It has been another interesting year for shareholders of tech company WiseTech Global Limited (ASX:WTC). The former market darling’s shares were savaged during the COVID-19 market crash a year ago, falling from nearly $40 per share to under $10 in a matter of months.
But, as the dust began to settle on the pandemic, the WiseTech share price recovered, and by late January the company’s shares had climbed to a new 52-week high of $34.42. However, another global mini-tech sell-off, combined with a lukewarm market response to the company’s first-half FY21 results announcement, has seen the WiseTech share price tumble almost 25% to $26.16 as at the time of writing.
What does WiseTech do?
For those needing a refresher on what WiseTech actually does, it is a logistics software company. Its flagship product is the CargoWise platform, which aims to provide a centralised global trade management solution. Users are able to access the platform from anywhere in the world, in multiple languages and currencies, and it can provide up-to-date, live inventory tracking information.
The software also helps users manage the complexities of global logistics, allowing them to better understand the implications that changes in international tariffs and taxes will have on their business.
How has the company been performing?
WiseTech reported total revenues of $238.7 million for the first half of FY21, a 16% increase over the same period last year. Earnings before interest, tax, depreciation and amortisation expenses (EBITDA) jumped 43% to $89.2 million, while underlying net profit after tax soared by 61% to $43.6 million. The Wisetech share price did jump 9% at the time the company’s results were released.
Despite WiseTech’s fondness for driving growth through acquisitions (the company has made a whopping 39 acquisitions since its initial public offering (IPO) back in 2016), much of the revenue uplift was organic. CargoWise accounted for $150 million of the company’s first-half revenue (an increase of 19% over the first half FY20), while acquisition revenue made up the remaining $88.7 million – a more modest year-on-year increase of 12%.
What was more pleasing to see were the cost synergies that these acquisitions had delivered – particularly during a period when many companies have been experiencing serious market headwinds from the COVID-19 pandemic.
Cost efficiency measures and acquisition synergies delivered $6.1 million in benefits over the first half, boosting EBITDA margin by an impressive 7 percentage points to 37%.
WiseTech also ended the half with a healthy cash position of $251.4 million and significant undrawn debt facilities, making it unlikely the company will need to raise additional funding via an equity capital raise any time soon.
Outlook for FY21
In its results announcement, WiseTech actually upgraded its revenue guidance for FY21. It stated it still expected revenues to be in the range of $470 million to $510 million (an increase of between 9% to 19%). However, it updated its EBITDA target, reflecting the continuing benefit that acquisition synergies and cost efficiency strategies are expected to deliver to the company’s bottom line over the second half of this financial year.
WiseTech now anticipates EBITDA to be in the range of $165 million to $190 million, an uplift of between 30% to 50% over FY20.
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Rhys Brock owns shares of WiseTech Global. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of WiseTech Global. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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