WANdisco Update: Momentum Continues Into Q4
Edison | Jan 15, 2013 11:27PM ET
WANdisco’s (WAN.L) trading update confirmed that momentum continued into Q4, both in terms of commercial progress with the Subversion application lifecycle management business and in hitting development milestones in big data, where the first product launches are now anticipated in Q1.
Strong bookings, renewals and new client momentum
Fourth quarter subscription bookings of $2.53m (vs Edison $2.5m) are up 76% year-on-year (25% sequentially) with full year bookings of $7.92m up 71% year-on-year. The annualised renewal rate by booking value of 140% signals that existing customers are continuing to spend more, with significant increases from four large customers driving particularly strong growth in this figure. (Stripping this out, the renewal rate was 116%). New customers included Apple, Fujitsu, Cap Gemini and General Dynamics while another division of Cisco has also become a customer.
Significant advances in big data strategy
While the statement contains no new news regarding the developments in big data/Hadoop, the company had clearly taken large strides forward over the course of Q4. In particular, the November 2012 acquisition of AltoStor significantly strengthened the company's credentials in the arena, expanding the product set and accelerating the anticipated launch of first products from 2014 to H113. We now understand that the first three product launches are anticipated to be within Q1, meaning initial bookings should come in this year.
Estimates unchanged, but good grounds for upside
We maintain our estimates, with bookings forecast to grow at a CAGR of 47% from 2012 through 2014 and sales growth of 56%. It is worth noting that our 2013 forecasts do not factor in any contribution from Hadoop which should be incremental to our forecasts, with potentially significantly higher average subscription fees than for the more established Subversion Application Lifecycle Management products. We will address this when we have more visibility on potential booking volumes and prices.
Valuation: What price for exposure to the core of Hadoop?
With the company rated at 14x 2014 EV/sales, clearly substantial growth prospects are being priced in. However, we feel that a continuation of the progress shown over the course of Q4 should project the company into a select group of four or five independent companies at the core of Hadoop, one of the key technologies underpinning the structural growth of big data. Progress over the next few months will give us a clearer picture of the commercial potential, but if the company executes on its plans then we can still see significant upside potential.
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