Categories
Technology Stocks

Driven by strong top line revenue growth, WTC increasing organization-wide efficiencies and acquisition synergies

Male gamer in headphones holds joystick and playing videogame on console or desktop PC, gaming lifestyle, cybersport. Computer games player in his room with neon light, streamer

Investment Thesis

  • Market leading position (significantly ahead of the nearest competitor). 
  • Growing global trade and increasingly globalization of products sold. 
  • High degree of revenue visibility and low customer annual attrition rates. 
  • R&D spend will ensure product/services are enhancing WTC products. WTC’s vision is to be the operating system for global logistics. Having completed 39 acquisitions since its IPO in 2016, WTC has assembled significant resources and development capabilities to fuel its CargoWise technology pipeline. 
  • Scalability of the business model. 
  • Geopolitical tensions considered by management as “tailwinds” due to higher consolidation of the logistics software industry.

Key Risks

  • Company announces another earnings downgrade. 
  • Organic growth could moderate further, which may no longer warrant such a lofty valuation. However, organic growth has improved over FY19. 
  • Management noted that revenues from recent acquisitions actually declined and offered little margin. This means the return from these acquisitions could take longer than management’s expectations. 
  • Competitive threat (new product/technological advancements). 
  • Disruption to technology (data breach). 
  • Adverse currency movements.

Key Highlights: Relative to the pcp and on a constant currency basis: 

  • 1H22 Total Revenue of $281.0m, up +18% (+22% ex FX) on 1H21. 
  • CargoWise revenue was up +29% (+33% ex FX) to $193.0m, driven by Large Global Freight Forwarder rollouts, new customer wins, price and increased existing customer usage.
  • Acquisition (non-CargoWise) revenue of $87.9m, down -1% (up +2% ex FX). 
  • Market penetration momentum continuing – two new global rollouts secured in 1H22 – FedEx and Access World – and Brink’s Global Services (Brink’s) signed post 31 December 2021. 
  • Ongoing product development delivered 589 CargoWise new product features and enhancements and continued expansion of the CargoWise ecosystem. 
  • Organization-wide efficiency and acquisition synergy program well-progressed – $20.2m of gross cost reductions in 1H22 (net benefit $19.7m). 
  • EBITDA of $137.7m up +54% driven by revenue growth and cost reductions. Margin of 49%, up 12 bps. CargoWise’s 1H22 EBITDA margin of 58% represents an increase of 4pp on 1H21.
  • Underlying NPAT of $77.3m, up +77%. 
  • WTC generated strong free cash flow of $90.3m, up +85%. 
  • WTC retained a strong balance sheet, with cash as at 31 December 2021 of $380.3m and no outstanding debt excluding lease liabilities. WTC has an undrawn, unsecured, four-year, $225m, bi-lateral debt facility, to fund future growth. 
  • WTC’s Board declared a fully franked interim ordinary dividend of 4.75cps, which equates to payout ratio of 20% of Underlying NPAT.

Company Description

WiseTech Global (WTC), founded in October 1994, is a leading provider of software to the logistics services industry globally. WTC develops, sells and implements software solutions that enable logistics service providers to facilitate the movement and storage of goods, domestically and internationally. WTC’s software assists their customers to better address and adapt to the complexities of the logistics industry while increasing their productivity, reducing costs and mitigating risks. WTC services over 6,000 customers across more than 115 countries with offices in Australia, New Zealand, China, Singapore, South Africa, United Kingdom and the United States.

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.