Results from three key tech stocks tell an interesting story about the future of the space in Australia.
Buy Now Pay Later (BNPL) pioneer Afterpay revealed yet more losses in what will be its final full-year figures before the company was bought by US payments group Square for $US29 billion.
But, for local investors, Afterpay is now becoming an afterthought – it is about to be swallowed. The shares went nowhere.
Remaining with us in the BNPL space on the ASX is the putative Number 2: Zip Co. Its 2020-21 results showed promise, but also a huge loss as it positions itself for future offshore expansion and no doubt to meet the stepped-up rivalry in Australia. Zip shares drifted down 1.5% to $7.21
But the third tech result from logistic software group WiseTech produced a market reaction that told it all – a 58% jump by mid-morning after a 24% surge on the opening, before trading in the stock was halted. This took some wind out of the sails, but the shares still ended up an astounding 28% on the day.
For a company that was the butt of considerable market scepticism and attacked by short sellers, Wednesday’s huge surge in the share price tells us that local investors might be positioning it as the next Afterpay-type stock with a big global suitor in the offing.
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In its 2020-21 results WiseTech revealed a solid 18% rise in revenue to $507.5 million – at the top end of its guidance range, while earnings topped forecasts.
But there was nothing that justified a 58% surge in the value of the company in half a session on Wednesday.
The shares closed up 28% at $46.50 after hitting an all-time high of $57.31.
WiseTech’s revenue growth was driven by its CargoWise division which increased its revenue by 26% to $332 million which reflected increased usage – a time of considerable disruption in logistics from shipping, trucking and Covid driven problems interrupting trade and boosting costs
Earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 63% to $206.7 million which was well above the guidance range of $165 million to $190 million from the company.
But net profit of $108.1 million was down 33% from $160.8 last year, but still beat analyst estimates
The company declared a dividend of 3.85 cents per share, taking total dividends to 6.55¢ cents compared to expectations of 5 cents and sharply above the 3.1 cents a share paid for 2019-20.
WiseTech founder and CEO, Richard White, said the company continued to gain momentum in its market penetration after signing FedEx and had a strong pipeline of potential new global customers.
“Our top line revenue growth, coupled with our ability to implement organisation-wide efficiencies and extract acquisition synergies, has enabled us to achieve a marked step change in operating leverage that is evident in our strong 2020-21 financial performance,” he said in the release to the ASX
Helping investors make up their minds about the company was WiseTech”s guidance for the next financial year of revenue growth of 18% to 25% on the basis that market conditions would not materially change.
That would see revenue of $600 million – $635 million and EBITDA growth of 26% to 38% (in the range of $260 million – $285 million).
WiseTech said its revenue growth was predominantly from recurring sources. The company advised that of the $101.4 million additional revenue generated in the year to June, $97.3 million was recurring.
The company said supply chain disruption, capacity constraints and the outbreak of new COVID-19 strains in key markets was likely to continue to impact global trade until there was a widespread rollout of vaccines.
“We are benefitting from the acceleration in structural shifts from legacy systems to integrated global software solutions and industry consolidation, as large customers acquire businesses and add them to their CargoWise rollouts,” Mr White said.
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While Afterpay reported a 90% jump in underlying sales in the year to June, the results were academic.
Strong growth in its North American business, which is the company’s largest region underlined what Square Inc wants to pay so much money for a profitless business – its about the rapid expansion in a market many times larger than Australia.
Afterpay a 78% jump in revenue to $924.7 million, which is slightly below analysts; estimates for $941.2 million in revenue.
Afterpay said its active customers had increased by 25,000 people a day during the year to 16.2 million in total. It said underlying sales on the platform jumped 90% to $21.1 billion in the year.
The company lost $159.4 million, an increase on last year’s loss of $22.9 million.
Afterpay said the main reason for the loss was a net loss on financial liabilities and the cost of share-based payments.
Earnings before interest, tax, depreciation and amortisation (EBITDA) eased 13% to $38.7 million, which is said reflected higher investment in staff and marketing as it looks to expand the business globally.
All of which is for Square to worry about now.
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After saying bye-bye to Afterpay, investors will now focus more closely on Zip Co, the local successor in the sector.
Zip told the ASX on Wednesday it boosted revenue by 150% in the year to June, but saw losses low out because of its rapid growth approach in the United States, however its statutory loss widened sharply.
Zip reported record revenue of $403.2 million, an increase of 150% and a loss before interest, tax, depreciation and amortisation (EBITDA) of $22.9 million.
Zip however reported a statutory loss of $653 million, compared with a $19.9 million loss last year.
Zip said this was because of a “number of non-recurring items and items that have had a significant impact on the result.” This included the $306,000 cost of acquiring Quadpay.
Zip said its customer numbers jumped 248% in the year, to 7.3 million.
