Wandisco Plc FY Update... 'Hit 'Em with the Fusion, Nah'
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WANdisco plc WAND – LSE; WAND.L January 16, 2018 European Software & IT Services BUY COMPANY UPDATE FY update... ‘Hit 'em with the fusion, nah’ Price (15 January 2018) 830p Summary Changes Previous Current Rating - BUY WANdisco smashes our 2017 forecast with bookings, +45% YoY to US$22.5m – besting Target Price 1,062p 1,067p our US$20.8m estimate. The start-turn was ‘Fusion’ where bookings are +121% YoY to US$15.7m - we had expected US$12.6m. Also, CFO Erik Miller continues to delight on Key data cash, US$27.4m, ahead of estimates. Whilst WANdisco did not disclose to revenue or Bloomberg/Reuters codes: WAND LN / WAND.L EBITDA detail we elected to make small upgrades as we ‘bake-in’ the bookings beat. Market cap (£m) 276 Net/net we raise 2017E revenue from US$16.8m to US$18.6m and Adj EBITDA from - FTSE ALL SHARE 4,264 US$2.4m to -US$1.79m. Whilst it is easy to get carried away with the numbers beat in 1mth perf (%) 45.6 truth we are more impressed by the CEO Mr Richards commentary that “. there has 3mths perf (%) (3.8) been a transformation at WANdisco which started when we launched our core WANdisco 12mths perf (%) 270.5 Fusion product ‘. With this we are reminded that Mr Richards has, by evolving Fusion as 12mth high-low (p) 890 - 246 a general data replication platform (i.e. this is no longer the Hadoop-play) he has created Free float (%) 75 shareholder value 'in the moment' and for the long term as Fusion maps onto a changing market. Also shows that he is cognizant of the product life cycle and the constant need Key financials for product refresh. This morning we expect that Mr Richards is likely singing along to Allan Kingdom and ‘The Fusion’ ‘I be off the loud pack / I be off the bounce back’ as he Year to Dec 2016A 2017E 2018E weaves his way to work through San Francisco traffic – as long as he has dialled in to Sales 11.4 18.6 21.9 Hip Hop Corner on the car stereo. To reflect the forecast changes we increase our target EBITDA (adj) (7.5) (1.8) 1.0 price to 1067p (1,062p) and retain our Buy. EV/EBITDA (x) (50.1) (199.6) 358.4 PE adj (x) NA NA NA EV/Sales (x) 32.9 19.3 16.4 Key Points EPS adj (c) (0.47) (0.24) (0.14) News. In an FY trading update WANdisco announces that bookings are +45% YoY to Prices are as of close 15 January 2018 US$22.5m, US$15.5m YoY, and ahead of our US$20.8m estimate. Fusion bookings All sources unless otherwise stated: Company are +121% to US$15.7m, 2016: US$7.1m and Stifel: US$12.6m. Cash of US$27.4m, data, FactSet, Stifel estimates including US$4.0m from the new growth capital facility, at 31 December 2017 (30 June Share price performance (indexed) 2017: US$9.9m). Stifel estimate US$23.8m. 350 Operational highlights. WANdisco signed two new contract awards with major financial 300 institutions, US$4.32m and US$4.1m respectively contract, both secured via the IBM OEM partnership. Other contracts include a US$2.0m contract for WANdisco Fusion with 250 one of the world’s largest retailers and a first contract win for WANdisco Fusion in the 200 healthcare sector with a major American healthcare company. 150 David Richards, CEO and Interim Chairman: “We have begun 2018 with a strong new 100 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 business pipeline across multiple industry verticals, not only through our partnership with Absolute Rel.FTSE ALL SHARE (ASX) IBM, but also via our other channel partners, as we maximise our routes to market. With the proceeds of the recent placing we have the resources to capitalise on the opportunity in front of us.” Impact on forecasts. We have changed 2017E forecasts to reflect the news. We have raised FY revenue to US$18.6m, from US$16.8m prior. In addition we raised Adj EBITDA to -US$1.79m from -US$2.4m prior estimate. Diary date. Finals early March 2018 George O'Connor | +44 (0) 20 7710 7694 | george.o'[email protected] UK Sales Desk | +44 (0) 20 7710 7600 Completed: 16 January 2018 02:15EST Disseminated: 16 January 2018 02:15EST MiFID II - Research: Is your access agreed? CONTACT us today Stifel does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. All relevant disclosures and certifications appear on pages 23 - 25 of this report. WANdisco plc Company Update WAND – LSE January 16, 2018 European Software & IT Services Key data1 Key information Key profit and loss data ($) Target price methodology/risks 2016A 2017E 2018E Target price methodology. We use a blended model to arrive at our Sales 11.4 18.6 21.9 12-month target price of US1,471cents/1,067p (note: we are using GB EBITDA (9.3) (3.0) (0.6) £:US at $1.38), using discounted cash flow, sum-of-the-parts and free EBITDA margin (%) (81.3) (16.4) (2.6) cash flow yield. While WANdisco has a number of adjacent growth opportunities, we believe the ‘cash generation’ bias in our valuation Gross profit 10 17 20 methodology reflects how investors see the benefits of subscription- Net income (9.2) (12.4) (7.8) based business models. PBT rep (10.0) (13.3) (8.7) EBITDA adj (7.5) (1.8) 1.0 Risks to target price. In addition to general and macroeconomic risks, Depreciation & amortisation 9 8 8 the downside risks include continued deceleration in the source code DPS 0.00 0.00 0.00 and Big Data markets. This would impact cash inflow and thereby increase cash outflow and lessen investor interest. Upside risks include Key cash flow data ($) a better-than-expected revenue growth, possibly as a consequence of the channel partner sales accelerating faster than anticipated. 2016A 2017E 2018E Operating profit (17.9) (10.9) (8.8) Operating cash flow (2.2) 3.9 4.2 Business description Capex (0.1) (0.1) (0.1) WANdisco is an infrastructure software company that has developed a Dividends 0.00 0.00 0.00 patent-protected method for data replication of across heterogeneous Net debt (7.3) (23.4) (22.2) compute environments. Taxes paid (0) 1 1 Cash flow from investing 5 19 (1) Senior management FCF (8.3) (0.8) (1.2) David Richards - CEO Dividends 0.00 0.00 0.00 Cash at end of year 8 27 26 Erik Miller - CFO Key balance sheet ($) Key dates 2016A 2017E 2018E Cash and cash equivalents 7.6 26.8 25.5 Mar 2018 - Finals Total assets 20.2 39.4 37.9 Major shareholders Oppenheimer Funds 12.9% T. Rowe Rice International 4.74%% Ross Creek Capital 3.58% Global Frontier Investments 2.59% Herald Investment Management 1.89% Website www.wandisco.com 1 Year end December Data in millions, except per share and percentages Source: Company data, FactSet, Stifel estimates 2 WANdisco plc Company Update WAND – LSE January 16, 2018 European Software & IT Services WANdisco FY update . ‘Hit 'em with the fusion, nah’ The news WANdisco provides an update on the performance of its business in the second half and full year results to 31 December 2017. Financial highlights . Record bookings secured in 2017, up 45% YoY to US$22.5m, US$15.5m YoY, and ahead of our US$20.8m estimate. H2/2017 bookings +28% YoY to US$12.3m, US$9.6m YoY. These are ahead of our estimates, and up sequentially from US$9.7m in H1/2017A . Big Data bookings, i.e WANdisco Fusion, +121% in 2017 to US$15.7m, US$7.1m YoY. Stifel: US$12.6m . Details suggest Source Code Management bookings cUS$6.8m - our estimate was US$8.3m . A new US$5.0m term loan facility with Silicon Valley Bank, with an additional US$3.0m revolving credit facility . Raising US$22m gross proceeds via a 2.97m share placing 4 December 2017 . Cash of US$27.3m, including US$4.0m from the new growth capital facility, at 31 December 2017 (30 June 2017: US$9.9m). Stifel estimate US$23.8m Operational highlights . Two new contract awards with major financial institutions, a record US$4.32m contract win as well as a US$4.1m contract, both secured through the IBM OEM partnership . A US$2.0m contract for WANdisco Fusion with one of the world’s largest retailers . A first contract win for WANdisco Fusion in the healthcare sector with a major American healthcare company Technology . Released WANdisco Fusion 2.11, the latest version of the Company's patented data replication product which includes substantial performance improvements to the Fusion core replication engine, resulting in flexible installation processes for users, as well as significant product performance improvements of up to 75% from the prior version . Launched one of the industry’s first Hybrid Data Lake architecture in collaboration with Amazon Web Services (“AWS”) . Integrated with AWS Snowball, a secure appliance to transfer large amounts of data in and out of the AWS cloud Route to market .