WANdisco: Accelerated Development

A period of breakneck development since IPO culminated with the company securing its first big data customer. A strong start to 2013 prompts a 20% upgrade to bookings. Conversion of only a modest proportion of Hadoop opportunities could significantly transform the P&L.


Textbook debut year
WANdisco’s (WAND.AIM) progress since its June 2012 IPO has been impressive, with the company delivering strong financial performance and significantly exceeding operational expectations. Enabled by the IPO fundraising, the sales team is now translating into an acceleration in growth. Facilitated by its listed share capital, the acquisition of AltoStor helped bring on board key staff, significantly accelerating the company’s big data development programme and broadening the product offering.

Accelerated Hadoop progress
Having released its first Hadoop products to market 12 months ahead of schedule, the company has secured a major UK telco as is first customer. The pipeline looks extremely strong, fueled by the promise of WANdisco’s Non-Stop Name Node product to improve the availability and resilience of Hadoop implementations. If proof of concepts convert into broader implementations, contract values significantly in excess of $1m seem likely. A number of OEM opportunities are also being explored, which would serve as a further validation of the company’s technology and open up the possibility of rapidly scaling growth.

Multiple growth vectors
Meanwhile, the established Subversion ALM business is performing exceptionally well and was the sole driver behind the strong growth in bookings over the course of 2012 (up 71% y-o-y to $7.9m) and Q13 (up 93% to $3m). Expansion of the product set and sales capability should accelerate the run rate from here. Thus we are upgrading our bookings forecasts for 2013 and 2014 by 20% and 12% respectively. Respective sales estimates move up by 11% and 16%, although increased investment widens 2013 EBIT adj loss by 20%. Amodest number of enterprise-wide or OEM deals could drive significant further upside to estimates.

Valuation: Acceleration priced in, but scope for more
The 2013 EV/Sales ratio of 29x suggests a step change in financial performance is being priced in. However, if the company continues to cement itself as key player in Hadoop, financials should be transformed, giving the company ample potential to deliver upside on the current £168m market capitalisation.

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