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Financial FAQ

 

Source: FY22 Results Investor Briefing Materials (Slide 18 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 FY22 we made excellent progress on the continued alignment of acquisition development teams to support WiseTech's development pipeline.

Also, of strategic note in FY22, we delivered 1,199 new CargoWise product 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 organization-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 18-21 of our FY22 Results Investor Briefing Materials here 

 

Source: FY22 Results Investor Briefing Materials (Slide 20).


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 20 of our FY22 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. And among the Top 25 Global Freight Forwarders the CAGR was 46%.

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

Five existing customers grew organically, adding new geographies and users, and are now classified as Large Global Freight Forwarder customers, as indicated by the red borders.

The earliest of these customers, Omni Logistics, has been with us for 15 years. Demonstrating how our customers grow with us and how our software becomes increasingly integral to their operations.

We secured five new global rollouts in the FY22, UPS, FedEx, Craft Multimodal, Brink's and Access World, with a total of 43 global rollouts, including many of the world's largest logistics providers. We continue to have a strong pipeline of active and future opportunities.

 

 

Source: FY22 Results Investor Briefing Materials (Slide 6). 


Our performance should be looked at in the context of the broader market conditions.

On the above slide we provide some external data points on global trade volumes and demand as well as trends in freight volumes, along with some of our own views on the market and longer-term structural drivers which continue to play out. All of these support sustained demand for our solutions, acknowledging that in the near-term demand may be affected by changes in market conditions.

Merchandise trade volume grew more slowly this year, relative to 2021, however growth is predicted to increase again in 2023, while demand for goods continues to track nearly 5% ahead of pre-COVID levels.

As outlined in our 1H22 results, COVID was the cause of many well-publicised disruptions to global supply chains, in the form of capacity constraints, port congestion and labour shortages, as well as general operating inefficiencies, all of which continued through the second half.

What this means is that there is a considerable backlog which we expect to support freight volumes, noting US imports are still expected to be higher than the record year experienced in 2021.  

While there are differing views around near term trends, we believe all of the structural drivers of the industry will continue to push global freight forwarders and logistics providers to strive for operational improvements with a focus on efficiency. This will accelerate the replacement of in-house legacy systems with modern, globally capable, integrated software solutions that deliver efficiency, enhance productivity, transparency and visibility, mitigate risk, and facilitate better planning and control of their complex global operations. These capabilities are exactly what CargoWise delivers.  

In this uncertain environment, organisations are much more focused on their efficiency and profitability, while they continue to adopt new hybrid working models, take their businesses into the cloud, and digitise their documents and processes.

An increasingly complex regulatory environment that includes substantial fines and penalties, drives the need for better control of risks which in turn, drives new customers to CargoWise. Continued industry 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. These industry drivers are also providing a strong tailwind for our business.

This is clearly demonstrated by the continued growth in our customer base and wider adoption of CargoWise across the industry, as we move closer to our vision to be the operating system for global logistics.

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: FY22 Results Investor Briefing Materials (Slide 11). 


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 last six years CargoWise recurring revenue has grown by almost five times from $85.2 million in FY16 to $422.3 million in FY22, an increase of $337.1 million which equates to a 31% compound annual growth rate over the period. 

The above slide (slide 11 in the FY22 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 six-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 six years has been Large Global Freight Forwarder rollouts, which have contributed over a third of our revenue growth or 12 percentage points of the 31% CAGR.  

The next biggest contributor has been new customer wins, which contributed 6 percentage points of growth. 

This is followed by thousands of new product enhancements reflected in our pricing, which contributed 4 percentage points. Major new product launches and increased usage by existing customers contributed 3 percentage points each to growth.

Lastly and importantly, underlying supply chain market growth contributes just 3 percentage points, or just under 10% of growth. This means the overwhelming majority of our growth is driven by factors we influence, like winning new customers and investing in new products and features. We’re therefore not reliant on the market to deliver the majority of our organic growth.

CargoWise non-recurring revenue growth has been driven by customer paid product enhancements and in FY22 the licence of a CargoWise Landside Logistics component to accelerate product commercialisation, both of which are important future growth enablers.

Looking ahead, we expect future CargoWise recurring revenue growth to be consistent with our historical experience, driven primarily by the acceleration of large global freight forwarder rollouts and further contract wins, as well as the launch and expansion of new products from our long-term R&D investment including growth from our 6 key development priorities.

Pursuing inorganic growth opportunities is another important growth lever including smaller ‘tuck-in’ as well as potentially larger, strategically significant acquisitions where we can deploy our sizeable balance sheet, supported by strong operational cash generation, our undrawn $225 million debt facility and our proven M&A capability to accelerate our development opportunities and build out the CargoWise ecosystem.

Source: FY22 Results Investor Briefing Materials (Slide 13). 


Overall operating expenses were down 8 points as a percentage of revenue on FY21, reflecting margin expansion driven by increased operating leverage and the benefits of cost reductions from our efficiency program, which were ahead of expectations.

Product design & development expenses increased by $8.1 million to $96.9 million in FY22, driven by an acceleration in CargoWise innovation and development and a decrease in non-CargoWise platforms. While product and development expenses increased in absolute terms, the benefits of cost reductions drove a 2 percentage point reduction to 15% of revenue.

Approximately 43% of $96.9 million of product and development expenses were related to supporting the maintenance of non-CargoWise products in FY22, expenditures which continue to decrease in line with expectations, as new development and therefore maintenance of non-CargoWise products reduces. This is expected to drive further cost reductions as we transition these legacy products and customers onto our efficient CargoWise platform over time.

Our sales & marketing expenses were down 2 points as a percentage of revenue to 7%, or $44.9 million in FY22, broadly flat on the prior year. This reflects ongoing cost reduction benefits from our efficiency and acquisition synergy program, as well as our targeted sales and marketing approach on the Top 25 Global Freight Forwarders and the top 200 global logistics providers. The effectiveness of our Sales & Marketing program is reflected in the number of new large global rollouts and expanding new customer revenues over the year.

General & administration costs decreased 4 points as a percentage of revenue from FY21, to 14% primarily driven by the ongoing cost reduction benefits from our efficiency program including the non-repeat of the majority of restructuring costs incurred in FY21.

36 large global freight forwarder rollouts

Source: FY22 Results Investor Briefing Materials (Slide 12).


Our large global customers can take a number of years to roll out the CargoWise platform across all their global operations. As the roll-out progresses, customers add new countries, adopt new modules, and implement our productivity tools.

Of the 43 global rollouts in place at the end of FY22, 32 are ‘In Production’, meaning they are operationally live on CargoWise and have rolled out to 10 or more countries and 400 or more registered users.

The remaining 11 are ‘Contracted and in Progress’, meaning they’re at an earlier stage of their global rollout.

From a revenue generating perspective, you can see that these 32 global rollouts ‘In Production’ have delivered a compounded annual growth rate of 36% since FY16, driven by the growth of global rollouts by customers such as DSV, DHL, Toll, Yusen and Geodis; the adoption of additional CargoWise modules, products and features; and customer expansion through their own M&A activity.

Importantly, six of these 32 customers ‘In Production’ are Top 25 Global Freight Forwarders, which have generated a significantly higher compounded annual growth rate of 46% over the same six-year period, which shows the attractiveness and importance of these large global rollouts.

Looking ahead, it’s critical to understand the scale of the opportunity for growth within our Large Global Freight Forwarder customer base. Of the 11 global rollouts that were ‘Contracted and In Progress’ in FY22, collectively they have approximately only 25% of their expected users currently live on CargoWise. That they have grown at a compounded 114% since FY19, even with such a limited user base adopting CargoWise, shows the significant revenue growth potential.

To illustrate this point, in the last 12 months, the universe of expected users not currently live on CargoWise has grown by 30%, driven by five new contract wins including UPS and FedEx. There are four Top 25 customers in the cohort of 11 ‘Contracted and In Progress’ customers, or just over one-third, compared to around one fifth of the 32 Large Global Freight Forwarders ‘In Production’. All these factors contribute to the significant future growth potential this cohort of customers has and the value of new wins like UPS and FedEx in FY22, also noting initial customer rollouts have significant scope for wider adoption of CargoWise capabilities over time.

Our existing 32 customers with global rollouts ‘In Production’ will continue to drive revenue growth as they add new products, features and geographies – in particular as we increase our customs penetration from approximately 45% of global manufactured trade flows to our target of 90%.

We also anticipate continued logistics industry consolidation will support future revenue growth, with Large Global Freight Forwarder customers well positioned to leverage future consolidation to grow.

Given the significant runway of customers available to WiseTech in both the Top 25 Global Freight Forwarders and the Top 200 logistics providers, we expect to see future revenue growth driven by additional Large Global Freight Forwarder customer wins.

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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