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WANdisco’s $12.7m data migration deal with a global automotive manufacturer further strengthens the company’s position in the rapidly evolving automotive sector. It also highlights the central role that WANdisco plays in enabling data-centric Internet of Things (IoT) strategies. While the one-off nature of this contract means that the lifetime value of this deal is likely less than the recently announced large commit-to-consume deals, it is still very significant in size, prompting further upgrades to our bookings and cash estimates. The faster revenue recognition of this deal supports meaningful upgrades to revenues and reduced forecast losses.
WANdisco |
IoT migration win prompts upgrades |
Contract win |
Software and comp services |
23 December 2022 |
Share price performance
Business description
Next events
Analysts
WANdisco is a research client of Edison Investment Research Limited |
WANdisco’s $12.7m data migration deal with a global automotive manufacturer further strengthens the company’s position in the rapidly evolving automotive sector. It also highlights the central role that WANdisco plays in enabling data-centric Internet of Things (IoT) strategies. While the one-off nature of this contract means that the lifetime value of this deal is likely less than the recently announced large commit-to-consume deals, it is still very significant in size, prompting further upgrades to our bookings and cash estimates. The faster revenue recognition of this deal supports meaningful upgrades to revenues and reduced forecast losses.
Year end |
Revenue |
Bookings |
Ending RPO* ($m) |
EBITDA adj ($m) |
EPS** |
EV/sales |
Net cash ($m) |
12/20 |
10.5 |
10.2 |
4.9 |
(22.2) |
(57.3) |
64.3 |
18.1 |
12/21 |
7.3 |
11.9 |
9.4 |
(29.5) |
(57.9) |
92.7 |
25.9 |
12/22e |
19.0 |
116.0 |
105.0 |
(19.6) |
(38.3) |
35.6 |
24.5 |
12/23e |
28.0 |
120.0 |
197.0 |
(12.6) |
(25.0) |
24.2 |
15.5 |
Note: *Ending RPO = beginning RPO + bookings – revenue. **EPS is normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
One-off contract worth $12.7m for migrating IoT data
This agreement, worth $12.7m, is with a global Europe-based automotive manufacturer and WANdisco will migrate IoT data from the client’s data centre to the cloud. In contrast to recent record contract wins, this is a one-off migration rather than a commit-to-consume agreement. As a result, revenues will be recognised when software is delivered (rather than when consumed), and management estimates that 80% of the revenues will be recognised in FY22e and the rest in FY23e.
Enabling clients to develop new revenue streams
The automotive sector is undergoing a significant transformation, driven by vehicle electrification and digitisation, and the disruptive influence of companies such as Tesla which is developing increasingly service-oriented models. This is triggering a significant wave of investment as newer entrants grow and traditional players look to catch up. WANdisco looks to be extremely well placed to benefit from this. In this case, WANdisco is migrating a large amount of data to the cloud to enable the automotive manufacturer to implement IoT strategies. The recurring opportunity for WANdisco is in enabling manufacturers to migrate the huge amounts of data generated from car sensor networks to the cloud on an ongoing basis. The company’s recent wins totalling $25.3m with an automotive supplier were for such a deployment.
Valuation: Automotive wins lead to forecast upgrade
This deal leads to $64m worth of contract wins in IoT use cases across the automotive and telco verticals in Q422. The pipeline remains strong and we raise our revenue estimates to $19m in FY22 and $28m in FY23, up from the previous $12m and $25m, respectively. We lift our FY22 bookings forecast to $116m from $105m and maintain our previous $120m in FY23 bookings. FY23e Ending RPO reduces slightly to $197m from $200m due to the revenue upgrade. With near 100% gross margins and the cost base expected to remain relatively flat, revenue upgrades should drop strongly through to earnings.
Upgrading FY22 and FY23 estimates
After this new agreement, the statement confirms that FY22 revenues will be significantly ahead of market expectations and no less than $19m (Edison had expected $12m), with bookings expected to be more than $116m (Edison $105m, recently upgraded from $70m).
Year to date, WANdisco has announced nearly $114m in contract wins (see Exhibit 1) and is seeing an acceleration of interest in its solutions, with the pipeline at a record level in terms of both the number of opportunities and their combined value.
Exhibit 1: Notable deal wins in FY22
Date |
Client |
Use case |
Amount |
Model |
Cloud target |
Dec-22 |
Global automotive manufacturer |
IoT |
$12.7m |
One-off |
Not disclosed |
Dec-22 |
Tier 1 global telco supplier |
IoT |
$31m |
Commit-to-consume (CtC) |
Multiple |
Dec-22 |
Automotive components supplier (3rd agreement) |
IoT |
$13.2m |
CtC |
AWS |
Oct-22 |
Automotive components supplier (2nd agreement) |
IoT |
$7.1m across 5 years |
CtC |
GCP |
Sep-22 |
Large global telco (4th agreement) |
IoT, Hadoop workload migration |
$25m |
CtC |
Azure |
Jun-22 |
Top 5 Canadian financial services firm |
Hadoop workload migration |
$1.1m across 3 years |
CtC |
GCP |
Jun-22 |
Automotive components supplier |
IoT |
$5m across 5 years |
CtC |
AWS |
Jun-22 |
Leading Chinese information and communications technology providers |
Info and telecom |
$2.5m across 5 years |
Renewal and expansions of limited perpetual licences + maintenance |
On premises |
Jun-22 |
Large global telco (3rd agreement) |
IoT, Hadoop workload migration |
$11.6m (50% up front) |
CtC |
Azure |
Apr-22 |
Leading personal computer vendor |
Hadoop workload migration |
$213k |
CtC |
On premises |
Apr-22 |
Oracle customers |
Data lake migrations to Oracle cloud infrastructure |
$150k |
Prepay licence |
Oracle |
Apr-22 |
Top 10 global retailer |
Hadoop migration |
$720k |
CtC |
HP |
Apr-22 |
Large multinational insurance group |
IoT, Multi-cloud |
$630k |
CtC |
Azure |
Mar-22 |
Large global telco (2nd agreement) |
IoT, Hadoop workload migration, Multi-cloud |
$1.2m |
CtC |
Azure |
Mar-22 |
Large global telco supplier (initial agreement) |
IoT, Hadoop workload migration, Multi-cloud |
$1.5m |
CtC |
Azure |
Total |
$113.6m |
Source: WANdisco, Edison Investment Research
We continue to be encouraged by WANdisco’s momentum and we raise our FY22 and FY23 estimates (see Exhibit 2). We raise our revenue estimates to $19m in FY22 and $28m in FY23, up from the previous $12m and $25m, respectively. We lift our FY22e bookings forecast to $116m from $105m and maintain our previous $120m in FY23e bookings. We estimate FY23 Ending RPO should be $197m, down slightly from the previous $200m, which reflects the mathematical impact of revenues for the year being upgraded by more than bookings.
Operational gearing should be strong. With near 100% gross margins and the cost base expected to remain relatively flat, these new revenues should drop strongly through to earnings. We anticipate that continued momentum should result in WANdisco becoming a highly profitable business.
Exhibit 2: Forecast revision
FY22e |
FY23e |
|||||
$m |
Old |
New |
Change |
Old |
New |
Change |
Revenue |
12.0 |
19.0 |
58.3% |
25.0 |
28.0 |
12.0% |
% Growth |
64.2% |
160.1% |
- |
108.3% |
47.4% |
- |
Bookings |
105.0 |
116.0 |
10.5% |
120.0 |
120.0 |
- |
Ending RPO |
105.0 |
105.0 |
- |
200.0 |
197.0 |
(1.5)% |
Gross Cash Balance |
26.1 |
26.9 |
3.0% |
9.5 |
18.5 |
94.5% |
Adjusted EBITDA |
(25.9) |
(19.6) |
24.3% |
(15.3) |
(12.6) |
17.6% |
% Margin |
N/A |
N/A |
|
N/A |
N/A |
|
Normalised Operating Profit |
(32.1) |
(25.8) |
19.6% |
(21.5) |
(18.8) |
12.6% |
% Margin |
N/A |
N/A |
|
N/A |
N/A |
|
Normalised Profit before Taxes |
(31.4) |
(25.1) |
20.1% |
(20.8) |
(18.1) |
13.0% |
Reported Profit before Taxes |
(34.5) |
(28.2) |
18.3% |
(24.8) |
(22.1) |
10.9% |
Normalised Basic and Diluted EPS (c) |
(48.4) |
(38.3) |
20.9% |
(29.0) |
(25.0) |
13.9% |
Reported EPS (c) |
(53.4) |
(43.3) |
19.0% |
(35.0) |
(30.9) |
11.6% |
Net Debt/(Cash) (including leases) |
(23.7) |
(24.5) |
3.4% |
(6.5) |
(15.5) |
137.8% |
Source: Edison Investment Research
Exhibit 3: Financial summary
$m |
2020 |
2021 |
2022e |
2023e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|
|||||
Revenue |
|
|
10.5 |
7.3 |
19.0 |
28.0 |
Cost of Sales |
(1.1) |
(0.7) |
(1.9) |
(2.8) |
||
Gross Profit |
9.5 |
6.6 |
17.1 |
25.2 |
||
EBITDA (adjusted) |
|
|
(22.2) |
(29.5) |
(19.6) |
(12.6) |
Operating Profit (before amort. and except.) |
|
|
(28.5) |
(35.7) |
(25.8) |
(18.8) |
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) |
(28.9) |
(22.8) |
||
Net Interest |
(1.9) |
1.0 |
0.7 |
0.7 |
||
Profit Before Tax (norm) |
|
|
(30.4) |
(34.7) |
(25.1) |
(18.1) |
Profit Before Tax (FRS 3) |
|
|
(35.8) |
(38.8) |
(28.2) |
(22.1) |
Tax |
1.5 |
1.2 |
1.3 |
1.4 |
||
Profit After Tax (norm) |
(28.9) |
(33.5) |
(23.8) |
(16.7) |
||
Profit After Tax (FRS 3) |
(34.3) |
(37.6) |
(26.9) |
(20.7) |
||
Average Number of Shares Outstanding (m) |
50.5 |
57.8 |
62.2 |
67.0 |
||
EPS - normalised basic |
|
|
(57.3) |
(57.9) |
(38.3) |
(25.0) |
EPS - normalised fully diluted (c) |
|
|
(57.3) |
(57.9) |
(38.3) |
(25.0) |
EPS - (IFRS) (c) |
|
|
(68.0) |
(65.0) |
(43.3) |
(30.9) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
89.9 |
91.0 |
90.0 |
90.0 |
||
KEY PERFORMANCE INDICATORS |
||||||
Bookings |
10.2 |
11.9 |
116.0 |
120.0 |
||
Ending RPO |
4.9 |
9.4 |
105.0 |
197.0 |
||
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 |
61.9 |
47.5 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
10.1 |
5.7 |
35.0 |
29.0 |
||
Cash |
21.0 |
27.8 |
26.9 |
18.5 |
||
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) |
(29.8) |
(30.4) |
Long term borrowings |
(1.8) |
(1.2) |
(1.8) |
(2.4) |
||
Deferred Income |
(0.7) |
(0.3) |
(28.0) |
(28.0) |
||
Net Assets |
|
|
29.2 |
34.5 |
29.0 |
11.1 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(19.1) |
(29.1) |
(15.8) |
(3.6) |
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 |
(0.3) |
(7.8) |
||
Opening net debt/(cash) |
|
|
(18.3) |
(18.1) |
(25.9) |
(24.5) |
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) |
(24.5) |
(15.5) |
Source: WANdisco, Edison Investment Research
|
|
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