WiseTech (ASX:WTC) share price on watch after strong half and FY22 earnings guidance upgrade

WiseTech had a very strong half…

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Key points

  • WiseTech has delivered strong revenue and earnings growth during the first half
  • Management expects more of the same in the second half
  • This has led to the company reaffirming its revenue guidance and upgrading its earnings guidance

The WiseTech Global Ltd (ASX: WTC) share price will be on watch on Wednesday.

This follows the release of the logistics solutions company’s half year results.

WiseTech share price on watch after upgrading guidance

  • Revenue up 18% over the prior corresponding period to $281 million
  • Recurring on-demand revenue up 25.4% to $225 million
  • EBITDA up 54% to $137.7 million
  • Underlying net profit after tax up 77% to $77.3 million
  • Fully franked interim dividend of 4.75 cents per share
  • FY 2022 EBITDA guidance upgraded

What happened during the first half?

For the six months ended 31 December, WiseTech was on form again and delivered an 18% increase in revenue over the prior corresponding period to $281 million.

This was driven by increased market penetration, customer usage and adoption of its technology, as well a price change to CargoWise reflecting increased investment in product research and development (R&D), data centre hardware, and cyber security. Management notes that it has also made considerable progress with its cost reduction initiatives to drive operational efficiencies and acquisition synergies across the business.

Supporting its strong performance has been the stickiness of its CargoWise product. Management notes that its attrition rate for the CargoWise platform remains below 1%. In fact, this is a level its attrition rate has been at for almost 10 years. Management highlights that its customers are staying and growing their transaction usage due to the productivity and deep capabilities of the platform.

Management commentary

CEO Richard White commented: “The ongoing growth of eCommerce and strong demand for goods, coupled with the challenges posed by outbreaks of new COVID variants, has resulted in continued capacity constraints, port congestion, supply chain labor shortages and higher freight rates.”

“From WiseTech’s perspective, whilst higher freight rates do not result in immediate revenue growth, we are benefitting from the acceleration of the longer-term structural changes they are driving. In particular, we are seeing increased investment by logistics companies in replacing legacy systems with integrated global technology, such as CargoWise, to drive productivity, and facilitate planning, visualization and control of global operations.”

“We are also seeing continued consolidation within the logistics sector. Over the past two years Top 25 Global Freight Forwarders such as DHL, DSV6 , CEVA Logistics, Kuehne + Nagel and JAS Worldwide have embarked on acquisitions with consolidation activity intensifying in the second half of calendar 2021, ” he concluded.

Outlook

The good news for shareholders and the WiseTech share price today is that management appears confident that its strong form can continue.

On the basis that market conditions do not materially change, the company has reaffirmed its revenue growth guidance of 18% to 25% in FY 2022. This will represent revenue of $600 million to $635 million.

In respect to its earnings, management has now upgraded its EBITDA growth guidance to 33% to 43%, which represents EBITDA of $275 million to $295 million. This compares to its prior guidance of 26% to 38%, which implied EBITDA of $260 million to $285 million.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended WiseTech Global. The Motley Fool Australia owns and has recommended WiseTech Global. 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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