do believe in the long run it's going to the head that way so, that’s why we are in early..

Okay, great and then just one last quick one for me.

Just following up on the calibration questions earlier, if I looked at your calibration this quarter were your results this quarter last couple of quarters to my calculation to sort of low single-digit organic down from sort of mid single-digit last year, is there a shift happening here a little bit or its just noise.

I mean the numbers aren’t that big but just wondering what your sense is in terms of driving the business organically over the next year?.

I think what you’re seeing is something I have been talking about here for the last couple of quarters. We are deemphasizing license growth. So when you look at what our calibration was to our actual results, you are seeing the impact of license sales on it.

Our network continues to expand and grow more rapidly than our license revenues which are -– we are intentionally trying to shrink. And so that’s what you see. We’re not apologetic about that at all.

We think that that’s exactly what we should be doing and if you want to look for the proof in that look in the EBITDA numbers because you see them continue to grow rapidly and that’s because we make a lot more money on our network in the long run than we do selling one time licenses to people. So I think that’s what you’re seeing. .

Okay, great, thank you..

Thank you Blair.

Thank you. And I will now turn the call over to Scott Pagan for closing remarks..

Okay, great everyone. Thanks, we’ll look forward to talking to you next quarter..

Thank you and thank you ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect..