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WANdisco continued its run of large contract wins with the announcement of a record $31m commit-to-consume (CtC) agreement with a tier 1 global telco supplier. This win highlights the product/market fit and potential of the Internet of Things (IoT) use case, where applications require continuous movement of large amounts of data. We raise our FY22e and FY23e bookings and ending remaining performance obligations (RPO) as WANdisco’s momentum is encouraging. Until we have more visibility on the rate of data consumption, we leave our revenue estimates unchanged, although these recent wins provide potential for significant upgrades.
WANdisco |
Record $31m win with a global telco |
Record contract win |
Software and comp services |
20 December 2022 |
Share price performance
Business description
Next events
Analysts
WANdisco is a research client of Edison Investment Research Limited |
WANdisco continued its run of large contract wins with the announcement of a record $31m commit-to-consume (CtC) agreement with a tier 1 global telco supplier. This win highlights the product/market fit and potential of the Internet of Things (IoT) use case, where applications require continuous movement of large amounts of data. We raise our FY22e and FY23e bookings and ending remaining performance obligations (RPO) as WANdisco’s momentum is encouraging. Until we have more visibility on the rate of data consumption, we leave our revenue estimates unchanged, although these recent wins provide potential for significant upgrades.
Year end |
Revenue |
Bookings |
Ending RPO* ($m) |
EBITDA |
EPS** |
EV/sales |
Net cash ($m) |
12/20 |
10.5 |
10.2 |
4.9 |
(22.2) |
(57.3) |
58.9 |
18.1 |
12/21 |
7.3 |
11.9 |
9.4 |
(29.5) |
(57.9) |
84.9 |
25.9 |
12/22e |
12.0 |
105.0 |
105.0 |
(25.9) |
(48.4) |
51.7 |
23.7 |
12/23e |
25.0 |
120.0 |
200.0 |
(15.3) |
(29.0) |
24.8 |
6.5 |
Note: *Ending RPO = beginning RPO + bookings – revenue. **EPS is normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Largest ever deal, with scope to grow further
This contract marks the largest deal in WANdisco’s history and the second with a global telco supplier, following September’s $25m win. This client will use WANdisco’s technology to migrate IoT data to the cloud and, as with other recent contracts, half of the $31m will be paid in advance following the project’s commencement. The company sees good potential to grow this initial value further as data consumption and use cases expand.
Telco industry supports strategic IoT market
The telco industry is key for WANdisco, as it supports several verticals with their own IoT use cases, and this client is one of the largest global services suppliers of IoT applications. Management expects initial use cases to include smart meters, automotive, manufacturing and natural gas-related data. The IoT market provides a strategic opportunity for WANdisco, as IoT devices generate a recurring stream of data that must be gathered and sent to the cloud. As a result, telecom suppliers have an ongoing need to migrate data as significant amounts are generated every day, a great product/market fit for WANdisco in supporting IoT implementations like this.
Valuation: Deal momentum leads to forecast upgrade
Deal momentum has accelerated substantially in Q422, with $51m worth of contract wins announced in IoT use cases across the automotive and telco verticals. The pipeline remains very strong, as CEO, David Richards discussed in our recent EdisonTV interview. We raise our bookings estimates to $105m in FY22e and $120m in FY23e (previously $70m for both years), and boost ending RPO to $105m in FY22e and $200m in FY23e (previously $67.4m and $112.4m). We leave our revenue estimates unchanged until we gain more visibility on the rate of data consumption, as revenues are recognized only when data are consumed. With near 100% gross margins and the cost base expected to remain relatively flat, revenue upgrades should drop strongly through to earnings.
Raising FY22 and FY23 estimates
The accelerating momentum in contract wins (see Exhibit 1) and significant potential of the high-growth IoT market are encouraging. Year to date, WANdisco has announced nearly $101m in contract wins. As we mentioned in our previous note, WANdisco 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 |
Tier 1 global telco supplier |
IoT |
$31m |
CtC |
Not disclosed |
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 |
$100.9m |
Source: WANdisco, Edison Investment Research
WANdisco’s momentum is positive and leads us to increase our FY22 and FY23 estimates. We raise our bookings estimates to $105m and $120m in FY22 and FY23, respectively, from $70m previously in both years (see Exhibit 2). We lift our ending RPO to $105m in FY22e, up from $67.4m previously, and to $200m in FY23e, up from $112.4m previously. We leave our revenue estimates unchanged until we gain more visibility on the rate of data consumption. As a reminder, major deals will immediately benefit the primary KPIs of bookings and ending RPO, while revenues are recognised in step with the client’s migration of data.
Operational gearing should be strong. With near 100% gross margins and the cost base expected to remain relatively flat, revenue upgrades should drop strongly through to earnings. Continued momentum should result in WANdisco becoming a highly profitable business.
Exhibit 2: Forecast revision
FY22e |
FY23e |
|||||
Old |
New |
Change |
Old |
New |
Change |
|
Revenue |
12.0 |
12.0 |
- |
25.0 |
25.0 |
- |
% Growth |
64.2% |
64.2% |
- |
108.3% |
108.3% |
- |
Bookings |
70.0 |
105.0 |
50.0% |
70.0 |
120.0 |
71.4% |
Ending RPO |
67.4 |
105.0 |
55.8% |
112.4 |
200.0 |
77.9% |
Gross cash balance |
23.6 |
26.1 |
10.6% |
4.5 |
9.5 |
110.6% |
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 |
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 |
||
KEY PERFORMANCE INDICATORS |
||||||
Bookings |
10.2 |
11.9 |
105.0 |
120.0 |
||
Ending RPO |
4.9 |
9.4 |
105.0 |
200.0 |
||
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 |
52.6 |
38.5 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
10.1 |
5.7 |
26.5 |
29.0 |
||
Cash |
21.0 |
27.8 |
26.1 |
9.5 |
||
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) |
(26.8) |
(30.4) |
Long term borrowings |
(1.8) |
(1.2) |
(1.8) |
(2.4) |
||
Deferred Income |
(0.7) |
(0.3) |
(25.0) |
(28.0) |
||
Net Assets |
|
|
29.2 |
34.5 |
22.7 |
2.1 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(19.1) |
(29.1) |
(16.6) |
(11.8) |
Net Interest |
(0.3) |
(0.2) |
0.7 |
0.7 |
||
Tax |
0.7 |
1.0 |
1.3 |
1.4 |
||
Capex (including 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 |
(1.1) |
(16.0) |
||
Opening net debt/(cash) |
|
|
(18.3) |
(18.1) |
(25.9) |
(23.7) |
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) |
(23.7) |
(6.5) |
Source: WANdisco, Edison Investment Research |
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