Interim unaudited results

RNS Number : 4692N

WANdisco Plc

30 September 2021

 

30 September 2021

WANdisco plc

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

Interim unaudited results for the six months ended 30 June 2021

-  First commit-to-consume, multi-year contract at a $1m minimum signed with major US telco post period end

-  Strong balance sheet provides platform to accelerate capitalisation of cloud opportunity

WANdisco (LSE: WAND), the LiveData company   announces interim unaudited interim results for the six months ended 30 June 2021.

Financial headlines

·	Revenue for the period $3.4 million (H1 2020: $3.6 million)
·	Cash overheads1 of $20.1 million (H1 2020: $17.9 million)
·	Adjusted EBITDA2 loss of $14.2 million (H1 2020: $11.9 million)
·	Statutory loss from operations of $20.3 million (H1 2020: $14.0 million)
·	Cash at 30 June 2021 of $47.7 million (31 December 2020: $21.0 million)
·	No debt as at 30 June 2021 of $nil (31 December 2020: $0.6 million)
·	Raised gross proceeds of $42.4 million through a share placing and subscription to accelerate the Group's growth ambitions and to pursue near term opportunities with channel partners

Strategic and operational highlights

·	General Availability of our Azure service expected in the next few weeks, a critical step in converting pipeline customers
·	Progress in transitioning business model to cloud-centric consumption basis to increase predictability of revenue (unbilled backlog), reduced discounting (metered pricing) and easier upsell potential
·	Snowflake partnership complements existing Databricks relationship, consolidating market position in supporting machine learning applications
·	Investment into channel and direct sales capacity to further establish product availability
·	"Commit to Consume" contract structure to become the norm, where a customer is obligated to move a minimum amount of data over a given time

o	Brings WANdisco in line with cloud platform model aligning its service to the models of industry leaders such as Databricks and Snowflake
o	Benefits customers through the flexibility expected from cloud-based solutions
o	Provides WANdisco with a stream of committed revenues that have the potential to increase as customers' data needs expand

Post period end

·	Secured the first commit-to-consume contract, a minimum $1.0M, 5-year contract with an existing major US Telecom customer to migrate a minimum of 5PB of business-critical analytical data to the Microsoft Azure cloud, with a significant opportunity for further consumption growth.

Outlook

·

The disappointing first half performance linked to delays with general availability with the Microsoft product led to a smaller volume of consumption deals in H1. As the first Microsoft partner that has a deeply embedded solution, it remains strategic to Microsoft given the uniqueness of our technology. The Board now expects a minimum revenue plus Remaining Performance Obligation (RPO") target of $18m for FY21. The Board believes this is the most relevant KPI for a consumption business that is building long term consumption commitments. RPO is defined as deferred revenue plus committed, unbilled backlog.

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

"The first half of 2021 has been a period of both learning and tireless execution, as WANdisco laid the groundwork for significant acceleration in customer wins. Two factors impacted our topline financial performance in H1.

First, was underestimating the importance and timing of General Availability for our Azure product. As a business-critical operation, potential customers wanted the assurance that General Availability provides. We expect to be able to announce General Availability shortly, fully opening this pipeline opportunity.

Second, where we had expected an initial wave of smaller volume projects, demand was in fact led by large scale strategic migrations. It has now become clear that a data first approach to this datalake migration movement is the only viable approach for Bluechip organisations, leading to more complex projects with longer execution timelines.

With our product now launched on both Azure and AWS, we have also been focussed on transitioning our business model to a cloud-centric consumption model to align our revenue streams with that of our partners. This change will lead to greater predictability of revenue in the medium to long term, with revenue phased to align with consumption.

Complementing our existing relationship with Databricks, we have partnered with Snowflake to accelerate movement of data into their Data Cloud, consolidating WANdisco's market position in supporting machine learning.

Post period end, the first significant contract based on committed consumption of data and customer usage has been closed, which is typical of the scale of our customers' demand and pipeline opportunities.

The Board remains confident that the combination of our market opportunity, product readiness, and deepening commitments from customers and cloud partners provides a strong platform to deliver growth in the short and medium term."

1	Operating expenses adjusted for: depreciation, amortisation, capitalisation of development expenditure and equity-settled share-based payment. See Note 4 to the condensed consolidated interim financial statements for a reconciliation.
2	Operating loss adjusted for: depreciation, amortisation and equity-settled share-based payment. See Note 4 to the condensed consolidated interim financial statements for a reconciliation.

For further information, please contact:

WANdisco plc  via FTI Consulting

David Richards, Chief Executive Officer and Chairman 

Erik Miller, Chief Financial Officer 

Daud Khan, VP Corporate Development

FTI Consulting   [phone]

Matt Dixon / Chris Birt / Kwaku Aning

Stifel (Nomad and Joint Broker)     [phone]

Fred Walsh / Richard Short 

Panmure Gordon (Joint Broker)  [phone]

Erik Anderson / Alina Vaskina

About WANdisco

WANdisco is the LiveData company. WANdisco solutions 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's products keep 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. WANdisco has over a hundred customers and significant go-to-market partnerships with Microsoft Azure, Amazon Web Services, Google Cloud, Oracle, and others as well as OEM relationships with IBM and Alibaba. For more information on WANdisco, visit http://www.wandisco.com. 

 

BUSINESS REVIEW

In H1 FY21, we invested in both our channel and direct sales capacity to further establish our product availability and robust partnerships with cloud platform vendors and System Integrators ("SI's"). We continue to see a significant demand for cloud migration solutions, and many large enterprises are realising that moving to the cloud is a business imperative for analytics and elastic compute. Some have tried traditional migration solutions and have found them to be poorly suited to migrating large amounts of rapidly changing data with guaranteed consistency. These enterprises are now turning to WANdisco's suite of LiveData Migrator solutions that are easy to use and remove complexity whilst guaranteeing data consistency. 

We are starting to see a transition of our business model away from subscription contracts that required significant upfront revenue recognition thus giving rise to lumpy and difficult to predict revenue streams, into a cloud-centric consumption model that aligns our revenue streams to that of our partners and is consistent with our customers' expectations. Our enterprise contracts are structured as "Commit-to-Consume" contracts where a customer is obligated to move a minimum amount of data over a given time. This gives our customers the flexibility that they expect from cloud based solutions and gives WANdisco a stream of committed predictable revenues that have the potential to increase as our customers' data needs expand.

As the inflexibility of on-premise analytics platforms becomes a competitive hinderance for customers, there is an increasing need to re-platform analytics into the cloud. We already support some of the major destinations for cloud analytics such as Databricks and the cloud native platforms. Snowflake is another major destination for analytical data in the cloud, and we have announced a partnership with Snowflake to accelerate the movement of data into their Data Cloud. We also made significant progress towards the General Availability of our embedded solution for Microsoft Azure, LiveData Migrator for Azure, and expect to announce General Availability shortly.  During H1 FY21 and ongoing we have entered into joint marketing agreements with AWS, designed to promote migration to AWS with our LiveData Migrator for AWS. Our partnerships with these major cloud vendors and solutions provide WANdisco with a growing opportunity to become integral to the entire lifecycle of analytical data and cloud migration.

The Group continues to see the growing need for data consistency and data availability across the world, and WANdisco's ability to facilitate cloud migration at scale without business interruption is becoming a key factor for organisations and their SI partners as they accelerate their journey to the cloud.

COVID-19 update

The COVID-19 pandemic has led to the implementation of long-standing business continuity measures, with staff working from home across the globe. As a predominantly distributed organization working remotely for most employees is normal, and to date, we have not seen any negative impact on our productivity. The business remains well placed to weather a prolonged period of self-isolation with good teamwork and employee morale. We also believe that the improvements made to how we operate will continue and evolve further when the COVID-19 crisis ends.

Outlook

We have signed the first contract for multi-petabyte data migration spanning multiple years, and we believe we will continue to have success with similar scale enterprise deals.  Our cloud-centric consumption model and Commit-to-Consume structured contracts, gives WANdisco predictability over its revenues and the business confidence we will see a stream of committed revenues in H2 FY21.

With companies seeking to leverage cloud economics and scalability and adopting a data first migration approach, there is a significant opportunity ahead of us. Our native Azure service takes advantage of billing and technical integrations with Microsoft Azure. We are also seeing growing demand from our other cloud partners as the need to capitalise on the cloud and move on-premises workloads becomes a business imperative. The Board's confidence in our outlook is built upon the convergence of the market opportunity, product readiness, and the depth of relationships with our cloud vendor partners, System Integrators and Analytic platforms.

The disappointing first half performance linked to delays with general availability with the Microsoft product led to a smaller volume of consumption deals in H1. As the first Microsoft partner that has a deeply embedded solution, it remains strategic to Microsoft given the uniqueness of our solution. The Board now expects a minimum revenue plus RPO target of $18m for FY21. The Board believes this is the most relevant KPI for a consumption business that is building long term consumption commitments. RPO is defined as deferred revenue plus committed, unbilled backlog.

KPIs

Our business continues to evolve and as such, the metrics used to measure success also change. With the addition of Commit-to-Consume contracts, we believe KPIs that include remaining RPO is appropriate in addition to:

·	Consumption based revenue
·	Volume of data migrated
·	Number of customer wins
·	$ Net retention rates ($value of customer contracts in current period vs.$ value of those customers in the prior period)

The objective of these KPIs is to provide an indication of the rate of conversion of the cloud migration opportunity ahead, to account for revenues being recognised later in the sales cycle and financial year through metered consumption.

FINANCIAL REVIEW

Revenue for the period ended 30 June 2021 was $3.4 million (H1 2020: $3.6 million).

Deferred revenue from sales booked during the first half of 2021 and in previous years, and not yet recognised as revenue, is $2.7 million at 30 June 2021 (H1 2020: $3.2 million). Our deferred revenue represents future revenue from new and renewed contracts, many of them spanning multiple years.

Adjusted EBITDA loss² was $14.2 million (H1 2020: $11.9 million), due primarily to the strategic investments we made to strengthen our go-to-market and engineering resources to drive future growth.

Revenue

Revenue was $3.4 million (H1 2020: $3.6 million). The business continues to achieve a significant proportion of contracted revenue through direct sales. In most cases, these direct sales are only achievable through the close partnerships held with major cloud vendors. The Group expects over time to increase the contribution of partner channel sales to direct sales, as the partnerships with cloud vendors and ISV begin to bear fruit.

As we continue to transition to a recurring revenue model, the variability in near term revenue decreases as the one-off perpetual licenses decrease in volume and size, being replaced by smaller but more repeatable revenue streams with greater forward visibility.

Operating costs 

Cash overheads¹ increased in the period as we made important investments in Sales and Engineering to capitalise on the opportunities with our cloud partners, rising to $20.1 million from $17.9 million in the first half of 2020.

Product development expenditure capitalised in the period was $2.9 million (H1 2020: $2.6 million). All of this expenditure was associated with new product features and was capitalised.

Our headcount was 187 as at 30 June 2021 (31 December 2020: 180, 30 June 2020: 174). Headcount increases in the period were principally in Sales and Marketing and Engineering as we added capacity to develop new products and service our partner channel.

Profit and loss

Adjusted EBITDA² loss for the period was $14.2 million (H1 2020: $11.9 million).

The loss after tax for the period increased to $20.3 million (H1 2020: $14.0 million), principally as a result of increased overheads. The finance loss of $1.4 million (H1 2020: $3.9 million gain), reported within finance costs/income, arose from the retranslation of intercompany balances at 30 June 2021, reflecting the increase in Sterling against the US dollar. The impact of FX rates 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 gain/(loss) respectively arising on the net assets of overseas subsidiaries in reserves results in a minimal impact on the Group net assets.

Balance sheet and cash flow

Trade and other receivables at 30 June 2021 were $6.0 million (31 December 2020: $10.1 million). This includes $1.1 million of trade receivables (31 December 2020: $5.3 million) and $4.9 million related to non-trade receivables (31 December 2020: $4.8 million). 

Net consumption of cash was $14.4 million before financing (H1 2020: $12.4 million), resulting in a closing cash balance of $47.7 million at 30 June 2021. The consumption of cash was due primarily to an increase in cash overheads. For the full year, cash consumption will be a function of the level of revenues achieved and collection of customer receivables in the period. At 30 June 2021 we had drawings under our revolving credit facility with Silicon Valley Bank of $nil (31 December 2020: $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 2021) raising gross proceeds of $42.4 million. The proceeds are being used to support our relationships with strategic partners and provide growth working capital.

Post period end

The Group closed its first multi-year Commit to Consume contract post period end. Commit-to-Consume contracts align revenue to the consumption of services, as is the standard in the cloud, enhancing the predictability of future revenues.

WANdisco secured a $1.0 million, 5-year Commit-to-Consume contract with an existing major US Telecom customer to migrate business critical analytical data from an on-premises Vertica system to the cloud. WANdisco's unique technology was the only solution capable of moving the live data set to the cloud within Azure's ecosystem effectively and without disruption. The customer has committed to a minimum of 5PB over a maximum term of five years. This represents only a fraction of the customer's data estate and there is a significant opportunity for further consumption growth for WANdisco.

Consolidated statement of profit or loss and other comprehensive income

For the six months ended 30 June 2021

		Six months ended 30 June 2021 (Unaudited)	Six months ended 30 June 2020 (Unaudited)	Year ended 31 December 2020 (Audited)
Continuing operations	Note	$'000	$'000	$'000
Revenue	3	3,354	3,625	10,532
Cost of sales		(305)	(322)	(1,066)
Gross profit		3,049	3,303	9,466
Operating expenses	4	(21,936)	(21,043)	(43,373)
Operating loss	4	(18,887)	(17,740)	(33,907)
Finance income		28	3,971	305
Finance costs		(1,443)	(180)	(2,183)
Net finance (costs)/income		(1,415)	3,791	(1,878)
		2
Loss before tax		(20,302)	(13,949)	(35,785)
Income tax		(15)	(30)	1,453
Loss for the period		(20,317)	(13,979)	(34,332)

Other comprehensive income

Items that are or may be reclassified subsequently to profit or loss:

Foreign operations - foreign currency translation differences		1,695	(3,969)	3,872
Other comprehensive income for the period, net of tax		1,695	(3,969)	3,872
Total comprehensive income for the period attributable to owners of the parent		(18,622)	(17,948)	(30,460)

Loss per share

Basic and diluted loss per share

5

($0.36)

($0.29)

($0.68)

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

Consolidated statement of financial position

At 30 June 2021

		30 June 2021 (Unaudited)	30 June 2020 (Unaudited)	31 December 2020 (Audited)
	Note	$'000	$'000	$'000
Assets
Property, plant and equipment		2,759	3,133	2,895
Intangible assets		5,246	4,962	5,027
Other non-current assets	6	1,131	2,656	2,215
Non-current assets		9,136	10,751	10,137
Trade and other receivables	7	6,038	6,593	10,142
Cash and cash equivalents		47,695	33,634	21,039
Current assets		53,733	40,227	31,181
Total assets		62,869	50,978	41,318
Equity
Share capital		8,593	7,481	7,641
Share premium		213,741	172,897	172,868
Translation reserve		(16)	(9,552)	(1,711)
Merger reserve		1,247	1,247	1,247
Retained earnings		(169,633)	(133,237)	(150,851)
Total equity		53,932	38,836	29,194
Liabilities
Loans and borrowings	8	1,580	2,028	1,778
Deferred income	9	451	1,075	659
Deferred tax liabilities		4	3	4
Non-current liabilities		2,035	3,106	2,441
Current tax liabilities		5	58	12
Loans and borrowings	8	508	1,907	1,115
Trade and other payables		4,144	4,934	5,462
Deferred income	9	2,245	2,137	3,094
Current liabilities		6,902	9,036	9,683
Total liabilities		8,937	12,142	12,124
Total equity and liabilities		62,869	50,978	41,318

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

Consolidated statement of changes in equity

For the six months ended 30 June 2021

	Attributable to owners of the Company
	Share capital	Share premium	Translation reserve	Merger reserve	Retained earnings	Total equity
Six months ended 30 June 2021 (Unaudited)	$'000	$'000	$'000	$'000	$'000	$'000
Balance at 1 January 2021	7,641	172,868	(1,711)	1,247	(150,851)	29,194
Total comprehensive income for the period
Loss for the period	-	-	-	-	(20,317)	(20,317)
Other comprehensive income for the period	-	-	1,695	-	-	1,695
Total comprehensive income for the period	-	-	1,695	-	(20,317)	(18,622)
Transactions with owners of the Company
Contributions and distributions
Equity-settled share-based payment	-	-	-	-	1,535	1,535
Proceeds from share placing net of issue costs	952	40,873	-	-	-	41,825
Total transactions with owners of the Company	952	40,873	-	-	1,535	43,360
Balance at 30 June 2021	8,593	213,741	(16)	1,247	(169,633)	53,932
Six months ended 30 June 2020 (Unaudited)
Balance at 1 January 2020	7,097	149,336	(5,583)	1,247	(121,922)	30,175
Total comprehensive income for the period
Loss for the period	-	-	-	-	(13,979)	(13,979)
Other comprehensive income for the period	-	-	(3,969)	-	-	(3,969)
Total comprehensive income for the period	-	-	(3,969)	-	(13,979)	(17,948)
Transactions with owners of the Company
Contributions and distributions
Equity-settled share-based payment	-	-	-	-	2,664	2,664
Proceeds from share placing net of issue costs	383	23,510	-	-	-	23,893
Share options exercised	1	51	-	-	-	52
Total transactions with owners of the Company	384	23,561	-	-	2,664	26,609
Balance at 30 June 2020	7,481	172,897	(9,552)	1,247	(133,237)	38,836

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

Consolidated statement of cash flows

For the six months ended 30 June 2021

		Six months ended 30 June 2021 (Unaudited)	Six months ended 30 June 2020 (Unaudited)	Year ended 31 December 2020 (Audited)
	Note	$'000	$'000	$'000
Cash flows from operating activities
Loss for the period		(20,317)	(13,979)	(34,332)
Adjustments for:
-  Depreciation of property, plant and equipment		536	601	1,203
-  Amortisation of intangible assets		2,634	2,531	5,070
-  Net finance costs		65	148	69
-  Income tax		15	30	(1,453)
-  Foreign exchange		1,137	(3,870)	3,773
-  Equity-settled share-based payment	10	1,535	2,664	5,403
		(14,395)	(11,875)	(20,267)
Changes in:
-  Trade and other receivables		4,707	1,530	339
-  Trade and other payables		(1,266)	712	910
-  Deferred income		(1,050)	(598)	(57)
Net working capital change		2,391	1,644	1,192
Cash used in operating activities		(12,004)	(10,231)	(19,075)
Interest paid		(91)	(157)	(294)
Income tax received		956	672	662
Net cash used in operating activities		(11,139)	(9,716)	(18,707)
Cash flows from investing activities
Interest received		1	15	21
Acquisition of property, plant and equipment		(362)	(36)	(307)
Development expenditure		(2,853)	(2,616)	(5,220)
Net cash used in investing activities		(3,214)	(2,637)	(5,506)
Cash flows from financing activities
Proceeds from issue of share capital net of issue costs		41,825	23,945	24,076
Repayment of bank loan		(556)	(833)	(1,666)
Payment of lease liabilities		(288)	(349)	(595)
Net cash from financing activities		40,981	22,763	21,815
Net increase/(decrease) in cash and cash equivalents		26,628	10,410	(2,398)
Cash and cash equivalents at 1 January		21,039	23,354	23,354
Effect of movements in exchange rates on cash and cash equivalents		28	(130)	83
Cash and cash equivalents at the end of the period		47,695	33,634	21,039

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

Notes to the condensed consolidated interim financial statements

For the six months ended 30 June 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 interim financial statements ("Interim financial statements") as at and for the six months ended 30 June 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

These interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 31 December 2020 ("last annual financial statements"). They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.

These interim financial statements were authorised for issue by the Company's board of directors on 29 September 2021.

b Going concern

These interim financial statements have been prepared on a going concern basis.

As at 30 June 2021 the Group had net assets of $53.9m (31 December 2020: $29.2m), including cash of $47.7m (31 December 2020: $21.0m) as set out in the interim consolidated statement of financial position, with a debt facility drawn of $nil (31 December 2020: debt facilities drawn of $0.6m). In the six months ended 30 June 2021, the Group incurred a loss before tax of $20.3m (H1 2020: $13.9m) and net cash outflows before financing of $14.4m (H1 2020: $12.4m).

Revenue for H1 2021 was $3.4m (H1 2020: $3.6m), with an operating loss of $18.9m (H1 2020: $17.7m), mainly due to reduced revenue and increased operating expenses.

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 unaudited interim 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.

Whilst the Directors are confident in the Group's ability to grow revenue, the Board's sensitivity modelling (which considered the impact of Brexit and COVID-19) shows that the Group can remain within its facilities in the event that revenue growth is delayed (i.e. revenues do not increase from the level reported in 2020) 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 2020. 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 interim financial statements. Accordingly, they continue to adopt the going concern basis in preparing the Group financial statements.

c Functional and presentational currency

The interim 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 period 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 period 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:

2.  Basis of preparation (continued)

d Alternative performance measures (continued)

-	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: 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 expenses. 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:

Revenue	Six months ended 30 June 2021 (Unaudited) $'000	Six months ended 30 June 2020 (Unaudited) $'000	Year ended 31 December 2020 (Audited) $'000
North America - USA	2,133	2,571	8,635
North America - other	21	36	34
Europe	647	715	1,096
Rest of the world - China	350	201	412
Rest of the world - other	203	102	355
	3,354	3,625	10,532

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

	Six months ended 30 June 2021 (Unaudited)	Six months ended 30 June 2021 (Unaudited)	Six months ended 30 June 2020 (Unaudited)	Six months ended 30 June 2020 (Unaudited)	Year ended 31 December 2020 (Audited)	Year ended 31 December 2020 (Audited)
	% of revenue	Revenue $'000	% of Revenue	Revenue $'000	% of revenue	Revenue $'000
Customer 1	5%	163	4%	128	10%	1,070
Customer 2	3%	93	-	-	24%	2,515
Customer 3	1%	42	14%	508	5%	558
Customer 4	1%	21	21%	770	8%	792

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

3.  Revenue and segmental analysis (continued)

e Split of revenue by timing of revenue recognition

Revenue	Six months ended 30 June 2021 (Unaudited) $'000	Six months ended 30 June 2020 (Unaudited) $'000	Year ended 31 December 2020 (Audited) $'000
Licences and services transferred at a point in time	1,905	2,168	7,607
Services transferred over time	1,449	1,457	2,925
	3,354	3,625	10,532

f Contract balances

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

	Six months ended 30 June 2021 (Unaudited) $'000	Six months ended 30 June 2020 (Unaudited) $'000	Year ended 31 December 2020 (Audited) $'000
Receivables, which are included in "Other non-current assets - accrued income"	1,072	2,508	2,124
Receivables, which are included in "Trade and other receivables - accrued income"	2,213	3,172	1,480
Contract liabilities, which are included in "Deferred income - non-current"	(451)	(1,075)	(659)
Contract liabilities, which are included in "Deferred income - current "	(2,245)	(2,137)	(3,094)

4.  Cash overheads and Adjusted EBITDA

		Six months ended 30 June 2021 (Unaudited)	Six months ended 30 June 2020 (Unaudited)	Year ended 31 December 2020 (Audited)
a Reconciliation of operating expenses to "Cash overheads":	Note	$'000	$'000	$'000
Operating expenses		(21,936)	(21,043)	(43,373)
Adjusted for:
Amortisation and depreciation		3,170	3,132	6,273
Equity-settled share-based payment	10	1,535	2,664	5,403
Development expenditure capitalised		(2,853)	(2,616)	(5,220)
Cash overheads		(20,084)	(17,863)	(36,917)

		Six months ended 30 June 2021 (Unaudited)	Six months ended 30 June 2020 (Unaudited)	Year ended 31 December 2020 (Audited)
b Reconciliation of operating loss to "Adjusted EBITDA":	Note	$'000	$'000	$'000
Operating loss		(18,887)	(17,740)	(33,907)
Adjusted for:
Amortisation and depreciation		3,170	3,132	6,273
Equity-settled share-based payment	10	1,535	2,664	5,403
Adjusted EBITDA		(14,182)	(11,944)	(22,231)
Development expenditure capitalised		(2,853)	(2,616)	(5,220)
Adjusted EBITDA including development expenditure		(17,035)	(14,560)	(27,451)

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:

	Six months ended 30 June 2021 (Unaudited)	Six months ended 30 June 2020 (Unaudited)	Year ended 31 December 2020 (Audited)
	$'000	$'000	$'000
Loss for the period attributable to ordinary shareholders	20,317	13,979	34,332
Weighted average number of ordinary shares	Number of shares  '000s	Number of shares  '000s	Number of shares  '000s
Issued ordinary shares at 1 January	52,613	48,241	48,241
Effect of shares issued in the period	3,849	307	2,251
Weighted average number of ordinary shares during the period	56,462	48,548	50,492

Basic loss per share

$0.36

$0.29

$0.68

b Adjusted loss per share

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

		Six months ended 30 June 2021 (Unaudited)	Six months ended 30 June 2020 (Unaudited)	Year ended 31 December 2020 (Audited)
Adjusted loss for the period:	Note	$'000	$'000	$'000
Loss for the period attributable to ordinary shareholders		20,317	13,979	34,332
Adjusted for:
Net foreign exchange loss/(gain)		(1,350)	3,939	(1,809)
Equity-settled share-based payment	10	(1,535)	(2,664)	(5,403)
Adjusted loss for the period		17,432	15,254	27,120

Adjusted loss per share

$0.31

$0.31

$0.54

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

		30 June 2021 (Unaudited)	30 June 2020 (Unaudited)	31 December 2020 (Audited)
Due in more than a year:		$'000	$'000	$'000
Other receivables		59	148	91
Accrued income		1,072	2,508	2,124
Total other non-current assets		1,131	2,656	2,215

7.  Trade and other receivables

			30 June 2021 (Unaudited)	30 June 2020 (Unaudited)	31 December 2020 (Audited)
Due within a year:			$'000	$'000	$'000
Trade receivables			1,086	741	5,319
Other receivables			371	1,160	411
Accrued income			2,213	3,172	1,480
Corporation tax			1,299	731	2,277
Prepayments			1,069	789	655
Total trade and other receivables			6,038	6,593	10,142

8.  Loans and borrowings

		30 June 2021 (Unaudited)	30 June 2020 (Unaudited)	31 December 2020 (Audited)
		$'000	$'000	$'000
Non-current liabilities
Lease liabilities		1,580	2,028	1,778
		1,580	2,028	1,778
Current liabilities
Current portion of secured bank loan		-	1,389	556
Current portion of lease liabilities		508	518	559
		508	1,907	1,115
Total loans and borrowings		2,088	3,935	2,893

At 30 June 2021, the $nil of bank loan (31 December 2020: $0.6m) represented term debt drawn down with Silicon Valley Bank. The facility comprised $nil term debt (31 December 2020: $0.6m), 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 final bank loan payment was made in April 2021 when the agreement ended.

9.  Deferred income

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

		30 June 2021 (Unaudited)	30 June 2020 (Unaudited)	31 December 2020 (Audited)
Deferred income which falls due:		$'000	$'000	$'000
Within a year		2,245	2,137	3,094
In more than a year		451	1,075	659
Total deferred income		2,696	3,212	3,753

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 2020.

a Expense recognised in profit or loss

		Six months ended 30 June 2021 (Unaudited)	Six months ended 30 June 2020 (Unaudited)	Year ended 31 December 2020 (Audited)
		$'000	$'000	$'000
Total equity-settled share-based payment charge		1,535	2,664	5,403

b Summary of share options outstanding

	Six months ended 30 June 2021 (Unaudited)	Six months ended 30 June 2020 (Unaudited)	Year ended 31 December 2020 (Audited)
Number of share options outstanding:	Number	Number	Number
Outstanding at the start of the period	4,271,684	5,028,157	5,028,157
Granted	-	-	674,860
Forfeited	(116,232)	(68,566)	(159,190)
Exercised	-	(1,444)	(1,272,143)
Outstanding at the end of the period	4,155,452	4,958,147	4,271,684
Exercisable at the end of the period	3,370,593	3,750,873	2,784,861
Vested at the end of the period	3,370,593	3,750,873	2,784,861

11.  Contingent liabilities

The Group had no contingent liabilities at 30 June 2021 (30 June 2020: None, 31 December 2020: None).

12.  Subsequent events

There are no significant or disclosable post-balance sheet events.

 

END

 

 

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