Descartes Systems Group Inc

TSX:DSG

Earnings Call Transcript 2021-Q4

[Operator]

Welcome to the Quarterly Results Call. My name is Adrianne, and I'll be your operator for today's call. [Operator Instructions] Please note, this conference is being recorded.I'll now turn the call over to Scott Pagan. Scott Pagan, you may begin.

[John Scott Pagan, President & COO]

Thanks, and good afternoon, everyone. Joining me remotely on the call today are Ed Ryan, CEO; and Allan Brett, CFO. 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 our assessment of the current and future impact of the COVID-19 pandemic on our business and financial conditions. Descartes' operating performance, financial results and condition, Descartes' gross margins and any growth in those gross margins, 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 securities 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're cautioned that such information may not be appropriate for other purposes. We don't 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 in which any such statement is based, except as is required by law. And with that, let me turn the call over to Ed.

[Edward J. Ryan, CEO & Director]

Thanks, Scott, and welcome, everyone, to the call. Similar to past calls, each of Scott, Allan and I are in remote locations, so please excuse any brief pauses before we answer your questions later in the call. We've got some great end of year financial results that I'm excited to walk you through, but let's start with a roadmap for this call. First, I'll start with some comments about our performance over the past quarter and year. Some of the things about our business that we believe have helped us to be successful. I'll then hand it over to Allan, who will go over Q4 and full fiscal year financial results in detail. I'll come back and provide some perspective on how our business is calibrated as we look at the first quarter that we're already a month into and provide some insight into some factors that we think will help us this fiscal year. And finally, we'll open it up to the operator to coordinate the Q&A portion of the call. Well, we've had another great quarter in fiscal year, especially considering the challenges the business has had to rise up to and meet over the past 12 months. Our plans are always set on growing adjusted EBITDA 10% to 15% per year. For Q4, we grew adjusted EBITDA 20% over Q4 a year ago, and our adjusted EBITDA for the full year grew 16% over last year. We did that with record revenues, record services revenues, record income from operations, record cash flow from operations and record adjusted EBITDA. We had cash from operations that was over 90% of our adjusted EBITDA by the metrics we focus on, our results were very good. The right words for me to be using here are we and our because this is something that our entire business banded together and achieved. We have a dedicated team working remotely and continuing to service our customers to the highest standards. Our team has remained committed to our goals and our plans. That focus has kept the business growing and operating well even during turbulent times. And that's really what I wanted to emphasize in these opening comments. Descartes is a resilient business. Our business was purpose-built to be able to flexibly respond to challenges and continue to achieve our goals. Our business is designed to be able to grow through varied market conditions, including the extreme conditions that we saw over this past year. So I just want to highlight some of the structural advantages that we have as we go to market. First, we're debt free, well capitalized, profitable and generate cash. As you can see from the financial results that we reported today, we have a solid financial structure and strong financial results. As a result, when market conditions change, we don't find ourselves in bet the company type situations. We're not over-leveraged and we're not relying on additional capital to execute on the growth opportunities that changing market conditions can present. We operate and plan our business with a view to balance sheet and operating strength so we can weather storms and capitalize on opportunities. Second, we have a high degree of predictable recurring technology revenues. Today, we reported recurring revenues for the quarter and year, 89% of our total revenues. We also have another 10% or so of our revenues that are fairly predictable professional services revenues. This gives us great visibility in our business and allows us to proactively adjust our investments or expenses with the knowledge of the revenue base from period to period. Third, we serve multiple transportation markets. We provide advanced technology solutions that help with cargo moving from point a to point B regardless of the method of transportation used. We serve ocean markets, rail markets, air markets and road transportation in all its various forms. From full and less-than-truckload to private fleets, carriers and last mile deliveries. We believe that serving all these transportation modes is critical for our customers, especially since many freight moves involve multiple modes of transportation. This diversity also serves us well when market circumstances may impact a particular mode of transportation, such as how the past year has impacted air cargo. Fourth, we serve multiple customer types. We've purposely designed solutions that can help all parties to a cargo move, whether this be the carriers that own the ships, planes and trucks moving the goods, manufacturers, retailers, distributors, service providers that need goods to move, or the numerous logistics intermediaries like forwarders, brokers and third-party logistics providers that help the shippers and carriers connect and execute in an efficient and specialized way. This broad approach to serving customers gives us an excellent view as to the needs of each group so we can hone our solutions to remove inefficiencies in freight movement. It also protects us as particular customer groups experience ebbs and flows in the supply and demand in the transportation markets. Fifth, we have multiple products. When you're serving multiple transportation markets and customer groups, you're undoubtedly going to need an expansive solution set to meet a range of needs. Like all businesses, different products will see fluctuations in demand. However, for us, with the diversity of solution sets, we are confident that we'll experience more revenue consistency than a company that might be single-threaded in a specific product or solution. Our predictable recurring revenues also give us good visibility into demand for particular solutions so that we can adjust our investments accordingly. Sixth, we have broad exposure to international markets. As we've seen over the past year, it's become less important where your offices are physically located when you're a successful technology services provider. Instead, when you're looking at the company's international footprint, we believe that understanding the company's exposure to different geographic markets is more relevant. For us, that means understanding where cargo is originating and being delivered and where the world's largest parties involved in logistics operate. We found that over time, one country's downturn in logistics activity most likely ends up as an opportunity for another geographic market. Given that our diverse geographic customer base and involvement in logistics transactions originating or ending all over the world helps insulate us from particular changes in any individual geography. Seventh, we have scale. Since we serve the ocean community to borrow a sailing metaphor, there's a big difference between the abilities of a small dimi and a substantial vessel to weather a storm. We believe that our growth over the past years has created a strong seaworthy business. Other smaller start-up businesses may struggle with the scale needed to get them safely to the next port. And finally, we grow our business organically and by acquisition. Descartes has grown organically and by acquisition, we plan to keep doing that. We believe that a technology company in the supply chain and logistics space needs to be able to do both to be successful over the long term. In part, this is because changing market conditions will influence your ability to generate growth by either of those particular methods by focusing on total growth, both organic and acquisition, our business remains focused on what matters, strengthening the business for our customers. We want to remain innovative for what our customers need, regardless of whether that innovation comes from what we've designed internally or from combining with a leading successful company that's got something unique that the market wants. There's no better example of a company with innovative technology like that than the QuestaWeb acquisition that we completed this week. QuestaWeb is a leading provider of foreign trade zone, or FTZ solutions and customs compliance solutions. Foreign trade zones are especially cordoned off areas where commercial merchandise gets customs treatment as if it was outside the U.S.. Internationally, they're sometimes called free trade zones. There are about 250 of them in the United States within an hour drive of various ports of entry. FTZ is a very specialized market with very few technology providers able to master the intricacies of what customers need. FTZ is something that our customers have been actively asking for. We have a broad roster of logistics intermediaries, brokers and forwarders, who will love to have this available over the global logistics network and integrated to their forwarder back office system. We think this is going to be a great combination in part because our customers told us before we bought it, that it would be a great combination. This combination is even more important for our logistics service provider customers when you combine it with other innovative technologies such as our online freight booking tool that recently joined us as part of the containers acquisition. It's just further evidence of how much the logistics service provider community means to Descartes and is an important part of our investment strategy. So a warm welcome to the QuestaWeb team as we immediately get to the task of integrating our solutions on the global logistics network. Just to reiterate, we believe it's important for successful technology companies in our space to focus on growing organically and by acquisition. Some businesses are designed to only be acquisitive and where valuations start increasing, they must unreasonably push what they're prepared to pay to compete for deals to continue to grow. For Descartes, we've kept a consistent approach to acquisitions. We're disciplined on price. We're focused on generating profits. We focus on businesses that can integrate with what we already do for our customers. We add geographic reach and functionality that our customers have asked for. And we, unlike other companies aren't limited to home-run large-scale deals. We often find the best deals for our business and our shareholders, or smaller deals, where the continued satisfaction of customers and employees may be as important to the seller as price. Overall, Descartes is a resilient business. It's resilient because it was designed that way. We've got structural benefits that we believe distinguish us from many out there and position us to be able to grow in good times and in bad. When there are challenges like they were this past year, the Descartes business and our team has proven itself ready, willing and able to respond. And with that, I'll turn the call over to Allan to go through our Q4 and full year financial results in detail. Allan?

[Allan J. Brett, Chief Financial Officer]

Okay. Thanks, Ed. As indicated, I'm going to walk you through our financial highlights for our fourth quarter and year ended January 31. We are pleased to report record quarterly revenues of $93.4 million this quarter, that's an increase of 11% from revenues of $84.2 million in Q4 of last year. Our revenue mix in the quarter continued to be very strong, with services revenue increasing 12% to $82.7 million or 89% of total revenue in the fourth quarter compared to $73.7 million or 88% of revenue in the same quarter last year. Continuing with the long-standing trend to decrease the emphasis on onetime revenue, license revenues came in at $1.4 million or just over 1% of revenue in the quarter, down from $2.5 million or 2% of revenue in Q4 last year. While professional services and other revenue came in at $9.3 million or 10% of revenue, up nicely from $8.0 million or 10% of revenue in Q4 last year. For the year, revenue came in at $348.7 million, up 7% from revenue of $325.8 million in the previous year. Our revenue mix for the year remained fairly consistent with roughly 89% services revenue, 1.5% license revenue and approximately 9.5% of revenue from professional service -- from professional services. Gross margin for the fourth quarter increased to 75% of revenue for the quarter, up from gross margin of just over 73% in the fourth quarter last year. For the year, gross margin was very consistent with the previous year at 74%. Operating expenses in the fourth quarter and for the year ended January 31 decreased -- sorry, increased primarily related to the impact of recent acquisitions. While those increases were partially offset by several items, including the impact of restructuring efforts that we completed earlier in the year from cost efficiencies gained as we successfully integrated past acquisitions and identified cost overlap opportunities and finally, also from cost savings, we continue to see from the impact of the pandemic, particularly in the area of travel, marketing costs and facility costs. As a percentage of revenue, the increase in each category of our operating expenses was lower than the increase in revenue for the second year in a row as we benefit from our operating leverage as we grow. As a result, with revenue growth and continued strong cost control, we continue to see strong adjusted EBITDA growth to a record of $38.6 million or 41.3% of revenue in the fourth quarter. That's up 20% from $32.2 million or 38.2% of revenue in the fourth quarter last year. While adjusted EBITDA for the year came in at $142 million or 40.7% of revenue, up 16% from adjusted EBITDA of $122.6 million or 37.6% of revenue last year. As a result of these solid operating results, cash flow generated from operations came in at $36.5 million or approximately 95% of adjusted EBITDA in the fourth quarter of this year, and that's up 38% from operating cash flow of $26.4 million, or 82% of adjusted EBITDA in the fourth quarter of last year. For the year, cash flow from operations was a record $131.2 million or 92% of adjusted EBITDA, up 26% from $104.3 million or 85% of adjusted EBITDA last year as a result of lower interest expenses as well as lower cash taxes in fiscal '21. Going forward, subject to unusual events and quarterly fluctuations, we expect to continue to see strong operating cash flow conversion of approximately 85% to 90% of our adjusted EBITDA in the periods ahead. From a GAAP earnings perspective, net income came in at $17.2 million, up 51% from net income of $11.4 million in the fourth quarter last year. For the year, net income was $52.1 million or $0.61 per diluted common share, up 41% from $37 million or $0.45 per diluted common share last year. Overall, we are very pleased with these operating results in the fourth quarter and for the fiscal 2021 year as strong cost control allowed us to weather through the impact of the pandemic on our business, while we still managed to achieve 16% growth in adjusted EBITDA and 26% growth in cash flow from operations. If we turn our attention to the balance sheet, our cash balances totaled $133.7 million at the end of January 2021, and we did not have any borrowings outstanding under our credit facility at the end of the year. Subject to -- subsequent to year-end, on Monday of this week, we announced that we used approximately $36 million of our existing cash balances to complete the QuestaWeb acquisition, which Ed described in some detail a little bit earlier. As a result, we currently have approximately $100 million in cash balances as well as our $350 million line of credit available to drawn on for future acquisitions. So we clearly continue to be well capitalized to allow us to consider on all opportunities in our market consistent with our business plan. If we look ahead to fiscal 2022, we should note the following. After recurring approximately $3.8 million in capital additions, in fiscal 2021, we expect to incur between $5.0million and $7.0 million in additional capital expenditures this coming year. We expect the amortization expense will be approximately $53.9 million for fiscal 2022, with this figure being subject to adjustment for foreign exchange and future acquisitions. As a result of a few unusual tax recoveries, our income tax rate in Q4 came in at 21% of pretax income, resulting in a tax rate for the year of approximately 26% in fiscal '21, slightly lower than our statutory tax rates in Canada and the U.S. Going forward, we would expect that our tax rate will continue to trend in the range of 25% to 30% of our pretax income for fiscal '22. Although, as always, we should add that our tax rate may fluctuate from quarter-to-quarter from onetime items that may arise as we operate internationally across multiple countries. And finally, after incurring stock-based compensation expense of $6.3 million in the past year, we currently expect stock-based compensation coming in approximately at $6.6 to $6.8 million for fiscal 2022, subject to any forfeitures of stock options or share units. I'll now turn it back over to Ed to wrap up with our baseline calibration.

[Edward J. Ryan, CEO & Director]

Great. Thanks, Allan. I talked earlier about some of the advantages of how Descartes is structured. This structure gives us a solid base for planning for the future. We've just gone through our planning cycle for fiscal 2022, and I wanted to remind you of some of the principles we use in planning and executing in our business, principles that are the same as in past years. We plan for our business to grow adjusted EBITDA 10% to 15%, annually. We plan to grow through a combination of organic growth and acquisitions. When we overperform, we expect to reinvest that overperformance back into our business. We focus on recurring revenues and establishing relationships with customers for life, and we thrive on operating a predictable business that allows us forward visibility to our revenues and investment paybacks. With these principles, we calibrated our business for the upcoming financial year. In our quarterly report that Scott mentioned that we filed today, we've provided a comprehensive description of baseline revenues, baseline calibration and their limitations. Typically, we calibrate as of February 1, being the beginning of our fiscal year. This year, however, we're calibrating, as of February 26, being the date of the QuestaWeb acquisition. So as of February 26, and using foreign exchange rates of $0.79 to the dollar -- Canadian dollar, $1.21 to the euro and $1.39 to the pound, we estimate that our baseline revenues for the first quarter of 2022 are approximately $86.8 million, and our baseline operating expenses are approximately $56 million. We consider this to be our baseline calibration of approximately $30.8 million for the first quarter of 2022, or approximately 35% of our baseline revenues as at February 26, 2021. We've indicated previously that the targeted adjusted EBITDA operating margin range for our business is 35% to 40%. As mentioned in our actual results for Q4 and FY '21 had us at about 41%, it's possible that we exceed that 35% to 40% operating range again in Q1. But we don't yet see this as a permanent change in our preferred operating range. We will look at this again as Q2 starts based on market stability, including continued global progress towards vaccination and ending the current pandemic. We expect that the growth that we'll have in FY '22 will be a combination of organic and acquisition growth. As you've seen with the QuestaWeb acquisition that we announced earlier this week, we expect to continue to be acquisitive this year. The acquisition market is competitive with higher valuations, prompting many people to explore the market -- the sale market. We believe there are still acquisitions that meet our financial and strategic criteria and that continued focus and diligent efforts will guide us on the acquisition front. On the organic front, where we see the opportunity to capitalize on some market tailwinds, we'll be preparing our business for higher levels of organic growth. For us, that means focused in 3 ways: one, selling more of what we have to existing customers; two, selling our products and services to customers who may be new to the global logistics network; and three, continuing to enhance service delivery quality to reduce any revenue attrition in our business. From our perspective, this is especially important coming off a year that's caused many customers to reexamine who their technology service providers are, so they're best positioned for a post-pandemic world. Preparing for higher levels of organic growth is logical when you see market tailwinds. I outlined earlier some of the structural benefits our business has in comparison to our peers and competitors. However, there are some other factors that we believe are increasingly in our favor. First, we have a broad roster of customers. The number of parties that are connected to our global logistics network and using our technology continues to grow, and it's a big competitive differentiator. We believe that most of the world's shipments involve our customers in one way, shape or form, and that's a big attraction for new customers to join the global logistics network or existing customers to expand what they do with us. Second, we have a broad range of partners prepared to recommend us. Over many years, we've developed relationships with some of the world's leading technology providers, strategic integrators, industry professionals and analysts. Our consistent delivery of quality service and stability has made us an easier referral recommendation for those in the know about logistics. Third, we have the public size and scale that customers are looking for. Customers have a broad range of choice in technology service providers. From venture funded start-ups to publicly traded multinational technology companies. We believe that we have the size and scale that customers are looking for in making their decisions. We have solid financial metrics so that customers can be sure are going to be around for the long run. We're publicly traded, so customers can easily monitor our financial status unlike other privately owned companies where financial engineering interest of the owners may otherwise hamper what the business can accomplish. And we have the capital and scale to invest in things what smaller businesses may not take as seriously as we do, like corporate security and environmental and social governance issues. Fourth, our solutions have a positive impact on the environment. Descartes has long recognized the connection between the value of our solutions and their impact on the environment. Many of the benefits our customers receive using Descartes logistics and supply chain solutions directly and positively impact the environment. From reducing driving distance for fleet operators to automating logistics and customs clearance processes to eliminate paper, Descartes solutions reduced the global carbon footprint in a number of ways, and we're very proud of that. Fifth, we can recruit extremely talented people. I've mentioned in the past that we're the perfect work home for people who eat, sleep and breathe logistics. Well, we're now also a great home for people who want to be attached to a business focused on repeatable and long-term success. We continue to be impressed with the quality of people who want to join the Descartes team and help us on our mission. Our people have been the driving force for getting us to where we are, and we expect that they will be what continues to drive us to even greater heights. Sixth, we have market tailwinds. As I mentioned on our last call, we believe there are some good market tailwinds for us as we start FY '22. With the recent Brexit departure of the U.K. from the EU, we've seen good traction from customers who come to us to help them make electronic customs and security filings in the U.K., brand-new filings that never needed to be made before Brexit. Our customers continue to be intimately involved in vaccine distribution in the broader supply chain, pushing them to rely -- to reliance on technology solutions to help the process proceed on the tight time lines that governments and the populists are demanding. And e-commerce continues to have our customers seek new and more efficient mechanisms of controlling inventories and distribution. These are just a few of the factors that we think will contribute to our performance in fiscal '22. We've got structural and other advantages to promote growth for us in FY '22. We have a long list of good decisions to choose from. That's a great position for our employees, customers and shareholders to be in. And one, we have no doubt many of our competitors and peers envy. Thanks to everyone for joining us on the call today. As always, we're available to talk to you about our business by phone or virtual meeting, and we hope sometime sooner rather than later in person. With that, I'll turn the call over to the operator for questions.

[Operator]

[Operator Instructions] And our first question comes from Paul Steep from Scotia Capital.

[Paul Steep, Analyst]

Ed, could you maybe just elaborate a little bit about what your expectations might be and maybe around customs and compliance in terms of the uplift that you're sort of expecting out of the shoots on that with Brexit this year? And then I've got one quick follow-up clarification.

[Edward J. Ryan, CEO & Director]

Sure. Thanks, Paul. Yes. I mean, we're early days yet in Brexit. We know we've signed up a good portion of the market. We think we're the market leader in that business right now. There's still an informed compliance phase, which means that the government is not finding anyone yet for not making these filings. I think they have announced that they have 6 months to get in compliance. So we think it's going to be good for our business. We think it's going to be somewhat impactful to our business, not at a point right now where we're going to start guessing about just how much. But hopefully, in the next 2 quarters, we'll have a lot more form perspective on that, let's say.

[Paul Steep, Analyst]

Fair enough. And then just the clarifications are, just one little thing in the MD&A here about you've always called out sort of a 4% to 6% range on the annual recurring revenues in terms of potential attrition. You changed the last bit of the wording saying you thought it might be a hair higher or somehow higher than historic. I'm assuming that just relates to concern around the pandemic or that there's nothing else there? Just wanted to clarify.

[Edward J. Ryan, CEO & Director]

Yes, I wouldn't read too much into that. I mean you're right, we probably did change that because of the pandemic and maybe some of the uncertainty that, that's created. But not really seeing a material change to it at the moment. So we'll see what happens in the future, but at the same time, we have a lot of things going our way. So whatever happens with attrition, I expect that we would -- if it was higher than normal, we would be making up for with some of the higher growth that we're seeing right now.

[Paul Steep, Analyst]

And I guess the other thing you did also call it is you called out the actually -- relative to the last couple of quarters, you had actually seen an uptick in volume due to the pandemic, maybe just where you've seen that uptick? And I'll pass forward.

[Edward J. Ryan, CEO & Director]

Sure. Thanks, Paul. Yes. I mean, certainly our data content businesses are booming right now as governments around the world changed a whole bunch of tariff rates because of the pandemic, they basically made a whole broad range of products, tariff and duty-free for some period of time. That means more and more companies need access to our database to figure out how to properly classify their goods to take advantage of those reduced rates or eliminated rates. Our e-commerce business has done very well. You probably heard us say that in the past, but the pandemic drove a whole bunch of people online. And because of our exposure to e-commerce, not only directly serving small and medium-sized e-tailers but also doing deliveries for a lot of the delivery service agents that are delivering these packages to the home, it's been a real tailwind for us. And it seems like it was a big step function up and continues to this day. So we're pretty happy about that.

[Operator]

And our next question comes from Paul Treiber from RBC Capital Markets. .

[Paul Michael Treiber, Director of Canadian Technology & Analyst]

I just want to follow up on the last question. Just in terms of the outlook going forward for organic growth. I mean, as you think through reopening, what do you say? Obviously, there will be big tailwinds, I think the volumes. But how do you think about those areas that you saw a strong uptick amidst lockdowns? How do you think -- particularly in e-commerce, how do you see those businesses progressing as we get through the reopening.

[Edward J. Ryan, CEO & Director]

I think e-commerce is going to remain strong. I think we have some business areas that are up for the long run, like e-commerce. We're also seeing some of the businesses that we saw suffer in the pandemic, like air cargo start to come back now. It's -- I would say air cargo is not all the way back, but it's certainly -- the volumes have picked up considerably. We're probably -- we're like 5% to 10% down versus the 25% we saw down 6, 8 months ago. And as more planes are going back in the sky, people start to travel more and governments are subsidizing cargo-only flights and vaccines are being distributed around the world, largely on planes. That's all been helpful to the airline business and the recovery and helpful to us as they're recovering and there's a bunch of other areas in our business that remain in a bit of a boom. So we'll see what happens in the coming months, but we think we've got a lot of things going in our direction.

[Paul Michael Treiber, Director of Canadian Technology & Analyst]

And looking at baseline, I guess, the delta between baseline and actuals over the last couple of quarters, it has widened out, what do you think has been the reason for that? And then do you anticipate that trend continuing into Q1 and beyond?

[Edward J. Ryan, CEO & Director]

Yes. I mean, our organic growth rates are certainly picking up steam right now. And we're happy about that. Yes. The things I mentioned in the beginning of the call, right? There's a lot of things going in our direction right now, and our customers need help dealing with this and the pandemic probably highlighted that to them. And as you might see in the broader technology market, push them towards technology to solve those problems, and we were a logical candidate to do that. I would always say this quite simply to someone who's not in our business, but just kind of a friend or something that wants to understand what's going on is that the whole world just figured out that they need to be able to manage their shipments electronically from their home on a phone or a laptop, and that plays into our hand. That's what we do for people. And there were days just a couple of years ago when people went -- we could do this manually. We can pick up a phone and call these carriers, manage these shipments in other ways. We don't have to use technology to do that. All of a sudden the pandemic hits, everyone gets at home and everyone goes, that's out the window. You have to do this electronically. And because that's our business, we were beneficiary of that.

[Paul Michael Treiber, Director of Canadian Technology & Analyst]

That's helpful. Just one more for me. You mentioned the acquisition pricing environment, multiples are increasing, but you're still finding value. Can you just speak to the purchase multiple on QuestaWeb, how it compares to other acquisitions that you've done in the past?

[Edward J. Ryan, CEO & Director]

We we're not -- because it's a competitive situation, we're not going to get into naming the actual multiples, but it's maybe a little more than we would have paid a couple of years ago for a business like this, but as you've seen us do with a lot of businesses where we're kind of forced to pay up a little bit or maybe get out of our normal range. With QuestaWeb, we saw a high-quality business with a lot of opportunity to grow and thought we got a good deal on it at the end of the day. When prices go up -- and we're very cost conscious, right, we have our calculators out on every deal trying to figure out how are we going to get our money back for our shareholders. One of the ways you could do that is just to buy higher quality assets, hey, if I'm going to be forced to pay a higher price for something, that's fine. Let me get something that high quality. Because of our time -- amount of time that we've all been doing this and the amount of time that our tenured employees have been around looking at companies and assets in our space. We think we're better positioned than a lot of our competitors to find the right assets, the ones that are going to grow. And if we're forced to pay a little more for them, at least we're buying an asset that we think is going to be worth it in the long run.

[Operator]

And our next question comes from Matt Pfau from William Blair.

[Matthew Charles Pfau, Research Analyst]

First, Ed, wanted you to just drill into the organic growth acceleration a bit more. And maybe you've already hit on this a little bit, but what product specifically are you expecting to drive that acceleration? And just sort of wondering is that acceleration, how dependent is it upon economic recovery versus just sort of other tailwinds that you're seeing in your business that maybe aren't as dependent upon a recovery?

[Edward J. Ryan, CEO & Director]

Yes. I mean I'm not specifically thinking about the recovery in this process, although I think that will help. We're certainly seeing a big uptick in our custom security filing business because of Brexit. I think that's going to continue as Brexit continues to roll out. We are seeing our trade compliance that I just mentioned a little earlier with -- it's showing up in the data content businesses that we have. As people want more access to tariff and duty information so they could save money. They're turning to us as the provider of choice to do that, and that's been great for us. And a bunch of our network business is e-commerce and some of the other beneficiaries of e-commerce like moves in the trucking space, MacroPoint, things like that, have really moved up. And I think we'll continue to -- the comment I made to Paul earlier about people needing to manage shipments electronically now that all their employees have to work from home, I think that's here to stay. And I think that really plays into our hand, and is not only behind some of the growth you've seen in the past couple of quarters, but behind what you might see in the future.

[Matthew Charles Pfau, Research Analyst]

Got it. That makes sense. And then I wanted to ask about the commentary on EBITDA margins. And I appreciate that, depending upon what type and size of acquisitions you make, it could have an impact on that. But excluding acquisitions, I guess, why would you expect margins to potentially go down throughout the year? Are you planning on bunch of hiring or certain organic investments to drive that? Just maybe help better understand the commentary around the margins.

[Edward J. Ryan, CEO & Director]

Well, you've noticed for a while, we're pretty conservative. We would always choose to under-promise and overdeliver. And we think we're in pretty good shape to do these things. But there's a lot of turmoil going on in the market right now, right? A lot of our expenses have changed in the past year. You saw we were conservative in operating the business last year and cutting our costs to line up with some of the reductions we saw in the pandemic, and we understand that some of those costs may come back. That will be certainly one of the issues that goes on. As you mentioned and I kind of mentioned it in my prepared comments, we may be choosing to invest in some areas in our business where we see opportunities from growth as we see our organic growth rates growing. And more intense focus on logistics is -- probably puts an opportunity in front of us to invest more in our business and take advantage of that in the long run. And we look at that as a conservative approach of things, even though we're spending money to do that, right? We see an opportunity that we know is going to work. That's when you see us kind of pounce and that could happen again. But I think overall, this is probably just -- our conservative nature is such until we're positive that, that's going to happen, you're not going to see us move things.

[Operator]

The next question comes from Deepak Kaushal from Stifel GMP.

[Deepak Kaushal, Director and Technology & Communications Analyst]

I've got a couple. Ed, first on QuestaWeb. It sounds like you described it as a pretty niche market in the U.S. but having growth opportunities. Can you talk a little bit about where you can see the growth for that? And what the non-U.S. opportunities for that business might look like and how you get there?

[Edward J. Ryan, CEO & Director]

Well, remember, it's companies from all over the world to take advantage of these foreign trade zones in the U.S. And if you're going to buy a global solution, you need to be able to handle that. If your company uses foreign trade zones, you need to have a solution for that to handle that. And we see -- as we have with a lot of our acquisitions, I always say we're buying on extra neighbors property with every acquisition. We have a lot of investments in the Florida broker space. You see us doing the containers deal, the ship track deal, these things are all related. And people that buy those pieces of functionality or back office forwarder system, back office brokerage system, container solutions also need to handle in a lot of cases, foreign free trade zones. And we wanted to make sure that we had the solutions that the customers want. I mean we think of ourselves as buying and building to an end state in the logistics technology space. And we thought free trade zones was a big part of that. And when we saw QuestaWeb come up for sale, I mentioned, there's not many companies out there that handled this well. And when we saw them come up for sale, we thought we should go get that because that's what our customers want.

[Deepak Kaushal, Director and Technology & Communications Analyst]

Got it. And is this something that you can export to other countries or regions down along?

[Edward J. Ryan, CEO & Director]

Well, this concept doesn't exist exactly in other countries in the world. There are a lot of foreign companies, though, that also operate free trade zones in the United States. So we might be selling it overseas maybe more effectively than the smaller QuestaWeb did on their own because we have a broader footprint of salespeople out on the street. But as you're kind of pointing out, it's a U.S. focused set of functionality. But bought by people all over the world that we might have more access to. So yes, if you understood my -- the intricacies of my answer.

[Deepak Kaushal, Director and Technology & Communications Analyst]

Got it. Yes. No, that's helpful. I appreciate that. [indiscernible]. I just want to follow-up on something you mentioned around attrition. You talked about improving your enhanced quality to reduce attrition. And in general, there could be some sort of vendor consolidation accelerate post-COVID been kind of going on in tech for a while. Do you see this so a risk or an opportunity for you guys? Because it's hard to see major big players that could be preferred consolidators as a supplier versus Descartes and what you guys offer to the table. How do you think -- how should we think about in terms of an opportunity?

[Edward J. Ryan, CEO & Director]

Well, we think of it as an opportunity, right? I mean I'm quite sure it's going to be an opportunity for us. But that doesn't mean that we don't have to -- part of being in the lead all the time is being able to look every shoulder and go who might catch me here and how? And what am I going to do to prevent that from happening? And we don't spend a ton of time looking over our shoulder, but we certainly are aware of where we are in the market and where we might need to improve to make sure that we're always the best in every area that we operate. And as we get bigger, we want to make sure that our brand is continually known as someone that is providing the best service for the best price in the market. And part of that is delivering the best functionality and being on top of that. So well, to answer your question, I see that's a big opportunity for us. And certainly, I think that the fact that we're getting bigger makes it easier for bigger companies to do business with us. But at the same time, I want to be mindful of the fact that I got to have good functionality for them or they're not going to want to do everything with me. So a little both.

[Deepak Kaushal, Director and Technology & Communications Analyst]

Got it. And when we think of your partners like [indiscernible] I remember this a couple of years ago was a big opportunity in transportation management. What's kind of the status of those partnerships and how does that rollout in play in the coming years?

[Edward J. Ryan, CEO & Director]

Bigger than ever. I mean they're growing probably bigger than ever and growing faster than ever. They have been great partnerships for us. We continue to expand with them. They continue to get more and more traction with their transportation management solutions and their global trade management solutions. And every time they do that, they're using a global logistics network. So that's been great for us, and hopefully, great for them and their customers as well.

[Operator]

And our next question comes from Raimo Lenschow from Barclays.

[Frank Joseph Surace, Research Analyst]

This is Frank on for Raimo. I have one on your conversations with customers. It may still be early days here, but as we continue to reopen and as more vaccines get distributed, has there been any sort of inflection yet in these conversations with customers compared to prior quarters when there was no vaccine approved yet and reopenings seemed far more distant?

[Edward J. Ryan, CEO & Director]

I don't know if that specifically changed things for us. I mean, and if it has, I haven't really seen that yet. I mean we continue to sell very effectively in this pandemic. I mean it's one of the big surprises to me in this pandemic is that in the early days of it that we're selling as effectively as we were prior to the pandemic and another surprise to me in the last couple of quarters is that we sold more stuff than we've ever sold before coming into the -- let's say, at the height of this pandemic in the last 6 months or so, as companies have decided to buy more and more logistics functionality to deal with these problems. I think it's probably largely the world just found out because of this pandemic, the logistics is a little more important than they thought it was. And that puts pressure on our customers to perform, it gives them a lot of opportunity. And they need technology to help them do it. And we've been a beneficiary of that. And our sales guys, even though they haven't been able to travel to see customers in a year, have been selling more than ever. And that's been great news for us. I think it's going to be good news to come.

[Frank Joseph Surace, Research Analyst]

Great. That's really helpful. And then one more, if I can, on the acquisition. This builds on a bit of a pattern on acquiring into some growth areas like compliance and e-commerce, how should we think about M&A going forward considering that? When you're in the market, is there a bit more of a focus on growth areas specifically? Or are you really looking for the right asset regardless?

[Edward J. Ryan, CEO & Director]

I mean we'll look at anything. Over the last 20 years, you've seen us buy stuff that's shrinking the day we bought it. You've seen us buy stuff that's not profitable the day we bought it. But in the last 5 or 6 years, and I kind of touched on this earlier on the call, as prices have gone up, we've thought as relative to cheap buys, we thought, hey, do I want to overpay for something that's got some issues or want to overpay for something that's in a very good position. Well, if I'm going to be forced overpay, I'd like to overpay for something that's growing rapidly and well positioned because I think, in those circumstances, when I get the right company like a MacroPoint. I go -- I don't think I'm going to care about the purchase price. I'm going to laugh about the price 10 years ago. Even though the day I bought it, it seemed very expensive to everyone. And we went out and got that company. And here we are a couple of years later, and we're going, geez, that purchase price would be a bargain in today's market. And I think that's driven us towards, as you said, the higher growth areas. It's part of it. It's also easier for us to buy these things that are growing, right? There's less problems, right? And the problems that they have are the ones that we're best prepared to deal with. They go, hey, I've got this great product. I want to get it out to all these people, but I don't know those people. When we go well, I do. And so if I buy your company, we have a couple of hundred sales people out there that know those customers, we can go out and attack them more aggressively than you might have been able to do on your own, just as an example. And that makes the acquisition worth more to us than most other players in the market, certainly than to a private equity firm who isn't going to bring anything else to the table other than money.

[Operator]

Your next question comes from Justin Long from Stephens.

[Justin Trennon Long, Managing Director]

Congrats on the quarter.

[Edward J. Ryan, CEO & Director]

Thank you, Justin. Appreciate it.

[Justin Trennon Long, Managing Director]

No problem. And I wanted to circle back to organic growth clearly, there's been an acceleration. But I was wondering if you could put some more numbers around it. Just based on the way you calculate organic growth, can you speak to the acceleration that you saw in the fiscal fourth quarter? And then going forward, coming out of this pandemic, you gave a lot of reasons why you think organic growth can accelerate. But I think you've historically talked about this 3% to 6% growth range. Has the framework changed? And if so, what do you think that could look like the next few years?

[Edward J. Ryan, CEO & Director]

Well, yes, I think we're above that right now this quarter, above that 3% to 6% range. You heard me talk about the growth in the EBITDA margin in that range. So as being conservative about making future predictions about it. But we see it's up right now. We see a lot of runway for that to continue. I don't know where it's going to go yet. But we like the way we're positioned, that's kind of what I was highlighting on the call. We certainly can feel it right now, but it's as good as we've seen it in a long time, if not ever. And I'm hopeful that continues, but I don't know that for sure and probably wouldn't make future predictions about it until I'm sure. So I'll leave it at that.

[Justin Trennon Long, Managing Director]

Okay. And then I wanted to circle back secondly to the penetration of your customer base. Could you just speak high level, where you see the most opportunity on that front, whether that's a specific customer base, if that's a specific set of products? Where do you see the most opportunity to increase that penetration rate?

[Edward J. Ryan, CEO & Director]

Well, we see across a whole bunch of different products that we have. We're -- and you can see it in almost every acquisition we do. I mean these acquisitions are to an uninformed observer, it might seem like they're all over the place. They're not. These are things that -- I always think of this as like the bottom of the Amazon page, people that bought this should also buy this and this and this. And when we're buying companies, that's what we're thinking about, right? We're thinking of -- well, if I have bought product A, B and C from Descartes, wouldn't I love to have product D over here, we should make that part of our portfolio. Who's the best guy in that space? How do I get him to selling that company? Because we think we can take advantage of that. And we think that's something our customers want us to do and we better position them to operate their business. And the pandemic may have accelerated some of that as more and more people realize the technology is an increasingly important part of solving logistics and supply chain problems. And that's played right into our hands. And I think that's behind some of the organic growth that you've mentioned in the past and behind some of the excitement you hear in our voices today about the future.

[Operator]

And the next question comes from Scott Group of Wolfe Research.

[Scott H. Group, MD & Senior Analyst]

Ed, when you talk about service quality, I wonder, are there opportunities to maybe get some additional pricing? And then if organic growth is accelerating, does that change how you think about the 10% to 15% for EBITDA growth?

[Edward J. Ryan, CEO & Director]

We always operate our business to 10% to 15%. I hope to come back 10 years from now, and we'll still be saying 10% to 15%. You see we beat that number all the time. We're trying to be conservative when we say that to people. Sorry, could you repeat the first part of the question? I lost it in the second part.

[Scott H. Group, MD & Senior Analyst]

Yes, you were talking earlier about service quality, and I'm wondering if you see opportunities to -- on the pricing side.

[Edward J. Ryan, CEO & Director]

Yes. I mean, that's not a place we normally go, right? I mean one of the questions earlier mentioned the concept of cross-selling and selling more stuff to existing customers. Our cross-selling numbers continue to rise every quarter. I want that to continue to be the case. We're constantly buying companies to actually drive that cross-selling. And when we're doing that, we want them to see us as very reasonable guys to deal with, right? So we have tried to keep our prices consistent and not -- when we have a customer over a barrel not get them to spend more money by getting them to -- by charging them more per drink, but get them to spend more money because they like the solution and they want to roll it out further, and it benefits their business. And as a result, they end up buying more stuff from us. And we've chosen the latter every time, and we'll continue to, right? We want to be seeing in this market where we're selling FedEx or DHL, the 20th and 21st and 22nd products. And we have a big complex relationship with them. We don't want them ever thinking that we're unreasonable people because we check the prices up just because we could. And so we'll take that goodwill and use it to get them to buy more products instead of getting a few more sense out of them per transaction.

[Scott H. Group, MD & Senior Analyst]

Okay. Makes sense. And just lastly, all of this port congestion that we're seeing these delays on the ocean, is that good for you, bad for you, no impact.

[Edward J. Ryan, CEO & Director]

I mean, listen, that stuff is all going to move, and there's congestion that's generally good news. That means there's a lot of demand for our customers, and that means our customers are doing well, and that means that we're probably going to do well, too, because we charge them by the transaction. So that's good for us. Otherwise, the actual congestion itself doesn't need a whole lot of that.

[Operator]

.And that concludes our question-and-answer session. I will turn the call back over for final remarks.

[Edward J. Ryan, CEO & Director]

Great. Thanks, everyone. We look forward to reporting back to you on Q1 in May. And otherwise, have a great day. Thanks.

[Operator]

Thank you, ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect. .