WiseTech Global Limited (WTC) Earnings Call Transcript & Summary

Thank you for joining WiseTech Global's Results Update. We are joined today by CEO and Founder, Richard White; and CFO, Andrew Cartledge. I will now hand over to Richard. Please go ahead.

Good morning, everyone, and thank you for joining us today for our FY '21 financial year results briefing. To kick off our presentation today, there are a few financial and strategic highlights I'd like to cover before handing over to Andrew, who will take you through the financials in more detail. We announced today that we delivered FY '21 total revenue of $507.5 million, representing an 18% increase on FY' 20, at the top of our guidance. Excluding FX impacts, total revenue was up 24% with 90% recurring revenue, providing us with stable and predictable long-term revenue strength. Importantly, in FY '21, our CargoWise revenue grew by 31% excluding FX movements. Strategically, this growth is significant. First and foremost, it is indicative of the growing revenue contribution that our large global freight forwarder rollouts deliver, which will accelerate by the time as rollouts progress and as we secure new global customers. Secondly, it is indicative of the fact that as we have expanded the CargoWise ecosystem, adding new capabilities, modules and geographies, our existing customers have increased the usage and we have secured new customer wins. The remainder of our revenue growth was generated by our acquired businesses, which delivered 12% revenue growth excluding FX movements. This brings us to EBITDA, which was up 63% in FY '21 at $206.7 million, exceeding our guidance and evidencing the step change in operating leverage we are achieving through top line revenue growth and increased efficiencies. We're implementing organization-wide efficiencies and extracting synergies from our acquired businesses and are pleased to report that in FY '21, we delivered $13.8 million of net cost reduction, exceeding our $10 million target. Our underlying NPAT for the year was up 101% on FY '20 at $105.8 million. And our free cash flow of $139.2 million was up 149% on the prior year, a testament to our high-quality earnings. In recognition of the continued strength of WiseTech's business, the Board has declared a fully franked final dividend of $0.0385 per share, up 141% on FY '20, taking up total dividend for the year to $0.0655 per share, representing a payout ratio of 20% of underlying NPAT. Our performance in FY '21 should be looked at in the context of the broader market conditions we're operating in. As noted in our first half results, shipment demand is shifting from services to goods as a result of COVID restrictions and various country-specific fiscal stimulus packages. Whilst this has boosted demand for global trade during the year, there have also been disruptions, including reduced airfreight belly hold capacity as a result of COVID passenger restrictions, limited seat freight capacity, port access and container availability challenges. This has resulted in constrained capacity and congestion across both sea and airfreight, driving higher freight rates. These higher rates did not translate into immediate revenue growth for WiseTech. However, we are benefiting from the acceleration in the longer-term structural changes that these conditions create. Constrained capacity and congestion mean that logistics providers are investing in fast-tracking their digital transformation by replacing in-house legacy systems with integrated global software that deliver efficiency, enhance productivity, transparency and visibility, mitigate risk and facilitate planning and control of their global operations. This is exactly what CargoWise delivers. These conditions are also driving increased consolidation within the sector, which you can see with the recently announced acquisition of J.F. Hillebrand by DHL and Greencarrier by JAS as well as DSV's publicly announced interest in acquiring DB Schenker. Typically, consolidation is driven by the larger global logistics providers, and we benefit to the extent that our customers are the acquirers, where our platform is in place in the acquired business and adopted by the acquirer. The market buzz around other potential acquisitions shows an acceleration in appetite, size and speed for consolidation among the top 200 global logistics providers that we regard as our target customers, which is a good entrée into our strategic highlights for the year. Our strategy is designed to leverage the opportunity that current market conditions and structural change provide. We are a product-led business and have reached an inflection point in our growth trajectory, which you can see in our financial performance. Our focus on the top 25 global freight holders and top 200 global logistics providers is gaining traction. I'm proud to report that we recently signed FedEx for a global rollout on CargoWise, which is in addition to the 6 global rollouts we secured in FY '21 and the existing 30 global rollouts by large freight holders already in place. Importantly, we have a strong pipeline of potential new global customers, which we are actively pursuing and a number of which are likely to be near-term wins. Later, I will spend time talking about the strategic importance of these global customer rollouts not only in terms of market penetration, but also from a future revenue growth perspective. If there is one thing you take away from our results announcement today, it should be the significance for our business of this ramp-up in global customer wins. Our ability to secure new global customers is driven by the appeal of our CargoWise offering and our ongoing product development and enhancement. In FY '21, we expanded our CargoWise native customs functionality to cover approximately 45% of global manufactured trade flows, up from 35% in FY '20. We also completed the product integration of global rates functionalities secured by our CargoSphere and Cargoguide acquisitions. These are now in production with major customers, and we have commenced the rewrite of this functionality into CargoWise as a native module. Also, of strategic note in FY '21 was the addition of sea freight to our e-commerce capabilities. The addition of 1,096 new CargoWise product features and enhancements and the deployment of the beta version of Neo to a select group of customers. Our product development and increasing market penetration drive our top line revenue growth, which coupled with the delivery of our organization-wide efficiencies and acquisition synergies enable us to achieve a step change in operating leverage, enhancing our profitability, not just in FY '21, but also setting us up to deliver ongoing attractive returns for shareholders in the years ahead. I will now hand over to Andrew, who will take you through our financial performance before reverting back to me to talk in greater detail about our strategic progress and outlook.

Thank you, Richard, and good morning, everybody. Starting with an overview of our income statement. As Richard noted, our FY '21 total revenue was $507.5 million, representing growth of 18% on FY '20, including $23.4 million of foreign exchange headwind in the year versus a $12.1 million foreign exchange benefit in FY '20. Excluding the FX impact, FY '21 total revenue increased by $101.4 million, representing 24% growth. Our CargoWise revenue continued its strong growth, delivering FY '21 revenue of $331.6 million, up 31% on FY '20 excluding FX impacts and up 26% if you include FX movements. Revenue from acquisitions of $175.9 million was up 12% in FY '21 ex FX and up 6% including FX, mainly driven by the full year impact of the 5 acquisitions completed in '20. Gross profit for the year was up 22% on FY '20, reflecting a 3 percentage point improvement in our gross profit margin in FY '21 to 85%. I'll pause here to make a point that our acquired businesses generally have lower gross profit margins than CargoWise, reflecting that size and commercial license models, which typically lead to higher product and service support costs and lower leverage, resulting in a dilutive impact on our overall gross profit margin. EBITDA in FY '21 was $206.7 million, up 63% in FY '20, a strong performance, exceeding guidance and reflecting our continued revenue growth and the cost reduction benefits of our organization-wide efficiency and acquisition synergies program. This program delivered a net cost reduction of $13.8 million for the year, well ahead of our $10 million target. Richard will provide more color on our efficiency program shortly. However, I'd make the point that our FY '21 EBITDA includes $8.2 million of restructuring costs incurred as part of the implementation of this program and $10.6 million of FX headwind. EBITDA margin for the year of 41% was up 11 percentage points on FY '20. It was particularly pleasing to see our CargoWise EBITDA margin increase by 7 percentage points to 55%, driven by revenue growth and cost reductions, including reduced travel, entertainment and trade show costs in response to the prevailing COVID pandemic business conditions. Moving down the table, you can see that our EBIT was up 86%, reflecting our strong operating performance. Our depreciation and amortization charges increased by 23%, driven by our continued investment in R&D to propel future growth, including investment in commercialized products as well as our investment in data centers. This brings us to our statutory net profit after tax for the year, which was down 33% on FY '20 at $108.1 million, reflecting a lower fair value gain in FY '21 compared to settlements of acquisition earn-outs in FY '20 and the corresponding fair value adjustments made to contingent consideration. Excluding these earn-out adjustments, our FY '21 underlying NPAT increased by 101% to $105.8 million, and underlying earnings per share increased by 99% to $0.326 per share. In looking at our total revenue growth, it's important to distinguish between recurring and nonrecurring revenue. As you know, recurring revenue was the backbone of SaaS and subscription-based companies such as WiseTech because it's indicative of customers using our product on a consistent basis, giving us the ability to project future revenue more accurately. Nonrecurring revenue, on the other hand, grows less quickly and can include one-off license revenue. You can see on this slide that if you exclude the $23.4 million FX headwinds, we delivered $101.4 million of total revenue growth. Of this, $97.3 million was recurring revenue growth, representing 25% growth on the $382 million of recurring revenue we generated in FY '20. If we dive deeper into the recurring revenue composition, you will see that 97% of our CargoWise revenue was recurring, in line with FY '20 levels. Our nonrecurring revenue contributed $4.2 million to total revenue growth in FY '21. This represents 9% growth on the $47.4 million of nonrecurring revenue we reported in FY '20. Our nonrecurring revenue growth in FY '21 was comprised of nonrecurring revenue generated by our acquisition businesses, primarily driven by our 5 acquisitions in FY '20 and contraction in our FY '19 and prior acquisitions as expected. Let's now take a closer look at our CargoWise and acquisitions revenue growth for the year. You can see on this slide that CargoWise revenue generated $68.6 million with a $78.1 million total revenue growth we achieved in FY '21. Of this revenue growth, $52.2 million was attributable to existing CargoWise customers, up from $31 million in FY '20, reflecting increased usage through the addition of transactions, seats and new sites, the utilization of additional products and modules and growth from industry consolidation. Importantly, all existing CargoWise customer cohorts from FY '06 and prior through to FY '21 delivered revenue growth. And CargoWise customer attrition continued to be extremely low at less than 1%, in line with our track record since starting to measure this metric 9 years ago, demonstrating the stickiness of our CargoWise customers. $16.4 million of CargoWise revenue growth in FY '21 was attributable to new customers and is indicative of the strong opportunity pipeline we have, in particular with larger global freight forwarders as they roll out on our platform. Included in our FY '21 CargoWise revenue growth is the benefit of a $22 million price change implemented in the first half of the year across existing and new customers to offset increased investment in product R&D, data center hardware and cybersecurity. Revenue from acquisitions grew by 6% in FY '21. This was comprised of $10.5 million of revenue growth from the 5 acquisitions completed in FY '20 and $400,000 of revenue from our small foothold acquisition in Japan late in FY '21. Our acquisition revenue growth was partially offset by a $1.4 million reduction in revenue from acquisitions completed in FY '19 and prior years as expected. I'd like to pause here and talk a little bit about revenue growth drivers and how you should think of our CargoWise revenue growth trajectory going forward. On a constant currency basis, over the past 5 years, our CargoWise recurring revenue has almost quadrupled from $84.5 million in FY '16 to $321.9 million in FY '21, equating to a 31% compound annual growth rate over the 5 years. On this slide to help illustrate the relative contribution to our CargoWise recurring revenue growth from each of our revenue drivers, we split out the relative contribution to growth based on the averages over a 5-year period, recognizing that the contribution to growth of each of these may vary year-on-year. The biggest driver of CargoWise recurring revenue over the past 5 years has been large global freight forwarder rollouts, which have contributed to over 1/3 of our revenue growth or 12 percentage points to 31% CAGR. This is why, as Richard mentioned, the 6 new global rollouts secured in FY '21 and the signing of FedEx post 30th of June is significant when you think about our future revenue growth pipeline. These large customers take multiple years to roll out the CargoWise platform across their sites globally. This means their usage and transaction revenues continue to grow over time. Richard will talk in more detail shortly about the revenue of these large rollouts and how you should think about year-on-year accretion in revenue that they deliver. The next biggest contributor to CargoWise revenue growth over the past 5 years has been new customer wins across the FY '17 to FY '21 cohorts, which contributed 6 percentage points of growth. Next, our over 4,300 new product features and enhancements reflected in price, which contributed 4 percentage points to our growth. Increased usage by existing customers contributed 3 percentage points to growth with major new product launches and the underlying supply chain market growth, each contributing 3 percentage points to growth. What's important to note is that of the 31% CargoWise compound annual growth rate, 28 percentage points of this growth relates to WiseTech specific factors, primarily our increased market penetration and the appeal of the CargoWise customer value proposition, enabling us to significantly outpace the overall market growth. As I mentioned earlier, our CargoWise nonrecurring revenue growth over the past 5 years has been driven by customer paid product enhancements, which in themselves are important, future growth enablers. Looking ahead, we anticipate our future CargoWise recurring revenue growth will reflect our historical experience, driven primarily by the acceleration of large global freight forwarder rollouts and further new contract wins as well as the launch and expansion of new products such as customs and rates and longer-term new product developments such as Neo. We also remain open to strategically significant acquisition opportunities, although -- but in the near term, we have slowed our acquisition activity to focus on expanding the CargoWise ecosystem and driving scale and operating leverage through the extraction of synergies from existing acquisitions. Going forward, we intend to provide updates on the relative contribution to our revenue growth driver at our full year results each year. This brings us to our operating expenses. You can see on this slide 3 graphs, charting our operating expenses year-on-year since FY '17 across 3 areas: product design and development; sales and marketing; and general and administration expenses. Overall, our operating expense as a percentage of revenue were down 9 percentage points, reflecting leverage from revenue growth and the benefits of cost reductions across the business as part of our organization-wide efficiencies program. In terms of product design and development expenses, you can see our continued commitment year-on-year in R&D to drive innovation and the development of new CargoWise product features and enhancements. Our FY '21 product design and development expense increased by $3.9 million to $88.8 million for the year compared to $84.9 million in FY '20. This represents an increase of approximately 5% on FY '20, which equates to a decline in terms of percentage of revenue from 20% in FY '20 to 17% in FY '21, a good outcome, reflecting our revenue growth and cost reductions for the year. To provide some context on product design and development expense, approximately 55% of this expense is related to supporting the maintenance of acquired legacy products. So there is opportunity growth to continue to reduce this cost as we transition the IP from these legacy products on to our efficient CargoWise platform. Our sales and marketing expenses were down 4 percentage points as a percentage of revenue from 13% or $57 million in FY '20 to 9% or $45 million in FY '21. This reflects cost reductions in sales and marketing account across our acquired businesses and the deliberate more targeted sales and marketing focus on the top 25 global freight forwarders and the top 200 global logistics providers as well as a reduction in travel and trade show costs due to COVID. Importantly, our success in growing our new customer revenue and securing additional large global rollouts in FY '21 demonstrates the effectiveness of our targeted sales and marketing focus. Our general and administration costs increased from $84.1 million in FY '20 to $89.1 million in FY '21. This increase was predominantly the result of the $8.2 million in restructuring costs as part of our organization-wide efficiency program that I spoke about earlier. Excluding the $8.2 million of restructuring costs, G&A expense in FY '21 as a percentage of revenue was 16%, a 4 percentage point improvement on FY '20. Let's take a closer look at our R&D investment. You've heard us say on many occasions that we are a product-led technology company and the asset we build is software. Our commercial model is designed to support streamlined, low maintenance, marketing and sales costs with strong ongoing investment in product design and development that continues to enhance our competitive positioning and growth by developing technology solutions for pain points in the constantly evolving global logistics sector. Accordingly, by continuing to increase R&D investment, our new products will continue to deliver long-term recurring revenue growth. You can see on this slide our investment in R&D has increased each year over the past 5 years with a total of more than $560 million invested over the period. In FY '21, we invested $167.1 million in R&D, up 5% on $159.1 million invested in FY '20. This represents a reinvestment of 33% of our revenue in R&D, which is at the top end of other SaaS peer investment levels. We capitalize our investment in new internally developed software components in line with the applicable Australian accounting and international financial reporting standards. For example, our investments in R&D related to building out our global customers' capability, international logistics and the international e-commerce capabilities are capitalized. As previously communicated, between 40% and 50% of our total R&D investment is capitalized each year. And the remainder, which relates to bug fixes, maintenance and research, is expensed. In FY '21, $78.3 million of our R&D investment was capitalized, up from $74.2 million in FY '20, reflecting acceleration of our global native customs and compliance capability builds on the CargoWise platform. Turning now to our balance sheet. You can see on this slide the strength of our balance sheet and our solid financial foundation to fund the future growth. At June 30, 2021, we had $350 million in cash. And post 30th of June, we successfully completed a refinancing of our debt facility. We now have in place a new unsecured 4-year $225 million bilateral facility supported by 6 banks, which is undrawn, providing ample financial flexibility and headroom. The 24% increase in receivables you can see on the slide is in line with our revenue growth. And the $19.5 million increase in our intangible assets of $904.5 million relates primarily to investment in new capitalized product development, offset by amortization and FX. In share capital, you can see a $48 million increase in FY '21, reflecting new shares issued to our Employee Share Trust for future vesting of employee compensation, which is a key retention tool, and new shares issued for acquisition earnout consideration. Before I hand back to Richard, I'd like to talk briefly about our highly cash-generative operating model. In FY '21, our operating cash flow was up 57% on FY '20 at $229.9 million. Since listing in FY '16, our delivered $681 million of operating cash flow and $605 million of EBITDA, demonstrating the strength of our underlying operating model and our solid track record of cash generation. A significant portion of our FY '21 operating cash flows, $90.8 million, was reinvested into the long-term growth initiatives such as R&D to develop and expand the CargoWise product offering and then building out our global footprint, including data centers and IT infrastructure that enhance scalability, reliability and security of the CargoWise platform and provide capacity for future growth. Before I move on to free cash flows, I'd draw your attention to the changes in our working capital, which mainly reflects the increase in trade payables and customer deposits, partially offset by an increase in receivables related to revenue growth. I'd also note that the noncash items and EBITDA were consistent year-on-year. However, in FY '21, we increased our use of equity to improve employee retention through share-based payments, which was offset by a reduction in employee provisions. Our free cash flow performance in FY '21 was exceedingly strong at $139.2 million. It was up 149% on FY '20. And our free cash flow conversion rate of 67% was up 23 percentage points on the prior year. In addition, our free cash flow margin was up 14 percentage points on FY '20, reflecting our improved operating cash flow. All in all, you can see that we have a highly cash-generative business model, providing us strong free cash flow for ongoing investment in our growth. I'll now hand back to Richard, who will provide you with an update on our strategic progress and the outlook for the business.

Thank you, Andrew. You've heard me say many times that WiseTech's strategic vision is to be the operating system for global logistics. And our mission is to create breakthrough products that enable and empower those that own and operate the global supply chains of the world. To achieve this, our strategy is driven by our people and centered around the 3Ps: product, penetration and profitability, with a focus on accelerating our global growth by leveraging the structural changes that are currently taking place in the global logistics and supply chain sectors. In particular, our strategy is focused on capitalizing on the growing demand for integrated global software solutions, as industry consolidation drives large logistics providers to replace their legacy in-house systems with integrated software solutions that deliver increased visibility, productivity and control. Our customers operate in a highly complex, dynamic, ultra-competitive environment. CargoWise's competitive advantage is its ability to continue to rapidly enhance productivity and capability, drawing away from regional and local competitors, delivering advantages to customers and potential customers still on aging legacy systems. This is what enables us to retain customers, increase their CargoWise usage and attract new customers. So let's now take a look at each of our strategic 3Ps in more detail and how they come together to enable us to be the operating system for global logistics. Our product development capability is fundamental to our business. This slide is intended to provide context in terms of how we envision the evolution of the CargoWise ecosystem. You can see we have a strong track record of innovation and constantly evolving the CargoWise ecosystem. For instance, over the years, we have evolved from a traditional licensing model to an on-demand licensing model in 2008 to a cloud-based solution in 2012 through to the launch of CargoWise One in 2014 as an integrated global offering. As part of the CargoWise One launch, we transitioned to a seats plus transaction licensing model. And from 2018 to 2020, our focus was on establishing domain leadership in global logistics execution technology and fast-tracking our development pipeline with multiple acquisitions that delivered new geographies, adjacencies, intellectual property and development teams. During this time, we signed another 7 global rollouts and nearly doubled our revenue. In FY '21 and over the next 2 years, our focus is on expanding our CargoWise footprint and functionalities across customs, rates and e-commerce as well as broadening CargoWise's enterprise-wide capabilities and securing additional large global customers. To this end, in FY '21, we invested $167.1 million in product development, delivered 1,096 new product features and enhancements, recommenced recruitment of technology and industry talent globally in our major centers and established another international center of excellence in Bangalore, India. We also continued to align our acquisition development teams to our WiseTech development priorities with 53% of our people now focused on product development, up from 51% in FY '20. Looking to FY '24 and beyond, our focus will be on completing the integration of acquired intellectual property into CargoWise, including expanding functionalities to cover landside logistics and transport management as well as accessing a larger total addressable market driven by the rollout of Neo. Our #1 development priority and opportunity in FY '21 was to enhance our technology lead in global customers and cross-border compliance. Our objective is to deliver one globally unified system, manage import and export customers procedures for jurisdictions covering approximately 90% of global manufactured trade flows. At the first half results, I explained that achieving this without the benefit of acquired in-country expertise and relationships with government and customers in each jurisdiction is time consuming, complex, risky and expensive and in foreign language jurisdictions would prove almost impossible. To accelerate and derisk this process and avoid costly and unsuccessful custom development, we invested in strategic foothold acquisitions. These provide us with feet on the ground to build our capability, significant local industry knowledge and technology domain expertise as well as a platform for localization and integration with major ports in that jurisdiction. In non-English speaking jurisdictions, they also provide language localization for CargoWise modules and documents such as delivery instructions and invoices that cannot be presented in English. Our acquisitions enable us to accelerate the delivery of customs compliance requirements. Once we achieve this, we enter the commercialization phase, which is a staged process that takes time, typically starting with 5 to 10 smaller early adopters to stress-test CargoWise native components and government messaging interfaces and then progressively roll out to larger customers. As I mentioned at the start of the presentation, in FY '21, we expanded CargoWise's customs functionality to include France, Italy, Spain and Puerto Rico, adding to our established coverage in Australia, New Zealand, Singapore, the U.S., Canada, the U.K., mainland China, Taiwan and South Africa, all up in FY '21, we increase the geographic coverage of our customs functionality to cover approximately 45% of global manufactured trade flows, up from 35% in FY '20. Our development work is continuing with further jurisdictions to be added in FY '22 and beyond. Noting that our progress is often subject to factors outside of our control, such as country-specific regulatory changes and availability of government testing facilities, which can sometimes accelerate the process and other times result in delays. An example of this is Germany, where despite our custom development being complete, the authorities have deferred all new certifications due to COVID and other local issues. In addition to our development of global customs and compliance functionalities, we also have a program of work focused on further extending the CargoWise ecosystem. This includes building a native global rates engine that streamlines the carrier booking to payment processes. As a transitional measure, we have released the integration of CargoSphere and Cargoguide rates functionalities into CargoWise. These are in production with major customers. Another area of focus is developing e-commerce as a single platform for the international e-commerce fulfillment market. Our offering is live in the U.S., Australia and New Zealand, and we have a strong pipeline of sales. In FY '21, we added sea freight to our existing e-commerce airfreight functionalities to address the move of e-commerce freight from air to sea, given the significant reduction in belly freight capacity on passenger flights. We also integrated Pierbridge and SmartFreight into our e-commerce solution. We are continuing to implement enhancements to this offering. Longer term, our development pipeline includes incorporating our land transport solution into our core CargoWise architecture, with landside logistics the first step in that process. We have now released our new highly functional CargoWise Transit Warehouse module, which is in production with a number of customers, and have recently entered into a transit warehouse global rollout agreement with a major customer. We are also focused on expanding our total addressable market with the development of CargoWise Neo, which will provide a web-based global integrated platform enabling beneficial cargo owners such as large manufacturers, importers and exporters to link directly with their logistics provider to plan, price, book, track, trace and manage their freight. As I have previously explained, the development of Neo will progress over a number of years. It is still in its early stages and will leverage a number of existing CargoWise modules and future developments. So it will take time before it delivers a significant revenue. However, it is already in front of a number of customers and creating a stronger target-wise customer value proposition. I am pleased to report that the feedback we have received has been very positive, and we are now working to develop further Neo capabilities. That brings us to our next strategic P, penetration. With fully digital and highly automated global logistics solutions still in the very early stages, we have considerable scope for growth. Our approach is to target global rollouts by the top 25 global freight holders and the top 200 global logistics providers because they can fully leverage our global capabilities and therefore provide the greatest revenue growth potential. On this slide, you can see the progress we have made in securing global rollouts. We have grown our global rollouts in 2 ways, through CargoWise customer contract commitments and by existing customers who are not on formal rollout agreements, but are growing organically, adding new geographies and users as they go. Andrew explained earlier that more than half of the 31% CAGR of our CargoWise recurring revenue over the past 5 years has been driven by large global freight forwarder rollouts and new customers. What is of note over the past 12 months is the significant momentum we are seeing in global rollouts and new customer wins. As I mentioned at the start of the presentation, we secured 6 new global rollouts in FY '21, and we signed FedEx post our end of financial year. These wins are in addition to the existing 30 global rollouts that we already had in place such as DHL Global Forwarding, DSV/Panalpina and Bolloré. Importantly, we have a strong pipeline of potential new global customers, which we are actively pursuing, a number of which are likely to be near-term wins. I'd like to spend some time now on how you should think of the revenue growth trajectory of these global rollouts. As you know, our large global customers take multiple years to roll out the CargoWise platform across their business units. As the rollout progresses, they add new countries, adopt new modules and implement our productivity tools. DHL is a good example. We signed a global rollout contract with them in FY '16, and over this period, they have completed the rollout of CargoWise across their entire ocean freight business and most of their airfreight business, with the remainder of the airfreight rollout planned for completion by the end of this year. This has been a 5-year process. And as noted by DHL, it is one of the fastest rollouts by our freight forwarder of this size. Of the 36 global rollouts in place at the end of FY '21, 29 are in production, which means they are operationally live on CargoWise, having rolled out to 10 or more countries and 400 or more registered users. The remaining 7 are contracted and in progress, which means they are at an earlier stage of their global rollout. From a revenue-generating perspective, you can see that these 29 global rollouts in production have delivered compound annual growth of 37% over the past 5 years. This is being driven by the progression of rollouts by customers such as DSV, DHL, Toll, Yusen and Geodis. The adoption by these 29 customers of additional CargoWise modules, products and features as well as customer expansion through M&A activity such as DSV/Panalpina and the recently announced acquisition by DHL and JAS that I mentioned earlier. Importantly, 8 of the 29 customers in production are top 25 global freight forwarders. These 8 have generated a much higher compound annual growth rate of 46% over the past 5 years. So you can understand why our focus is on securing global rollouts by these big players. Looking ahead, given the significant runway of new customers available in both the top 25 global freight forwarders and the top 200 logistics providers, which we are actively pursuing, we expect to see future revenue growth driven by additional large global customer wins. We also anticipate significant growth from the global rollouts that are contracted and in progress, 2 of which are top 25 global freight forwarders. To give you a sense of the magnitude of this opportunity, if you look at the 7 rollouts that were contracted and in progress in FY '21, collectively, they have less than 10% of their expected users currently live on CargoWise. However, they have delivered 158% of compound annual revenue growth over the 2-year period from FY '19 to FY '21. So there is significant additional revenue to come. Our existing 29 customers with global rollouts in production will also continue to drive revenue growth as they add new products, features and geographies, in particular, as we increase our customs coverage from approximately 45% of global manufactured trade flows to our target of 90%. Last but not least, we anticipate continuing industry consolidation but also support our future revenue growth with our large global freight forwarder customers well positioned to leverage future consolidations to grow. Both our product development and penetration progress drive revenue growth leading us to our third P, profitability. In FY '21, we implemented an organization-wide efficiency program that involves reducing costs, extracting acquisition synergies and streamlining our processes and teams to enhance our operating leverage and ensure appropriate allocation of resources to support scalability and delivery of our longer-term strategic vision. As Andrew explained, this program of work delivered a $13.8 million net benefit in FY '21, which exceeded our previously announced $10 million target. Initiatives we implemented to achieve this include centralizing physical operations and product development hubs, consolidating data centers, migrating data from acquired businesses as well as streamlining facility and office support as we progressed our acquisition integrations. These cost reductions partially offset our increased investment in FY '21 to support ongoing revenue growth through product development and recruitment of technology specialists. Looking ahead, we expect to achieve a cost reduction run rate of approximately $40 million for FY '22, exceeding our previous $20 million to $30 million target. This brings us to our FY '22 guidance. You will see in today's presentation a set of underlying assumptions upon which we have based our FY '22 guidance. We're providing guidance today on the basis that market conditions do not materially change, noting, in particular, the changes in industrial production and/or international goods flows may impact our guidance. Assuming there are no material changes to these assumptions and no unforeseen events that arise over the next 12 months, we expect our FY '22 total revenue to grow between 18% to 25%, representing $600 million to $635 million. Of this total revenue growth, we expect CargoWise revenue to grow by approximately 30% to 40% with the first and second half year splits broadly similar to FY '21. In terms of EBITDA, we expect this to be in the range of $260 million to $285 million in FY '22, equating to a growth of 26% to 38%. To wrap up today, I'd reiterate my comments at the start of today's presentation, we have reached an inflection point in WiseTech's growth trajectory. We are ideally positioned to continue to benefit from the acceleration in structural shifts towards consolidation, integration and digitization of global logistics and supply chains. These structural changes, coupled with our unique CargoWise offering and ongoing commitment to product development are enabling us to gain market penetration momentum. We are seeing a significant ramp-up in global rollouts, both in terms of new sign-ups and ongoing revenue growth from those already in place. You can see our strong track record of year-on-year revenue growth over the past 5 years, a track record of delivering on what we promised, a track record that has delivered long-term sustainable growth, a track record we are well positioned to continue as our global rollouts progress. You can also see our strong track record of EBITDA and EBITDA margin growth, demonstrating the strength of our business model and our increasing operating leverage, which we will continue to enhance. We are ideally positioned for ongoing growth and increased market penetration, with our healthy balance sheet and strong cash generation providing us with significant financial firepower to fund our future growth. We are excited about our future. Our product pipeline will ensure we have a competitive edge. And we already have plenty of penetration opportunity from large global rollouts as well as an ongoing momentum in new customer wins, all of which will enable us to capitalize on prevailing industry structural changes and to continue delivering sustainable revenue, profit and earnings per share growth as well as an increasing value for shareholders. Let's now open to questions.

[Operator Instructions] Your first question comes from Quinn Pierson from Credit Suisse.

Maybe just firstly, is there anything further you can share with us, please, regarding the FedEx contract, I guess, in particular, what the scope of that contract is in terms of maybe modes covered or regions? And then if there's anything you can share with regards to, I guess, the slope of that rollout and potential size from a revenue perspective?

So FedEx, it's their global forwarding division, which is a large global according to our definitions. And their rollout is relatively quick. Certainly, you should think of FedEx though as just one of the substantial number of wins that we've had in the past 12 months or so. And it's indicative of the flow of large globals. I think that there's -- I've clearly indicated that there's this history of these wins have been picking up, and we've also got a pretty decent opportunity pipeline as well. So FedEx is great because it's a well-known brand, people understand it. But it's a very -- we're very happy with FedEx. We actually have really worked well with them. And they will start fairly quickly. But I think the material issue is that the number of these running in parallel and our hope to bring those forward as quickly as possible and to get everybody moving very fast. You've seen from the Aramex well that we've been able to do, the customers have been able to do things very quickly at times. So that's a good improvement for the future.

Understood. Maybe secondly, on Page 12, you have an interesting disclosure showing revenue growth kind of broken out by contributors, where a large global freight forwarder [indiscernible] were the largest, et cetera. I guess as you look to FY '22 and onwards, could you give us some indication, is that kind of a similar, I guess, shape of growth or if there's any particular ins and outs that we should be cognizant of? And maybe as a subquestion on that, does customs become a revenue growth line item in and of itself or am I [indiscernible] myself on that.

Andrew, do you want to take that one?

Yes, sure, Richard. Thanks, Quinn. Yes, obviously, the 31% CAGR there over the 5 years is the average for each of those. Each individual item will grow differently in any particular year. But the shape overall, we sort of expect to continue. And I think we've put that on the page there with the future revenue growth drivers. When customs start to grow, it will show up in each of those categories. So we'll see large global freight forwarders start to use the customs application more, we'll see new customers that come on to the platform, in future start to use it. And we'll see existing customers also use it as well. So it will be part of that growth profile going forward. on top of the other things that we've listed there with the new large global freight forwarder wins and also growth from the other products that we're building out in CargoWise from the acquisitions like rates for example.

Yes, just to add on to that. When you think about something like customs or Neo or Transit Warehouse or the rating, it's much more helpful to think of them as part of an ecosystem. And even though they have their own revenue line, what is really going on is the entire platform becomes more attractive, and it becomes much more efficient and effective. It is really just a question of making the whole system more attractive and more valuable. And yes, each one of those things are individual revenue lines. But if you break them out, you lose the fundamental idea that the platform, the ecosystem, is actually what's driving the revenue.

That's helpful clarification. And just lastly from me. So at the end of FY '22, once the, I guess, full cost out run rate in acknowledging that, that cost out number has been increased, will the legacy costs, particularly from the acquired businesses, effectively have been cleaned out, like will this cost out program effectively be done and we're now down to the more, I guess, sustainable base. And what I'm getting at here is, as we looked kind of think of FY '23 and onwards, I'm just trying to understand what a more sustainable level of cost growth might be after this cost-out program finishes.

Yes, Quinn, I'll take that one. Clearly, the $40 million run rate target for FY '22 is an increase on the $20 million to $30 million that we'd previously targeted, so we're very pleased with that. I think what we'll see going forward and we've sort of indicated a little bit on Slide 13 is that there is some cost still in the business that will continue to run out over time. It won't come out immediately as we transition some of those legacy products off of their existing structures and technology and hardware and bring them over to the more efficient CargoWise platform. I think the main point to keep in mind here is that we're going to keep investing in the business to fund future growth opportunities. So we'll keep adding costs to support that activity as we go forward. You will have seen over the past couple of years, we've taken our cost as a percentage of revenue down from -- it was 70% in FY '19 to just over 55% this year, and that's a significant reduction in the cost base for the business driven by not only the cost actions that we've taken, but also the leverage that we've received from the volume increase in revenue.

Your next question comes from Paul Mason from E&P.

Just a few for me. The first one, I just wondered if you can make a comment on your remark about more significant strategic M&A. I think historically, you flagged that you were interested in potentially acquiring some customer assets in Southeast Asia. Is this sort of still what you're referring to? Or are you thinking sort of broader than that in terms of that remark?

So there's really a couple of things going on there. We continue to do little, very small nonmaterial acquisitions that are really kind of acquihires in order to flesh out these foothold capabilities and to expand the product capability totally. That's fundamentally about building the ecosystem. And all we were really saying is that we have the firepower to do more than that should we wish to do so. We have made no plans to that effect. And I think that what you've seen here in the last 12 months, and you'll see going forward for the next 12 months is a business really focused on just 2 really important things, obviously, the 3 Ps, but organic growth through CargoWise product leadership and increased efficiency across the business. As we grow in scale, we have always been very efficient managers, and there's a period of time when we were buying a lot of companies when we had to take a slight back seat to the fundamentals of growing that piece of the strategy. But we are very efficient managers, and we continue to look at the efficiency of all those businesses. And we're really working on the structure of how WiseTech builds its model and gets into that everything leaning into the CargoWise product capability set. Really talking about big M&A when we don't really have a plan for that. What we're really saying is we've got plenty of firepower should we choose to do those things. But our real focus is on organic growth and on increasing efficiency.

Okay. Great. So next one is just on CargoWise One guidance for FY '22 of 30% to 40% revenue growth. You guys used to include in some of your results presentation sort of a longer-term guide of 20% to 30% sort of through the cycle. I was just wondering if you could sort of make some comments about, given you're going above that sort of historical guidance this year, how you're viewing that as to do with the current environment and more like an impulse from sort of what's going on in supply chains versus whether there's any sort of more permanent step up in your view on long-term growth rates from your strategy around focusing on larger customers.

Yes, Paul, thanks, good question. So look, we're guiding here to FY '22. And we've taken revenue up to $600 million to $635 million, which is 18% to 25% growth overall. And as you rightly mentioned, it's 30% to 40%, excluding FX for CargoWise. We're not really sort of guiding past FY '22 at this point. What we try to do is lay out the framework in terms of how the business has grown historically, and that was the 31% CAGR that we showed earlier in the presentation today. A lot of things that are going to drive growth in FY '22, like large global freight forwarder rollouts, like our investment in new products, like just an indicative amount of market growth, et cetera, are all part of that 30% to 40% that we see coming through. We're not guiding any further out in FY '22 at this point.

What I would add, we're obviously working very hard on the CargoWise ecosystem. And I keep referring to this rather than thinking about any one thing, making sure that our core focus in the business and every staff member, every acquired business and every strategy that we have is to build that ecosystem. That's really what's going on here. And the fact is that CargoWise is a powerhouse, and we're getting lots of customer wins, and we're getting lots of opportunity. And there's lots of efficiency levered both in the sales processes, which you've seen actually incredibly a big step-up in sales, even though our sales and marketing spend is down as a percentage. We really become very efficient at targeting this big end of town major deals and using those to drive the company.

All right. And I've just got 2 quick sort of accounting related ones. So the first one, I just wonder if you can make some comments on what's driving the difference between your statutory tax and your cash tax paid and whether that's going to be sort of a permanent difference or a temporary one? And then second, if you could give us a little bit of a steer on what total R&D as a percentage of sales is going to look like for FY '22, that would be great.

Yes. Paul, I think we always run a slightly lower cash tax rate than the statutory tax rate. And a couple of things that drive that, we get tax deduction on quite a bit of the amount that we spend on capitalized development, which obviously goes into the balance sheet. So that comes through the cash tax rate. You'll also see from the note in the stat accounts today that we picked up a little bit of the refund on last year's return, which is also helping give a little bit of tailwind to the cash tax rate in FY '21. From an R&D perspective as a percentage of sales, really in line with what we've previously guided there in terms of the performance that we had in FY '21 as well, which was around 33% of sales. Obviously, we'll continue to grow our revenue base here. We're going to continue to invest in our product and our product development activity. And then we think they'll help you somewhere in that sort of similar range as it has been in FY '21.