Earnings Transcript for WTC.AX - Q3 Fiscal Year 2022

Company Representatives: Richard White - Chief Executive Officer, Founder Andrew Cartledge - Chief Financial Officer

Operator: Thank you for standing by, and welcome to the WiseTech Global FY22 Results Conference Call. All participants are in a listen-only mode. They will be a presentation followed by a question-and-answer session. [Operator Instructions]. I would now like to hand the conference over to Mr. Richard White, CEO and Founder. Please go ahead.

Richard White : Good morning, everyone and thanks for joining us today for our FY22 results briefing. Before I get into the financial highlights, I want to acknowledge the hard work and dedication of the WiseTech team. We are a team that is united in our vision and we are solving real world problems that impact people globally every day. I'm proud to be a part of that team and of the results we are sharing today. In FY22 we delivered total revenue of $632.2 million, representing a 25% increase on FY21. Excluding FX total revenue was up 26%. Within that revenue result, CargoWise revenue grew by 37% excluding FX. Its high quality result is underpinned by 89% recurring revenue and less than 1% customer attrition. That ultralow annual attraction rate has been consistent for the last 10 years, meaning we have a very stable and predictable, long term recurring revenues and therefore considerable confidence in forward guidance. This growth is strategically important, because it demonstrates the increasing revenue contribution that our large global freight forwarder rollouts delivered, as well as our ability to attract new customers and increase usage by our existing customers as we expand the CargoWise ecosystem. The remainder of our revenue was generated by non-CargoWise applications which delivered 5% revenue growth including FX. EBITDA was up 54% versus the prior corresponding period to $319 million with our EBITDA margin growing by 9 parentage points to 50%. This excellent outcome reflects our organization-wide efficiency program, including the ongoing extraction of synergies from the global business. This program delivered $32.6 million in net cost reductions in FY22, driving further operational leverage as our revenue has grown. Our underlying impact for the year was up 72% at $181.8 million and our free cash flow of $237.3 million was up 71% from on the prior year, delivering a cash balance at June 30 of $483.4 million. This demonstrates the high quality of our earnings, which along with our undrawn debt facility gives us plenty of headroom to execute on our growth plans. This stand-up performance demonstrates the increasing resiliency of our business model, in an environment of persistent supply chain constraints, inflationary pressures and the COVID related business disruption, to have delivered these outcomes is a real testament to the strength of our business, the dedication of our people and the effectiveness of our 3P Strategy. In particular, I would like to recognize the exceptional efforts of our team and their ability to pivot quickly as the environment has changed. I'm confident that we have the right team in place to continue achieving our goals and grow the business, ultimately building value for all of our stakeholders. In recognition of the continued strength of the WiseTech business, the board has declared a fully franked final dividend of $0.064per share, up 66% on FY21 representing a payout ratio of 20% of underlying impact. Our performance should be looked at in the context of the broader market conditions. On this slide we have provided some external data points on global trade volumes and demand as well as trends and freight volumes, along with some of our own views on the market and longer term structural drivers which continue to play out. All of these support sustained demand for our solutions, acknowledging that in the near term demand might be affected by changes in market conditions. As you can see, merchandise trade volume grew more slowly this year relative to 2021. However, growth is predicted to increase again in 2023, while demand for goods continues to track nearly 5% ahead of pre-COVID levels. As I said at the half year, COVID was the cause of many well publicized disruptions to global supply chains, in the form of capacity constraints, port congestions and labor shortages, as well as general operating inefficiencies, all of which continued through the second half. What this means is that there is a considerable backlog which we expect to support freight volumes, nothing U.S. imports are still expected to be higher than the record year experienced in 2021. While there are different views around near term trends, we believe all of the structural drivers of the industry will continue to push global freight forwarders and logistic providers to strive for operational improvements with a focus on efficiency. This will accelerate the replacement of in-house legacy systems with modern, globally capable, integrated software solutions that deliver efficiency, enhanced productivity, transparency and visibility mitigate risk and facilitate better planning and control of the complex global operations. These capabilities are exactly what CargoWise delivers. In this uncertain environment, organizations are much more focused on their efficiency and profitability, while they continue to adopt new hybrid working models, take the businesses into the cloud and digitize their documents and processes. An increasingly complex regulatory environment, that includes substantial fines and penalties, drives the need for better control of risks, which in turn drives new customers to CargoWise. Continued industry consolidation benefits us where our customers are the acquirers, where our platform is already in use in the acquired business and adopted by the acquirer. These industry drivers are also providing a strong tiled wind for our business. This is clearly demonstrated by the continued growth in our customer base and wider adoption of CargoWise across the industry as we move closer to our vision to be the operating system for global logistics. It is worth noting that market growth has only accounted for 3 parentage points of the 31% CAGR in recurring revenue growth since FY16 when we IPO-ed. The factors’ largely been in our controller and delivered the vast majority of that growth, driven by consistent execution of our 3P Strategy. While the structural drivers are referred to, we’ll support sustained growth for many years to come. We are focused on our six key development priorities to further build up the CargoWise ecosystem. These are landside logistics, warehouse, Neo, digital documents, customs and compliance and international eCommerce. I will talk to these in more detail later. With our relentless focus on delivering the best solutions to our customers, we increased investment in CargoWise R&D by 28% in FY22, with 1,199 new product enhancements that further strengthen the CargoWise value proposition. The current environment has also presented an opportunity to accelerate our investment in R&D to drive further revenue growth. As a management team, we have decades of experience in navigating business cycles and have used the challenges created by COVID and result in its national supply chain problems effectively. We have exceptional people across the business, supported by a strong culture of innovation and continue to strongly attract amazing and talented people, despite the competitive market. Along with the two tuck-in acquisitions we included in our FY22 results, since the year-end we also acquired Bolero, a leading provider of electronic Bills of Lading and digital document capabilities. The addition of Bolero enhances our offering in digital documents and drives and expands our market opportunity. It is also a great example of where it makes sense for us to acquire, rather than to build these complex capabilities internally. CargoWise added 10 new global customers in FY22, signing five new global rollouts with UPS, FedEx and Craft Multimodal in the second half, and Brink’s and Access World in the first half, and a further five customers grew into the large global category in FY22 from smaller initial CargoWise deals. There are substantial growth opportunities available to us by increasing penetration across our existing customer base, not only through greater adoption of our existing core and adjacent capabilities, but also through new global rollouts. We have 43 CargoWise global rollouts, with 10 of the top 25 global freight forwarders, including three of the most recognized logistics brands in the world being DHL, FedEx and UPS. That is very significant in terms of our market presence and product recognition. Our ability to secure new and retain existing global customers is driven by the power of CargoWise and the continued stream of product enhancements, meaning we are well placed to convert this strong pipeline of sales opportunities. This will all underpin further revenue growth, operating leverage and margin expansion. We made excellent progress in our organization wide efficiency and acquisition synergy program referred to earlier, which on a run rate basis is ahead of our prior target. Along with price increases implemented in the second half to help offset the impact of inflation and generate returns by product investments, we are exceptionally well placed to deliver ongoing attractive shareholder returns in the years ahead. I will now hand over to Andrew to take you through our financial performance, before talking again in greater detail about our strategic progress and outlook.

Andrew Cartledge: Thank you, Richard and good morning everyone. Starting with an overview of our FY22 financial performance, as Richard noted the business delivered strong revenue growth during the year with total revenue of $632.2 million, representing year-on-year growth of 25%, which is at the top end of our guidance range. Excluding the $9.4 million foreign exchange headwind, FY22 total revenue grew by 26%. Revenue growth from our core CargoWise platform was even stronger, up 35% to $447.9 million or 37% excluding FX, which was a gain at the top end of the 30% to 40% range included in our guidance. Non-CargoWise revenue was up 5% to $184.3 million. Gross profit for the year was up 28%, reflecting a 2 percentage point increase in our gross profit margin on the prior year to 87%, having already upgraded our FY22 EBITDA guidance at our first half results in February. In July we again upgraded our EBITDA guidance following a strong second half performance. FY22 EBITDA of $319 million was up 54% on FY21, reflecting an EBITDA margin of 50% which was up 9 percentage points on FY21, driven by a strong top-line growth as well as cost reductions for our organization wide efficiency program at $32.6 million for the year, which was ahead of our expectations. Projected cost investments were partially delayed due to the impact of lockdowns and tight labor markets; however, hiring increased in the second half of ’22, versus first half of ‘22 with total global headcount ending the year at 1,979 and net additions increasing 20% in 2H ’22, versus 1H ‘22. Further down the table you see that EBIT was up 70% on FY21 reflecting leverage from our operating performance. Depreciation and amortization increased by 13% as we continued to increase our investment in R&D to expand the capabilities of the CargoWise ecosystem, partially offset by reductions in acquired amortization from acquisitions completed over the past few years. Statutory net profit after tax for the year was up 80% on FY21 at a $194.6 million, demonstrating the ability of our business model to deliver revenue growth while expanding margins. Excluding non-recurring tax on acquisition contingent consideration and minor fair value adjustments, our FY22 underlying impact increased by 72% to $181.8 million and underlying earnings per share increased by 71% to 55.8 cents per share. Moving to slide 10, you can see that excluding the $9.4 million FX headwind, we delivered total revenue growth of $134.2 million, up 26% on FY21. One way to look at our total revenue growth is by recurring and non-recurring revenue. As you know, recurring revenue is the backbone of SaaS and subscription based companies like WiseTech. Recurring revenue represents revenues from customers who are using our product consistently and gives us good visibility over future revenues. For WiseTech, our non-recurring revenue includes things like customer paid product enhancements and one-off license revenue that accelerate to future recurring revenue growth. On the left side of this slide you can see our recurring and non-recurring revenue growth. In FY22 recurring revenue grew by 25% or $116.5 million excluding the impact of FX, driven by increased usage by existing large global freight forwarding customers, new customer wins and two tuck-in acquisitions we made during the year. We also increased prices early in the second half as we started to see signs of inflation, to ensure we continue to generate appropriate returns on our investment as we delivered value for our customers by enhancing product capabilities. Non-recurring revenue increased by 36% or $17.7 million excluding FX, benefiting from customer paid product enhancements, which stepped up in the second half as expected and also includes the benefit of a third party product license agreement that enables WiseTech to accelerate commercialization and future growth of CargoWise landside logistics component, which we've invested in and developed over recent years. You can say another way to look at our total revenue growth on the right hand side of this slide, where you can see the contribution to growth of CargoWise and non-CargoWise revenues. CargoWise revenues grew by 37% or $122.3 million excluding FX, existing CargoWise customs contributed $82.7 million to the growth, reflecting increased CargoWise usage, new products and features, large global freight forwarder rollouts and the previously mentioned price increases. As noted by Richard earlier, CargoWise customer attrition remains at an extremely low rate of less than 1%, demonstrating the stickiness of our CargoWise platform for our customers and emphasizing their significant long term value generated from each CargoWise customer under our SaaS model. New customers contributed $39.6 million, approximately one-third of CargoWise revenue growth in FY22 and enclosed the previously mentioned product license for our CargoWise landside logistics component. Non- CargoWise revenue was up $10.1 million this year from acquisitions completed in FY21 prior years. We expect a reduction in non-CargoWise revenue over time as customers’ transition to the WiseTech commercial model and we exit some of lower margin non-recurring products. Turning to our revenue growth drivers on Slide 11. As you can see on the chart on the left hand side, on a constant currency basis, over the last six years our CargoWise recurring revenue has grown by almost 5x from $85.2 million in FY16 to $422.3 million in FY22, an increase of $337.1 million, which equates to a 31% compound annual growth rate over the period. On the right you can see the relative contribution of each of our revenue drivers to our CargoWise recurring revenue growth over the same period, which shows the biggest driver of CargoWise recurring revenue growth has been large global freight forwarder rollouts, which contributed over a third of our revenue growth or 12 percentage points of the 31% CAGR. The next biggest contributor has been new customer wins, which contributed 6 percentage points of growth. This is followed by thousands of new product enhancements reflected in our pricing, which contributed 4 percentage points, major new product launches and increased usage by existing customers contributed 3 percentage points each to growth. Lastly, and importantly, underlying supply chain market growth contributed just 3 percentage points or just under 10% of our growth. This means the overwhelming majority of our growth is driven by factors we influence, like winning new customers and investing in new products and features. We are therefore not reliant on the market to deliver the majority of our organic growth. As I mentioned earlier, our CargoWise non-recurring revenue growth has been driven by customer paid product enhancements, and in FY22 the license of the CargoWise landside logistics component to accelerate product commercialization, both of which are important future growth enablers. Looking ahead, we expect future CargoWise recurring revenue growth to be consistent with our historical experience, driven primarily by the acceleration of large global freight forwarder rollouts and further contract wins, as well as the launch and expansion of new products from our long term R&D investment, including growth from our six key 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 sizeable balance sheet, supported by strong operational cash generation, our undrawn $225 million debt facility and our proven M&A capability to accelerate our development opportunities and build out the CargoWise ecosystem. Turning to slide 12, I'd like to talk about the revenue growth trajectory from each of these global freight forwarder rollouts. As you know, our large global customers could take a number of years to rollout the CargoWise platform across all their global operations. As the rollout progresses, customs add new countries, adopt new modules and implement our productivity tools. Of the 43 global rollouts in place at the end of FY22, 32 are in production, meaning they are operationally live on CargoWise and have rolled out to 10 or more countries and 400 or more registered users. The remaining 11 are contracted and in progress, meaning they are at an earlier stage of their global rollout. From a revenue generating perspective you can see that these 32 global rollouts in production, that delivered a compounded annual growth rate of 36% since FY16 driven by the growth of global role last by customs such as DSP, DHL, Toll, Yusen and Geodis. The adoption of additional CargoWise modules, products and features and custom expansion through their own M&A activity. Importantly, six of these 32 customers in production are top 25 global freight forwarders, which have generated a significantly higher compounded annual growth rate of 46% over the same six year period, which shows the attractiveness and importance of these large global rollouts. Looking ahead, it's critical to understand the scale of the opportunity for growth within a large global freight forwarder customer base. Of the 11 global rollouts that were contracted any progress in FY22 collectively there were approximately only 25% of the expected users currently live on CargoWise; that they have grown at a compounded 114% since FY19, even with such a limited user base adopting CargoWise, shows their significant revenue growth potential. To illustrate this point, in the last 12 months the universe of expected users, not currently live on CargoWise has grown by 30%, driven by five new contract wins, including UPS and FedEx. There are four top 25 customers in the cohort, 11 contracted and in progress customers, just over one-third compared to around one-fifth of the 32 large global freight forwarders in production. All these factors contribute to the significant future growth potential this cohort of customer has and the value of new wins like UPS and FedEx in FY22. Also, noting initial customer rollouts have significant scope for wider adoption of CargoWise capabilities over time. Our existing 32 customers with global rollouts in production continue to drive revenue growth as they add new products, features and geographies. In particular as we increase our customs penetration from approximately 45% of global manufactured trade flows to our target of 90%. We also anticipate continued logistics industry consolidation to support our future revenue growth with our large global freight forwarder customers well positioned to leverage future consolidation to grow. Finally, 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 customer wins. On slide 13, you can see our operating expenses from FY18 across three areas

Richard White: Thank you, Andrew. WiseTech’s strategic vision is to be the operating system for global logistics. To achieve this, our strategy has been focused on the 3P’s

Operator: Thank you. [Operator Instructions] Your first question comes from Bob Chen with JP Morgan. Please go ahead.

Bob Chen : Good morning, guys! Just a question around the new logos, one over the second half and can you talk a little bit about the materiality of some of these recent wins versus your existing clients and how that sort of impacts the pipeline into FY’23. I mean, is there usually a bit of a digestion period after you win some new clients?

A - Richard White: Yes, that's a great question, thanks for that. The way to look at all of these rollouts is that they take time to start. It may take time to run and to complete, and you can see that with almost every one of these major businesses. They take a considered view of products; they consider the way that they rollout, they take certain key countries first. They get certainty. Internally it builds knowledge and capability and then over the period, most of these start to accelerate. In planning this, we actually give people a kind of a standard template which we tune to their particular business dynamics. It's typically taking countries where the most opportunity presents and the most benefit accrues as early as possible, but it's always a plan that steps out of our repetitive use and so this – that doesn't make a huge difference to the first you sign them in, but that difference improves all the time, and you can see that with almost all of the customers that have fully rolled out and are complete. DHL and DSP are good examples of those. They are very solid. They continue to grow their businesses and we’re obviously a part of that growth as well. But these as I said, and as Andrew said, there is considerable upside of CargoWise users that are planned, but not yet live and so there’s quite a lot of long term tailwinds.

Bob Chen : Thanks guys. I'll jump back in the queue.

Operator: Thank you. Your next question comes from Kane Hannon with Goldman Sachs. Please go ahead.

Kane Hannon: Hey guys! Just to comment in the background, price rises offsetting inflation, is that relative to the 8% to 10% inflation impacted you’ve called out and so we’re thinking about double-digit pricing.

Richard White: Yeah Ken, it's a good question. So we've got 8% to 10% on the cost base in the guidance. Of course that went all through to revenue given sort of you know revenue is higher than the cost base. So we have built price increases in to offset the cost inflation and that is included in the revenue guidance and the CargoWise revenue growth, that 30% to 35%.

Kane Hannon: Okay when – sorry, maybe just a quick follow to that is, I’ve asked about the $10 million below your revenue and your CargoWise growth is basically the same as that historical CAGR. It sounds like processing is going to be a little bit stronger in ’23. I mean which of the buckets are a little bit weaker than I suppose into ‘23.

A - Richard White: Well, as you know the 31% CAGR that we’ve delivered over the last six years in terms of CargoWise recurring revenue growth comes from a number of buckets and we’ve been through that in the presentation today. The biggest one of those is obviously the large global freight forwarders, but in any particular you know year we see acceleration on you know some of them, it could be product driven in a particular period of time. It could be new customer wins that drive the growth in that particular year, but I think you know we’re quite pleased with the 30% to 35% that we built into the growth forecast for FY23, which is obviously around or ahead of the average that we’ve delivered over the last six years.

Kane Hannon: Thanks guys.

Operator: Thank you. Your next question comes from Nick Basile with CLSA. Please go ahead.

Nick Basile: Good morning, Richard and Andrew. Just one question for me then. On the penetration of the CargoWise product, I think you called out the stronger growth from the top global freight forwarders. The top 10 were delivering these sort of 46% growth. Just interested to sort of know what the feedback’s been from those customers around the usage of the product and the level of penetration. How are you sort of thinking about growth into ‘23 from increased transaction volumes versus balancing that with your own price increases.

A - Richard White: Great question, thanks. The way I’d look at this is, the best indication of customer satisfaction is increased usage and increased sales and I think that's how we really trail or track on this. But equally you know we’ve got a very, very strong product that is gaining momentum in practically every sector, and if you look on the slide that deals with this focus areas, which is slide 19, you know say that we’re calling our additional adjacent areas, many of these areas were additional share of wallet, increased share of wallet. Also moving into other markets which are adjacent to our core market that we have significant influence in driving into, and obviously we’re getting good take-up in our core product, but we’re equally getting quite good take-up on the adjacent parts of their product and we're signaling here in my script and on slide 19, that we’re really focused on growing that addressable marketplace and actually creating new addressable capabilities that nobody's really counting yet, because the move to digital documentation and straight through digital processing and integrating all the pieces together, that's actually the really big value proposition. What we do in forwarding has benefited from that same focus across the forwarding landscape. We are now taking it from the forwarding landscape and pushing it up from landside logistics to warehousing into DCOs, through digital documentation and straight through processing, customs compliance we should note of that for some time and also international ecommerce. These things are additive to our core product, but also additive through our addressable market and some of those create entirely new marketplaces that nobody’s even considered yet.

Nick Basile: Yeah, great. Could I just ask one follow-up. In terms of when you talk about straight through digital processing, what do you think we’ll see as the current penetration level and how high can that get to over the next couple of years?

A - Richard White: One of the features of CargoWise is the fact that once data is in the system, it transits the system completely without being rekeyed or retyped or restated in any way. You do have additive things that come into any system such as CargoWise, but typically it's common market data, common structural information and as you go through various processes, you do add a little bit of new placement, particularly tracking and more commercial detail as the information is needed for compliance and government regulatory arrangements. So CargoWise internally is really a straight through processor. What we are taking about now is taking that straight through process, making the documents on either side of it completely digital as well, so that you're not rekeying documents, the documents are been consumed by the system as digital entities. So the structure of the data is in the document. We're also talking about moving into the adjacent areas, so we are going to landside logistics, into warehousing, into the beneficial cargo owners, into customs and compliance which are already really there with customs compliance in terms of digital straight through processing and international e-commerce which we’re practically speaking, mostly there in that space. So the digital documentation part of this is taking all those things and saying, wherever there is a gap or a link needed or some improvement internally and making that whole system so that it's just straight through, but then also taking at the edges of the system and making sure that every document in can be consumed digitally and at a highly automated level. And when we publish the document out, it contains the structured data in the document, so it can be consumed by CargoWise even though like I said before, in another computer system.

Nick Basile: Okay, thanks.

Operator: Thank you. Your next question comes from Elise Kennedy with Jarden. Please go ahead.

Elise Kennedy : Thank you. So my question is around acquisition. So you made two small acquisitions and post the financial close. With the combination of its strongly created balance sheet track recorded, you got in M&A and by midway you’ve got those earlier stage companies in time. Wouldn’t that make sense to do significantly more acquisitions, like the last six months historically. Just curious about what’s the – if there is any change impact in that strategy.

Richard White: I think it makes sense to focus on the thing that creates the best value for the company, and keep in mind that we are a strongly organic growth company. We think of acquisitions as tools to accelerate market penetration, to create access to new adjacent markets, to create advantages in our organic strategy and to make sure that we’ve got that best product capability and that we, next we move towards being that supplier of logistics across the world to all of the key parts. I think you have to see acquisitions as a tool, as one of the tools to get to the bigger, better and higher values for customers and for shareholders. So we are very considered and determined with acquisitions. We are obviously doing them again, if that's the point you're making, but we're also not rushing to do something quickly. We got – really got our earlier strategy. We got what we needed to do the strategic job that we've done. You know those accusations are largely integrated into the business and performing well. We’ve taken a lot of the skills and capabilities and knowledge out of those acquisitions to accelerate the CargoWise development and that's a positive thing. And all of those three acquisition, which includes Bolero of course, are all designed to push the products further, to get us into closer, into the digital documents for instance, into connecting digitally in the case of Inobiz. In the case of Hazmatica, to solve a very complex pain point with dangerous goods management. You'll see this more and more, but we're not going to suddenly got back to doing an acquisition amount, that's not the plan. The plan is to use these in clever ways that drive value for the business and each of those steps has to be – you’re always thinking about buy versus build and ultimately you have to make those decisions very cleverly and ultimately we’re a organic growth software developer that builds a great product for a fantastic industry.

Elise Kennedy : Thank you.

Operator: Thank you. Your next question comes from Roger Samuel with Jefferies. Please go ahead.

Roger Samuel : Well, hi guys! I’ve got some questions around your non-recurring revenue. Firstly, what's the margin on that and do you expect much non-recurring revenue to come in FY23 in your guidance?

Andrew Cartledge: Yeah, thanks for the question Roger. We just had a little bit of problem here in the last part of it, but I think you're asking about margin on the non-recurring revenue, just to confirm.

Roger Samuel: Yeah, the margin and then also do you expect much non-recurring revenue to come in FY23.

Andrew Cartledge: I’ll answer the piece about the non-recurring margin, revenue margin first. And again, we just had a problem on the last part, sorry about the technical issue here. And so the non-recurring revenue margin varies across the business. Some of it is quite high margin, because its development work that just passes us straight through, and you’d see margins on that consistent with the overall EBITDA of the business if not a little bit higher. We do have some non-recurring revenue that sits in the non- CargoWise side of the business and that is typically a lot lower margin, because it requires a lot more cost to actually deliver those non-recurring revenues. And I think in the past we've described those as things like implementation, work and customization of products and those type of things. So it’s a bit of a mix to be honest Roger. Roger, would you mind just asking the second part of your question again, see if we can get it this time?

Roger Samuel : Yeah, I’ll try. Just wondering if you expect much non-recurring revenue to come in FY23?

Andrew Cartledge: A key component of non-recurring revenue in the CargoWise space is the paid customer enhancements, and those are important feature growth enablers for us. It’s our customers asking us to accelerate the development of certain things that are in our pipeline and obviously paying to have access to those. And once those become available, we open up, open those enhancements to all of our customers and we start to generate transactional recurring revenues from offering those in the platform. So we will continue to do those. We had a healthy pipeline in FY22 and we have a pipeline going into FY23 as well.

Roger Samuel : Okay, alright. And then maybe just a follow up on that. Can you talk a little bit more about, the agreement for landside. Is it something that you – so you sell to a third party rather than directly to your customers?

Andrew Cartledge: Sure, I might let Richard take that one. Richard.

Richard White: Yes, so you got to think of the business as relying upon, various capabilities in order for the software to work and we've got to be able to distribute those capabilities globally. And so we've decided to take an approach where we focus on the software and the licensing for the software and the size of the software and we use partners to do certain parts of the distribution, maintenance and other things that will enable us for landslide logistics. And to do that, the positive for us is that we get to focus on our core capabilities, and we get to give what is a very complicated technical set of capabilities to other partners who can drive that globally and distributor those, maintain those and manage those at those components globally, and really focus on our core business.

Roger Samuel : Thank you.

Operator: Thank you. Your next question comes from Siraj Ahmed with Citi. Please go ahead.

Siraj Ahmed : Hi Richard! Just in terms of the product focus and just following up on the landslide logistics, so can you – just in terms of benefit for WiseTech, does that bring forward the capability for you? I believe previously it was a FY23 or FY24 sort of opportunity. Does that bring it forward? And also I think you brought warehouse as the focus area. So, just keen to understand, it seems like the landslide is getting a bit more of a focus.

Richard White: So if you look at the six focus areas that we talked about, landslide logistics and warehouse are the two of the left hand side. Very clearly we're identifying that we're going to put more time and effort into focusing on those. Those are the areas where you have a lot of IRT hand held devices and technology pieces that require hardware and then require software. We are really deciding to scale the company out on the software side, so that we can use hardware partners and to do that we needed to actually have changed the footprint and to really be able to focus on. You think of all the complexities in subscribing to mobile networks worldwide, having WiFi deployments, having hand held devices distributed, maintained, managed, that’s a very big and complex business and if we didn't get it into other people's hands, we’d be having to build an entire business around that globally. This way we can do the focus on the software, run very fast and allow partners to scale alongside us as we do it. That’s the whole intent here.

Siraj Ahmed : Okay. Thank you.

Operator: Thank you. [Operator Instructions]. Your next question comes from Paul Mason with E&P. Please go ahead.

Paul Mason : Good morning. Just had one of your slide 20 about the large rollouts. So we had two that dropped off this year, I know it’s XPO and Crowley, and then one that Logistics Plus dropped off last year and it’s come back. Could you maybe tell us a bit about the dynamics about the drop-offs and particularly with Logistics Plus how that got dropped off and come back. Like what’s sort of driving that? Is there any like spending directed elsewhere and then returning or is it just because that’s sort of fallen behind in market share. Thanks.

Richard White: Thanks, that’s a great question. One of the drivers here is the consolidation activity within the industry and the competitive tension between major players that are all fighting for market share. So I think some of the departures were related to that. Some of the departures are related to, I think – XPO on my right, actually divested the business unit and that’s what change that one. But generally, you know we are talking about a very competitive industry where there is consolidation, there is divestitures, there is changes in competitive nature, there is good and bad fortunes. We can't really control that, but all we can really do is give them great software and make them as success as possible.

Paul Mason : [Inaudible]

Andrew Cartledge: To what Richard said there, and we provided a reconciliation of the large global freight forwarders in the back of the presentation, which you've probably taken a look at, and it calls out Crowley and XPO, is no longer large global freight forwarders in the definition that we have. They are still our customers. They're just not got rollouts in 10 or more countries or they are more than 400 years as Richard explained with XPO. That was then divested in a portion of that business, but they are still our customers and they still use CargoWise.

Paul Mason : Do you have time one more?

Richard White: Yes, go ahead Paul.

Paul Mason : Great! Could I may be ask quickly just on CargoWise. It looks like it’s sort of been deemphasized a bit in the R&D slide. Maybe could you give us a different update in terms of sort of the current time horizons to deliver that product, whether there’ll be any change there or is it the reason for you deemphasize, just because you got the customer projects in those other categories warehousing, landslide, logistics, sort of taken from this. Thanks.

Richard White: Neo remains a very important project. It does align some other things on this slide 19, and the point of putting them all together is to show you that this is a comprehensive, across the business, across the world plan, not a single product. I did actually – I think in the last two updates to market the we gave, we did identify that Neo was very important. It needs to have a number of other things happened alongside of this, and so the first Neo does is replace our conventional customer components, our customers customers capabilities, and that it does very well. But to do that it doesn't give us all of the things we need in neo, and so all the things you see across there and the core system have to be present in neo and we have to be able to make Neo a critical capability for our customers to service their customers, and so there are number of things to do. But I’m certainly not saying we are deemphasizing Neo. We are just putting it as the first among equals, in a sense across the plan here. And all of these things, the landslide logistics, warehousing, Neo, the digital documents and straight through processing, customs compliance, international e-commerce all work together in the end, because they create that ecosystem that means that all the things operate and all the things work together and you have the straight to digital processing, and you have access to these new addressable markets and you even create new markets because you've got products that do things that nobody ever thought of doing before.

Paul Mason : Thank you.

Operator: Thank you. Your next question comes from Wei Sim with Macquarie. Please go ahead.

Wei Sim: Hi Richard and Andrew! Frist question from me is just in regards to our addressable market and maybe the comment that we made on last year, that the CargoWise universe is growing 30% by five new contract wins including UPS. Are you able to kind of flesh out what you mean by that?

Andrew Cartledge: I don't quite know, what you meant by that question. Can you just give me a bit more content.

Wei Sim: Just as in what do you mean that the universe is growing by 30%. And just – so that's maybe the first question. The other one is just in terms of how we should think about the addressable market. I think you know we've talked about the supply chain execution being around 4 billion previously or there about, and you know with I guess slide 19, and that – how do we think about or how should we think about the addressable market going forward.

Andrew Cartledge: Yeah. Wei, thanks for clarifying the first part of that question. The 30% increase is related to the expected number of users that are contracted, large global freight forwarder customers and expect to have on the system. And we obviously, with the wins that we had in the five new large global freight forwarders this year, has increased the size of that base by 30%. So you know we’ve added 30% more users to that population, from those five customers. So that's a pretty significant increase this year. Does that answer your question?

Wei Sim: Yes, so can I just think about it that your potential wallet sizes has increased by 30%, is that...

Andrew Cartledge: Well, those are customers that were in the large sort of freight forwarder populations. Some of them are in the top 25, some of them are in the top 200. So they were part of the addressable market previously. Richard, do you want to add anything to that?

Richard White: You have to think, addressable markets, the way people talk about it is a rear window look at what software has been sold in the past and some estimate of what that value is. We don’t actually say it this way and so we find the idea of addressable market somewhat of an odd fitting thing for us. A lot of the time we are creating an entirely new piece, that solves the problem that has been entirely manual in the past or has no functional or strategic support from a software point of view and we're also connecting. So those are new addressable markets if you will. But equally we are also connecting things together, so that connection has enormous value. So the connection is straight to digital processing, lowers labor costs, increases accuracy, increases speed and therefore there's a value in that. We're also moving people from in-house, systems that are owned by themselves and are on-prem, by moving those people into the cloud and the cloud makes you get a much bigger effect in terms of revenue and cost reduction for the customer. And then we're also talking about the total effect of being able to offer all of those things across the platform, and so your platform is itself much more valuable. They are all, they're not just traditional understanding of addressable market, but they are a capability which is – it's hard to assess what that means, but it's very obvious that we've been growing into that and it's not just share of existing wallet. Its creating new requirements to do better things, and you are taking away labor, you are removing risk, your craving cost reductions in there, IT costs and all of those things equate to more revenue for WiseTech.

Wei Sim: Okay, understood. Maybe just one more if I can. Just in regards to slide 19 again, on landside logistics and warehouse. Are these, I mean when I think about landslide logistics, maybe my understanding of supply chain management is not that great. But I think more so on the procurement side rather than on the execution site, so I mean would these be kind of like considered progresses towards neo.

Richard White: When you say landslide logistics, we mean port-to-door or port-to-warehouse. We don’t mean going further than that. So we're talking about at the export end and at the import end ,it’s really the containerized movements that occur from the airports or seaports to the end point for that container or unit wide device, or whatever it is. And it’s – there is a piece of that at the import side, there is a piece of that at the export side. But we're very tightly defining that, because it’s a very near step to that core capability, and so we have the ability to connect that very effectively. We're not trying to solve the world of every supply chain problem, in every place. We are being very considered about what moves we make and how we can push into those moves and gain competitive traction in those moves. We are not trying to do everything for everybody.

Wei Sim: Okay, understood. Thank you.

Operator: Thank you. Your next question comes from Siraj Ahmed with Citi. Please go ahead.

Siraj Ahmed: Just a follow-up, again on the product pipeline, development pipeline. A bit surprised that customs is a bit further out. Maybe if you could just give us an update on where customs is at, and in terms of takeout by existing customers as well.

Andrew Cartledge: Sure. So customs, we’ve got – probably our largest team in the company is across customs and compliance, it’s really two things and it's important to understand how complex this environment is and how much time it takes to build out the customs compliance capability. Keep in mind, we’ve got it in all English speaking countries with the exception of Ireland and we are working on Ireland right now, that’s a current project in the short time line. The EU made some changes to their customs design and regulations in the last sort of 18 months and that’s moved some of the projects to sit over the top of those regulations, so that we actually deliver the new regulatory regime rather than the old one and then have to rebuild it. So some of those projects slowed down based on that regulatory change. But we've also spent a lot of time improving the capability to develop customs capabilities quickly, and that includes better work processes, more technology support for universalizing what we do, better training at the teams, larger teams and obviously we're talking about continuing to do what we set out to do. But these things are just one of the many things that we are doing at the same time and I don't think rushing to try to get a singles custom system map is the right thing to do here. In fact because you have changed its platform, we can spend more time getting a lot more of the European systems ready to go and then live with customers, but you can see that we’re making positive progress. There is a great video from [inaudible] this medium to large size French forwarder that’s been with us for some time now and they are now using some of the European customs which were released in recent years, last year I think very effectively. So we are moving, it’s getting traction and progress, but we are capable of walking and chewing gum. So we're doing multiple things here, not just focusing on customs.

Siraj Ahmed: That’s helpful. Thanks Richard.

Operator: Thank you. That's all the time we have for our question-and-answer session today. I'll now hand back to Mr. White for closing remarks.

Richard White: Well, I'd like to thank everybody for listening. It's been a pleasure talking to you all and some great questions and we are very happy to – hopefully we’ll be meeting a lot of you on the rounds and Andrew and I will be seeing your there. Thank you everybody.

Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.