WANdisco’s announcement that it has signed two of its largest ever deals provides support for our full year estimates, which assume a strong uptick in H2 bookings. It also provides a welcome opportunity to focus on the business following the boardroom battle that has dominated recent headlines. We maintain our view that, from a commercial and market development perspective, things appear to be coming together for WANdisco. We believe that improved financial performance should follow and that the company is building a platform for scalable growth.
Two large deals announced
The larger deal, worth $1.5m, is with a US financial institution and was sold through a major Oracle reseller. It is the company’s largest deal to date stemming from its relationship with Oracle. We expect the Oracle and IBM partnerships to be the primary drivers of bookings growth in the near term, while relationships with Amazon, Google and Microsoft have the potential to scale up and accelerate growth further out. The other deal, worth $775k with a major European headquartered bank (a new customer), is for the for the ALM business and a welcome sign that this side of the business is starting to pick up following the struggles of the last 18 months or so. We understand that most of the cash from these deals will be collected upfront, supporting H2 cash flow.
Resumption of strategy post-boardroom battle
The company’s boardroom battle, which has dominated headlines of late, now appears over, with David Richards resuming his role as CEO and also becoming interim chairman pending the appointment of a suitable candidate. He is joined on the board by William Dollens from US fund and 4.5% shareholder Global Frontier Investments as a non-executive. Erik Miller has rejoined the company as interim SVP of finance. We believe these changes are likely to mean that WANdisco’s strategy remains essentially as it was, with the focus on growing the business through capitalising on the opportunity in big data and storage, controlling costs and moving towards cash flow break-even. From an IR perspective, the outcome of these events may now herald a greater focus on engaging with US investors.
Valuation: Estimates unchanged
Our estimates are unchanged and will be reviewed when there is more stability and as further data become available. Our central scenario, whereby the company delivers to our estimates for FY16 and FY17, bookings growth moderates year-onyear to 2025 and EBITDAC margins stabilise at 20%, returns a 225p fair value, up from 201p, as we roll the year forward and reflect exchange rate changes.