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Record $25m contract with top 10 global telco

WANdisco 21 September 2022 Update
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WANdisco

Record $25m contract with top 10 global telco

Contract win

Software and comp services

21 September 2022

Price

403p

Market cap

£268m

US$1.14:£

Net cash ($m) as of 30 June 2022

31.3

Shares in issue

66.5m

Free float

67%

Code

WAND

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

20.0

45.1

29.3

Rel (local)

26.4

44.5

30.5

52-week high/low

418.0p

222.5p

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 Oracle, Amazon, IBM and Microsoft.

Next events

Q322 trading update

TBD

Analysts

Dan Ridsdale

+44 (0)20 3077 5729

Ken Mestemacher, CFA

+44 (0)20 3077 5700

WANdisco is a research client of Edison Investment Research Limited

WANdisco’s (WAND’s) $25m commit-to-consume agreement with a top 10 global telco is the company’s largest ever by some margin. This contract also adds credibility to management’s ability to successfully execute its growth strategy and we raise our estimates for FY22 bookings and ending remaining performance obligations (RPO). Until we gain more visibility on the rate of data consumption, we leave our revenue estimates unchanged. When considering the expected expansion of IoT, WAND’s robust pipeline and the recent number of reference wins, we see sizable uplift potential at all KPI levels.

Year end

Revenue

($m)

Bookings

($m)

Ending RPO*

($m)

EBITDA

($m)

EPS**

(c)

EV/Sales

(x)

Net cash

($m)

12/20

10.5

10.2

4.9

(22.2)

(57.3)

26.0

18.1

12/21

7.3

11.9

9.4

(29.5)

(57.9)

37.4

25.9

12/22e

12.0

60.0

57.4

(25.9)

(48.4)

22.8

21.2

12/23e

25.0

65.0

71.0

(15.3)

(29.0)

10.9

1.5

Note: *Ending RPO = beginning RPO + bookings – revenue. **EPS is normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Escalating deal sizes, use-case expansion

It is the fourth deal signed with the sale customer since an initial $1.5m March 2022 contract, making the total $39.3m to date. The progression of four contracts highlights the potential for WANdisco to scale revenues with large data users. In the IoT, where applications require continuous movement of very large volumes of data, we are now seeing a use case capable of driving strong, sustainable growth. The contract is a geographical expansion of smart metering beyond Europe and vertical use-case expansion into automotive applications.

Upgrading bookings: P&L unchanged for now

Management expects the contract win to generate record bookings in FY22, significantly ahead of current market expectations. As a result, we are boosting FY22e bookings to $60m from $45m previously and ending RPO to $57.4m. We see scope for further upside – this contract win boosts known FY22 bookings to $52m so far, so WAND only needs another $8m between now and year-end to reach our $60m FY22e estimate. We leave FY23e bookings unchanged at $65m. Although this growth looks modest given the very substantial increases this year, it is prudent to wait for evidence of deal flow before revisiting this figure.

Upgrade potential through the P&L

These upgrades create clear upside potential to our P&L estimates. However, as revenue recognition only occurs only when data are consumed, we leave our revenue estimates unchanged until we evidence of data consumption. While the cash payment schedule of this deal is not disclosed, this momentum also substantially reduces the likelihood the business will need to raise further cash.

Exhibit 1: Financial summary

$m

2020

2021

2022e

2023e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

Revenue

 

 

10.5

7.3

12.0

25.0

Cost of Sales

(1.1)

(0.7)

(1.2)

(2.5)

Gross Profit

9.5

6.6

10.8

22.5

EBITDA

 

 

(22.2)

(29.5)

(25.9)

(15.3)

Operating Profit (before amort. and except.)

 

 

(28.5)

(35.7)

(32.1)

(21.5)

Acquired Intangible Amortisation

0.0

0.0

0.0

0.0

Exceptionals

0.0

(2.1)

0.0

0.0

Share based payments

(5.4)

(2.0)

(3.1)

(4.0)

Operating Profit

(33.9)

(39.8)

(35.2)

(25.5)

Net Interest

(1.9)

1.0

0.7

0.7

Profit Before Tax (norm)

 

 

(30.4)

(34.7)

(31.4)

(20.8)

Profit Before Tax (FRS 3)

 

 

(35.8)

(38.8)

(34.5)

(24.8)

Tax

1.5

1.2

1.3

1.4

Profit After Tax (norm)

(28.9)

(33.5)

(30.1)

(19.4)

Profit After Tax (FRS 3)

(34.3)

(37.6)

(33.2)

(23.4)

Average Number of Shares Outstanding (m)

50.5

57.8

62.2

66.9

EPS - normalised basic (c)

 

 

(57.3)

(57.9)

(48.4)

(29.0)

EPS - normalised fully diluted (c)

 

 

(57.3)

(57.9)

(48.4)

(29.0)

EPS - (IFRS) (c)

 

 

(68.0)

(65.0)

(53.4)

(35.0)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross Margin (%)

89.9

91.0

90.0

90.0

EBITDA Margin (%)

NA

NA

NA

NA

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

NA

NA

NA

NA

KEY PERFORMANCE INDICATORS

Bookings

10.2

11.9

60.0

65.0

Ending RPO

4.9

9.4

57.4

71.0

BALANCE SHEET

Fixed Assets

 

 

10.1

8.7

8.5

8.6

Intangible Assets

5.0

5.3

5.6

6.0

Tangible Assets

2.9

2.2

1.7

1.4

Investments

2.2

1.2

1.2

1.2

Current Assets

 

 

31.2

33.5

30.6

14.5

Stocks

0.0

0.0

0.0

0.0

Debtors

10.1

5.7

7.0

10.0

Cash

21.0

27.8

23.6

4.5

Other

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(9.7)

(6.2)

(11.6)

(14.6)

Creditors & Deferred Income

(8.6)

(5.6)

(11.0)

(14.0)

Short term borrowings

(1.1)

(0.6)

(0.6)

(0.6)

Long Term Liabilities

 

 

(2.4)

(1.6)

(4.8)

(6.4)

Long term borrowings

(1.8)

(1.2)

(1.8)

(2.4)

Deferred Income

(0.7)

(0.3)

(3.0)

(4.0)

Net Assets

 

 

29.2

34.5

22.7

2.1

CASH FLOW

Operating Cash Flow

 

 

(19.1)

(29.1)

(19.1)

(14.3)

Net Interest

(0.3)

(0.2)

0.7

0.7

Tax

0.7

1.0

1.3

1.4

Capex (inc capitalised R&D)

(5.5)

(5.8)

(6.0)

(6.3)

Acquisitions/disposals

0.0

0.0

0.0

0.0

Financing (net)

24.1

41.9

19.5

0.0

Dividends

0.0

0.0

0.0

0.0

Net Cash Flow

(0.1)

7.9

(3.6)

(18.5)

Opening net debt/(cash)

 

 

(18.3)

(18.1)

(25.9)

(21.2)

HP finance leases initiated

0.0

(0.1)

(1.2)

(1.2)

Other

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(18.1)

(25.9)

(21.2)

(1.5)

Source: WANdisco, 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 £60,000 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 research department of Edison 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 2022 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

This document is prepared and provided by Edison 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.

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.

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

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 £60,000 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 research department of Edison 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 2022 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

This document is prepared and provided by Edison 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.

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.

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

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

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