WiseTech Global Limited (WTC) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the WiseTech Global FY '23 Results. [Operator Instructions] I would now like to hand the conference over to Mr. Richard White, CEO and Founder. Please go ahead.

Good morning, everyone, and thank you for joining us today for our FY '23 results briefing. Before getting into the financial highlights, I want to draw your attention to 4 key points we are going to focus on in today's presentation. We have delivered a strong FY '23 financial performance and FY '24 outlook underpinned by continued growth in the number of large global freight forwarder rollouts. We signed our first global customer rollout in the second half of FY '23, and FedEx Trade Networks has recently confirmed they intend to roll out CargoWise global customers alongside their ongoing global forwarding rollout. We have executed a strategic move into landside logistics, initially with North America. And we have substantially increased our global development capability from just over 1,000 staff at the beginning of FY '23 to now over 1,800 resulting in 60% of our workforce now focused on product development in order to further accelerate our product delivery and address new markets. This substantial increase in scale and development throughput is driving our continued investment and focus on product innovation. So I am pleased to announce the release of the CargoWise Warehouse Suite, one of our 6 key development priorities, featuring 5 highly differentiated advanced warehouse modalities, each purpose built for integrated international forwarding and landside logistics needs and the release this month of CargoWise Neo to production customers another of our 6 development priorities. These important product releases again demonstrate our continued strong investment in future growth. Our goal is to drive innovation within the CargoWise ecosystem so that it is a must-have for large global forwarders and logistics operators. We're exactly where we plan to be as we head into FY '24. And this is down to the exceptional WiseTech team, which grew during the year to more than 3,000 people globally. Their hard work and relentless focus has enabled us to make great progress in realizing our vision to be the operating system for global logistics. I salute them all and their passion, and dedication and work ethic. Without them, none of this would be possible. In FY '23, we delivered total revenue of $816.8 million, representing a $184.6 million or a 29% increase on FY '22. This demonstrates the resilience of our business model and continued strong momentum. Organically, total revenue was up 21% as we did at the half year, we have separated out the organic growth to provide understanding and transparency to our results following our substantial acquisitions. Andrew will provide more details in his presentation. The vast majority of growth came from CargoWise with revenue up 41% to $659.6 million, an outstanding result. This is driving a 7 percentage point increase in a recurring revenue base to 96%, making our business very stable and predictable. Our customer attrition rate remains at less than 1% where it has been for the last 11 years. EBITDA excluding M&A costs grew 28% or $90.8 million to $412.1 million and is in line with the top end of our guidance range. EBITDA was up 21% to $385.7 million versus the prior corresponding period. As we explained at the half year results for FY '23, due to the near-term dilutive impact of recent M&A, EBITDA margin was down 3 percentage points to 47%. Our organic EBITDA was up 27% with an EBITDA margin up 2 percentage points to 53%, reflecting the benefit of new customers, new product releases, price increases and our enhanced operating leverage and ongoing financial discipline. Our underlying NPAT for the year was up 30% to $247.6 million and our free cash flow for FY '23 of $291.4 million was up 23% on FY '22. We are delivering high quality earnings, giving us plenty of headroom to execute on our organic growth plans and further acquisition opportunities that may arise. The final dividend of $0.084 per share is up 31% on FY '22, representing a payout ratio of 20% of underlying NPAT. This was against the backdrop of softening global trade flows as geopolitical frictions, persistent inflationary pressures and interest rate rises impacted global demand. We provide solutions that work well when the economy is going strong, but equally in tougher operating environments, logistics organizations have a greater need for our software to drive efficiencies, enhance productivity, improve manageability and data visibility and help with organizational cost reduction programs whilst maintaining their customer service obligations. As these results show, our business continues to be resilient through the cycle. The strength of our software, diversity of our revenue growth and the agility of our talented team to adapt to changes in the economics of logistics has allowed us to consistently deliver against our 3P strategy. We continued our unrelenting focus on enhancing our cargo-wise product by increasing investment in R&D by 45% to $261.9 million in FY '23, delivering 1,130 new CargoWise product enhancements which are key drivers of our revenue growth, including having now made major progress in 5 of our 6 CargoWise development priorities. As discussed at the FY '22 results and again at the half year, we took advantage of the current environment to accelerate our investment in R&D and drive further long-term revenue growth. This is reflected in the growth of our global employee base with 60% of our employees focused on product development. During the year, we completed 2 strategically significant acquisitions in Envase Technologies and Blume Global. Integration is progressing to plan and I will talk further on the strategic value of these acquisitions later. These 2 acquisitions followed our tuck-in acquisitions in Bolero and Shipamax, which have extended CargoWise's digital documentation and straight-through processing capabilities, and both have made small contributions to our FY '23 revenue growth. Leveraging our experienced M&A teams' acquisition and integration skills to accelerate our presence in these areas is a significant long-term product and revenue growth lever, and we intend to continue this highly effective strategy by using our strong balance sheet and cash-generative capabilities in a disciplined manner to further enhance growth. In terms of penetration, our momentum is building with 8 new or additional global rollouts secured during FY '23. Since year-end, we have also secured APL Logistics for a global CargoWise rollout and recently FedEx adding CargoWise Global Customs alongside their CargoWise forwarding rollout, making this the second global rollout of a CargoWise Global Customs system. As I said at the half-year, the significance of these watershed deals cannot be understated. Until now, there has never been a deeply capable single global customs platform with the capabilities and sophistication required to satisfy the complex needs of large global freight forwarders. Traditionally, players at this scale have engaged many individual vendors, usually 1 per country, in order to provide a patchwork of services to their customers and comply with the local requirements and electronic customs procedures. Our global customs product development has, by contrast, been directly driven by our foothold acquisition strategy and our long-term focus on developing a single, deeply integrated global customs architecture. We now cover approximately 55% of global manufactured trade flows directly on our native customs platform. With the remaining acquired foothold countries in development, we will cover approximately 70% of global manufactured trade flows. Several other large global freight forwarders are also looking to reorganize their approach to customs processing, seeing the many advantages of a single Global Customs platform. Excluding APL Logistics, this takes our total to 47 large global freight forwarder rollouts at the end of FY '23, including 11 of the top 25 global freight forwarders, which will continue to drive our growth in revenues through further product utilization. We are well-placed to convert our strong pipeline of sales opportunities underpinning future revenue growth. And lastly, we have launched a multi-year company-wide efficiency program, which we expect to deliver a net $15 million savings in FY '24 with an annual run rate of $40 million. This involves extracting acquisition synergies and streamlining our processes and removing duplication to enhance our operating leverage and ensure appropriate allocation of resources to support scalability and delivery of our long-term strategic vision. Some of the initiatives we will implement to achieve this include centralizing physical operations and product development hubs, consolidating various hosting and data center arrangements, migrating data processing from acquired businesses, streamlining offices and facilities, and extending integration of our acquisitions. It is important to note, as we indicated in the first half of FY '23 report, that while our largest strategic acquisitions are being integrated, our near-term EBITDA margins will be slightly lower. However, we expect EBITDA margins to return to more than 50% in FY '26. With that, I will hand over to Andrew to take you through our financial performance before talking again in some detail about our strategic progress and outlook.

Thanks, Richard, and good morning, everyone. Starting with an overview of our FY '23 financial performance on Slide 8, as Richard noted, the business delivered strong revenue growth during the year with total revenue of $816.8 million, up 29% year-on-year. Revenue growth was driven by our core CargoWise platform. With CargoWise recurring revenues growing to $650.1 million, up 37% organically. Total CargoWise revenues were up 41% to $659.6 million, or 30% organically on FY '22. This was slightly offset by non-CargoWise revenues, which reduced as expected by 5% to $157.2 million. Our strong growth continues to demonstrate the strength of customer demand for our core platform and the successful execution of our strategy. As we did at our half-year results in February, we've shared our organic growth rate, which excludes restructuring and M&A costs, as well as the growth related to those acquisitions in FX to help provide transparency over the underlying revenue, EBITDA, and EBITDA margin growth of the business. We provided a full breakdown of the FY '23 organic growth on Slide 32 in the appendix. As communicated at the half-year, we've reclassified Trinium's revenue from non-CargoWise to CargoWise, including all prior periods consistent with our classification of revenues from the recently acquired Envase and Blume businesses. Gross profit for the year was up 28% on FY '22, with gross profit margin of 86% down 1 percentage point on FY '22, reflecting dilution from recent M&A. Excluding M&A costs, EBITDA grew by 28% to $412.1 million, in line with the top-end of our guidance range provided at the half-year. Reported EBITDA of $385.7 million was up 21% on FY '22, reflecting an EBITDA margin of 47% down 3 percentage points on FY '22. Organically, EBITDA grew by 26%, and the EBITDA margin expanded by 2 percentage points to 53%. This strong organic EBITDA growth reflects our strong top-line growth underpinned by large global freight forwarder rollouts, as well as the impact of enhanced operating leverage, new product releases, pricing, and ongoing financial discipline. EBIT was up 18% on FY '22, incorporating a 34% increase in depreciation amortization, which demonstrates our continued investment in research and development to drive growth, as well as reflecting recent M&A. At the bottom of the table, you'll see underlying net profit after tax for the year was up 30% on FY '22 at $247.6 million. The definition of underlying NPAT has been updated to exclude M&A costs and contingent and deferred consideration interest unwind net of tax, a full reconciliation is available in the appendix. Underlying EPS was up 30% to $0.756 per share and statutory NPAT was up 9% to $212.2 million. On Slide 9, you can see the split between recurring and non-recurring revenues as well as between CargoWise and non- CargoWise revenues for a SaaS and subscription-based business like WiseTech recurring revenue represents revenues from customers who use our products consistently. A high proportion of recurring revenues gives us good visibility over future performance. For WiseTech, our non-recurring revenues include items like customer paid product enhancements and one-off license revenues that help to accelerate future recurring revenue growth. In FY '23, recurring revenue grew by 37% and or $211 million, excluding the impact of FX. This was driven by major new products released in FY '22, price increases to offset the impact of inflation and generate returns on product investment and revenues from acquisitions completed over the last 2 financial years. As expected, non-recurring revenues decreased by $34.5 million or 52%, excluding FX and due to the non-repeat of a product license agreement for a CargoWise landside logistics component in FY '22, which was also categorized as a new customer sale as well as expected contraction from non-CargoWise acquisitions completed in FY '21 and prior periods as part of our integration. On the right-hand side of the slide, you can see the contribution from the strong growth in CargoWise revenue, which was up $141.8 million, or 30% excluding FX. Of this, $127.7 million was from existing CargoWise customers, and $14.1 million was from new customers, including new large global freight forwarder rollouts. This growth also reflects major new products released in FY '22, price increases, and expected contraction in non-recurring revenue. Importantly, CargoWise customer attrition remains extremely low at less than 1%, demonstrating the stickiness of a CargoWise platform for our customers and emphasizing the significant long-term value generated from each CargoWise customer under our SaaS model. Non- CargoWise revenue was down by 5% to $157.2 million, driven by an expected contraction from acquisitions completed in FY '21 and prior years, partially offset by general price increases. We expect this trend to continue as customers transition to the WiseTech commercial model and we exit lower-margin, non-recurring products and services. Turning to our revenue growth drivers on Slide 10. As you can see on the chart on the left-hand side, on a constant currency basis over the last 7 years, our CargoWise recurring revenue has grown more than 7-fold from $86 million in FY '16 to $650 million in FY '23, having grown at 33% compounded annual growth rate over the period. On the right, you can see the relative contribution of each of the revenue drivers to our CargoWise recurring revenue growth over the same period, which shows the most significant driver of CargoWise recurring revenue growth has been the large global freight forwarder rollouts, which have contributed almost a third of the revenue growth, or 10 percentage points of the 33% CAGR. The next largest contributor has been new and existing customer growth, which contributed 7 percentage points of growth. This is followed by product enhancements reflected in our pricing of major new product releases, both contributing 5 percentage points each. Inorganic revenues and growth from the underlying supply chain market each contributed 3 percentage points of our growth. Importantly, this shows that the overwhelming majority of our growth is driven by factors we can influence, including winning new customers and investing in new products and features. Our organic growth is therefore less sensitive to market volatility, giving us far better visibility over our revenues. Looking ahead, we expect future CargoWise recurring revenue growth to be consistent with our historical experience, with accelerated growth to be driven primarily by large global freight forwarder rollouts, and further customer wins as well as the new products and features from acquisitions. We also expect growth from our 6 key product development priorities, which Richard will talk about in a few moments. Pursuing inorganic growth opportunities is another important growth lever, including smaller tuck-in as well as potentially larger strategically significant acquisitions, where we can deploy our sizable balance sheet and strong liquidity, supported by strong operational cash generation and our proven M&A capability to accelerate our development opportunities and build out the CargoWise ecosystem. Turning to Slide 11, I'd like to talk about the revenue growth trajectory from each of these large global freight forwarder rollouts. As you know, our large global customers can take a number of years to roll out the CargoWise platform across their global operations. As the rollouts progress, customers add new countries, adopt new modules, and implement our productivity tools. With 47 global rollouts in place at the end of FY '23, 33 are in production, meaning they're operationally alive on CargoWise and have rolled out to 10 or more countries and 400 or more registered users. The remaining 14 are contracted and in progress, meaning they're at an earlier stage of their global rollout. From a revenue perspective, you can see that these 33 global rollouts in production have delivered a compounded annual growth rate of 37% since FY '16, driven by the growth of global rollouts by customers such as DSV, DHL, Toll, Yusen, and Geodis, the adoption of additional CargoWise modules, products and features, and custom M&A activity. Importantly, 6 of these 33 customers in production are top 25 global freight forwarders, which have grown at 42% CAGR over the same period, showing the attractiveness of these large global rollouts. Looking ahead, we expect growth from a range of sources. The 14 global rollouts that were contracted and in progress in FY '23 have grown at a compounded rate of 115% since FY '19, and still, collectively, they have less than 40% of their expected users currently alive on CargoWise. This demonstrates the significant potential revenue upside from existing global rollouts increasing their user bases. The size of the expected user base not currently alive in CargoWise is in line with FY '22, with new contract wins including Kuehne+Nagel and OEC broadly offset by continued rollouts from existing customers such as Hellman, Bollore and CEVA. Our existing 33 customers with global rollouts in production will continue to drive revenue growth as their global rollouts and product penetration continues to expand and they add new products and features including customs, landside logistics, and warehouse. We also anticipate continued logistics industry consolidation will support our future revenue growth, with our large global freight forwarder customers well positioned to leverage future consolidation to grow. Given the significant runway of customers available to us in both the top 25 global freight forwarders and the top 200 logistics providers, we expect to see future revenue growth driven by additional large global freight forwarder contract wins. Another important driver is tighter supply chain industry conditions, which can motivate industry participants to intensify their focus on increasing the productivity and efficiency of their businesses and cost bases, which can drive strong demand for our CargoWise product. Moving to Slide 12, you can see our operating expenses over time across the areas of product design and development, sales and marketing, and general and administration. Our strong revenue growth and efficient operating model continues to drive enhanced operating leverage and margin expansion. Overall, operating expenses as a percentage of revenue excluding M&A costs were flat year-on-year, with increased expenses from our recent acquisitions offsetting operating efficiency and leverage. Product design and development expenses increased by $30.9 million, or 1 percentage point of revenue due to investment in CargoWise innovation and development, as well as recent M&A. Expenses for the maintenance of non-CargoWise products were down 14% versus FY '22, decreasing in line with expectations. As previously indicated, this trend is expected to drive further cost efficiencies as we transition these legacy products and customers onto our efficient CargoWise platform over time. Sales and marketing expenses were $59 million, or flat as a percentage of revenue at 7%, with the increase in dollar terms attributable to recent M&A. General and administration costs were up by 2 percentage points, with M&A costs adding 3 percentage points of revenue, more than offsetting the benefit of growth and ongoing financial discipline. Excluding M&A costs, G&A improved by 1 percentage point on FY '22 to 13% of revenue, highlighting the efficiency of our operating model. Turning now to R&D investment on Slide 13. Investment in innovation and product development remains a strategic priority for WiseTech, with deliberate acceleration in FY '23 as previously communicated. This is focused on building integrated software that enables our logistics customers to improve planning, productivity, visibility, and control of their global operations, enabling WiseTech to become the operating system for global logistics. Our overall R&D investment increased by $81.1 million, or 45% versus FY '22, with strong growth in CargoWise investment and hiring activity to drive future revenue growth, as well as an increase from recent M&A. Overall, this represents a reinvestment of 32% of our revenue in R&D, which is consistent with prior periods. However, now more heavily weighted towards CargoWise. 51% of FY '23 R&D investment was capitalized, up 5 percentage points on FY '22, with the second half at 50%, 3 percentage points lower than the first half, which reflected the acceleration of new strategic development priorities, which have higher capitalization rates than existing products, driven by favorable hiring conditions. FY '23 capitalized development is above the expected range of 40% to 50%. Moving forward, this is projected to be close to the top of the target range. Development costs for work in progress increased by $29.8 million to $54.3 million, reflecting increased investment in future products, not year-end production or delivering revenue. We delivered 1,130 new CargoWise product enhancements during the year, reflecting increased focus on larger development projects and product optimization. This brings enhancements delivered on the CargoWise application suite to more than 5,300 over the last 5 years, from a total investment of over $880 million. CargoWise product development resources increased by 96% versus FY '22, benefiting from the ongoing recruitment of high-quality talent attracted to WiseTech, in addition to recent M&A, with 60% of our global workforce now focused on product development, up 6 percentage points since FY' 22. Moving to our balance sheet on Slide 14. You'll see on this slide how our balance sheet strength and liquidity provide a solid platform to fund future growth. As of the 30 of June 2023, we had liquidity of approximately $400 million providing significant financial flexibility and headroom to fund strategic growth opportunities as demonstrated by our recent acquisitions. The $340.5 million decrease in cash during the period largely reflects investment in recent M&A, offset by strong operating cash flow generation. The 37% increase in receivables relates to revenue growth and recent M&A. The $1.2 billion increase in intangible assets was driven largely by the acquisitions made during the period, as well as investments in capitalized development previously mentioned, partially offset by amortization. Turning to our liabilities. The $225 million of current borrowings reflects partial funding of the strategic acquisition of Blume. As of the 30 of June 2023, we had total debt facilities both drawn and undrawn of $475 million, reflecting 1.2x FY '23 EBITDA, providing significant additional borrowing capacity. The $139.8 million increase in other current liabilities was driven primarily by an increase in trade payables from recent M&A and funds collected on behalf of customers offsetting current assets. You'll also see of $348.4 million increase in share of capital, reflecting new shares issued to the vendors as consideration for the Envase and Blume acquisitions, as well as to the Employee Share Trust to fund our employee equity programs. Our employee equity programs are a key component of our policy to support staff retention, attract high-quality talent and encourage long-term value creation across our workforce, which is reflected in the high number of our people that own WiseTech shares and share rights. Finally, I'd like to reference our strong continued cash flow performance on Slide 15. In FY '23, our operating cash flows were $433.3 million, up 28% on FY '22, demonstrating our highly cash-generative business model, delivering strong free cash flow. In FY '23, we increased the proportion of our operating cash flows reinvested to support long-term growth initiatives to $141.9 million, which were invested primarily in product development and data center capacity. Pleasingly, our operating cash flow conversion rate was 112%, up 6 percentage points on FY '22, driven primarily by higher revenue and EBITDA. Changes in working capital in FY '22 reflected a one-time decrease in deferred revenue from aligning non-CargoWise commercial models to shorter billing cycles, which was not repeated in FY '23. As a result of this improved operating cash flow, free cash flow for FY '23 was up 23% to $291.4 million, with free cash flow conversion up 1 percentage points to 76%, reflecting increased product development, as mentioned previously. The free cash flow margin remains strong at 36%, taking the sum of our total revenue growth and free cash flow margins, a Rule of 40 increased by 2 percentage points to 65% in FY '23, remaining highly attractive when compared to SaaS businesses globally. So to summarize, we're very pleased with WiseTech's financial performance in FY '23. The business continues to grow at a very healthy pace, with our highly cash-generative business model and strong liquidity, providing a solid foundation to fund our ongoing organic and inorganic growth. With that, I'll hand back to Richard.

Thank you, Andrew. WiseTech's strategic vision is to be the operating system for global logistics. And we have made significant progress in realizing that vision. In global customs, landside logistics, warehouse and Neo, we have achieved major milestones, which add considerably to our existing ecosystem and validate our strategies and long-term efforts. We are a product-led business. Our product strategies create deep value for existing customers, create a traction for new customers in our existing markets, allow us to enter new markets, increase the total addressable market that we serve and enhance our ability to gain further access to customers and opportunities in new markets. Acquisitions add to our speed of execution and fuel further and faster organic growth of our flagship product, CargoWise. Targeted acquisitions in customs and warehouse and significant recent acquisitions in landside logistics makes these bold product moves possible as well as faster and simpler to execute effectively. They will also drive further market penetration, growth and profitability over time, as has been demonstrated through our results in recent years. Our continued strong financial performance in FY '23 is the result of years of dedicated work on CargoWise by automating processes, stopping low-yield activities, enhancing successful activities and ensuring an ongoing ability to easily scale at very low cost, even as organic revenues grow substantially. This type of planning and execution sets us up for long-term sustainable growth and profitability in our core business and allows us to invest in expanded product segments, such as global customs and landside logistics, progressing further on our sixth product development priorities. CargoWise's depth of product capability and global reach is why more and more of the world's largest global freight forwarders keep choosing to move to WiseTech, as they understand the long-term value of what we're doing. CargoWise offers world-leading capability, unparalleled productivity improvements and IT cost reductions in an increasingly complex and costly industry. It is deeply capable, actively maintained and enhanced. It does not require customization or complex configuration. So it is fast to roll-out globally, and at a cost that is quite simply insignificant when compared to IT cost reductions and substantial productivity improvements derived from adopting CargoWise. This is why 24 of the top 25 global freight forwarders and 44 of the top 50 third-party logistics providers are already WiseTech customers in at least 1 area of their business. With the many still lightly penetrated customers providing plenty of opportunity for further CargoWise adoption and revenue growth, which now additionally includes landside logistics, the CargoWise warehouse suite, and CargoWise Neo, which will provide increased attraction, retention and expanded share of wallet. I want to emphasize that enabling our focus on these 3 pillars is all our talented people who drive these outcomes. We have accelerated the growth in our global talent base as more high-value and talented people gravitate towards highly profitable and innovative technology companies like WiseTech. We have seen a substantial increase of inbound applications to work at WiseTech. I'm extremely proud of the team and the culture of innovation we have fostered complemented by talent people that joined WiseTech through our acquisition program, one of the key value-enhancing components of these deals. 5 of the 6 priorities on this slide have now had significant M&A action or product releases. We continue to focus on these 6 priorities in order to deepen the value that we create and build even more attractive capabilities over the long-term. In many ways, in each of these development priorities, we are gaining access to or creating increased attraction and access to entirely new addressable markets by solving deeply complex supply chain issues, building new higher-function product sets, replacing very manual or missing processes with automation, as well as replacing old technologies with cloud-first fully-digital global capabilities. First and foremost, we continue to develop our product capabilities organically with over $880 million invested in R&D since FY '19, delivering more than 5,300 product enhancements to-date. 1,130 of these came in FY '23, which demonstrates the momentum we are building in our development capability. In addition to the acquisitions of Envase and Blume, which expand and accelerate our developed projects for landside logistics in North America, we are rapidly gaining traction with our customs product. Please note that for global customs, the warehouse suite and Neo, we have included download links on the relevant slides to product overviews, which will give you more detailed insights into the unique capabilities and competitive advantages. I encourage you to download these documents and study them at a later time. In addition to our product development capabilities, we can fast track the capabilities of CargoWise with new knowledge, experienced teams functionalities, market insights and customer viewpoints through targeted tuck-in and strategically significant acquisitions. To accelerate our vision to be the operating system for global logistics, we will continue to develop scale and capability across our product portfolio to enhance our customer value chain. To help accelerate our growth in these areas, we are also refining our sales processes to include dedicated sales teams focused on these additional growth drivers. The significant opportunities we have highlighted today are adjacent to our international freight forwarding market, and they are attractive to existing and new customers and expand into new market segments. Both forwarding and customs are a deeply integrated part of the CargoWise platform, and they feed landside logistics, the warehouse suite and Neo. The industrial logic of the Envase and Blume acquisitions further drives our expansion of CargoWise into an integrated landside road and rail capability. These acquisitions are proving to be highly valuable. We are making good progress with integration, which reflects our strong M&A track record and capability. Let me talk to the global customer piece of our value chain and the benefits that CargoWise provides relative to the traditional approach of gluing together many local systems. Traditionally, these legacy systems are based on local needs and experiences in each jurisdiction in their local languages and exposing the global business to a range of serious issues, including hidden costs, risks and process limitations. This involves a myriad of contracts, vendors, architectures, work processes, data integrations, user interfaces and serious unresolvable cybersecurity risks, not to mention a highly variable complex support and maintenance requirements. Compare these issues to a single, easy to implement globally capable CargoWise custom solution, single vendor contract and architecture with a deeply cyber-hardened attack surface meeting our customers' global customer requirements across multiple jurisdictions, multilingual in a highly scalable and deeply automated standardized process capable of supporting follow the sun and shared services models. As I mentioned earlier, winning Kuehne+Nagel now FedEx, many of the world's largest freight forwarders will rethink their approach and look to centralize their customs processes, because something like this has never been available to them before. It has become clear that the real cost of custom processes using many local systems is not just the minor local costs, but the many factors, substantial inefficiencies and risks that create dramatically higher total cost of ownership. The value proposition is so compelling and the logic is so clear now that we are confident that this will lead to further global customer rollouts. But equally, it is important to note that some customers are choosing to adopt our customs capability incrementally, which builds over time, all of which further underpins our long-term revenue growth. For further details, there is a comprehensive global customs document link in the deck on Slide 20. Many of our existing customers are now operating our global customer solution in 1 or more locations, and we expect that global adoption will continue to accelerate over time. As I mentioned, with CargoWise and its global customs capability, we cover approximately 55% of global manufactured trade flows, including the 4 largest EU economies, all major English-speaking countries, as well as Mainland China and Taiwan and have recently added native to Kia and Brazil capabilities. There are a number of active development projects underway, driven using foothold acquisitions, which will lift the coverage to 70% and we are progressively working towards our long-term target of 90% of global manufactured trade flows. There is a dramatic increase in WiseTech's addressable market beyond international freight forwarding, driven by organic product development and targeted acquisitions. Let me explain what the benefits are for our customers. As I talked about at the half year, the acquisitions of Envase and Blume added considerably to WiseTech's existing product capabilities and footprint in North America and beyond. With CargoWise, we can now manage marine and intermodal containers for U.S. trucking, railroads, ocean carriers, intermodal equipment providers, global freight forwarders and Beneficial Cargo Owners, or BCOs, digitally linking and integrating all aspects of planning, execution and visibility. Freight forwarders, BCOs and carriers can now have complete end-to-end visibility of shipments. Visibility in and of itself only helps highlight problems. It doesn't solve them. We can use that deep global visibility aggregated from many sources to dramatically enhance the tracking of ocean vessels, containers, aircraft and air freight, road and rail and by adding logistics optimization and supply chain orchestration, we make this visibility actionable and much more valuable. This alone substantially broadens our opportunity set. We are already directly engaged with ocean and air carriers and others and will now be engaging our freight forwarding customers via Neo to help them assess their BCO customers. Neo substantially expands our ecosystem and provides value to our customers' customers and creates further attractive value for international freight forwarders. The freight forwarders, BCOs and carriers all use landside logistics and can benefit from logistics optimization and supply chain orchestration. This derisks their operations by helping to predict and avoid problems, while delivering considerable savings, reducing inefficiencies and unwanted penalties. All of this will deliver cost savings and penalty reductions, productivity improvements and carbon footprint reductions, many times higher than the cost of adoption, whilst further enhancing competitive advantage. It also lays the foundation for further expanding our product capability, market penetration and long-term revenue growth, demonstrating again the vast runway we have ahead of us. This really is a win-win for our customers, their customers and for WiseTech. As with global customs, there is now a comprehensive warehouse suite that supplies all of the complex and varied international land side logistics warehousing needs through powerful modules that integrate tightly within CargoWise. Existing customers can easily access these capabilities to their current agreements and potential customers can easily join the CargoWise family. Adopting the CargoWise warehouse suite across the global business is an easy, fast, cost-effective and deeply integrated approach that surpasses anything that could be glued together from many disparate vendors and products at a much lower total cost of ownership. We now have many more components of global logistics in place, having built organically over many years,while learning from numerous global foothold and adjacency acquisitions, including Microlistics acquired in 2018. CargoWise warehouse incorporates contract, transit, short-term and long-term bonded and e-commerce warehouses. This makes the CargoWise's capability completely unique, deeply integrated and fit-for-purpose for our customers. This slide highlights the progress we have made in securing further global rollouts in FY '23. On the right-hand side of the chart, you can see the addition of OEC, BBL Cargo, Kuehne+Nagel, our first global customers rollout as well as NTG, IFB and EMO Trans in global freight forwarding. Since the year end, we have also added APL Logistics rolling out CargoWise and FedEx adding CargoWise global customer to their ongoing CargoWise rollout. During FY '23, we also added 2 additional organic rollouts in production in the form DB Group and Maersk logistics. Maersk's acquisition of Senator, along with JAS's acquisition of Greencarrier and CEVA’s acquisition of GEFCO are all great examples of continuing industry consolidation. This now brings the number of global rollouts to 47 and demonstrates how our customers grow with us and how our software becomes increasingly integral to their operations. These global rollouts provide us with a significant runway for revenue growth. As Andrew said, large global freight forwarders in production delivered a 37% revenue CAGR between FY '16 and FY '23. And of the 14 that are contracted and in progress, less than 40% of their expected users are currently live on CargoWise. Turning now to our third P, profitability. We remain focused on driving returns through our high-growth scalable SaaS model, which delivers strong profitability and operating cash flows. Improving our efficiency is part of our ongoing financial discipline, supported by continued reduction in non-CargoWise product maintenance costs, down 14% in FY '22, and driving return on product investment and further expansion of our CargoWise product capability. As I mentioned earlier, we have introduced a new company-wide efficiency program, which we expect will deliver $15 million of net savings in FY '24, with annual run rate savings of $40 million. This will continue to enhance our operating leverage as we scale, whilst we continue to assess further efficiencies where appropriate across the business. This leads me to our guidance for FY '24 and our continued strong growth outlook. This is despite a continued softening of global trade volumes given the trajectory of the core business, resilient nature of our recurring revenues and multiple sources of revenue growth. As we outlined previously, the majority of our growth is driven by factors other than global trade volumes. Our guidance is based on the assumption we have clearly set out on slide 24, so I won't go through them. Assuming there are no material changes to these assumptions and there unforeseen events that arise prior to June 30, 2024, we expect to deliver FY '24 revenue of $1.04 billion to $1.095 billion, representing revenue growth of 27% to 34% with CargoWise revenue expected to grow by approximately 34% to 43% overall. In terms of FY '24 EBITDA, we expect to deliver $455 million to $490 million, representing EBITDA growth of between 18% and 27%. We expect FY '24 revenue and earnings to be more weighted to the second half than in FY '23, as we have outlined on the slide, giving us strong momentum into FY '25. It is important to note that while our largest strategic acquisitions are being integrated, our near-term EBITDA margins will be slightly lower and contribute to a forecast 6 percentage point of EBITDA dilution in FY '24. However, we expect EBITDA margins to return to more than 50% in FY '26. You can see our strong track record of revenue, EBITDA and EBITDA margin growth since our listing in FY '16, delivering 34% revenue CAGR, 43% EBITDA CAGR and 54% free cash flow CAGR really demonstrates the strength and resilience of our business model. This strong momentum has been underpinned by 47 global rollouts in FY '23, including 11 of the top 25 global freight forwarders, stemming from an investment of over $880 million in CargoWise new products and enhancements since FY '19. We are well-placed to benefit from continuing logistics industry consolidation as well as pursuing our own M&A opportunities. Our strong balance sheet and cash generation provides us with significant financial firepower to fund our future growth. I would finally like to remind you of the 4 key points of progress I mentioned at the outset. Our strong FY '23 financial performance underpinned by 41% CargoWise revenue growth that brings leverage to our mission, growing the company and creating shareholder value and a strong outlook with 34% to 43% growth in CargoWise revenues and 18% to 27% growth in EBITDA for FY '24. Our first top 25 win for our global customs rollout with the world's largest freight forwarder, Kuehne+Nagel followed after year-end by FedEx, a second CargoWise global customs rollout. This shows momentum in a key space that drives enormous value for our customers. Our continued move deep into landside logistics starting with North America with our platform delivering breakthrough capabilities at scale in an industry beset with complex problems and inefficiencies. We can create many industry scale improvements and growth opportunities. Lastly, over many years, we have been building substantial and highly efficient product development processes. This year, as expected, we have seen a significant acceleration of that capability to deliver on and drive our product development priorities, this capability is clearly validated by the release of our CargoWise warehouse suite and CargoWise Neo. There is much to do but there is also so much potential. As a team, we are rich with enormous talent, motivation and conviction. I look forward to reporting our progress in the months and years ahead. Now let's open for questions.

Your first question comes from Lucy Huang with UBS.

My one question is around the customs rollout with Kuehne+Nagel and also FedEx. Are you able to give us some color on the progress of the Kuehne+Nagel rollout? And I guess, when we should start to see some revenue contribution coming from this? And also with FedEx, how should we be thinking about the progression in terms of the revenue uplift coming through?

Well, Kuehne+Nagel, all large forwarders, do quite a bit of planning before rolling out substantially. If you recall, the DHL contract we signed in something like April 2016, and they didn't really start rolling out until early 2017. So Kuehne+Nagel is sort of in that position. They're planning. We've got a number of things going. They do have a number of countries live already. But we won't see a rapid rollout, because as with all these large companies, they tend to do it a branch or a country at a time. And they tend to do that along the lines of where their business is tracking and how they want to run it. For instance, late in the year in November, December, nobody rolls anything out, because the volumes are very high around the Christmas period. FedEx is also in a rollout plan, and I think it will -- both will certainly contribute to revenue this year, but that's already included in our guidance. So I think the really -- the way to look at the customs capabilities and I remind you that there's a product brochure attached to the deck. You can load that down and it explains the whole model and in the back it explains all of the sort of traditional approach to customs and it explains what CargoWise One global customs does. And it's very important to understand that this is a real value creator and the long-term opportunity here. The outlook for that product is extremely strong. We're expecting that to accelerate over time. But of course, this is not a guidance issue. This is -- we're talking about a product driving our long-term capability and long-term revenue growth.

Your next question comes from Kane Hannan with Goldman Sachs.

Just the margin profile from here. So guiding to second half margins, 47%, 48%, you've got an extra $25 million, I think, of cost savings coming through in '25. So is there any reason why the FY '25 margin might be very close to 50%. Therefore, meaning '26 could be a few percent above that 50% or does the second half margin have more of that cost saving than I'm thinking?

I think you're right. The EBITDA margin coming out of the second half, we're forecasting to be sort of 47%, 48% range. There will be some more cost savings that come through from the $40 million cost efficiency program in FY '25. We forecast it right now that our EBITDA margins are going to get above that 50% plus range in FY '26. Of course, there's a number of variables that sort of get us there. And like you say, it could be a little bit earlier than we anticipate. But right now, we're guiding it to FY '26.

Just a snap on that, we've seen that happen during our original run of M&A, that we worked very hard in '20 and '21 on improving the margin in those companies you buy and then you improve. It's a thing that we've done very well. We've got a very strong team. We know how to run these businesses. We know how to keep costs under control. And this program is just something you do from time-to-time. You need to look at every aspect of your cost base. Of course, we're actually continuing to hire, and we're not talking about layoffs in that sense. We're talking about running the cost program along a range of things, bringing a lot of the cloud hosting into our data centers, looking at the office costs, there's many other things that we've got at those levers that we can reduce costs on.

Your next question comes from Nick Basile with CLSA. Nick Basile, your line is now live. Please proceed with your questions. Your next question comes from Bob Chen with JPMorgan.

Just a question on some of your recent acquisitions. I mean, it looks like the contribution from your acquisitions is a little bit below what you were expecting for this year. And even looking at your sort of guidance for FY '24, it sort of implies there's not much growth, they might even be going backwards. Like how are you sort of seeing those acquisitions shape up?

Yes, Bob, I think for FY '23, we sort of guided based on the information in the ASX announcements and the first half results. Revenue came in about $33 million, which was at sort of the low end of the range that we’d provided. And the EBITDA margin was reasonably in line with where we expected to be. Obviously, these are high-growth businesses that are in their investment phase, and our 15% negative EBITDA margin is in line with our expectations. I think what we've indicated in the guidance here is that the overall EBITDA margin is in line with our expectations. The underlying EBITDA margin within the business remains very strong and reflects continued CargoWise revenue growth and the ongoing cost investments to scale the business in the future. What we're seeing is the opportunity to continue to invest further from some of the opportunities that we've seen since we acquired those businesses and going through the diligence process. So we're going to add a little bit of cost into the business in FY '24 to be able to realize those future growth potentials, which is bringing the EBITDA margin for the combined 3 acquired businesses Shipamax, Envase and Blume in at about 5% when we'd originally probably indicated that it was going to be a few points higher than that, but not a lot. The 6 points of dilution in the margin rate from the acquisitions is sort of broadly in line with our expectations x the additional costs that we are investing to realize those revenue opportunities and revenue benefits.

Yes. And just on the product side, we've mentioned logistics optimization and supply chain orchestration, they both come from Blume product suites, which we have a very strong confidence in, and we're looking -- the outlook for those is extremely strong. So, we're working on building those into the sales model and bringing very strong teams into that. I think you would understand that it takes a little bit of time to get a substantial acquisition like Blume and Envase into the company and running at all cylinders. But it's -- from my perspective, everything that we thought we were going to get and more has been delivered in those 2 acquisitions.

Your next question comes from Darren Leung with Macquarie.

Thanks for the opportunity. I just wanted to ask on the FY '24 guidance, please and appreciate there's a lot of focus and sort of knowledge around the acquisitions. But -- and thanks for your disclosure on it. But if we strip out the EBITDA revenue contribution from Envase and Blume and Shipamax and call it CargoWise underlying revenue and EBITDA, it looks like the growth rates for both is about 19% in FY '24. Can you confirm that's correct? And also, if that is then it looks like the margin is also flat on a year-on-year basis. So, just any commentary around thinking behind that or if it's conservative, please?

Yes, Darren, I'll take that one. Look, I think let's start with sort of the revenue guidance overall in line with our expectations, really continued strong positive momentum from the FY '23 run rate. What we're seeing is a slight moderation in terms of market growth and if you remember, market growth reflects about just less than 10% of our overall CargoWise growth historically. And that sort of just really reflects some of the current industry volumes that we're seeing, and we're forecasting that to continue in FY '24. So, that's probably just taking a little bit of the top off the revenue growth. Overall, CargoWise revenue growth, however, for the year, we're forecasted to come in at 34% to 43%. And that far exceeds the 33% compounded growth rate that we've seen over the last seven years, FY '16 to '23, with inorganic obviously delivering a piece of that between 14 and 18 percentage points. As we've said also, part of that's going to be more -- excuse me, related to the second half of the year than it was in FY '23. We had a 46% to 54% split first half, second half in '23. So a little bit more weighted to the second half with some of the revenue growth from the opportunity, revenue growth opportunities from the acquisitions, plus some of the new products and customers come online in the second half. And as we've said before, that can be lumpy between first half and second half. In terms of the overall margin guidance, really sort of saying we're quite in line with where we expected to be from a CargoWise perspective. We've invested heavily this year, as Richard's indicated in the presentation, around R&D investments which are leading into all of these new products that we're bringing in line. Obviously, that's in our cost base for FY '24 from a run rate perspective. And we're also continuing to invest in FY '24 to drive significant future growth so. And as indicated, we come out of the year with an overall margin including the dilution from the acquisitions in the 47% to 48% range and anticipating that the margins will be back to 50% plus in FY '26.

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

Just one quick one on the cost efficiency program. You've played like net cost savings this year. I just wanted to ask, is there any substantial costs around achieving those savings, or is that just like a relatively straightforward cost out? Yes.

Good question, Paul. The 15 is net cost savings, so we've budgeted some costs to deliver that in FY '24. And then obviously, we've got the spring-loaded benefit of that running into FY '25 with the run rate savings and the program costs dropping away. So yes, there's some program costs to execute in that.

Your next question comes from Roger Samuel with Jefferies Australia.

And well done in launching Warehouse and Neo. Just a question on that. Have you got any customers in the pipeline for warehouse and Neo? I imagine that the typical customer there is quite different from your core pre-polling or customs business. Or perhaps you can leverage the customer base from Envase and Blume.

Let me address Neo first. Neo is a direct replacement, a very substantial upgrade for a product that is actually very widely deployed called Web Tracker. Neo replaces that and extends and expands it very significantly, and rolling that out will be very rapid. We're expecting that by the end of the year we'll probably retire Web Tracker, and most customers, if not all, will be using Neo. With Warehouse, we've been operating in stealth mode in Warehouse for some time. If you remember the last half, I said we weren't prepared to get to Warehouse at that time. But we've obviously got quite a lot of customers on Warehouse, something like 350 customers on the product Warehouse, 30-odd customers on the transit Warehouse, and just a little under 20 customers on the e-commerce warehouse. I don't know the bond in short and long-term bond warehouses that's -- I've got a stats. But all of them operate within the international supply chain and right at the border is around landside. And in this particular case, there's a lot of opportunity. The long-term outlook for these is we're going to be driving sales in this particular space, along, of course, with Global Customs and Neo driving sales as well, because Neo brings all of this together. It creates effectively a control tower, a management portal for customers' customers to run their businesses.

There are still several questions waiting to be asked. We will extend the briefing for another 15 minutes. Your next question comes from Roy Van Keulen with Morningstar.

A bit of a long-term one from me. You've been quite counter-cyclical in hiring and acquiring since COVID, and you've just announced an 80% ad count increase in product development against the backdrop of other tech companies laying people off. I'm wondering, what that's doing for costs in terms of lines of code written per AUD or something akin to that? And then on top of that, I don't want to be the analyst that asks the boring AI question, but you have a pretty outsized exposure to product development, so it seems that any productivity improvements on that front would feed through really well for you guys. And maybe to ask the same question in a cheeky, different way, the mantra has long been slower today, faster forever. And at an 80% increase in headcount, it sounds like you're going pretty fast. And I know you don't guide beyond the next year, but it kind of sounds like maybe in the years beyond next year, we'd expect revenue growth to pick up. Is that correct?

Yes, Roy, I'll do the first bit of that, which just sort of centers around the costs, and then I'll just hand it over to Richard. So I think I'll just refer you back to Page 13 in the deck where we look at the total research and development costs for the business. Clearly, we've seen a big step up in research and development costs this year as we'd previously flagged. And there are 2 reasons for that, obviously. One is the acquisitions of Blume and Envase, which bring in their own inorganic activity. But then there's also the increase that we've had from a hiring perspective where we've been able to execute on more product development projects. And I think you're seeing the results of some of that work today with the announcement of the Warehouse Suite and CargoWise Neo. So yes, I'll hand it over to Richard and just talk about the other parts.