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- Software solutions company WiseTech Global (WTC) has renegotiated earn-out arrangements for a number of its strategic purchases
- In the last few months, WiseTech has been working with its 17 acquired businesses to reduce and close-out future earn-outs and replace significant cash payments with equity
- WiseTech said these methods will help prioritise its acquisitions to accelerate the CargoWise platform expansion and development
- The negotiations have resulted in the reduction of contingent liabilities overall, from $215.5 million to $68.5 million
- The company has also appointed Arlene Tansey, as the non-Executive Director
- WiseTech has closed 5.77 per cent in the red, with shares trading for $21.06 each
Software solutions company WiseTech Global (WTC) has renegotiated its earn-out arrangements for a number of strategic purchases to strengthen its balance sheet.
Throughout the second half of the 2020 financial year, the company has been working with its 17 acquired businesses to reduce and close-out future earn-outs and replace significant cash payments with equity.
While this method strengthens the balance sheet and liquidity, WiseTech said it will prioritise its acquisitions to accelerate the CargoWise platform expansion and development.
CargoWise forms an essential link in the global supply chain and has over 50 billion data transactions annually.
Founder and CEO Richard White said the current environment provides WiseTech with the opportunity to restructure previously agreed acquisition earn-outs.
“Through our small, targeted, strategic acquisitions in recent years, we captured hard-to-access capability, development capacity and feet-on-the-ground in key
geographies,” he said.
“Our shared vision and alignment with our Founder MDs enabled us to close out these arrangements efficiently, remove significant contingent cash obligations and reduce future contingent liabilities,” he added.
The changes
The negotiations have resulted in a number of changes, which include the reduction in contingent liabilities overall, from $215.5 million to $68.5 million.
WiseTech will remove $151.5 million of future contingent cash liabilities, which means any liquidity that may occur as a result of an uncertain future event. The company will also have its $81.4 million of equity issuance, of which $45.7 million will remain escrowed for 12 months.
In the coming months, the ASX 200-lister will embark on a similar earn-out review for a number of remaining acquisitions, which are primarily geographic footholds with product development targets already in place.
“Our financial position continues to be strong as our unique commercial model delivers robust cash generation, positive free cash flow and significant liquidity to support our strategic and operational initiatives, including significant investment in R&D (research and development) and global rollouts for the world’s largest logistics organisations,” Richard explained.
WiseTech is expecting digital transformation to accelerate, which will drive demand for global technology and integrated platforms like CargoWise.
“In the current environment, our business continues to demonstrate resilience
and tracks in line with our expectations,” Richard said.
“Throughout this period and into FY21, we will continue to take the necessary actions to prioritise critical technology development, drive cost, cash and capital efficiency, and build our competitive position globally,” he added.
New non-Executive Director
WiseTech has also announced the appointment of new non-Executive Director, Arlene Tansey.
Arlene comes with more than 30 years of experience in financial services and banking. She currently holds directorships with Infrastructure NSW, Lendlease Investment and the Australian National Museum Foundation and Council.
“On behalf of the Board, I am delighted to welcome Arlene to the WiseTech Global group. With her considerable ASX governance experience, corporate expertise and financial acumen she brings a wealth of experience and is a valuable addition to our Board,” Chairman Andrew Harrison said.
WiseTech has closed 5.77 per cent in the red and shares are trading for $21.06 each.
