Global logistics software heavyweight and long-term holding within the ASX Growth portfolio, WiseTech Global, this morning announced full-year 2023 earnings.
Reporting robust growth despite guidance that missed analyst estimates.
The underlying net profit after tax (NPAT) saw a surge of 30% year-on-year, reaching $247.6 million. This impressive performance is buoyed by an increase in recurring revenue, which now accounts for 96% of total revenue, up from 89% last year. Moreover, the company’s revenue grew 29% y/y to $816.8 million, a figure that marginally exceeded market estimates. However, guidance for 2024 fell short of estimates, with a range of $455-$490m vs $542.6m and revenue between $1.04-1.10b modestly shy of the $1.1b expected. Understandably after strong year-to-date gains, the market is reacting negatively to the guidance miss with shares down -15.4% compared to the broader market which is 0.37% higher.
New product launches and strategic pricing adjustments have played a significant role in driving profitability. The price hikes were necessary to buffer against inflationary pressures and ensure WiseTech gets an apt return on its investments. WiseTech is also committed to continuous growth and refinement, recently launching a $40 million company-wide cost efficiency initiative, projected to bring about $15 million in net savings in FY24. The company has also aggressively pursued integration efficiencies, planning targeted acquisitions to boost the development, reach, and returns of its flagship product, CargoWise. In fact, the CargoWise segment alone generated revenue of $659.6 million, a 30% organic growth, with its recurring revenue jumping 37% organically.
However, the path isn’t without its challenges. Notably, recent strategic acquisitions are expected to weigh on the company’s EBITDA margin temporarily. While the EBITDA margin for 2024 forecasts at 47%, down from last year’s 50%, WiseTech anticipates it will bounce back, achieving margins over 50% by FY26.
Despite the concerns around 2024 guidance, the overall trajectory for WiseTech remains positive. CEO Richard White’s vision for the company to become the “operating system for global logistics” is slowly coming to fruition, especially with releases like CargoWise Warehouse Suite and CargoWise Neo. As the company continues to streamline its operations and strategically position itself through acquisitions and innovation, despite today’s reaction, the outlook remains optimistic.
As a reminder, WTC is an inclusion within the value component of the ASX Growth portfolio with financial metrics such as profitability and valuation key in determining its selection, and WTC remains an active buy/hold recommendation and has returned a total of 209% since it was added to the portfolio including today’s movement. The ASX Growth portfolio will next be rebalanced on September 15th.
