Full Year 2022 WiseTech Global Ltd Earnings Call ALEXANDRIA Aug 24, 2022 (Thomson StreetEvents) — Edited Transcript of Wisetech Global Ltd earnings conference call or presentation Wednesday, August 24, 2022 at 12:30:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Andrew Cartledge WiseTech Global Limited – CFO * Richard John White WiseTech Global Limited – Founder, CEO & Executive Director ================================================================================ Conference Call Participants ================================================================================ * Bob Chen JPMorgan Chase & Co, Research Division – Research Analyst * Elise Kennedy Jarden Limited, Research Division – Analyst * Kane Hannan Goldman Sachs Group, Inc., Research Division – Research Analyst * Nicholas Basile CLSA Limited, Research Division – Research Analyst * Paul Mason Evans & Partners Pty. Ltd., Research Division – Executive Director of Technology * Roger Samuel Jefferies LLC, Research Division – Equity Analyst * Siraj Ahmed Citigroup Inc., Research Division – Associate * ZheWei Sim Macquarie Research – Associate Director ================================================================================ Presentation ——————————————————————————– Operator [1] ——————————————————————————– Thank you for standing by, and welcome to the WiseTech Global FY ’22 Results Conference Call. (Operator Instructions) I would now like to hand the conference over to Mr. Richard White, CEO and Founder. Please go ahead. ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [2] ——————————————————————————– Good morning, everyone, and thank you for joining us today for our FY ’22 results briefing. Before I get into the financial highlights, I want to acknowledge the hard work and dedication of the WiseTech team. We are a team that is united in our vision and we’re solving real-world problems that impact people globally every day. I’m proud to be a part of that team and of the results we are sharing today. In FY ’22, we delivered total revenue of $632.2 million, representing a 25% increase on FY ’21. Excluding FX, total revenue was up 26%. Within that revenue result, CargoWise revenue grew by 37%, excluding FX. Its high-quality result is underpinned by 89% recurring revenue and less than 1% cost of attrition. That ultra-low annual attrition rate has been consistent for the last 10 years, meaning we have very stable and predictable long-term recurring revenue, and therefore, considerable confidence in forward guidance. This growth is strategically important because it demonstrates the increasing revenue contribution that our large global freight forwarder rollouts deliver as well as our ability to attract new customers and increase usage by our existing customers as we expand the CargoWise ecosystem. The remainder of our revenue was generated by non-CargoWise applications, which delivered 5% revenue growth including FX. EBITDA was up 54% versus the prior corresponding period to $319 million, with our EBITDA margin growing by 9 percentage points to 50%. This excellent outcome reflects our organization-wide efficiency program, including the ongoing extraction of synergies from the global business. This program delivered $32.6 million in net cost reductions in FY ’22, driving further operational leverage as our revenue has grown. Our underlying NPAT for the year was up 72% at $181.8 million, and our free cash flow of $237.3 million was up 71% on the prior year, delivering a cash balance at June 30 of $483.4 million. This demonstrates the high quality of our earnings, which, along with our undrawn debt facility, gives us plenty of headroom to execute on our growth plans. This standout performance demonstrates the increasing resilience of our business model. In an environment of persistent supply chain constraints, inflationary pressures and COVID-related business disruption to have delivered these outcomes is a real testament to the strength of our business, the dedication of our people and the effectiveness of our 3P strategy. In particular, I would like to recognize the exceptional efforts of our team and their ability to pivot quickly as the environment has changed. I am confident that we have the right team in place to continue achieving our goals and grow the business, ultimately building value for all of our stakeholders. In recognition of the continued strength of the WiseTech business, the Board has declared a fully franked final dividend of $0.064 per share, up 66% on FY ’21, representing a payout ratio of 20% of underlying NPAT. Our performance should be looked at in the context of the broader market conditions. On this slide, we have provided 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. As you can see, 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 I said at the half year, COVID was the cause of many well-publicized disruptions to global supply chains in the form of capacity constraints, port congestions and labor 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 U.S. 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, organizations 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 digitize 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 where our platform is already in use in the acquired business and adopted by the acquirer. 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. It is worth noting that market growth has only accounted for 3 percentage points of the 31% CAGR in recurring revenue growth since FY ’16 when we IPO-ed. Factors largely within our control have delivered the vast majority of our growth, driven by consistent execution of our 3P strategy, while the structural drivers I referred to will support sustained growth for many years to come. We are focused on our 6 key development priorities to further build out the CargoWise ecosystem. These are, landside logistics, warehouse, Neo, digital documents, customs and compliance and international e-commerce. I will talk to these in more detail later. With our relentless focus on delivering the best solutions to our customers, we increased investment in CargoWise R&D by 28% in FY ’22, with 1,199 new product enhancements that further strengthened the CargoWise value proposition. The current environment has also presented an opportunity to accelerate our investment in R&D to drive further revenue growth. As a management team, we have decades of experience in navigating business cycles and have used the challenges created by COVID and resultant international supply chain problems effectively. We have exceptional people across the business supported by a strong culture of innovation and continue to strongly attract amazing and talented people despite the competitive market. Along with the 2 tuck-in acquisitions we included in our FY ’22 results, since the year-end, we also acquired Bolero, a leading provider of electronic Bills of Lading and digital documentation capabilities. The addition of Bolero enhances our offering in digital documents and drives and expands our market opportunity. It is also a great example of where it makes sense for us to acquire rather than to build these complex capabilities internally. CargoWise added 10 new global customers in FY ’22, signing 5 new global rollouts with UPS, FedEx and Craft Multimodal in the second half and brings in Access World in the first half. And a further 5 customers grew into the large global category in FY ’22 from smaller initial CargoWise deals. There are substantial growth opportunities available to us by increasing penetration across our existing customer base, not only through greater adoption of our existing core and adjacent capabilities, but also through new global rollouts. We have 43 CargoWise global rollouts with 10 of the Top 25 Global Freight Forwarders, including 3 of the most recognized logistics brands in the world being DHL, FedEx and UPS. That is very significant in terms of our market presence and product recognition. Our ability to secure new and retain existing global customers is driven by the power of CargoWise and the continued stream of product enhancements, meaning we are well placed to convert the strong pipeline of sales opportunities. This will all underpin further revenue growth, operating leverage and margin expansion. We made excellent progress in our organization-wide efficiency and acquisition synergy program referred to earlier, which, on a run-rate basis, is ahead of our prior target. Along with price increases implemented in the second half to help offset the impact of inflation and generate returns from our product investments, we are exceptionally well placed to deliver ongoing attractive shareholder returns in the years ahead. I will now hand over to Andrew to take you through our financial performance before talking again in greater detail about our strategic progress and outlook. ——————————————————————————– Andrew Cartledge, WiseTech Global Limited – CFO [3] ——————————————————————————– Thank you, Richard, and good morning, everyone. Starting with an overview of our FY ’22 financial performance. As Richard noted, the business delivered strong revenue growth during the year, with total revenue of $632.2 million, representing year-on-year growth of 25%, which was at the top end of our guidance range. Excluding a $9.4 million foreign exchange headwind, FY ’22 total revenue grew by 26%. Revenue growth from our core CargoWise platform was even stronger, up 35% to $447.9 million or 37% excluding FX, which was again at the top end of the 30% to 40% range included in our guidance. Non-CargoWise revenue was up 5% to $184.3 million. Gross profit for the year was up 28%, reflecting a 2-percentage-point increase in our gross profit margin on the prior year to 87%. Having already upgraded our FY ’22 EBITDA guidance at our first half results in February; in July, we again upgraded our EBITDA guidance following a strong second half performance. FY ’22 EBITDA, the $319 million, was up 54% on FY ’21, reflecting an EBITDA margin of 50%, which was up 9 percentage points on FY ’21, driven by a strong top line growth as well as cost reductions from our organization-wide efficiency program of $32.6 million for the year, which was ahead of our expectations. Projected cost investments were partially delayed due to the impact of lockdowns and tight labor markets. However, hiring increased in second half ’22 versus first half ’22, with total global headcount ending the year at 1,979, and net additions increasing 20% in 2H ’22 versus 1H ’22. Further down the table, you see that EBIT was up 70% on FY ’21, reflecting leverage from our operating performance. Depreciation and amortization increased by 13% as we continue to increase our investment in R&D to expand the capabilities of the CargoWise ecosystem, partially offset by reductions in acquired amortization from acquisitions completed over the past few years. Statutory net profit after tax for the year was up 80% on FY ’21 at $194.6 million, demonstrating the ability of our business model to deliver revenue growth while expanding margins. Excluding nonrecurring tax on acquisition contingent consideration and minor fair value adjustments, our FY ’22 underlying NPAT increased by 72% to $181.8 million and underlying earnings per share increased by 71% to $0.558 per share. Moving to Slide 10. You can see that excluding a $9.4 million FX headwind, we delivered total revenue growth of $134.2 million, up 26% on FY ’21. One way to look at our total revenue growth is by recurring and nonrecurring revenue. As you know, recurring revenue is the backbone of SaaS and subscription-based companies like WiseTech. Recurring revenue represents revenues from customers who are using our product consistently and gives us good visibility over future revenues. For WiseTech, our nonrecurring revenue includes things like customer paid product enhancements and one-off license revenue that accelerate future recurring revenue growth. On the left side of this slide, you can see our recurring and nonrecurring revenue growth. In FY ’22, recurring revenue grew by 25% or $116.5 million excluding the impact of FX, driven by increased usage by existing large global freight forwarder customers, new customer wins and 2 tuck-in acquisitions we made during the year. We also increased prices early in the second half as we started to see signs of inflation to ensure we continue to generate appropriate returns on our investment as we deliver value for our customers by enhancing product capability. Nonrecurring revenue increased by 36% or $17.7 million, excluding FX, benefiting from customer paid product enhancements, which stepped up in the second half as expected, and also includes the benefit of a third-party product license agreement that enables WiseTech to accelerate commercialization and future growth of CargoWise landside logistics component, which we’ve invested in and developed over recent years. You can see another way to look at our total revenue growth on the right-hand side of the slide, where you can see the contribution to growth of CargoWise and non-CargoWise revenues. CargoWise revenues grew by 37% or $122.3 million, excluding FX. Existing CargoWise customers contributed $82.7 million to the growth, reflecting increased CargoWise usage, new products and features, large global freight forwarder rollouts and the previously mentioned price increases. As noted by Richard earlier, CargoWise customer attrition remains at an extremely low rate of less than 1%, demonstrating the stickiness of our CargoWise platform for our customers in emphasizing the significant long-term value generated from each CargoWise customer under our SaaS model. New customers contributed $39.6 million, approximately 1/3 of CargoWise revenue growth in FY ’22, and includes the previously mentioned product license for a CargoWise landside logistics component. Non-CargoWise revenue was up $10.1 million this year from acquisitions completed in FY ’21 and prior years. We expect a reduction in non-CargoWise revenue over time as customers transition to the WiseTech commercial model, and we exit some lower-margin nonrecurring products. Turning to our revenue growth drivers on Slide 11. As you can see on the chart on the left-hand side, on a constant currency basis, over the last 6 years, our CargoWise recurring revenue has grown by almost 5x from $85.2 million in FY ’16 to $422.3 million in FY ’22, an increase of $337.1 million, which equates to a 31% compound annual growth rate over the period. On the right, you can see the relative contribution of each of our revenue drivers to our CargoWise recurring revenue growth over the same period, which shows the biggest driver of CargoWise recurring revenue growth has been large global freight forwarder rollouts, which have contributed over 1/3 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 our 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. As I mentioned earlier, our CargoWise nonrecurring revenue growth been driven by customer paid product enhancements. And in FY ’22, the license of a CargoWise landside logistics component to accelerate product commercialization, 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, which Richard will talk about in a few moments. 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 sizable 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. Turning to Slide 12. I’d like to talk about the revenue growth trajectory from each of these large global freight forwarder rollouts. As you know, our large global customers can take a number of years to roll out the CargoWise platform across all their global operations. As the rollout progresses, customers add new countries, adopt new modules and implement our productivity tools. Of the 43 global rollouts in place at the end of FY ’22, 32 are in production, meaning they’re 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 FY ’16, driven by the growth of global rollouts by customers such as DSV, DHL, Toll, Yusen and Geodis. The adoption of additional cargo-wise modules, products and features and customer expansion through their own M&A activity. Importantly, 6 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 6-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 FY ’22, collectively, they have approximately only 25% of their expected users currently live on CargoWise, that they have grown at a compounded 114% since FY ’19, 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 5 new contract wins, including UPS and FedEx. There are 4 top 25 customers in the cohort, 11 contracted and in-progress customers, just over 1/3 compared to around 1/5 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 FY ’22. 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 our future revenue growth, with our large global freight forwarder customer is well positioned to leverage future consolidation to grow. Finally, given the significant runway of customers available to us 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. On Slide 13, you can see our operating expenses from FY ’18 across 3 areas: product design and development, sales and marketing and general and administration. Overall, operating expenses were down 8 points as a percentage of revenue in FY ’21, 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 and development expenses increased by $8.1 million to $96.9 million in FY ’22, 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 benefit 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 FY ’22. Expenditures, which continued 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 and marketing expenses were down 2 points as a percentage of revenue to 7% or $44.9 million in FY ’22, 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 and marketing program is reflected in the number of new large global rollouts and expanding new customer revenues over the year. General and administration costs decreased 4 points as a percentage of revenue from FY ’21 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 FY ’21. Turning now to R&D investment on Slide 14. Investment in innovation and product development is a strategic priority for WiseTech, and we remain focused on building integrated software that enables our logistics customers to improve planning, productivity and control of their global operations and to become the operating system for global logistics. Since FY ’18, we’ve invested over $695 million in developing technology solutions that solve important pain points for our logistics’ customers and build out our competitive position. In FY ’22, a 28% increase in CargoWise investment was partially offset by a 21% reduction across non-CargoWise platforms, reflecting our strategy to align non-CargoWise product development teams to support the CargoWise product development pipeline. As a result, investment in innovation and product development increased by 8% net versus FY ’21 to $180.8 million. Overall, this represents a reinvestment of 29% of our revenue in R&D, which is higher than most SaaS peers, and further emphasizes our product-led focus. Capitalized development increased to $83.9 million in FY ’22 versus FY ’21, reflecting increased investment focused on our 6 key development priorities. 46% of R&D investment was capitalized in FY ’22, 1 percentage point lower than FY ’21, and consistent with our expectation of capitalizing between 40% and 50% of our total R&D investment each year, with the remainder being expensed, which is related to bug fixes, maintenance and research. During the year, 1,199 new CargoWise product enhancements were delivered versus 1,096 in FY ’21, taking the number added in the last 5 years to over 4,900. This outcome was driven by a 31% increase in CargoWise product development resources over the last 12 months and an 86% increase over the last 3 years, with effective external recruitment and transfers from non-CargoWise teams. Despite a competitive market for technology talent, we’re taking advantage of the current environment and have accelerated our hiring globally to increase the pace of R&D investment to drive future revenue growth. We continue to attract high-quality talent across our global operations. Moving on to our balance sheet on Slide 15. You can see on this slide how our balance sheet strength and liquidity provide a solid platform to fund future growth. At 30 June, 2022, we had $483.4 million in cash, which, in addition to our undrawn $225 million debt facility, provides significant financial flexibility and headroom to fund strategic growth opportunities. To that end, since the balance sheet date, we’ve deployed cash of $66.2 million net of cash acquired to fund our acquisition of Bolero, a leading provider of electronic Bills of Lading and digital documentation capabilities to facilitate global trade. The 19% increase in receivables can be explained by our increased revenue growth, partially offset by improved collections performance. The $56.7 million increase in our intangible assets to $961.2 million relates primarily to investment in new capitalized product development, partially offset by amortization. Turning to our liabilities. The $19.4 million increase in current liabilities reflects an increase in trade and other payables. In share capital, you can see a $78.5 million increase in share capital reflecting new shares issued to fund our employee equity program, the future vesting and for acquisitions and earn-out considerations. Our employee equity program is a key component of our policy to support staff retention and encourage long-term value creation across our workforce, which is reflected in the high proportion of our people that own WiseTech shares and share rights increasing to 77% at the end of FY ’22. Before I hand back to Richard, I’ll quickly refer to our strong continued cash flow performance on Slide 16. In FY ’22, our operating cash flows were $339.6 million, up 48% on FY ’21, demonstrating the strength of our highly cash-generative operating model. A portion of our operating cash flows were reinvested to support long-term growth initiatives, including enhancing the scalability and reliability of the CargoWise platform as well as new product enhancements. Our operating cash flow conversion rate of 106% was down 5 percentage points on FY ’21, reflecting approximately a $15 million reduction in deferred revenue from the alignment of non-CargoWise commercial models to shorter billing cycles, partially offset by a reduction in past-due receivables. I also note that noncash items and EBITDA increased 49%, which includes an increase in headcount and salary increments as we use equity-based compensation to support employee retention. Our FY ’22 free cash flow performance was strong at $237.3 million, up 71% on FY ’21, driven primarily by higher revenue and EBITDA. Our free cash flow conversion rate of 74% was up 7 percentage points on FY ’21, and our free cash flow margin of 38% was up 10 percentage points, reflecting improved operating cash flow. Taking the sum of our total revenue growth and free cash flow margins, our Rule of 40 increased to 63% in FY ’22 from 45% in FY ’21, which is very significant in comparison to SaaS businesses globally. In conclusion, this emphasizes our ability to deliver strong top line revenue growth, while driving enhanced operating leverage and generating significant free cash flow to fund investments for continued future organic and inorganic growth. I’ll now hand back to Richard, who’ll provide an update on our strategic progress and the outlook for FY ’23. ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [4] ——————————————————————————– Thank you, Andrew. WiseTech’s strategic vision is to be the operating system for global logistics. To achieve this, our strategy has been focused on the 3Ps: product, penetration and profitability. Not only has this resulted in our strong FY ’22 performance, but it also sets us up for long-term sustainable growth. Our customers operate in an increasingly complex, dynamic and competitive environment. As mentioned earlier, CargoWise’s competitive advantage is that it is an integrated global software solution that enhances visibility, productivity and capability, delivering advantages to customers and potential customers still on aging legacy systems. This is what enables us to attract new customers and retain existing customers and increase their CargoWise usage. 24 of the Top 25 Global Freight Forwarders and 41 of the top 50 third-party logistics providers are already WiseTech customers in at least 1 area of their business. And the many likely penetrated customers provide plenty of opportunity for further CargoWise growth. Overlaying our focus on these 3 areas is the growing talent we have across our business and the strong culture of innovation complemented by targeted acquisitions. So let’s now take a look at our strategic 3Ps in more detail. The first P in our 3P strategy is product. The continued enhancement of CargoWise is critical to achieving our strategic vision. On this slide, you can see that our approach to product development is twofold. First and foremost, we invest in new CargoWise product innovations driven by our own product and development teams. In FY ’22, we invested $180.8 million in R&D, delivered an additional 1,199 new product enhancements, with 54% of our people focused on product development. Over the past 5 years, we have invested over $695 million in R&D and delivered more than 4,900 product enhancements. As part of this substantial product investment, we have increased our focus on 6 CargoWise development priorities. Focusing substantial investment in these development priorities will expand our penetration of these adjacent areas. In many ways, we are creating entirely new addressable markets by solving complex supply chain problems, building new areas of capability, replacing very manual or missing processes as well as replacing old technologies with cloud-first global digital capabilities. All of these R&D investments are enhancing the value of CargoWise. The second component of our product strategy is to accelerate our product development with targeted tuck-in and strategic acquisitions, which enable us to fast track the extension of CargoWise with new functionalities and adjacent market capabilities in the 6 development priorities and in our existing CargoWise ecosystem. Bolero, which we acquired in early FY ’23, is a good example of how we have accelerated our capability in digital documentation by adding electronic Bills of Lading. Since IPO on the 11th of April, 2016, to the end of FY ’22, we completed 41 acquisitions, including 2 tuck-in acquisitions announced at the half year. Inobiz, which provides tools, designing and managing CargoWise connections to industry and between customers, and Hazmatica, which provides hazardous goods compliance and management capabilities. The Bolero acquisition makes it 42. These tuck-ins are typically smaller in size with their staff and capabilities integrated directly into the CargoWise ecosystem to provide benefits to existing customers and increased attraction for potential customers. Leveraging the intellectual property from Inobiz and Hazmatica is progressing well, and their revenue has been included in CargoWise in FY ’22. It is important to note that all of the acquisitions since our listing have been successful. These acquisitions have improved market reach, product capability and processing efficiency of our product offering and driven better returns, while giving us access to amazing talent and creating stronger brand recognition. Collectively, they have accelerated the delivery of our vision and made a significant contribution to these strong results by growing our CargoWise capability and contributing directly to our recurring revenue base, profitability and driving greater value for our customers. We intend to use our well-established M&A capabilities and the experience from our prior acquisitions in a considered and deliberate way to further enhance our product capabilities, market penetration and long-term profitability. That brings us to our next P in our 3P strategy: penetration. We target global rollouts by the Top 25 Global Freight Forwarders and the top 200 global logistics providers. Because of CargoWise’s global capabilities and operational efficiency, it is most attractive to global businesses of this scale. And for WiseTech, businesses of this scale provide the greatest revenue and growth potential. On this slide, you can see the progress we have made in securing global rollouts. On the right-hand side of the chart, you can see new global contract wins from UPS, FedEx, Craft Multimodal, Brink’s and Access World. Customers of this scale will generate considerable additional business momentum. Just as importantly, as I mentioned earlier, 5 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 now have a total of 43 global rollouts, including 10 of the Top 25 Global Freight Forwarders, with a strong pipeline of future opportunities. These global rollouts provide us with significant revenue growth runway. As Andrew pointed out earlier, over 1/3 of the 31% CAGR for CargoWise revenue since FY ’16 has been driven by large freight forwarder global rollouts. And among the Top 25 Global Freight Forwarders, the CAGR was 46%. We also expect significant growth in the 11 large global freight forwarders that are in the early stages of their rollout, which we categorize as contracted and in progress. Approximately 25% of their expected users are currently live on CargoWise. And in the last 12 months, the number of expected users not currently live on CargoWise has grown by 30% driven by 5 new contract wins, including UPS and FedEx. So you can understand why our focus is on these big global players. This brings us to our third P, profitability. During FY ’22, we continued to progress our organization-wide efficiency program to ensure appropriate allocation of resources to support scalability and to enhance our operating leverage. This involved integrating, optimizing, automating extracting synergies and streamlining our management processes and teams. This program is essentially complete, and as I noted at the start of the presentation, delivered a $32.6 million net benefit in FY ’22. This was against a net benefit of $13.8 million in FY ’21. And the run rate is ahead of our previously announced target, delivering an annualized cost reduction of approximately $50 million. This focus on efficiency is part of our ongoing financial discipline and supported by a continued reduction in non-CargoWise product maintenance costs and price increases to further offset inflationary impacts and generate returns from our substantial investments. Focus on efficiency will continue to enhance our operating leverage as we scale. Now on to our guidance for FY ’23, and our continued strong growth outlook. Our guidance is based on market conditions not changing materially, noting, in particular, prevailing uncertainties relating to industrial production and international goods flow and sovereign and geopolitical risk. Assuming there are no material changes to these assumptions and no unforeseen events that arise prior to the 30th of June, 2023, we expect to deliver 20% to 23% FY ’23 total revenue growth, representing $755 million to $780 million, with CargoWise revenue expected to grow by approximately 30% to 35%, excluding FX. In terms of FY ’23 EBITDA, we expect to deliver 21% to 30% growth equating to $385 million to $415 million. This represents a further increase in our EBITDA margin of between 1 and 3 percentage points, demonstrating the continued operating leverage that we are able to generate as we scale. We are delighted with the continued momentum we are seeing across the business and confident in our longer-term outlook. In wrapping up today, I would like to reiterate some of my earlier comments. Our unique CargoWise offering, which we continue to expand and enhance through our own product development and our strategic acquisition program, is enabling us to drive momentum in our market penetration with both new global rollout signings and ongoing revenue growth from existing customers adding to that momentum. On this slide, you can see our strong track record of revenue, EBITDA and EBITDA margin growth over the past 6 years, delivering 35% revenue CAGR, 47% EBITDA CAGR and 60% free cash flow CAGR really demonstrates the strength and resilience of our business model. This strong momentum has been underpinned by securing 43 global rollouts, including 10 of the top 25 stemming from an investment of over $695 million in CargoWise product enhancements over the last 5 years. We are well placed to benefit from the continuing M&A consolidation activity among global logistics operators and their increasing investment in replacing legacy systems with digital solutions as well as pursuing our own M&A opportunities. Our strong balance sheet and cash generation provides us with significant financial firepower to fund our future growth. Meanwhile, the structural industry drivers I referred to earlier, should continue to be a tailwind for our business over the medium to long term. We have a vision and mission that is making an incredible difference to the world around us. We remain firmly on track to achieve this vision by building a system that our customers love and can’t do without. I’m proud of what our dedicated and talented teams have achieved, and I look forward to reporting on our progress in the months and years ahead. Let’s now open for questions. ================================================================================ Questions and Answers ——————————————————————————– Operator [1] ——————————————————————————– (Operator Instructions) Your first question comes from Bob Chen with JPMorgan. ——————————————————————————– Bob Chen, JPMorgan Chase & Co, Research Division – Research Analyst [2] ——————————————————————————– Just a question around the new logos won over the second half. Can you talk a little bit about the materiality of some of these recent wins versus your existing clients? And how that sort of impacts the pipeline into FY ’23? I mean is there usually a bit of a digestion period after you win some new clients? ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [3] ——————————————————————————– Yes, that’s a great question. Thank you for that. The way to look at all of these rollouts is that they take time to start and they take time to run and to complete. And you can see that with almost every one of these major businesses. They take a considered view of pilots. They consider the way that they roll out. They take certain key countries first. They get certainty. Internally, it builds knowledge and capability. And then over the period, most of these start to accelerate. In planning this, we actually give people a kind of a standard template, which we tuned to their particular business dynamics. It’s typically taking countries where the most opportunity presents and the most benefit accrues as early as possible. But it’s always a plan that steps out over a period of years. And so this — it doesn’t make a huge difference the first year you sign them in, but that difference improves over time. And you can see that with almost all of the customers that we’ve already rolled out in a complete — DHL and DSV are a good example of those. They’re very solid — they continue to grow their businesses, and we’re obviously a part of that growth as well. But this, as I said — as Andrew said in the deck, there’s considerable upside of CargoWise users that are planned, but not yet live. And so there’s quite a lot of long-term tailwinds. ——————————————————————————– Operator [4] ——————————————————————————– Your next question comes from Kane Hannan with Goldman Sachs. ——————————————————————————– Kane Hannan, Goldman Sachs Group, Inc., Research Division – Research Analyst [5] ——————————————————————————– Just a comment in the pack around price rises offsetting inflation. Is that relative to the 8% to 10% inflation impact you’ve called out? And so we’re thinking about double-digit pricing? ——————————————————————————– Andrew Cartledge, WiseTech Global Limited – CFO [6] ——————————————————————————– Yes, Kane, it’s a good question. So we’ve got 8% to 10% on the cost base in the guidance. Of course, that wouldn’t fall through to revenue given sort of revenues higher than the cost base. So we have built price increases in to offset the cost inflation, and that is included in the revenue guidance and the CargoWise revenue growth of 30% to 35%. ——————————————————————————– Kane Hannan, Goldman Sachs Group, Inc., Research Division – Research Analyst [7] ——————————————————————————– Okay. Helpful. And sorry, maybe just a quick follow-up to that. If I strip out the $10 million Bolero revenue, your CargoWise growth is basically the same as historical CAGR. It sounds like pricing is going to be a little bit stronger in ’23. I mean, which of the buckets are a little bit weaker than, I suppose, into ’23? ——————————————————————————– Andrew Cartledge, WiseTech Global Limited – CFO [8] ——————————————————————————– Well, as you know, the 31% CAGR that we’ve delivered over the last 6 years in terms of CargoWise recurring revenue growth comes from a number of buckets. And we’ve been through that in the presentation today. The biggest one of those is obviously large global freight forwarders, but in any particular year, we see acceleration on some of them that could be product driven in a particular period of time. It could be new customer wins that drive the growth in a particular year. But I think we’re quite pleased with the 30% to 35% that we built into the growth forecast for FY ’23, which is obviously around or ahead of the average that we’ve delivered over the last 6 years. ——————————————————————————– Operator [9] ——————————————————————————– Your next question comes from Nick Basile with CLSA. ——————————————————————————– Nicholas Basile, CLSA Limited, Research Division – Research Analyst [10] ——————————————————————————– Just 1 question for me then. On the penetration of the CargoWise products, I think you called out the stronger growth from the top global freight forwarders, the top 10 who’re delivering a sort of 46% growth. Just interested to sort of know what the feedback has been from those customers around the usage of the product and the level of penetration? How are you sort of thinking about growth into ’23 from increased transaction volumes versus balancing that with your own price increases? ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [11] ——————————————————————————– Great question. Look, the way to look at this is — the best indication of customer satisfaction is increased usage and increased sales. And I think that’s how we really track on this. But equally, we’ve got a very, very strong product that is gaining momentum in practically every sector. And if you look on the slide that deals with the focus areas, which is Slide 19, you’ll see that we’re calling out additional adjacent areas, many of these areas were additional share of wallet, increased share of wallet, also moving into other markets, which are adjacent to our core market that we have significant influence in driving into. And obviously, we’re getting good take-up in our core product, but we’re equally getting quite good take-up on the adjacent parts of our product, and we’re signaling here in my script and on Slide 19 that we’re really focused on growing that addressable marketplace and actually creating new addressable capabilities that nobody is really counting yet. Because the move to digital documentation and straight through digital processing and integrating all the pieces together, that’s actually the really big value proposition here. What we’re doing forwarding has benefited from that same focus across the forwarding landscape. We’re now taking it from the forwarding landscape and pushing it up from landside logistics to warehousing into BCOs through digital documentation and straight-through processing, customs compliance, which you’ve known about for some time and also international e-commerce. These things are all additive to our core product, but also additive to our addressable market and some of those create entirely new marketplaces that nobody have even considered yet. ——————————————————————————– Nicholas Basile, CLSA Limited, Research Division – Research Analyst [12] ——————————————————————————– Yes. Great. Could I just ask 1 follow-up? In terms of — when you talk about straight through digital processing, what do you think or see as the current penetration level? And how high can that get to over the next couple of years? ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [13] ——————————————————————————– One of the features of CargoWise is the fact that once data is in the system, it transits the system completely without being rekeyed or retyped or restated anyway. You do have additive things that come into any system such as CargoWise. But typically, it’s a common master data, common structural information and as you go through various processes, you do add a little bit of an inflation in particularly tracking and more commercial detail as the information is needed for compliance and government regulatory arrangements. So CargoWise is — internally is really a straight-through processor. What we’re talking about now is taking that straight through process, making the documents on either side of it completely digital as well so that you’re not rekeying documents, the documents are being consumed by the system as digital entities, so the structure of the data is in the document. We’re also talking about moving into the adjacent areas. So we’re going to landside logistics, into warehousing, into the beneficial cargo owners, into customs and compliance, which are already really there with customs and compliance in terms of digital straight-through processing and international e-commerce, which [we were], practically speaking, mostly there in that space. So the digital documentation part of this is taking all those things and seeing wherever there is a gap or a link needed or some improvement internally and making that a whole system so that it’s just straight through, but then also taking the edges of the system and making sure that every document in can be consumed digitally and at a highly automated level. And when we published a document out, it contains the structured data in the document, so it can be consumed by CargoWise in another location or another computer system. ——————————————————————————– Operator [14] ——————————————————————————– Your next question comes from Elise Kennedy with Jarden. ——————————————————————————– Elise Kennedy, Jarden Limited, Research Division – Analyst [15] ——————————————————————————– So my question is around acquisitions. So you made 2 small acquisitions and then another post the financial close. With the combination of the strong script, the balance sheet, track record you’ve got in M&A, an environment where you’ve got those earlier-stage confidence in talent. Wouldn’t that make sense to do significantly more acquisitions than WiseTech has done historically? Just curious about what’s — if there’s any change in impact on that strategy? ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [16] ——————————————————————————– I think it makes sense to focus on the thing that creates the best value for the company. And keep in mind that we’re a strongly organic growth company. We think of acquisitions as tools to accelerate market penetration, to create access to new adjacent markets, to create advantages in our organic strategy and to make sure that we’ve got that best product capability and that we next move towards being that supplier of logistics across the world to all of the key parts. I think you have to see acquisitions as a tool, as 1 of the tools to get to the bigger, better and higher values for customers and for shareholders. So we’re very considered and determined with acquisitions. We’re obviously doing them again, if that’s the point you’re making. But we’re also not rushing to do something quickly. We’ve got — really got our early strategy. We got what we needed to do the strategic job that we’ve done. That — those acquisitions are largely integrated into the business and performing well. We’ve taken a lot of the skills and capabilities and knowledge out of those acquisitions to accelerate the CargoWise development. That’s a positive thing. And all of those 3 acquisitions, which includes Bolero, of course, are all designed to push the product further to get us into — closer into digital documents. For instance, into connecting digitally in the case of Inobiz. In the case of Hazmatica to solve a very complex pain point in the dangerous goods management. You’ll see this more and more, but we’re not going to suddenly go back to doing an acquisition in a month. That’s not the plan. The plan is to use these in clever ways that drive value for the business. And each of those steps has to be — you always think about buy versus build and, ultimately, you have to make those decisions very cleverly. And ultimately, where our organic growth software developer that builds a great product for a fantastic industry. ——————————————————————————– Operator [17] ——————————————————————————– Your next question comes from Roger Samuel with Jefferies. ——————————————————————————– Roger Samuel, Jefferies LLC, Research Division – Equity Analyst [18] ——————————————————————————– I’ve got some questions around your nonrecurring revenue. Firstly, what’s the margin on that? And do you expect much nonrecurring revenue to come in FY ’23 in your guidance? ——————————————————————————– Andrew Cartledge, WiseTech Global Limited – CFO [19] ——————————————————————————– Yes. Thanks for the question, Roger. And we just had a little bit problem here in the last part of it, but I think you’re asking about the margin on the nonrecurring revenue, just to come… ——————————————————————————– Roger Samuel, Jefferies LLC, Research Division – Equity Analyst [20] ——————————————————————————– Yes, the margin and also do you expect much nonrecurring revenue to come in FY ’23? ——————————————————————————– Andrew Cartledge, WiseTech Global Limited – CFO [21] ——————————————————————————– I’ll answer the piece about the nonrecurring margin — revenue margin first. And again, we just had a problem on the last part, sorry about the technical issue here. And so the nonrecurring revenue margin varies across the business. Some of it is quite high margin because it’s development work that just passed us straight through. And you’d see margins on that consistent with the overall EBITDA of the business, if not a little bit higher. And we do have some nonrecurring revenue that sits in the non-CargoWise side of the business. And that is typically a lot lower margin because it requires a lot more cost to actually deliver those nonrecurring revenues. And I think, in the past, we’ve described those as things like implementation work and customization of products and those type of things. So it’s a bit of a mix, to be honest, Roger. Roger, would you mind just asking the second part of your question again, so if we can get it at this time? ——————————————————————————– Roger Samuel, Jefferies LLC, Research Division – Equity Analyst [22] ——————————————————————————– Yes. Just wondering if you expect much nonrecurring revenue to come in FY ’23? ——————————————————————————– Andrew Cartledge, WiseTech Global Limited – CFO [23] ——————————————————————————– A key component of our nonrecurring revenue in the CargoWise space is the paid customer enhancements. And those are important future growth enablers for us. It’s our customers asking us to accelerate the development of certain things that are in our pipeline and obviously, paying to have access to those. And once those become available, we open up those enhancements to all of our customers, and we start to generate transactional recurring revenue from offering those in the platform. So we will continue to do those. We had a healthy pipeline in FY ’22, and we have a pipeline going into FY ’23 as well. ——————————————————————————– Roger Samuel, Jefferies LLC, Research Division – Equity Analyst [24] ——————————————————————————– Okay. All right. And maybe just a follow-up on that. Can you talk a bit more about a license agreement for landside? Is it something that you say sell to a third party rather than directly to your customers? ——————————————————————————– Andrew Cartledge, WiseTech Global Limited – CFO [25] ——————————————————————————– Sure. I might let Richard take that one, Richard? ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [26] ——————————————————————————– Yes. So you’ve got to think of the business as relying upon various capabilities in order for the software to work. And we’ve got (inaudible) to distribute those capabilities globally. And so we’ve decided to take an approach where we focus on the software and the licensing for the software and the size of that software, and we use partners to do certain parts of the distribution, maintenance and other things that the enablers for landside logistics. And to do that, the positive for us is that we get to focus on our core capabilities, and we get to give what is a very complicated, technical set of capabilities to other partners who can drive that globally and distribute those, maintain those and manage those components globally and really focus on our core business. ——————————————————————————– Operator [27] ——————————————————————————– Your next question comes from Siraj Ahmed with Citi. ——————————————————————————– Siraj Ahmed, Citigroup Inc., Research Division – Associate [28] ——————————————————————————– Richard, just in terms of the product focus and just following up on the landside logistics, so can you — just in terms of benefit for WiseTech, does that bring forward the capability for you? Because I believe previously, it was FY ’23 or FY ’24 sort of opportunity? Is that bringing forward? And also, I think you’ve brought warehouse as a focus area. So just keen to understand, it seems like the landside is getting a bit more of a focus. ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [29] ——————————————————————————– So if you look at those 6 focus areas that we talked about, landside logistics and warehouse is the 2 on the left-hand side. Very clearly, we’re identifying that we’re going to put more time and effort to focusing on those. Those are the areas where you have a lot of IoT and handheld devices and technology pieces that require hardware and then require software. We’re really deciding to scale the company out on the software side so that we can use hardware partners. And to do that, we needed to actually change the footprint and to really be able to focus on — you think of all the complexities in subscribing to mobile networks worldwide, having Wi-Fi deployments, having handheld devices distributed and maintained, managed. That’s a very big and complex business. And if we didn’t get it into other people’s hands, we’d be having to build an entire business around that globally. This way, we can do the focus on the software, run it very fast and allow partners to scale alongside us as we do it. And that’s the whole intent. ——————————————————————————– Operator [30] ——————————————————————————– (Operator Instructions) Your next question comes from Paul Mason with E&P. ——————————————————————————– Paul Mason, Evans & Partners Pty. Ltd., Research Division – Executive Director of Technology [31] ——————————————————————————– I just had 1 on your Slide 20 about the large rollout. So we have had 2 that dropped off this year, you know, it’s XPO and Crowley. And then 1 that Logistics Plus dropped off last year and has come back. Could you maybe tell us a bit about the dynamics about the drop-offs? And particular with Logistics Plus, how they’ve dropped off and come back? Like what’s sort of driving that? Is there anything like spend being directed elsewhere and then returning? Or is it just because that’s sort of fallen behind in market share? ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [32] ——————————————————————————– Okay. Thanks for a great question. One of the drivers here is the consolidation activity within the industry and the competitive tension between major players that are all fighting for market share. Certainly, some of the departures were related to that. Some of the departures are related to — I think, XPO actually divested a business unit, and that’s what changed that one. But generally, we’re talking about a very competitive industry where there’s consolidations, there’s divestitures. There’s changes in competitive nature. There’s good and bad fortunes and we can’t really control that. All we can really do is give them great software and make them as successful as possible. ——————————————————————————– Paul Mason, Evans & Partners Pty. Ltd., Research Division – Executive Director of Technology [33] ——————————————————————————– (inaudible). ——————————————————————————– Andrew Cartledge, WiseTech Global Limited – CFO [34] ——————————————————————————– (inaudible) to what Richard said there, and we provided a reconciliation of the large global freight forwarder is in the back of the presentation, which you’re probably taking a look at. And it calls out Crowley and XPO was no longer large global freight forwarders in the definition that we have. They’re still our customers, and they’ve just not got rollouts in 10 or more countries order more than 400 users. And as Richard explained with XPO that was then divesting a portion of their business, but they are still our customers and they still use CargoWise. ——————————————————————————– Paul Mason, Evans & Partners Pty. Ltd., Research Division – Executive Director of Technology [35] ——————————————————————————– Do you have time for 1 more? ——————————————————————————– Andrew Cartledge, WiseTech Global Limited – CFO [36] ——————————————————————————– Yes. ——————————————————————————– Paul Mason, Evans & Partners Pty. Ltd., Research Division – Executive Director of Technology [37] ——————————————————————————– Can I maybe ask quickly just on CargoWise Neo? It looks like it’s sort of been deemphasized a bit in the R&D slide. Maybe could you give us a bit of an update in terms of sort of the current time horizons to deliver that product, whether there’s been anything change there? Or is there a reason for the deemphasis just because you’ve got the customer projects in those other categories warehousing, landside logistics sort of taken prominence. ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [38] ——————————————————————————– Neo remains a very important project. It does align some other things on the Slide 19. And the point in putting them all together is to show you that this is a comprehensive across the business, across the world plan, not a single product. And I did actually — I think in the last 2 updates to market that we gave, we did identify that Neo, whilst very important, needs to have a number of other things happening alongside it. And so the first thing Neo does is replace our conventional customer components, our customers’, customers’ capabilities. And that it does very well. But to do that doesn’t give us all of the things we need in there. And so all of the things you see across there and the core system have to be present in Neo, and we have to be able to make Neo that critical capability for our customers to service their customers. And so there are a number of things to do. But I’m certainly not saying that we’re deemphasizing Neo. We’re just putting it as the first among equals in a sense in — across the plan here. And all of these things, the landside logistics, warehousing, Neo, the digital documents and straight-through processing, customs and compliance, international e-commerce, they all work together in the end because they create that ecosystem. It means that all the things operate and all the things work together and you have the strategical processing, and you have access to these new addressable markets and you even creating new markets because you’ve got products that do things that nobody ever thought of doing before. ——————————————————————————– Operator [39] ——————————————————————————– Your next question comes from Wei Sim with Macquarie. ——————————————————————————– ZheWei Sim, Macquarie Research – Associate Director [40] ——————————————————————————– First question for me is just in regards to our addressable market. And maybe the comment that we made on last year, the CargoWise universe growing 30% by 5 new contract wins, including UPS. Are you able to kind of flesh out what you mean by that? ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [41] ——————————————————————————– I don’t quite know what you mean by that question. Can you just give me a bit more context? ——————————————————————————– ZheWei Sim, Macquarie Research – Associate Director [42] ——————————————————————————– Just what do you mean that the universe has grown by 30%. And just — so that’s maybe the first question. The other 1 is just in terms of how we should think about the addressable market. I think we’ve talked about the supply chain execution being around $4 billion previously or thereabouts. And with, I guess, Slide 19 and that — how do we think about — or how should we think about the addressable market going forward? ——————————————————————————– Andrew Cartledge, WiseTech Global Limited – CFO [43] ——————————————————————————– Yes. Wei, thanks for clarifying the first part of that question. The 30% increase is related to the expected number of users that are contracted large global freight forwarder customers expect to have on the system. And we — obviously, with the wins that we’ve had in the 5 new large global freight forwarders, this year, that’s increased the size of that base by 30%. So we’ve added 30% more users to that population from those 5 customers. So that’s a pretty significant increase this year. That answer your question? ——————————————————————————– ZheWei Sim, Macquarie Research – Associate Director [44] ——————————————————————————– Yes. So can I just think about it that your wallet — potential wallet size has increased by 30%, is that. ——————————————————————————– Andrew Cartledge, WiseTech Global Limited – CFO [45] ——————————————————————————– Well, those are customers that were in the large sort of freight forwarder population, some of them are top 25, some of them the top 200. So they were part of the addressable market previously. Richard, I don’t know if you want to add anything to that? ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [46] ——————————————————————————– You have to think addressable markets, the way people talk about it is a rear window to look at what software has been sold in the past and some estimate of what that value is. We don’t actually see it this way. And so we find the idea of address market somewhat of an odd fitting thing for us. A lot of the time, we’re creating an entirely new piece that solves the problem that has been entirely manual in the past or has had no functional strategic support from a software point of view. And we’re also connecting — so those are new addressable markets, if you will. Equally, we’re also connecting things together so that connection has enormous value. So the connection, the straight-through digital processing lowers labor costs, increases accuracy, increases speed and therefore, there’s a value in that. We’re also moving people from in-house systems that are owned by themselves and are on-prem by moving those people into the cloud. And the cloud means you get a much bigger effect in terms of revenue and cost reduction for the customer. And then we’re also talking about the total effect of being able to offer all those things across the platform, and so your platform is itself much more valuable. They’re all — they’re not the [traditional] understanding of the addressable market, but they are a capability, which is — it’s hard to assess what that means, but it’s very obvious that we’ve been growing into that — and it’s not just a share of existing wallet. It’s creating new requirements to do better things. And you’re taking away labor, you’re removing risk, you’re creating cost reductions in their IT costs and all of those things equate to more revenue for WiseTech. ——————————————————————————– ZheWei Sim, Macquarie Research – Associate Director [47] ——————————————————————————– Okay. Understood. Maybe just 1 more, if I can. Just in regards to Slide 19, again, on landside logistics and warehouse. Are these — I mean, when I think about landside logistics, maybe my understanding of supply chain management is not that great, but I think more so on the procurement side rather than on the execution side. So I mean, would these be kind of like considered precursors towards Neo that… ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [48] ——————————————————————————– When we say landside logistics, we mean port to [door] or port to warehouse. We don’t mean going further than that. So we’re talking about — at the export end and at the import end, it’s really the containerized movements that occur from the airports or seaports to the endpoint for that container or can — or a unit like device or whatever it is. And it’s — there’s a piece of that at the import side, there’s a piece at the export side. But we’re very tightly defining that because it’s a very near step to our core capability. And so we have the ability to connect that very effectively. We’re not trying to solve the [woes] of every supply chain problem in every place. We’re being very [considered] about what moves we make and how we can push into those moves and gain competitive traction in those moves. We’re not trying to do everything for everybody. ——————————————————————————– Operator [49] ——————————————————————————– Your next question comes from Siraj Ahmed with Citi. ——————————————————————————– Siraj Ahmed, Citigroup Inc., Research Division – Associate [50] ——————————————————————————– It is just a follow-up again on the product pipeline — development pipeline. A bit surprised that customs is a bit further out. Maybe if you could just give us an update on where customs is at and in terms of take-up by existing customers as well? ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [51] ——————————————————————————– Sure. So customs, we’ve got probably our largest team in the companies across customs and compliance. It’s really 2 things. And it’s important to understand how complex this environment is and how much time it takes to build out a customs and compliance capability. Keep in mind, we’ve got in all English-speaking countries with the exception of Ireland and we’re working on Ireland right now. That’s a — that’s a current project with a short timeline. The EU made some changes to their customs design and regulations in the last sort of 18 months. And that’s moved some of the projects to sit over the top of those regulations so that we actually deliver the new regulatory regime rather than the old one and then have to rebuild it. So some of those projects slowed down based on the regulatory change. But we’ve also spent a lot of time improving the capability to develop customs capabilities quickly, and that includes better work processes, more technology support for universalizing what we do, better training of the teams — the larger teams. And obviously, we’re talking about continuing to do what we’ve set out to do. But these things are just one of the many things that we’re doing at the same time. And I don’t think rushing to try to get a single custom system out is the right thing to do here. In fact, because you have changed its platform, we can spend more time getting a lot more of the European systems ready to go and then live with customers. But you can see that we’re making positive progress. There’s a great video from (inaudible) , who’s a medium to large size French forwarder that’s been with us for some time now, and they’re now using some of the European customs we’ve released in recent years, last year, I think, very effectively. So we’re moving. It’s getting traction in progress, but we are capable of walking and chewing gum. So we’re doing multiple things here, not just focusing on customs. ——————————————————————————– Andrew Cartledge, WiseTech Global Limited – CFO [52] ——————————————————————————– (inaudible). ——————————————————————————– Operator [53] ——————————————————————————– That’s all the time we have for our question-and-answer session today. I’ll now hand back to Mr. White for closing remarks. ——————————————————————————– Richard John White, WiseTech Global Limited – Founder, CEO & Executive Director [54] ——————————————————————————– Well, I’d like to thank everybody for listening. It’s been a pleasure talking to you all and some great questions. And we’re very happy to — hopefully, we’ll be meeting a lot of you on the rounds, and Andrew and I’ll be seeing you there. Thank you, everybody. ——————————————————————————– Operator [55] ——————————————————————————– That does conclude our conference for today. Thank you for participating. You may now disconnect.
Edited Transcript of WTC.AX earnings conference call or presentation 24-Aug-22 12:30am GMT
