Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- WiseTech Global Ltd (ASX:WTC, Financial) achieved an EBITDA margin run rate of 50% in the fourth quarter, a full year ahead of schedule.
- The company reported a 28% increase in total revenue to $1.04 billion, with CargoWise revenue growing by 33% to $880.3 million.
- WiseTech Global Ltd (ASX:WTC) announced three breakthrough products: CargoWise Next, Container Transport Optimization, and ComplianceWise, which are expected to drive future growth.
- The company declared a final dividend of $0.092 per share, up 10% on FY23, representing a payout ratio of 20% of underlying NPAT.
- The business continues to show strong financial performance with underlying NPAT up 15% to $283.5 million and free cash flow up 14% to $333 million.
Negative Points
- Gross profit margin decreased by 1 percentage point to 85%, diluted by M&A activities in FY23 and FY24.
- Operating cash flow conversion rate decreased by 5 percentage points to 107%, reflecting higher working capital driven by growth.
- Free cash flow conversion reduced by 8 percentage points to 67%, due to increased R&D investment.
- The company missed its acquisition contribution target, delivering $114 million versus the guided range of $125 million to $150 million.
- There is a significant second-half revenue bias expected for FY25, which may pose risks if product launches or customer uptake do not meet expectations.
Q & A Highlights
Q: Can you provide more details on the expected revenue contribution from the new product launches in FY25?
A: (Andrew Cartledge, CFO) We forecast FY25 revenue to be between $1.3 billion and $1.35 billion, with CargoWise revenue up between 31% and 37%. The second half of the year will see a significant contribution from the new product launches due to their scheduled release dates. (Richard White, CEO) The new products address critical gaps in the market, which should lead to quicker adoption compared to replacing existing products.
Q: How does the current market growth impact your revenue projections?
A: (Andrew Cartledge, CFO) The market growth has slowed to 1% CAGR, which has been factored into our projections. Despite this, we expect to maintain a 33% compounded growth rate due to strong performance in other areas, including new customer acquisitions and product rollouts.
Q: Can you clarify the expected second-half revenue skew for FY25?
A: (Andrew Cartledge, CFO) We expect a significant second-half revenue skew, more than the 52% seen in FY24. This is due to the timing of new product launches, which will start contributing more significantly in the second half. (Richard White, CEO) The new products are solving fundamental problems without replacing existing ones, leading to faster adoption.
Q: How are you addressing the lower-than-expected acquisition contributions?
A: (Richard White, CEO) We are focusing on integrating acquisitions like Blume and Envase into our larger solutions, such as Container Transport Optimization. This approach aims to create a much larger revenue stream, even if it means cannibalizing the standalone revenues of these acquisitions.
Q: What is the expected impact of the new products on your EBITDA margins?
A: (Andrew Cartledge, CFO) We expect EBITDA margins to be around 51% to 52% for FY25, with an exit rate of approximately 53%. The new products will help drive this margin improvement, along with ongoing cost efficiencies.
Q: Can you provide an update on the rollout of Neo?
A: (Richard White, CEO) Neo has been offered through the early access program and has received strong reviews from hundreds of customers. While Neo is not a major revenue driver, it enhances the overall attractiveness and usability of our platform.
Q: How are you targeting cost efficiencies, particularly in acquired businesses?
A: (Richard White, CEO) We focus on eliminating duplicative and wasteful processes, especially in acquired businesses. Our goal is to automate and streamline operations, while maintaining high-value talent in product development.
Q: Can you elaborate on the specific cost efficiencies provided by Container Transport Optimization?
A: (Richard White, CEO) Container Transport Optimization addresses costs such as dead legs, wharf storage, container detention charges, and futile trips. These inefficiencies are significant cost drivers in container transport, and our solution aims to optimize these areas.
Q: What is the potential market size for your top 10 customers without considering market share gains or price increases?
A: (Richard White, CEO) Our customers are integrated global logistics providers, and our products address various components of their service delivery. The upside is substantial, especially with our new products addressing white space areas that have not been effectively solved before.
Q: How should we think about price increases for FY25?
A: (Richard White, CEO) We do not plan to increase prices with the rollout of CargoWise Next. Our focus is on adding value through new products and capabilities, rather than relying on price increases to drive revenue growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
