Wisetech has reaffrimed its full year guidance, sayimg it expects revenue growth of 21-29% in FY20, with EBITDA to increase by between 5-22%.
The company said it has $230m in net cash, with a $390m in undrawn debt facilities. It does not intend to raise further cash.
Wisetech said it expects its business to remain resilient, but said its customers faced a great dela of uncertainty.
You can read the full update here
Reported numbers were strong for the first half, with revenue up 31% and net profit up 22% (excluding reduction in contingent liabilities). Margins remained strong (despite a big increase in expenses), retention high, and core growth of Cargowise One platform also solid (up 24%).
Difficult to fault at face value really. Although the Short-seller's argue that most growth is really acquired, a lot of expense is hidden from the income statement due to high development capitalisation and acquisitions, and that the 'deal machine' that is Wisetech is enabled only by a high share price that allows them to tap the market for cheap cash.
Still, if you think that acquisitions will ultimately prove an efficient and quick way to gain entry into new markets and capture clients, and that the business will manage to eventually scale well under a fairer recognition of costs, and ultimately be the dominant software for the global logistics market, there's a not unreasonable bull case here -- especially if shares can maintain a healthy market premium to help underpin growth funding.
It's a tough one; i think both cases make some fair points.
Then you have the huge drop in the outlook, which has resulted from the Corona Virus impact to China (which accounts for 16% of global GDP and is of course a major logistics hub).
Wisetech have forecast full year revenue of $420-450m (up 21-29%) and EBITDA of $114-132 (up 5-22%). This compares to prior guidance of $440-460m for revenue and $145-153m for EBITDA. That's a drop in guidance for revenue and EBITDA of 3.3% and 17%, respectively.
Of course, when pandemic related issues abate, there'll likely be a big tick up in logistics activity, but exactly when and by how much is unknown. Nevertheless, it's not unreasonable to treat this imapct as a legitimately one-off, and doesn't itself impact the existing long term Bull or Bear cases.
I personally think there's an excellent business at the core, but am mindful of the risks associated with the existing growth strategy and some of the legitimate financial reporting concerns.
Results presentation can be seen here
After today's drop, shares are still on a forward P/S of ~17, or 61x forward EV/EBITDA (excluding contingent liabilities). Stll too rich for me.
28-May-2020: WTC updates acquisition earnout arrangements
On the surface of it, this seems prudent enough, mostly reducing or closing out future earnouts with 17 of their acquired businesses and replacing significant cash payments with equity (WTC shares). These negotiations resulted in:
In the coming months, they plan to embark on a similar earnout review for a number of remaining acquisitions, which are primarily geographic footholds with product development targets already in place.
The change in fair value estimate of contingent consideration is expected to necessitate a one-off A$69.5m fair value gain in the 2H20, however this non-cash, non-taxed item does not affect revenue nor EBITDA. Wisetech Global does not anticipate any impairment of goodwill as a result of these earnout changes.
--- click on link above for more ---
I like the debt and future liability reduction aspect of this, however WTC is around 3.8% down today as I type this. Maybe the market has been reminded of just how many acquisitions WTC have made over recent years - and the associated risks of that strategy.
22-April-2020: WiseTech business update and FY20 guidance reaffirmed