Wandisco's (LON:WAND) designation as an Amazon (NASDAQ:AMZN) Web Services (AWS) Advanced Technology Partner strengthens its position in the cloud ecosystem. We believe that a large, strategic deal remains in the pipeline, and the $17.5m capital raising (at a premium), should reassure potential partners. Our estimates are adjusted to reflect the new shares, but are otherwise unchanged. As highlighted in our last update note, there could be upside to FY19 estimates if a strategic deal is secured.
AWS deepens relationship; strategic deal ongoing
After a rigorous qualification process, WANdisco has been designated an Advanced Technology Partner by AWS. This represents AWS’s highest-tier relationship and is a big endorsement of the company’s technology by the largest player in the cloud ecosystem. AWS will now incentivise partners to sell Fusion alongside its solutions. It has also raised $17.5m in equity (at a 9% premium to market) from U.S. investors (the deal was restricted to the U.S. to avoid creating a second line of stock). No update on the strategic deal discussion is provided and it is still not certain that it will be secured, however this additional capital should at least reassure large customers on long-term funding.
Forecasts largely unchanged
WANdisco highlights a strong end to FY18 across its partner network, with revenue ‘in line’ with board expectations and a cash balance of $10.7m at year end. We recently lowered revenue forecasts to $18.7m as the timing of the strategic deal was pushed out (see our last note, Strategic progress but inflection pushed to FY19). No explicit guidance about FY19 is provided, but the strong momentum has continued into January. After factoring in the impact of the increased share count and capital raising, we leave our forecasts unchanged. Reaching a strategic deal with a major partner could generate upside to our near-term estimates.
Valuation: Prospect of further deals supports rating
A reverse DCF suggests the current valuation (£312m) implies c 30% revenue growth sustained until 2025 and reaching a 25% EBITDAC margin. Deepening relationships with fast-growing key partners in cloud market is the key to delivering that, in our view. We will examine WANdisco’s strategic prospects in more detail in a forthcoming note, but recent newsflow suggests the company is making progress. Converting these deepening relationships into financial performance is now the focus for FY19.
Business description
WANdisco is a distributed computing company. It has developed a suite of solutions based on proprietary replication technology, which solve critical data management challenges prevalent across cloud computing, big data and the ALM software markets.
