WiseTech Global Ltd (ASX: WTC) has released its FY19 results this morning, reporting high growth in revenue and profit. Here’s what you need to know.

About WiseTech

WiseTech Global was founded in 1994 by Richard White to provide software for the logistics sector. Since then it has grown to become a global provider of logistics software, claiming to service 19 of the top 20 logistics companies globally.

WiseTech makes money by charging its customers on a ‘per use’ basis rather than as a standard subscription model. Meaning, WiseTech directly benefits as its customers grow their businesses.

The Numbers

WiseTech reported revenue growth of 57% to $348.3 million. Operating profit also increased but only by 37% to $80.2 million. This was a result of operating expenses increasing by approximately 62% in FY19.

Net profit after tax (NPAT) grew 33% to $54.1 million while earnings per share (EPS) was up 27% to 17.7 cents per share.

The percentage of recurring revenue declined slightly from 90% to 88% as a result of acquisitions, as did the gross profit margin, from 83% down to 81%.

WiseTech now claims to service 43 of the top 50 global third-party logistics providers, up from the last reported figure of 38 out of 50.

Dividends

WiseTech declared a final dividend of 1.95 cps fully-franked to be paid on 4th October 2019. This brings the full-year dividend to 3.45 cps, up around 27% from FY18.

Analyst Estimates

Despite the high growth, WiseTech fell short of analyst NPAT targets. According to Bloomberg, estimated NPAT was $57.76 million, 6.7% higher than the actual results.

The estimate for dividends was 1.9 cps, which WiseTech marginally beat.

Management Commentary

WiseTech Founder and CEO Richard White said the company’s growth is driven by innovation and product capability.

“We continued to deliver high quality growth in FY19 with revenues up 57% to $348.3 million and EBITDA up 39% to $108.1 million, a reflection of our strategy to accelerate WiseTech’s global growth and industry penetration, driven by geographic expansion, relentless innovation and deepening product capability, all of which saw usage by the world’s largest logistics providers increase,” he said.

FY20 Outlook

Significant organic growth and a customer attrition rate of 1% lead WiseTech to estimate FY20 revenue of $440 – $460 million, representing growth of 26% – 32%.

EBITDA is expected to be in the range of $145 – $153 million, up 34% – 42%.

Is WiseTech A Buy?

WiseTech is an interesting business because it is so clearly a global leader in its industry and it has a lot of room for growth, but I’m not sure I can get past the valuation. FY20 revenue growth is expected to be between 26% and 32%, down from 57% in FY19, while EBITDA growth is expected to be roughly the same as FY19 (39%).

This decline in the revenue growth rate may alter some shareholders’ valuations of the company if they were expecting growth to continue exceeding 50% per year.

The operating expenses were also higher this year, but much of that can be put down to R&D and product innovation. As the company matures and takes further market share, it could be expected that R&D and marketing expenses begin to decline so I don’t see this as a big issue.

The bottom line is, I think WiseTech is a great company and it will remain on my watchlist, but I’m not a buyer at today’s price.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.