WANdisco: Good Q2 Performance

WANdisco has reported a strong Q2, with its Application Lifecycle Management (ALM) business delivering good bookings growth and its Big Data business seeing a strong pipeline of potential customers. In addition, the software company has become a Gold level member of Oracle PartnerNetwork, thereby opening up access to Oracle’s global enterprise sales force and vast customer base of large corporations. The announcements provide us with further confidence that WANdisco’s strategy is moving according to plan. Ahead of the release of full year results on 18th September, we keep our forecasts unchanged and maintain our buy stance, with a target price of 1,456p.

Good Bookings Growth

For the three months ended 30th June 2014, overall bookings grew by 11% year-on-year to $3.4m (Q2 2013: $3.06m), with ALM bookings accounting for $3.3m (Q2 2013: $3.1m) and Big Data bookings accounting for $0.1m (Q2 2013: $0.2m). The ALM offering achieved some significantly sized renewals from existing customers, including Fannie Mae and Pixelworks, as many customers extended the usage of the product across their organisations. Notable new customers included Polycom and PetSmart. The Big Data offering achieved a new subscription from a wholesale logistics technology provider to the pharmaceuticals industry. For prospective Big Data customers, we understand that WANdisco has progressed a number of pre-contract evaluations, in which it is running its Non-Stop Hadoop software on the data centre infrastructures of global corporations.

Oracle Certification

WANdisco’s product, Non-Stop Hadoop for Cloudera, has been certified for distribution on Oracle Big Data Appliance-pre-configured Oracle servers for Hadoop installation and deployment. In doing so, WANdisco has become a Gold level member of Oracle PartnerNetwork, representing a major step forward in WANdisco’s channel distribution strategy. Oracle has a dedicated Big Data Appliance and indeed a dedicated Big Data salesforce as well as its generalist hardware salesforce. This new partnership has been given additional momentum by existing Oracle customers in the financial services and automotive manufacturing.

Valuation

The last reported cash balance was $25.67m (31st Dec. 2013) and we believe WANdisco may look to strengthen its capital base, either through equity or debt, in FY15. We maintain our DCF model, leading to a target price of 1,456p, and reiterate our stance of “buy”. We see the biggest risk to our forecasts coming from a delay in Big Data business wins.