Partners getting into gear

WANdisco 20 December 2016 Update

WANdisco

Partners getting into gear

Deal through IBM

Software & comp services

20 December 2016

Price

203p

Market cap

£75m

£/US$1.24

Estimated net cash ($m) at end FY16

4.6

Shares in issue

37.0m

Free float

85%

Code

WAND

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

28.9

(1.0)

158.6

Rel (local)

25.0

(3.3)

127.5

52-week high/low

224.0p

73.0p

Business description

WANdisco is a distributed computing company. The company has developed a suite of solutions based around proprietary replication technology, which solve critical data management challenges prevalent across cloud computing, big data and the ALM software markets.

Next events

Bookings update

Mid-January 2017

FY16 results

End February 2017

Analysts

Dan Ridsdale

+44 (0)20 3077 5729

Bridie Barrett

+44 (0)20 3077 5700

WANdisco is a research client of Edison Investment Research Limited

WANdisco’s $1m deal with a major automotive manufacturer via its OEM agreement with IBM is a positive indicator of the potential for this relationship to help drive an acceleration in growth. Add to this the November deal with Playtika through Amazon’s AWS Marketplace, WANdisco now has three major tech partners generating sales – IBM, Oracle and Amazon. Increasing sales volumes through these channels will be a key instrument for driving sustainable, strong scalable growth.

Year
end

Revenue ($m)

EBITDA*
($m)

PBT*
($m)

EPS*
(c)

Closing net cash ($m)

EV/Sales
(x)

12/14

11.2

(17.9)

(25.9)

(103.3)

2.5

7.9

12/15

11.0

(16.0)

(26.4)

(87.7)

2.6

8.0

12/16e

11.9

(9.8)

(20.8)

(58.3)

4.6

7.4

12/17e

13.3

(8.2)

(19.5)

(48.0)

0.4

6.6

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangible amortisation, exceptional items and share-based payments. EPS is diluted.

Six-figure deal through IBM, strong pipeline for more

WANdisco has announced that it has signed a deal estimated to be worth $1m with a major automotive multinational via the company’s OEM agreement with IBM. We believe that like-for-like pricing on deals through this partnership is similar to those generated directly, although we estimate that the value (just for the IBM Replicate element) could be worth three times as much to IBM. We understand that the project is related to seamlessly transferring vehicle data to the cloud, highlighting the breadth of potential use cases to which the company’s technology can be applied. The statement confirms that both the company and IBM have significant pipelines, although the company will not get full visibility on the volume of IBM deals for FY16 until February when IBM’s Q4 royalty report is due.

IBM joins the mix of revenue generating partners

Over the past two years the company has secured an enviable roster of partnerships with major technology companies, including IBM, Amazon, Oracle, Microsoft and Google. In IBM and Oracle, two partners have demonstrated an ability to generate $1m deals and we believe that the deal flow should accelerate from here. The November deal with Playtika, a provider of free-to-play games on social networks and mobile platforms, was the first for the company’s Fusion Amazon S3 Cloud solution. It was also the first to be secured through Amazon’s AWS Marketplace meaning that this relationship is also now off the mark.

Valuation: Momentum recovery should drive upside

Following a period of investment and repositioning, WANdisco now looks very well placed to benefit from the growth in cloud and big data. Our current central scenario (delivery to our estimates for FY16 and FY17, then moderating y-o-y growth to 2025 and EBITDAC margins stabilising at 20%) returns a 225p fair value. We believe that the market and the company’s partners could support more aggressive growth at better margins, but we await further data before revising estimates. The company’s potential strategic value should also not be discounted.

Exhibit 1: Financial summary

$'000s

2013

2014

2015

2016e

2017e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

8,012

11,218

10,994

11,908

13,275

Cost of Sales

(1,579)

(2,165)

(749)

(1,748)

(1,997)

Gross Profit

6,433

9,053

10,245

10,160

11,278

EBITDA

 

 

(7,832)

(17,874)

(15,988)

(9,840)

(8,222)

Operating Profit (before amort and except)

 

 

(12,888)

(26,424)

(25,858)

(20,010)

(18,692)

Acquired Intangible Amortisation

0

0

0

0

0

Exceptionals

(2,276)

(1,586)

(614)

0

0

Share based payments

(4,104)

(11,907)

(4,057)

(4,057)

(4,057)

Operating Profit

(19,268)

(39,917)

(30,529)

(24,067)

(22,749)

Net Interest

(242)

557

(506)

(800)

(800)

Profit Before Tax (norm)

 

 

(13,130)

(25,867)

(26,364)

(20,810)

(19,492)

Profit Before Tax (FRS 3)

 

 

(19,994)

(39,360)

(31,035)

(24,867)

(23,549)

Tax

263

1,053

1,129

905

857

Profit After Tax (norm)

(12,867)

(24,814)

(25,235)

(19,906)

(18,636)

Profit After Tax (FRS 3)

(19,731)

(38,307)

(29,906)

(23,963)

(22,693)

Average Number of Shares Outstanding (m)

22.0

24.0

28.8

33.3

37.1

EPS - normalised (c)

 

 

(58.5)

(103.3)

(87.7)

(59.8)

(50.2)

EPS - normalised diluted (c)

 

 

(58.5)

(103.3)

(87.7)

(58.3)

(48.0)

EPS - (IFRS) (c)

 

 

(89.7)

(159.5)

(103.9)

(72.0)

(61.2)

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

80.3

80.7

93.2

85.3

85.0

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

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

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

8,403

10,224

8,813

5,843

2,573

Intangible Assets

8,092

9,814

8,583

5,265

1,647

Tangible Assets

311

410

230

578

926

Investments

0

0

0

0

0

Current Assets

 

 

36,184

16,933

9,283

16,018

9,929

Stocks

0

0

0

0

0

Debtors

10,511

14,452

6,728

7,450

9,520

Cash

25,673

2,481

2,555

8,568

409

Other

0

0

0

0

0

Current Liabilities

 

 

(15,874)

(13,043)

(12,562)

(22,932)

(33,009)

Creditors

(15,874)

(13,043)

(12,562)

(18,932)

(33,009)

Short term borrowings

0

0

0

(4,000)

0

Long Term Liabilities

 

 

(5)

(5)

(5)

(5)

(5)

Long term borrowings

0

0

0

0

0

Other long term liabilities

(5)

(5)

(5)

(5)

(5)

Net Assets

 

 

28,708

14,109

5,529

(1,077)

(20,512)

CASH FLOW

Operating Cash Flow

 

 

(11,588)

(13,551)

(18,224)

(5,192)

2,985

Net Interest

(242)

58

59

(800)

(800)

Tax

263

(3)

552

905

857

Capex (inc capitalised R&D)

(7,763)

(9,515)

(8,464)

(7,200)

(7,200)

Acquisitions/disposals

0

0

0

0

0

Financing (net)

30,235

465

26,175

14,300

0

Dividends

0

0

0

0

0

Net Cash Flow

10,905

(22,546)

98

2,013

(4,158)

Opening net debt/(cash)

 

 

(14,545)

(25,673)

(2,481)

(2,555)

(4,568)

HP finance leases initiated

0

0

0

0

0

Other

209

(619)

(16)

0

0

Closing net debt/(cash)

 

 

(25,673)

(2,481)

(2,555)

(4,568)

(409)

Source: Company data, Edison Investment Research

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority (www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by WANdisco and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority (www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by WANdisco and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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