A substantial shift in the Hadoop supply landscape and sales execution issues in ALM held up progress in H115. However, with the launch of Fusion we believe the company is strongly positioned within an evolved big data market place. Limited visibility prompts a substantial cut to our booking and revenues estimates, as well as costs, but while the timing is difficult to gauge, we still expect a sustainable acceleration in operationally geared growth. Visibility of this is the key catalyst for upside.
2015 has seen a substantial evolution in both the Hadoop supply landscape and WANdisco’s product offering. In particular, the entry of the major storage vendors into the market has proliferated the supply landscape and shifted the balance of power. WANdisco’s progress has been held up in these shifting sands, but with the launch of Fusion we believe that the company is establishing a product and partner platform to accelerate its global penetration of enterprise customers. The noninvasive nature of Fusion enables it to easily integrate with multiple vendors within Hadoop or mixed-storage environments and the company is deepening its relationships with tier-one storage vendors such as IBM, Oracle, HP and EMC. Ten new big data customers were won in H1, with eight in Q2 after the Fusion launch.
While timing is difficult to gauge, we still believe that the company’s strengthened product and channel relationships, plus scale-ups from its growing Big-Data customer base should drive a sustainable operationally geared acceleration in growth. However, visibility is still limited and given the 40% drop in bookings in H1 – primarily due to a substantial drop in ALM new business wins – we reduce our FY15e and FY16e bookings by 37% and 45% to $15.4m and $24.3m respectively. Cost reductions mitigate the impact on profitability and cash burn, and the company retains its $10m debt facility with HSBC, although further cash is likely to be required before the end of FY16 on the basis of our current estimates.
Given WANdisco’s market position, business model and IP, we believe it is well placed to generate value significantly higher than the current £42m market capitalisation. Our reverse DCF suggests that the current share price factors in achievement of our 2015 forecasts followed by c 20% mid-term bookings growth to 2020 (taking revenues to $50m) with EBITDA margins reaching 20% at maturity. Given the size of the big data opportunity, with good execution we believe there is scope for WANdisco to substantially exceed these figures.
