Balanced & Growth Watchlist Update – Wisetech Global WTC:ASX

Date: 22/11/2024

*** GENERAL ADVICE ONLY***

WiseTech Global (WTC:ASX) held its Annual General Meeting (AGM) on November 22, 2024, providing several key updates that are likely to be of interest to investors and analysts:

Financial Guidance Update

WiseTech has revised its FY25 guidance, which is a significant development for analysts to consider:

• Revenue is now expected to be A$1,200 million – A$1,300 million, representing growth of 15%-25% compared to FY24
• EBITDA is projected to be A$600 million – A$660 million, indicating growth of 21%-33% versus FY24
• The full-year EBITDA margin is anticipated to be 50%-51%This guidance update reflects a downward revision from previous expectations, primarily due to delays in the commercial launch of some breakthrough products.

Product Development and Launch Delays

The company provided insights into the progress of its three breakthrough products:

• ComplianceWise was released in Q1 FY25 as planned
• CargoWise Next is broadly on track
• Container Transport Optimization has been delayed to the second half of FY25, impacting anticipated revenue. These delays are attributed to recent organizational changes and media distractions, which have affected the product development timeline.

Strategic Initiatives

WiseTech is pursuing other significant initiatives to mitigate the revenue delay caused by product launch postponements. These initiatives are expected to have long-term benefits for both WiseTech and its customers

Leadership Changes

The AGM addressed the recent leadership transition, with Andrew Cartledge serving as Interim CEO. The company is in the process of searching for a permanent CEO, while former CEO and founder Richard White has transitioned to an advisory role

Governance and Board Composition

The company is evolving its board composition to align with its global expansion. Two new independent Non-Executive Directors, Lisa Brock and Fiona Pak-Poy, were added earlier in the year

Analyst Perspective

From an equities analyst viewpoint, the revised guidance and product delays are likely to be seen as short-term headwinds. However, the company’s long-term growth prospects remain strong, supported by:

1. Continued expansion of the CargoWise platform, which is attracting large global freight forwarders
2. Robust recurring revenue base (97% of total revenue) and low customer attrition rate
3. Ongoing R&D investment, representing 35% of revenue in FY24
4. Strategic acquisitions enhancing global customs capabilitiesThe company’s ability to maintain high EBITDA margins while investing in growth initiatives is noteworthy. However, analysts may express concern about the impact of recent controversies on the company’s reputation and the potential distraction from core business operations.

Overall, while the short-term outlook has been tempered by product delays, WiseTech’s strong market position in logistics software and its focus on innovation suggest that the company remains well-positioned for long-term growth. Analysts will likely monitor the progress of the delayed products and the impact of new strategic initiatives closely in the coming quarters.

Comparison vs Broker Expectations

1. Guidance vs Expectations: WiseTech’s updated guidance is lower than what analysts anticipated, particularly Citi, who expected a reconfirmation of previous guidance
2. Revenue Growth: The revised 15%-25% revenue growth is likely below analyst expectations, given the previous optimism
3. EBITDA Margin: The projected 50%-51% EBITDA margin aligns with analyst views on WiseTech’s profitability trajectory
4. EPS Forecasts: The updated guidance suggests EPS may come in lower than Morgan Stanley’s forecast of 121.40 cents and Bell Potter’s 114.70 cents for FY25
5. Dividend Outlook: With lower earnings expectations, dividends may be impacted, potentially falling short of Morgan Stanley’s 23.30 cents and Bell Potter’s 22.40 cents forecasts for FY25
6. Share Price Impact: The guidance revision may put pressure on WiseTech’s share price, potentially affecting the ability to reach analyst price targets (Citi: $124.50, Morgan Stanley: $120, Bell Potter: $123.75)
7. Long-term Outlook: Despite near-term challenges, analysts generally maintain a positive long-term view on WiseTech’s growth prospects and competitive position

The revised guidance reflects challenges related to product launch delays, particularly the Container Transport Optimization product.

However, the company’s core business and long-term strategy remain intact, which aligns with the overall positive sentiment from analysts despite the short-term setback