- Share price has rallied 285% since May
- Multiple new contracts have seen bookings balloon
- Cash burn and customer concentration remain big risks
What a year it has been for WANdisco (WAND:AIM). While share prices have flopped all in almost every corner of the UK market, the data replication technology designer has seen its stock more than double, or more spectacularly, it’s up 285% since early May. On the 23 December, WANdisco shares were trading at 870p.
The multiple commit-to-consume contract wins this year with a European Telecoms company to replicate sensor data onto AWS, Amazon’s (AMZN:NASDAQ) cloud computing platform, have got investors excited again about the technology’s commercial case.
BOOKINGS SURGING
Bookings totalled $27.3 million at the end of June 2022, up from just $2.1 million at the same point in 2021. Then the first of several agreements were struck with this customer, ending up worth $25.3 million, struck on 50% upfront, the rest over the term.
Then, on 22 December 2022, WANdisco announced that revenue for 2022 is likely to be ‘significantly’ ahead of market expectations, and no less than $19 million, after announcing a new $12.7 million deal with a European automotive parts manufacturer.
‘This compares to our $13.6 million [revenue] estimate,’ confirmed Stifel analysts. Bookings for the year are now expected to be no less than $116 million, versus $11.9 million last year. Put bluntly, this one agreement is bigger than 2021’s entire bookings.
This is a one-off migration, so is not repeatable business, but in an increasingly electric cars world, you can see why others might follow as car manufacturers want to monitor and analyse driving and car performance data in real-time in the Cloud.
CASH AND CONCENTRATION RISK
But a word of caution - WANdisco continues to chew through mountains of cash, and no-one sees profits anytime soon. One analyst sees 2023 revenues of $28 million on $120 million of bookings, yet that still implies adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) losses of $12.6 million.
In June, WANdisco had $33 million cash and was debt-free. Over the previous 12 months, annual cash burn was approximately $33 million, implying a year’s worth of cash. That’s before this latest agreement, which is expected to be 80% paid upfront, so you can probably add another three of four months of cash burn, but that’s still a very short cash runway.
There is also a question of customer concentration. The European Telco is believed to worth around 40% of WANDdisco’s revenues going forward, so the real tests are to improve cash burn fast and win new logo customers so not so many of WANdisco’s eggs are in one basket.
Investors must decide if, at 870p, it’s worth paying roughly 20-times forecast 2023 sales for a still loss-making business.
