WAND.L Regulatory News (WAND)

15 June 2022

WANdisco plc

("WANdisco", the "Company" or the "Group")

Preliminary unaudited results for the year ended 31 December 2021

- Commit to Consume contract structure to drive greater adoption of WANdisco solutions in future periods

- General Availability of LiveData Migrator for Microsoft Azure critical to driving pipeline conversion

- Largest ever multi-year contract win with large global automotive supplier

WANdisco (LSE: WAND), the LiveData company announces preliminary unaudited results for the year ended 31 December 2021.

Financial headlines

· Revenue for the year of $7.3 million (2020: $10.5 million)

· Cash overheads1 of $41.5 million (2020: $36.9 million)

· Adjusted EBITDA2 loss of $29.5 million (2020: $22.2 million)

· Statutory loss from operations of $37.6 million (2020: $34.3 million)

· Cash at 31 December 2021 of $27.8 million (2020: $21.0 million)

Strategic and operational highlights

· Announced LiveData Migrator for Azure ("LDMA") General Availability, critical to pipeline conversion

· Commit to Consume contract structure to be widely utilised across all future clients, where a customer is contracted to move a minimum amount of data over a given time:

o  Customers continue to benefit from the flexibility of our scalable cloud-based solutions

o Provides WANdisco with a stream of committed revenues that have the potential to increase as customers' data needs expand, increasing revenue visibility

o  Signed the first Commit to Consume contract in 2021 with an existing US Telecom customer, worth $1.0 million over five years, with a significant opportunity for further consumption growth

o  Secured the Company's largest Commit to Consume contract valued at a minimum of $6 million over five years, to replicate over an exabyte of automobile Internet of Things ("IoT") sensor data to the Google Cloud. Revenues will be realised in FY22 and in later years

· Channel partner ecosystem continues to offer exciting revenue opportunities; through our partnership with IBM, we secured a 3 year $3.3 million contract with a large North American investment bank for the use of LiveData Migrator ("LDM"), with a 50% revenue share

· Snowflake partnership continues to complement WANdisco's existing Databricks relationship, consolidating the Company's market position in supporting machine learning applications

· Key investments made in channel and direct sales capacity to further establish product availability

· Meaningful commercial momentum with blue chip customers and partners:

o  Initial contract won with a top 5 UK bank to migrate to Amazon Web Services

Outlook

· The Company's successful transition to a cloud-centric, consumption-based model over the last year has allowed the business to deepen its strategic relationships with key partners such as Oracle and provided greater near term visibility on revenue and pipeline more generally

· Significant success with IoT service providers, whilst the General Availability with Microsoft for LDMA marked a significant milestone in the Company's history

o  IoT use cases are growing and led to new business worth over $2.6 million in Q122 with a global telecoms customer

· The major reorganisation of the Company's sales and go-to-market functions has begun to bear fruit with improved H2 2021 results, greater pipeline visibility, lower operating costs and expansion into new verticals and use cases for our products

· FY21 bookings increased 17% to $11.9 million from $10.2 million in the prior year, whilst ending Remaining Period Obligations ("RPO") rose to $9.4 million for FY21, up 92% year on year3

· This significant strategic progress made in FY21 provided a springboard for strong business momentum in Q122 with multiple new contract wins for our LDM solution, both directly and via key cloud channel partners including Azure, AWS and IBM, as well as our principal analytics partners Databricks and Snowflake

· The strong trading seen in Q122 continues unabated into Q2, giving the Board increasing confidence in its outlook and ability to deliver increased revenues, bookings and Ending RPO for FY22.

David Richards, Chief Executive Officer and Chairman of WANdisco, commented:

"We made significant strategic progress in FY21 reorganising our go-to-market operation and cost structure. This has provided us greater revenue visibility, accountability and efficiencies to drive our business forward, and I am confident that we will continue to convert on our strong pipeline of cloud migration opportunities in FY22.

Our achievements in Q421 provided a springboard for our new business acceleration into Q122 and we are extremely excited about the significant market opportunities that lay ahead of us for the rest of this year. We are well placed to capture significant opportunities as we look to enter new verticals and capitalise on an expected increase in IoT-driven deals.

Along with the improvements made to the business in H2 2021, we announced that our product developed for Microsoft, Live Data Migrator for Azure was now generally available. Achieving General Availability offers potential, new and existing customers increased confidence in our products and simplifies the ordering process, which is essential to converting on our growing pipeline.

We also shifted from multi-year subscription contracts to the preferred transacting method for cloud customers with the adoption of Commit to Consume contracts. The Commit to Consume contract structure allows customers to try before adopting our solutions with very little risk, whilst allowing us to capture the growth in consumption that logically stems from the adoption of cloud-based solutions.

We have also been able to strengthen and expand our partner ecosystem with some of the largest organisations in the world such as IBM and Oracle, who continue to depend on us to support their businesses and their enterprise customers with critical data migrations to the cloud.

In 2022, the business is focused on continuing the acceleration of business started in H2 2021. As we have announced post period end, we have made significant achievements with major contract wins in the IoT space, in addition to continuing to secure large contracts for replicating on premises Hadoop data to the cloud. With our recent contract wins, unique set of solutions and high visibility of near-term pipeline, we remain confident in our ability to significantly improve results in FY22."

For further information, please contact:

About WANdisco

WANdisco is the LiveData company. WANdisco's LiveData Cloud Services enable enterprises to create an environment where data is always available, accurate and protected, creating a strong backbone for their IT infrastructure and a bedrock for running consistent, accurate machine learning applications. With zero downtime and zero data loss, WANdisco LiveData Platform keeps geographically dispersed data at any scale consistent between on premises and cloud environments allowing businesses to operate seamlessly in a hybrid or multi-cloud environment. For more information on WANdisco, visit www.wandisco.com.

BUSINESS REVIEW

In 2021, we announced LDMA General Availability, a critical step in converting pipeline. A new Azure service, the LiveData Platform for Azure, allows customers to use our software as if it were a native Azure offering. As an Azure service, customers can deploy WANdisco's LiveData products by selecting it from the same Azure menu used for native Microsoft services such as compute and storage, with metered billing added on their existing monthly Azure payments. No software to install, no new contracts to sign, no barrier to entry.

The General Availability of LDM ("LiveData Migrator") and LDMA was essential to the acceleration of business in the second half of 2021. Achieving the General Availability milestone provided potential customers with greater assurance about their ability to embark on petabyte-scale data migration projects with WANdisco and, as such, is steadily unlocking a pipeline of growth opportunities - especially in IoT. Key to these wins was the Company's cloud agnostic solution that moves large amounts of data from on premise Hadoop to multiple different clouds. A strategic selling point to customers is that LDM can move data to any of the cloud providers and provides ultimate ownership of data to the customer, allowing them to avoid vendor lock-in while enabling arbitrage cloud pricing and increased functionality. Additionally, the Company's ability to migrate data at scale without requiring any system downtime, along with its capacity to automatically migrate data changes as they occur - ensuring data consistency - were key factors in securing new business.

In 2021, the business made steady progress in its transition to a cloud-centric, consumption-based model, resulting in more predictable revenues (unbilled backlog, or RPO), reduced discounting (metered pricing) and increased upsell opportunities. The cloud platform model of the "Commit to Consume" contract structure, where a customer is obligated to move a minimum amount of data over a given time, is now the standard for WANdisco. This helped drive strong bookings and RPO growth in H2 2021 as WANdisco benefitted from a stream of committed revenues that have the potential to increase as customers' data needs expand.

In Q3 2021 we signed our first Commit to Consume contract, a $1.0 million, 5-year deal with an existing US telecoms customer with a significant opportunity for further consumption growth. Following this win, in Q4 2021 the Company secured a Commit to Consume contract valued at a minimum of $6 million over five years, to replicate over an exabyte of automobile sensor data (IoT data) to the Google cloud. Additionally, through its channel partner IBM, the Company secured a $3.3 million contract with a large North American investment bank for the use of LDM, with a 50% revenue share.

The new contract wins achieved in Q4 2021 directly and through key industry partners are testament to the strategic progress achieved across the business this year, while the General Availability of the LiveData Platform for Azure was a critical step in converting WANdisco's new business pipeline. The Company is excited by the opportunities in the market to enter new verticals and is well placed to capitalise on an expected increase in IoT-driven deals in 2022. Q4 2021 saw a significant increase in bookings and RPO and this momentum, combined with high near-term visibility, gives confidence in the Company's ability to execute on our 2022 pipeline.

COVID-19 update

The global nature of the COVID-19 virus has resulted in macroeconomic uncertainty, which appears to be receding in the geographies we operate in. We are constantly monitoring the impact that COVID-19 may have in current and future periods but historically we have experienced minimal effects on our customer base and order flow, and are well positioned to operate should COVID-19 restrictions return.

Conflict in Ukraine and Russia

As an organisation we want to express how shocked and saddened we are by the humanitarian crisis in Ukraine and are constantly monitoring the situation. We will continue to seek advice as the situation evolves and hope that the conflict can be resolved as soon and humanely as possible.

Historically, we only had some customers in Russia who were not significant in scale relative to our overall operations. We have kept apprised of the latest sanctions, and upon the advice of legal counsel have recently announced internally that we cannot provide any of our products or services in Russia, nor can we continue to provide products or services with current Russian customers. 

KPIs to map shift to consumption-based revenue model

Group revenues have historically been characterised by subscription contracts in which the licence component of revenues is recognised upfront. As paying for consumption is the primary way cloud services are bought, WANdisco has begun a shift to a consumption-based model. We believe that a consumption model is the true Software as a Service ("SaaS") model, with customers expecting to purchase on a consumption basis within the cloud ecosystem through Commit to Consume contracts and metered billing.

To effectively build consumption revenue streams, sales compensation must also be changed to incentivise the activation of customers and the early commitment of customers to build consumption through the year, as opposed to a single point of sale.

A consumption-based model provides greater agility and the ability to scale as required and provides valuable data to evolve our product and offering. Data on how customers are using the product drives interaction with customer success much of which is automated.

This shift to a consumption model, where revenue is recognised over time rather than upfront, will lead to revenues scaling over the year, with revenue recognised further into the sales cycle.

As our business continues to evolve, the metrics we use to measure our success also need to change. To aid in mapping pipeline progress against this changing revenue model, we will provide quarterly business updates providing new KPIs including:

· Current and YTD Bookings

· Period ending RPO ("Remaining Performance Obligations")

The objective of these KPIs is to provide an indication of business closed in the period and YTD, and RPO as a measure of the future revenues to flow through as our customers consume data.

Outlook

In 2021, the business has made steady progress in its transition to a cloud-centric, consumption-based model, resulting in more predictable revenues (unbilled backlog, or RPO), reduced discounting (metered pricing) and increased upsell opportunities. This helped drive strong bookings and RPO growth in H2 2021 as WANdisco benefitted from a stream of committed revenues that have the potential to increase as customers' data needs expand.

The General Availability of the LiveData Platform for Azure was successfully launched in H2 2021. The announcement signified the completion of a multi-year joint project with Microsoft to integrate WANdisco's technology into its cloud fabric and unlock the Azure ecosystem for global blue-chips - one of the most important initiatives in WANdisco's history to date.

Following the major reorganisation of the Company's sales and go-to-market functions, we have seen the foundations of this begin to bear fruit with improved H2 2021 results, greater pipeline visibility for FY22 and lower operating costs.

Looking ahead, the high visibility of WANdisco's near term business pipeline underpins our confidence in strong trading in 2022. The Company is well placed to capture significant market opportunities in IoT-driven deals and expansion into new verticals in the coming year.

FINANCIAL REVIEW

Revenue for the year ended 31 December 2021 was $7.3 million (2020: $10.5 million).

Deferred revenue from sales booked during 2021 and in previous years, and not yet recognised as revenue, is $1.8 million at 31 December 2021, at 31 December 2020 this stood at $3.8 million. Our deferred revenue represents future revenue from new and renewed contracts, many of them spanning multiple years.

Adjusted EBITDA loss2 was $29.5 million (2020: $22.2 million), due primarily to the reduction in revenue and continued investments in the business.

Revenue

Revenue was $7.3 million (2020: $10.5 million), reflecting the emphasis on signing Commit to Consume contracts that are recognised rateably over the term of the contract rather than substantially upfront with subscription type arrangements. Commit to Consume arrangements allow for revenues to increase in proportion to the amount of data migrated whereas subscription contracts are for a fixed amount regardless of the amount of data migrated over the contractual term.

The move to Commit to Consume contracts resulted in increased bookings in 2021 of $11.9 million (2020: $10.2 million) and RPO increased to $9.4 million at 31 December 2021 (31 December 2020 $4.9 million).

18% of revenues in 2021 came from a multi-period subscription agreement with a new customer through a partner, which contributed to the total largest customer representing 22% of revenues.

Contract wins continue to exhibit variability in the timing of their completion.

Operating costs 

Cash overheads1 increased in the year as we made investments in go-to-market resources and engineering, rising to $41.5 million from $36.9 million in 2020. In November 2021, recognising that our cloud products are easier for customers to install and use, we optimised our cost structure, trimming an estimated $6 million in annual costs from the business on a forward looking basis.

Capitalised product development expenditure was $5.3 million in the year (2020: $5.2 million). All of this expenditure was associated with new product features.

Our headcount was 159 as at 31 December 2021 (31 December 2020: 180). The reduction in headcount was primarily due to our cost reduction efforts as discussed above.

Profit and loss

Adjusted EBITDA2 loss for the year was $29.5 million (2020: $22.2 million).

The loss after tax for the year increased to $37.6 million (2020: $34.3 million), as a result of the lower revenue and increased overheads and partially offset by a lower share-based payment charge. The financial gain of $1.1 million (2020: $1.8 million loss), reported within finance income/(costs), arose from the retranslation of intercompany balances at 31 December 2021, reflecting the decrease in Sterling against the US dollar. The impact of FX rate changes on the financial statements should be restricted to the retranslation of US dollar denominated intercompany loans, as opposed to the operating activities of the business. A translation loss (2020: gain) arising on the net assets of overseas subsidiaries reported in reserves results in a minimal impact on the group net assets.

Balance sheet and cash flow

Trade and other receivables at 31 December 2021 were $5.7 million (31 December 2020: $10.1 million). This includes $1.2 million of trade receivables (31 December 2020: $5.3 million) and $4.5 million related to non-trade receivables (31 December 2020: $4.8 million). The reduction in trade receivables was due primarily to the timing of revenues during the year.

Trade and other payables reduced to $4.2 million (31 December 2020: $5.5 million), mainly due to reduced commissions to the sales team due to the lower revenue in 2021.

Net consumption of cash was $34.0 million before financing (2020: $24.2 million), resulting in a closing cash balance of $27.8 million at 31 December 2021. The consumption of cash was due primarily to lower revenues and a modest increase in cash overheads. At 31 December 2021, we had drawings under our revolving credit facility with Silicon Valley Bank of $nil (2021: $0.6 million).

On 10 March 2021, the Group announced the subscription and placing of 6,885,572 new ordinary shares of 10 pence each in the Company by existing shareholders at a price of 446 pence (a discount of 0.4% on the closing share price on 9 March 21) raising gross proceeds of $42.5 million.

Consolidated statement of profit or loss and other comprehensive income

For the year ended 31 December 2021

The notes form an integral part of these condensed consolidated financial statements.

Consolidated statement of financial position

At 31 December 2021

The notes form an integral part of these condensed consolidated financial statements.

Consolidated statement of changes in equity

For the year ended 31 December 2021

The notes form an integral part of these condensed consolidated financial statements.

Consolidated statement of cash flows

For the year ended 31 December 2021

The notes form an integral part of these condensed consolidated financial statements.

Notes to the condensed consolidated financial statements

For the year ended 31 December 2021

1. Reporting entity

WANdisco plc (the "Company") is a public limited company incorporated and domiciled in Jersey. The Company's ordinary shares are traded on AIM. These condensed consolidated financial statements ("Financial statements") as at and for the year ended 31 December 2021 comprise the Company and its subsidiaries (together referred to as the "Group"). The Group is primarily involved in the development and provision of global collaboration software.

2. Basis of preparation

a Basis of accounting

Whilst the financial information included in this preliminary announcement has been prepared on the basis of the requirements of UK adopted International Financial Reporting Standards ("IFRSs") in issue and effective at 31 December 2021, this announcement does not itself contain sufficient information to comply with IFRS.

The Group expects to publish full Consolidated financial statements in June 2022. The financial information set out in this preliminary announcement does not constitute the Group's Consolidated financial statements for the years ended 31 December 2021 or 31 December 2020.

The financial information for 2020 is derived from the consolidated accounts for the year ended 31 December 2020 which have been audited and delivered to the registrar of companies with the Jersey Financial Services Commission ("JFSC"). The auditor has reported on those accounts; the audit reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 113B (3) or (6) of the Companies (Jersey) Law 1991. The financial information for 2021 is derived from the consolidated accounts for the year ended 31 December 2021, which have not yet been reported on by the Independent Auditors. Given the facts set out in Note 2(b), it is possible that the audit report for the year ended 31 December 2021 will contain a material uncertainty over the ability of the Group to continue as a going concern.

The Consolidated financial statements have been prepared in accordance with IFRSs as adopted for use in the UK.

The preliminary announcement has been prepared using the accounting policies published in the Group's accounts for the year ended 31 December 2020, which are available on the Company's website. From 1 January 2021 the new standards set out below were adopted by the Group.

(i) New and amended standards adopted by the Group

The following new standards and amendments to standards that are effective for the first time for the financial year beginning 1 January 2021 have been adopted:

- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16); and

- Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16).

These amendments to standards have not had a material impact on these Financial statements.

(ii) New and amended standards and interpretations issued but not effective for the financial year beginning 1 January 2021 and not early adopted

A number of new standards are effective for annual periods beginning after 1 January 2021 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these Financial statements.

The amended standards and interpretations are not expected to have a significant impact on the Group's consolidated financial statements.

2. Basis of preparation (continued)

b Going concern basis of accounting

These Financial statements have been prepared on a going concern basis, which assumes that the Group will be able to meet the mandatory repayment terms of the banking facilities as disclosed in Note 8.

As at 31 December 2021 the Group had net assets of $34.4m (31 December 2020: $29.2m), including cash of $27.8m (2020: $21.0m) as set out in the consolidated statement of financial position, with no debt facility outstanding (2020: debt facility drawn of $0.6m). In the year ended 31 December 2021, the Group incurred a loss before tax of $38.8m (2020: $35.8m) and net cash outflows before financing of $34.0m (2020: $24.2m).

During 2021, the performance of the Group declined, with revenues reducing by 31% to $7.3m (2020: $10.5m) and operating loss increasing to $39.8m (2020: $33.9m).

The Directors have prepared a detailed budget and forecast of the Group's expected performance over a period covering at least the next twelve months from the date of the approval of these financial statements. As well as modelling the realisation of the sales pipeline, these forecasts also cover a number of scenarios and sensitivities in order for the Board to satisfy itself that the Group remains within its current cash facilities, details of which are included in Note 8.  The cash flow model includes the injection of at least $17.0m from the proposed share placing expected following the year end. This funding is subject to the successful completion of the share placing, including shareholder approval. Neither of which are confirmed at the date of this announcement.

Whilst the Directors are confident in the Group's ability to grow revenue, the Board's sensitivity modelling (which considered the impact of Brexit, COVID-19, recession risks and the conflict in Ukraine) shows that the Group can remain within its facilities in the event that revenue growth is delayed (i.e. revenue does not increase from the level reported in 2021) for a period in excess of twelve months. The Directors' financial forecasts and operational planning and modelling also include the actions, under the control of the Group, that they could take to further significantly reduce the cost base during the coming year in the event that longer-term revenues were set to remain consistent with the level reported in 2021. On the basis of this financial and operational modelling, the Directors believe that the Group has the capability and the operational agility to react quickly, cut further costs from the business and ensure that the cost base of the business is aligned with its revenue and funding scale.

As a consequence, the Directors have a reasonable expectation that the Group can continue to operate within its existing facilities and be able to meet its commitments and discharge its liabilities in the normal course of business for a period not less than twelve months from the date of approval of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the Group financial statements. However, the events noted above indicate that there is a material uncertainty related to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern and, therefore, the entity may be unable to realise its assets and discharge its liabilities in the normal course of business. These results do not include any adjustments should the going concern basis of preparation be inappropriate.

c Functional and presentational currency

The consolidated financial statements are presented in US dollars, as the revenue for the Group is predominately derived in this currency. Billings to the Group's customers during the year by WANdisco, Inc. were all in US dollars with certain costs being incurred by WANdisco International Limited in sterling and WANdisco, Pty Ltd in Australian dollars. All financial information has been rounded to the nearest thousand US dollars unless otherwise stated.

d Alternative performance measures

The Group uses a number of alternative performance measures ("APMs") which are non-IFRS measures to monitor the performance of its operations. The Group believes these APMs provide useful historical financial information to help investors and other stakeholders evaluate the performance of the business and are measures commonly used by certain investors for evaluating the performance of the Group. In particular, the Group uses APMs which reflect the underlying performance on the basis that this provides a more relevant focus on the core business performance of the Group and aligns with our KPIs. Adjusted results exclude certain items because if included, these items could distort the understanding of our performance for the year and the comparability between periods. The Group has been using the following APMs on a consistent basis and they are defined and reconciled as follows:

- Cash overheads: Operating expenses adjusted for: depreciation, amortisation, capitalisation of development expenditure and equity-settled share-based payment. See Note 4 for a reconciliation.

- Adjusted EBITDA: Operating loss adjusted for: impairment loss, depreciation, amortisation and equity-settled share-based payment. See Note 4 for a reconciliation.

e Use of judgements and estimates

In preparing these Financial statements, management has made judgements and estimates that affect the application of the Group's accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.

3. Revenue and segmental analysis

a Operating segments

The Directors consider there to be one operating segment, being that of development and sale of licences for software and related maintenance and support.

b Geographical segments

The Group recognises revenue in three geographical regions based on the location of customers, as set out in the following table:

Management makes no allocation of costs, assets or liabilities between these segments since all trading activities are operated as a single business unit.

c Major products

The Group's core patented technology, Distributed Coordinated Engine "DConE", enables the replication of data. This core technology is contained in all the Group's products. 

d Major customers

No other single customers contributed 10% or more to the Group's revenue (2020: $nil).

e Split of revenue by timing of revenue recognition

f Contract balances

The following table provides information about receivables and contract assets and liabilities from contracts with customers.

4. Cash overheads and Adjusted EBITDA

5. Loss per share

a Basic loss per share

The calculation of basic loss per share has been based on the following loss attributable to ordinary shareholders and weighted average number of ordinary shares outstanding:

5. Loss per share (continued)

b Adjusted loss per share

Adjusted loss per share is calculated based on the loss attributable to ordinary shareholders before net foreign exchange loss, acquisition-related items and the cost of equity-settled share-based payment, and the weighted average number of ordinary shares outstanding:

c Diluted loss per share

Due to the Group having losses in all years presented, the fully diluted loss per share for disclosure purposes, as shown in the consolidated statement of profit or loss and other comprehensive income, is the same as for the basic loss per share.

6. Other non-current assets

7. Trade and other receivables

8. Loans and borrowings

At 31 December 2021 there was no bank loan debt. In 2020 there was $0.6m term debt drawn down with Silicon Valley Bank. The facility comprises $nil (2020 $0.6m) term debt, with an interest-only period to 31 May 2018, followed by a three-year maturity at a floating interest rate charged at 1.5% above the US prime rate. The bank loan was secured over the assets of WANdisco, Inc.

9. Deferred income

Deferred income represents contracted sales for which services to customers will be provided in future periods.

10. Share-based payment

The Group operates share option plans for employees of the Group. Options in the plans are settled in equity in the Company and are normally subject to a vesting schedule but not conditional on any performance criteria being achieved. 

The terms and conditions of the share option grants are detailed in the Group annual financial statements for the year ended 31 December 2021.

a Expense recognised in profit or loss

b Summary of share options outstanding

11.  Commitments and contingencies

The Group had no contingent liabilities at 31 December 2021 (31 December 2020: None).