One of the few local or even global tech companies to be consistently profitable, WiseTech Global is an ASX/S&P All Tech index standout. The business is a leading international logistics software provider and counts 24 of the top 25 global freight forwarders and 41 of the top 50 third-party logistics providers as clients. Its flagship product, CargoWise, is a platform that spans and connects players across the global supply chain to increase productivity, visibility and efficiency.

Richard White, WiseTech Global CEO and founder, attributes the business’s success to a very focused strategy. “We call it the three Ps: product, penetration and profitability, underpinned by our fourth P, people.”

The company is product-led and always has been, constantly investing in its underlying systems and platform. Penetration means working hard to win more business from more of the top 25 global freight forwarders and top 200 global logistics corporations. To this end, the business has recently signed global transport giants FedEx and UPS as new clients, on the back of winning DHL as a client in 2016 and many other top 25 clients in recent years.

In February 2020, White knew COVID was going to be really big, well before there was widespread acceptance of the fact that COVID would have monumental consequences. “When we announced the impacts of COVID on the business, I was called everything from a liar to a fake. A couple of months later, as lockdowns began to bite, supply chains surged and the business thrived. We were able to improve our business very substantially during this period. We did that because we used COVID to create rapid positive change driven by the crisis and as an opportunity to do things better. Our product enabled our customers who needed their staff to have the ability to operate remotely from their homes instead of from work. We used everything we could think of to improve our model. We worked hard to get our people to work from home very effectively, which actually increased productivity. This is agile thinking at its best. You need to be able to look at the problem and see how you can turn it into an opportunity.”

As a result, WiseTech has been self-funded for a long time. “We’ve obviously had the ability to raise capital in the market. We’ve only done that with very specific acquisition goals in mind. We’ve really always been able to, as a friend of mine says, wash our own face. It means we don’t need to come to market to grow the business organically because its growth is easy to fund. The company is large enough and profitable enough now we probably don’t need to raise capital for more potential acquisitions. This is the same agile thinking. It’s the same idea that you can grow fast and be profitable at the same time. This may not be easy or a fashionable view, but it’s a very important thing if you’re going to be a responsible business,” he adds.

White is sceptical of tech companies that pursue a growth-at-any-cost model, with no underlying profit. “There is a role for land-grab companies targeting a specific large market and the goal is to secure significant penetration of that market. But, you have to have very large dollar sales numbers and very high growth for that to work, and you have to have a path to profitability. I see companies burning double their revenue in costs to get growth. I’ve seen a company that’s burning 11 times its revenue add on in costs. I mean, that’s just unconscionable. Eventually, investors are not going to fund those companies. If growth-at-any-cost isn’t dead, it’s certainly in critical care.”

Tech sector outlook

Despite turbulence in markets, White sees a bright future for the Aussie tech sector. “It’s important to look at Australia and then look globally to get an understanding of the potential. When we listed on 11 April 2016, tech businesses made up about three per cent of the ASX by market cap, today that is about nine per cent. When you look at US-listed markets, tech is around 27 per cent of market cap. So, there’s a big upside opportunity for the Australian technology sector.”

He says recently the tech sector has been constrained by lack of migration and the need to strengthen the STEM – science, technology, engineering and maths – education system, which WiseTech is working on. It recently announced one per cent of its annual pre-tax profit will now go towards tech education initiatives starting with a $2.5 million contribution in FY22 to Grok Academy to enable all Australian K-12 students to enhance their Digital Technologies experience encouraging more students into IT careers and helping Australia produce its own tech workers.

“We’re trying to build the tech sector and I’m encouraging other tech founders to lean in as well because it’s in our joint commercial interest to make a success of education so it feeds the sector with more highly skilled tech workers. We need to be much better at developing talent locally. In the short term, we also have to use the visa system carefully to ensure we bring in the right amount of senior talent.”

According to White, we owe it to ourselves as a nation to invest in our tech capabilities. “We’re a smart country, we’ve got a great culture, we’ve got a great legal system. In Australia, you can do business with the US in the mornings and with Europe in the evening. It makes my day long, but it means I can run a global company from Sydney very effectively.”

Access to capital

White has a message for other businesses considering listing on ASX. “It’s important not to rush to public markets as a small tech company; that can be negative for success and growth. It might look like a good solution to raise money but it can hurt you in the medium to long term unless you have scale. You have to be able to show high growth of a substantial revenue base and have to have a clear path to profit. So, there are very important underpinnings to a listing. There is a time to list and there is a time to stay private. It’s also important for the stability of markets that we build strong businesses that thrive once listed. This makes future listings much more viable, and it also builds trust in both the market and the tech companies that list on that market. There are fantastic opportunities to list on ASX, but scale and quality is very important. Just because you can’t raise money privately, doesn’t mean you should try to raise money publicly.”

He believes there’s the opportunity for a two-way flow of capital between local and global markets, a strategy the business successfully pursued between 2017 and 2020, when it acquired 39 companies to drive global growth. “We did a great job of integrating those businesses and you can see that in our profits. So, it’s not a question of whether overseas firms will pick up local firms or whether local firms will pick up overseas firms. This is a marketplace and sometimes you’re a seller and sometimes you’re a buyer. That’s the proper way a market operates and it makes for the diversity you need in technology.”

White and his team’s success integrating multiple businesses into the mothership comes from lengthy experience, having acquired companies since 1994. It’s given him an unparalleled perspective on what works and what doesn’t.

“Between 2017 and early 2020. we used a strategy called foothold and adjacency. We chose acquisitions that would enhance our capabilities and gain access to, or knowledge of, local markets – now they are part of our organic growth. We ran very hard on these acquisitions because we wanted to make sure nobody could get in front of us and stop us.

Embedding a cohesive culture across the many acquisitions was seamless because tech business and culture is fairly similar.

Says White: “There are differences, but the differences are much smaller than the similarities. Plus, good founders, leaders and staff want to contribute something positive. If you can identify the right culture, you will bring them forward and infuse them with the tools we use for success and goals of the company. If you look at our credo, paragraph two says “culture eats strategy for lunch” because you can’t run people with strategy you need motivated, engaged staff that care about their work and the company. You have to turn their desires into your desires and vice versa.”

Aside from culture, he says systems and good long-term capabilities to manage people are essential ingredients of effective teams. “Our workflow engine, our job engine and the way we do software development and run the business is well proven. So it’s quite quick to integrate new people, companies and processes.”

Do good do better

Outside the three P strategy, White’s ESG focus is education – internally, across the industry and for future tech professionals.

“Internally education is critical for ongoing professional development of our staff, from technical skills and accreditation to creative thinking and problem-solving. Of course, it is also an important part of ensuring our security and governance and mandatory training includes issues such as anti-money laundering, cyber security awareness and diversity training and so on.

“We also use our online learning platform, WiseTech Academy, to offer accessible industry-relevant training outside the company. For example, we have just been accredited to deliver dangerous goods education. Logistics is a great industry and we want to encourage more people to join it.

“We are also using our education focus to help grow the overall tech sector by encouraging more people to consider tech careers regardless of their gender, location or economic circumstance. We start with digital skills for K-12 students via our work with Grok Academy and Earn and Learn opportunities to support high school students going on to study IT at university. We use our ESG programs to take real action that has impact.

Leading by example is important to White. “You shouldn’t be a leader just on growth and profit. You’ve got to be better on a number of other factors. Innovation feeds our ESG strategy. One aim is to rapidly build a zero-carbon strategy and show other businesses how they can use that same approach. I know a lot about solar and batteries now and I would love to scale up and then outsource the learnings to other ASX companies to use.”

Looking ahead

White is excited about the future and unconcerned about short-term market dynamics. “We obviously have to manage wages growth as tech wages are our largest single cost, but we are very calm and orderly and the market is correcting. Around us there will be layoffs, there will be funding rounds that might not get funded. There’ll be companies that shut their doors. We will stand in the market and continue to be a high quality, high-value employer, building long-term value for our staff through our equity programs.”

When it comes to the WiseTech investor relations program, the work is managed between White, head of investor relations Ross Moffat and CFO Andrew Cartledge. “We believe in leading with content. That’s one of our mantras. We give our investors a lot of information. But they want to see the whites of our eyes. We spend a lot of time thinking about how we can give information to investors so when they come to a meeting they already deeply understand the company and what we’ve done so they can ask refined questions,” White explains.

He says it’s important for a business such as WiseTech to be on the front foot with the information they give the market. “As a company, as we’ve grown, that information has become more sophisticated and more content driven. I think investor relations is important, but the most important thing is that you’re a great company. So start by building a great business and then talk about it, but mainly lead with content.”

In terms of the composition of the share register, White owns about 41 per cent of the company, with his fellow directors owning another 10 per cent and staff an additional five per cent. “We have a mix of retail investors and local and international institutions, which talks to the company’s global capability.”

The business has an exceptionally strong balance sheet with around $500 million cash on hand, so there’s no need to tap the market for more any time soon. “But we’re always looking for significant business improvements, both organically and inorganically.”

Looking further ahead, White expects WiseTech to maintain its current trajectory. “I’ve been doing this for 28 years and I see the continuum. The business is the same but our scale is much larger, our reach is much larger and our ability to execute is much larger. We’re pulling every lever to build out more parts of our vision – to be the operating system for global logistics. I don’t see that as being anywhere near complete. There’s lots to build, lots to do, lots of problems to solve.

“This is a very complex and fragmented industry. I love problems like that because at this scale we can take those really big problems that no one is confronting and solve them in ways no one could imagine. That creates a lot of value for our customers, which obviously creates a lot of value for our staff and our shareholders. So I see the trajectory of the business continuing for the foreseeable future.”