matrix-2953869_1920

Capital raising and Snowflake partnership

WANdisco 11 March 2021 Update
Download PDF

WANdisco

Capital raising and Snowflake partnership

Capital raising

Software & comp services

11 March 2021

Price

470p

Market cap

£279m

US$:£1.38

Net cash (US$m) end 2020

17.5

Shares in issue (reflecting capital raise)

59.4m

Free float

92%

Code

WAND

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.9)

1.8

(9.7)

Rel (local)

(4.6)

(1.5)

(21.4)

52-week high/low

820p

410p

Business description

WANdisco’s proprietary replication technology enables its customers to solve critical data-management challenges created by the shift to cloud computing. It has established partner relationships with leading players in the cloud ecosystem including Amazon and Microsoft.

Next events

FY20 results

April 2021

Analysts

Dan Gardiner

+44 (0) 3077 5700

Dan Ridsdale

+44 (0) 3077 5729

WANdisco is a research client of Edison Investment Research Limited

WANdisco has raised $42m (gross) at 446p, 7% above the undisturbed closing price. The proceeds will be used to accelerate the execution of its existing business plan and will bolster its balance sheet ahead of a potential US listing. It has also struck a partnership deal with Snowflake to help accelerate the migration of on-premise Hadoop data. FY21 sales guidance of ‘at least $35m’ (Edison estimate $37m) is reiterated. We make minor estimate changes to reflect the capital raising and updated cost guidance, but our FY21 sales forecast is unchanged.

Year end

Revenue ($m)

EBITDA*
($m)

EBIT*
($m)

EPS*
(c)

EV/sales
(x)

EV/EBITDA
(x)

12/18

17.0

(9.4)

(16.3)

(37.5)

20.1

N/A

12/19

16.2

(11.7)

(18.5)

(38.8)

21.1

N/A

12/20e

10.5

(21.5)

(28.4)

(60.0)

32.5

N/A

12/21e

37.0

(2.4)

(9.4)

(17.4)

9.2

N/A

Note: *EBITDA, EBIT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Raised $42m at 446p

WANdisco has raised $42.46m (gross proceeds) at 446p, a 7% premium to the closing price on Monday 8 March (the undisturbed closing price). The placing was structured into three elements: a $30m subscription from a US special purpose vehicle (SPV) managed by Global Frontier Technology (GFT is an existing shareholder and one of its partners, Grant Dollens has a seat on the board); a subscription of c $4.9m with other US investors; and a placing of c $7.5m with existing and new institutional shareholders.

Use of proceeds and Snowflake partnership

WANdisco made good strategic progress in FY20, launching LiveData products with leading cloud vendors Azure, AWS and IBM. This cash aims to accelerate the integration of LiveData with AWS and deepen its presence at Google (GCP). It will also bolster the balance sheet ahead of a potential US listing. Guidance on FY21 cash costs is $44m (we had previously assumed $40m). The Snowflake partnership (announced separately – see below) is potentially important as it is becoming a destination of choice for migrating on-premise Hadoop data to the cloud.

Updated numbers but revenue forecast unchanged

We update our numbers to reflect the capital raising, updated cost guidance and January’s trading statement, but our FY21 sales forecast remains unchanged (Exhibit 1). Ahead of the full-year results expected in April, WANdisco is reiterating its guidance of FY21 sales of at least $35m (Edison estimate $37m) supported by signing a further 50 Azure customers and migrating 100PB and 30PB into the Azure and AWS clouds respectively in FY21.

Valuation: Awaiting revenue growth catalyst

Our previous analysis highlighted the significant value LiveData could create in the long term as it is adopted by major cloud vendors. Factoring in the additional shares, we estimate the 470p price (10 March close) implies revenues reaching $232m by 2030 and a 42% EBIT margin. Gauging longer-term prospects will become easier as evidence of the LiveData adoption rate emerges during H121.

Snowflake partnership and forecast changes

WANdisco has announced a partnership with Snowflake to help accelerate the migration of on-premise Hadoop workloads to Snowflake’s data analytics platform using its LiveData Migrator product.

While not many details of the partnership are given, the deal is potentially significant as Snowflake is a large cloud player and becoming a destination of choice for US enterprises (in particular) looking to migrate on-premise Hadoop workloads to the cloud. Given WANdisco already has a partnership with Databricks (an alternative platform), it now has agreements with the top two destinations for Hadoop data, giving it the ability to address the full market and helping establish LiveData Migrator as the de-factor standard. These analytics platforms can be run off either AWS or Azure clouds. Following detailed integration work last year, LiveData Migrator supports migration to both these platforms.

Updated numbers but revenue forecast unchanged

Exhibit 1 shows the principal changes to FY20 and FY21 forecasts. We adjust our FY20 revenue estimate to reflect January’s trading statement (FY20 sales of at least $10.5m) and this effects EBITDA, adjusted EPS and the cash position. FY21 EBITDA losses increase to reflect the higher cost guidance but the sales forecast remains unchanged. A full financial summary is shown on the following page.

Exhibit 1: Major changes to forecasts

US$m

FY20e

FY21e

Old

New

% change

Old

New

% change

Revenue

13.0

10.5

(19.2)

37.0

37.0

0.0

Adjusted EBITDA

(19.2)

(21.5)

N/A

(0.4)

(2.4)

N/A

Adjusted EPS (c)

(55.1)

(60.0)

N/A

(14.6)

(17.4)

N/A

Gross cash

22.1

20.3

(8.5)

10.9

44.1

304.7

Source: Edison Investment Research

Exhibit 2: Financial summary

$m

2017

2018

2019

2020e

2021e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

19.6

17.0

16.2

10.5

37.0

Cost of Sales

(2.0)

(1.5)

(1.2)

(0.9)

(2.9)

Gross Profit

17.7

15.5

15.0

9.6

34.1

EBITDA

 

 

(0.6)

(9.4)

(11.7)

(21.5)

(2.4)

Operating Profit (before amort. and except.)

 

 

(7.5)

(16.3)

(18.5)

(28.4)

(9.4)

Acquired Intangible Amortisation

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

Share based payments

(2.2)

(5.9)

(8.7)

(6.0)

(6.0)

Operating Profit

(9.7)

(22.1)

(27.2)

(34.4)

(15.4)

Net Interest

(0.3)

(0.1)

0.1

(0.1)

0.0

Profit Before Tax (norm)

 

 

(7.8)

(16.3)

(18.4)

(28.6)

(9.4)

Profit Before Tax (FRS 3)

 

 

(14.0)

(19.4)

(29.1)

(30.6)

(15.4)

Tax

0.5

0.8

0.9

(0.5)

(0.4)

Profit After Tax (norm)

(7.3)

(15.5)

(17.5)

(29.1)

(9.7)

Profit After Tax (FRS 3)

(13.5)

(18.6)

(28.3)

(31.2)

(15.7)

Average Number of Shares Outstanding (m)

37.8

41.4

46.7

48.5

56.0

EPS (c)

 

 

(19.4)

(37.5)

(38.8)

(60.0)

(17.4)

EPS - normalised fully diluted (c)

 

 

(19.4)

(37.5)

(38.8)

(60.0)

(17.4)

EPS - (IFRS) (c)

 

 

(35.8)

(44.9)

(62.6)

(64.2)

(28.1)

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

90.0

90.9

92.7

91.4

92.1

EBITDA Margin (%)

(3.0)

(55.2)

(72.2)

(204.5)

(6.5)

Operating Margin (before GW and except.) (%)

(38.2)

(95.5)

(114.3)

(270.8)

(25.4)

BALANCE SHEET

Fixed Assets

 

 

8.5

8.9

11.6

8.4

9.7

Intangible Assets

7.1

5.5

4.9

2.8

3.7

Tangible Assets

0.6

0.8

3.7

5.5

6.0

Investments

0.9

2.6

3.0

0.0

0.0

Current Assets

 

 

27.4

10.8

31.9

25.2

61.0

Stocks

0.0

0.0

0.0

0.0

0.0

Debtors

0.0

0.0

8.5

4.9

16.9

Cash

27.4

10.8

23.4

20.3

44.1

Other

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(14.1)

(11.9)

(9.2)

(7.7)

(15.6)

Creditors & Deferred Income

(13.2)

(7.9)

(7.0)

(5.8)

(13.7)

Short term borrowings

(1.0)

(4.0)

(2.2)

(1.9)

(1.9)

Long Term Liabilities

 

 

(10.4)

(1.4)

(4.1)

(4.1)

(10.2)

Long term borrowings

(3.3)

(0.1)

(2.9)

(0.8)

(0.8)

Deferred Income

(7.1)

(1.3)

(1.2)

(3.3)

(9.3)

Net Assets

 

 

11.4

6.4

30.2

21.7

45.0

CASH FLOW

Operating Cash Flow

 

 

0.7

(11.0)

(14.1)

(20.2)

(6.5)

Net Interest

(0.3)

(0.2)

(0.2)

(0.3)

(0.3)

Tax

1.4

0.1

0.8

0.0

0.0

Capex (inc capitalised R&D)

(7.1)

(5.6)

(5.9)

(6.4)

(8.3)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

Financing (net)

21.2

0.9

34.2

23.9

39.0

Dividends

0.0

0.0

0.0

0.0

0.0

Net Cash Flow

15.9

(15.8)

14.8

(2.9)

23.9

Opening net debt/(cash)

 

 

(7.2)

(23.1)

(6.7)

(18.3)

(17.5)

HP finance leases initiated

0.0

(0.6)

(3.2)

2.2

0.0

Other

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(23.1)

(6.7)

(18.3)

(17.5)

(41.4)

Source: Company data, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by WANdisco and prepared and issued by Edison, in consideration of a fee payable by WANdisco. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by WANdisco and prepared and issued by Edison, in consideration of a fee payable by WANdisco. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues

You may be interested in