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Source: 1H22 Results Investor Briefing Materials (Slide 16 and 7). 


WiseTech’s strategic vision is to be the operating system for global logistics and our mission is to create breakthrough products that enable and empower those that own and operate the global supply chains of the world. 

To achieve this, our strategy is driven by our people and centred around the 3P’s: Product, Penetration and Profitability – with a focus on accelerating our global growth by leveraging the structural changes that are currently taking place in the global logistics and supply chain sectors. 

In particular, WiseTech's strategy is focused on capitalizing on the growing demand for integrated global software solutions as industry consolidation drives large logistics providers to replace their legacy in-house systems with integrated software solutions that deliver increased visibility, productivity and control. 

Our customers operate in a highly complex, dynamic, ultra-competitive environment. CargoWise’s competitive advantage is its ability to continue to rapidly enhance productivity and capability, drawing away from regional and local competitors, delivering advantages to customers and potential customers still on aging legacy systems. This is what enables us to retain customers, increase their CargoWise usage and attract new customers.  

We are a ‘product-led’  business and have reached an inflection point in our growth trajectory which can be seen in our financial performance. Our focus on the Top 25 Global Freight Forwarders and top 200 global logistics providers, is gaining traction. Importantly, we have a strong pipeline of potential new global customers, which we are actively pursuing. 

Our ability to secure new global customers is driven by the appeal of our CargoWise offering and our ongoing product development and enhancement. In 1H22 we made excellent progress on the continued alignment of acquisition development teams to support WiseTech's development pipeline.

Also, of strategic note in 1H22, we delivered 589 new CargoWise product featured and enhancements, and completed two small 'tuck-in' acquisitions to extend CargoWise's enterprise-wide functionality.

Our product development and increasing market penetration drive our top line revenue growth, which coupled with the delivery of our organisation wide efficiencies and acquisition synergies enable us to achieve operating leverage, setting us up to deliver ongoing, attractive returns for shareholders in the years ahead.

For more detail on each of our 3P strategy focus areas, please see slides 17-20 of our 1H22 Results Investor Briefing Materials here 

 

Source: 1H22 Results Investor Briefing Materials (Slide 18).


With fully digital and highly automated global logistics solutions still in very early stages we have considerable scope for growth.  

Our approach is to target global rollouts by the Top 25 Global Freight Forwarders and the top 200 global logistics providers because they can fully leverage our global capabilities and therefore provide the greatest revenue growth potential. 

On the above slide (slide 18 of our 1H22 Results Investor Briefing Materials), you can see the progress we have made in securing global rollouts.   

We have grown our global rollouts in two waysthrough CargoWise customer contract commitments and by existing customers who are not on formal roll out agreements but are growing organically adding new geographies and users as they go.  

Over a third of the 31% CAGR of our CargoWise recurring revenue, over the past five years, has been driven by Large Global Freight Forwarder rollouts. 

What is of note over the past 18 months is the significant momentum we are seeing in global rollouts and new customer wins. 

We secured two new global rollouts in the 1H22, FedeX and Access World, with a total of 40 global rollouts, including many of the world's largest logistics providers, and we added Brink's Global Services post 31 December. We continue to have a strong pipeline of active and future opportunities.

More than one third of the 31% CAGR of our CargoWise recurring revenue, over the past five years to FY21, has been driven by Large Global Freight Forwarder rollouts.

 

 

Source: 1H22 Results Investor Briefing Materials (Slide 6). 


Overall market conditions in global logistics in FY21 continued to be impacted by ongoing COVID-19 restrictions, with consumer demand for services shifting to demand for goods, supported by various country specific fiscal stimulus measures, boosting demand for global trade. 

Ongoing COVID restrictions in the second half of calendar 2021, continued to drive consumer demand for goods rather than services.
While this boosted demand for global trade during the year there was also well-publicized disruptions in the form of capacity constraints, port congestion and labor shortages – all of which contributed to higher freight rates.

As outlined in our FY21 results, these higher rates do not translate into immediate revenue growth for WiseTech. We do, however, benefit from the acceleration in long-term structural changes that these conditions drive.

Constrained capacity and congestion mean that logistics providers are investing in accelerating their digital transformation. They’re increasingly replacing in-house legacy systems with integrated global software that delivers efficiencies and facilitates planning and control of their global operations, which is what CargoWise delivers.

These conditions are also driving increased consolidation which you can see with global freight forwarders such as DHL, DSV, CEVA Logistics and Kuehne + Nagel having embarked on acquisitions over the past two years. This consolidation activity intensified in the second half of calendar 2021 and is expected to continue in 2022.

From WiseTech’s perspective, consolidation benefits us where our customers are the acquirers or our platform is already in use in the acquired business and adopted by the acquiror, complementing and enhancing our growth strategy.

 

Total addressable market
The supply chain management IT segment

 

Source: WiseTech's 2020 Investor Day presentation.


WiseTech operates in the global logistics service provider software market. Our CargoWise offering provides a cloud-based, supply chain and logistics execution software solution that enables our customers to manage their involvement in logistics and the global supply chain in areas such as freight forwarding, customs clearance, tracking, warehousing, cross-border compliance and transport by air, sea, rail and road.  

According to research firm Armstrong & Associates, the global logistics market is valued at approximately US$9 trillion1 and expected to grow at approximately 5% p.a. through to 20232, reflecting increasing global trade flows. Gartner estimates transport and logistics IT expenditure in 2019 was valued at $164 billion or approximately 2% of the total global logistics market3. 

Looking more specifically at the global supply chain software execution IT segment, Gartner estimates this to be valued at US$4.7 billion in 20194 with the broader global supply chain software management IT segment valued at US$15.2 billion5. This is supported by Allied Market Research which estimates the global supply chain management market to be valued at US$15.9 billion. 

We have for some time spoken about growth in global logistics occurring at a time when structural change is also taking place.   

Logistics service providers are facing a number of challenges including increasing supply chain complexity, greater regulation, compliance hurdles and cost pressures resulting in: 

  • a move to digitalization or what we call “straight through digital processing” when you consider CargoWise One and CargoWise Neo;  
  • growing demand for an integrated global logistics technology solution; and 
  • further industry consolidation. 

1Source: Armstrong & Associates, Global 3PL Market Size Estimates, 2019 Logistics Cost, March 2020 
2Source: Armstrong & Associates, Global 3PL Market Size Estimates, Global Logistics Costs Growth Expectations, 2018–2023
3Source: Gartner Transportation & Logistics IT Expenditure, Worldwide, 2019, 3Q20 Update, 5 October 2020
4Source: Gartner Supply Chain Software Execution, Worldwide, 2019
5Source: Gartner Supply Chain Software Management, Worldwide, 2019

Revenue growth drivers

Source: FY21 Results Investor Briefing Materials (Slide 12). 


This answer looks at our historic revenue growth drivers, and provides a framework for how to think about our CargoWise revenue growth trajectory going forward. 

On a constant currency basis, over the past five years CargoWise recurring revenue has almost quadrupled from $84.5 million in FY16 to $321.9 million in FY21This equates to a 31% compound annual growth rate over the five years. 

The above slide (slide 12 in the FY21 Results Investor Briefing Materials), helps illustrate the relative contribution to our CargoWise recurring revenue growth from each of our revenue driversThe table separates out the relative contribution to growth based on the averages over a five year period, recognizing that the contribution to growth of each of these may vary year-on-year. 

The biggest driver of CargoWise recurring revenue growth over the past five years has been Large Global Freight Forwarder rollouts, which have contributed just over a third of our revenue growth or 12 percentage points of the 31% CAGR.  

This also highlights why the six new global rollouts secured in FY21, and the signing of FedEx post 30 June 2021, are significant when considering our future revenue growth pipeline.  

These large customers take multiple years to rollout the CargoWise platform across their sites globally. This means their usage and transaction revenues continue to grow over time.   

The next biggest contributor to CargoWise recurring revenue growth over the past five years has been new customer wins across the FY17 to FY21 cohorts, which contributed 6 percentage points of growth. 

Next, are over 4,300 new product features and enhancements reflected in price which contributed 4 percentage points to our growth. 

Increased usage by existing customers contributed 3 percentage points to growth, with major new product launches and underlying supply chain market growth each contributing 3 percentage points to growth. 

What is important to note is that of the 31% CargoWise compound annual growth rate, 28 percentage points of this growth relates to WiseTech specific factors primarily our increasing market penetration and the appeal of the CargoWise customer value proposition. This has enabled us to significantly outpace the overall market growth.  

CargoWise non-recurring revenue growth over the past five years has been driven by customer paid product enhancements, which are important future growth enablers. 

Looking ahead, we anticipate future CargoWise recurring revenue growth will reflect our historical experience – driven primarily by the acceleration of large global freight forwarder rollouts and further new contract wins, as well as the launch and expansion of new products such as customs and rates and longer-term new product developments such as CargoWise Neo. 

We intend to provide updates on the relative contribution to our revenue growth drivers at our full year results each year. 

 

Source: 1H22 Results Investor Briefing Materials (Slide 11). 


On the above slide are three graphs charting our operating expenses since 1H20 across three areas: product design and development; sales and marketing; and general and administration expenses. 

Overall, our operating expenses were down 11 points as a percentage of revenue on 1H21, reflecting our increased operating leverage as a result of revenue growth and the cost reduction benefits of our efficiency program. In terms of product design & development expenses you can see our continued commitment year-on-year in R&D to drive innovation and improvements across the CargoWise ecosystem. Our 1H22 product design & development expense increased by $0.4 million to $45.2 million, for the half year. This reflects an increased focus on innovation and development of the CargoWise platform, whilst investment in acquired platforms was down, in line with our stated commitments to expand the CargoWise ecosystem.

As a result of our revenue growth and the further alignment of our acquired teams in our more efficient CargoWise development process, overall Product design & development investment was down 3 points as a percentage of revenue to 16% versus 1H21.

To provide some context on Product Design & Development expense, approximately 47% of this expense is related to supporting the maintenance of acquired legacy products. This means that we have a continued opportunity to either reinvest or realize these cost savings as we transition these legacy products onto our efficient CargoWise platform.

Our sales & marketing expenses were down 3 points as a percentage of revenue to $19.8 million, or 7%, in 1H22. This reflects the ongoing cost reduction benefits brought by our efficiency and acquisition synergy program, as well as our targeted sales and marketing focus on the Top 25 Global Freight Forwarders and the top 200 global logistics providers. Our continued success in securing new large global rollouts and expanding new customer revenue in the half underlines the effectiveness of our targeted sales & marketing program.

Our general & administration costs decreased from 19% as a percentage of revenue in 1H21 to 14%, or $40m, in 1H22. This decrease was predominantly driven by the ongoing cost reduction benefits from the efficiency program and underlines the success of this program in driving further margin expansion and operating leverage. 

 

36 large global freight forwarder rollouts

Source: FY21 Results Investor Briefing Materials (Slide 23).


Our large global customers take multiple years to roll out the CargoWise platform across their business units and geographies. As the roll-out progresses they add new countries, adopt new modules and implement our productivity tools.  

DHL is a good example. We signed a global rollout contract with them in FY16 and over the next few years they have completed the rollout of CargoWiseThis has been a five year process and, as noted by DHL, it is one of the fastest rollouts by a freight forwarder of this size. 

Of the 36 global rollouts in place at the end FY2129  are ‘In Production’, which means they are operationally live on CargoWise having rolled out to 10 or more countries and 400 or more registered users.  

The remaining seven are ‘Contracted and in Progress’, which means they are at an earlier stage of their global rollout. 

From a revenue generating perspective, you can see that these 29 global rollouts ‘In Production’ have delivered compound annual growth of 37% over the past five years. This has been driven by the progression of rollouts by customers such as DSV, DHL, Toll, Yusen and Geodis and the adoption by these 29 customers of additional CargoWise modules, products and featuresas well as customer expansion through M&A activity such as DSV/Panalpina.

Importantly, eight of these 29 customers 'In Production' are top 25 global freight forwarders. These eight have generated a much higher compound annual growth rate of 46% over the past five years, which explains our focus on securing global rollouts by these big players. 

Looking aheadgiven the significant runway of new customers available to us in both the Top 25 Global Freight Forwarders and the top 200 logistics providerswhich we are actively pursuingwe expect to see future revenue growth driven by additional large global customer wins. 

We also anticipate significant growth from the global rollouts that are ‘Contracted and in Progress’two of which are Top 25 Global Freight Forwarders. To give a sense of the magnitude of this opportunity, if you look at the seven rollouts that were ‘Contracted and In Progress’ in FY21, collectively they have less than 10% of their expected users currently live on CargoWisehoweverthey have delivered 158% of compound annual revenue growth over the two-year period from FY19 to FY21, indicating there is significant future growth to come. 

Our existing 29 customers with global rollouts ‘In Production’ will also continue to drive revenue growth as they add new products, features and geographies. In particular, as we increase our customs coverage from approximately 45% of global manufactured trade flows to our target of 90%. 

We anticipate continuing industry consolidation will also support our future revenue growth with our Large Global Freight Forwarder customers well positioned to leverage future consolidations to grow. 

 

About WiseTech Global

Our strategy

The 3P's

Our strategy is designed to accelerate growth by leveraging structural changes, and our people focus on our 3P’s – Product, Penetration and Profitability – to deliver our vision.

We bring meaningful, continual improvement to the world’s supply chains. We replace aging, legacy, proprietary and domestic systems with efficient, highly automated and integrated global capabilities.

Our breakthrough software solutions are renowned for their powerful productivity, extensive functionality, comprehensive integration, deep compliance capabilities and truly global reach.

Our product

Our customers

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