Preliminary unaudited results

RNS Number : 7234P

WANdisco Plc

11 June 2020

 

11 June 2020

WANdisco plc

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

Preliminary unaudited results for the year ended 31 December 2019

- WANdisco products deeply embedded in Microsoft Azure

- Microsoft relationship to drive significant expansion

WANdisco (LSE: WAND), the LiveData company   announces preliminary unaudited results for the year ended 31 December 2019.

Financial highlights

· Revenue for the year $16.2 million (2018: $17.0 million)

· Cash overheads¹ of $31.7 million (2018: $29.8 million)

· Adjusted EBITDA² loss of $11.7 million (2018: $9.4 million)

· Statutory loss from operations $28.3 million (2018: $19.7 million)

· Cash at 31 December 2019 of $23.4 million (2018: $10.8 million)

· Debt of $2.2 million (2018: $3.9 million)

·     Significant progress with Microsoft and other Tier 1 partnerships underpin the Board's confidence in our               strategy and product focus

· Proposed placing to raise at least $25 million, see separate announcement

Operational and strategic highlights

· WANdisco Fusion deeply embedded in Microsoft's Azure cloud:

o  A native Azure offering, providing a fast and easy way to establish data connectivity from on-premises to cloud storage.

o  Providing seamless customer experience and appearing as a native first party Azure service.

o  Delivering tight integration, reducing deployment complexities through eliminating the customer need to  plan data deployment or accommodate networking and storage options.

o  Billing delivered through existing Azure billing service ensures customers do not require additionalvendor approval.

· LiveMigrator launched enabling uninterrupted petabyte scale data migration to the cloud

· LiveAnalytics launched providing access to Spark-based analytics in the cloud

· Partnered with Databricks to provide rapid data migration to Azure Databricks

· Achieved Advanced Technology Partner status with Amazon Web Services

· Secured c.$5 million in contract renewals and expansions in China

· Raised $34 million in two share placings completed at a premium to market at the time

· Appointed Micro-D Master Distributor for Africa

Post period end

·     Microsoft Azure LiveData Platform public preview with expectation to sign over 50 new customers on the Azure   platform over the next 12 months

·     Secured first global reseller agreement with a large global systems integrator

·     Implemented business continuity measures in response to COVID-19

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

"In 2019 we delivered on our primary strategic goal of cementing our partnership with Microsoft to embed Fusion into Azure which positions the Group for significant scalable growth. With the Microsoft Azure LiveData Platform becoming publicly available post period end as a paid service within Azure, we expect to facilitate a greater volume and velocity of deals.

"The future of analytics and in particular machine learning and Artificial Intelligence ("AI") is in the cloud. Our partnership with Databricks highlights the growing demand for non-disruptive solutions for bringing data to the cloud. In this regard we are uniquely positioned.

"In 2020, the business is focused upon capitalising on growing opportunities as our relationship with Microsoft and other Tier 1 partners continue to expand. With the backdrop of the COVID-19 pandemic, business is increasingly based in the cloud and the Board remains confident that our product direction and strategic progress provides a strong platform to deliver growth in 2020."

1	Operating expenses adjusted for: depreciation, amortisation, capitalisation of development expenditure and equity-settled share-based payment. See Note 6 to the condensed consolidated financial statements for a reconciliation.
2	Operating loss adjusted for: depreciation, amortisation and equity-settled share-based payment. See Note 6 to the condensed consolidated financial statements for a reconciliation.
3	Effective 1 January 2019, the company adopted a new accounting standard ("IFRS 16 - Leases"), which impacted the company's treatment of operating leases. The company adopted IFRS 16 using the cumulative effect method with the effect of initially applying this standard recognised at the date of initial application (i.e. 1 January 2019).  Accordingly, the information presented for 2018 has not been restated - i.e. it is presented, as previously reported, under IAS 17 and IFRIC 4.  In the interest of comparability during the transition year to IFRS 16, the company has provided adjusted EBITDA and operating loss information in accordance with both IFRS 16 and under the previous lease accounting standard in effect prior to the adoption of IFRS 16 ("IAS 17 - Leases"). See Note 3 to the condensed consolidated  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 

FTI Consulting   [phone]

Matt Dixon / Chris Birt / Kwaku Aning

Stifel (Sole Broker and Nomad)  [phone]

Fred Walsh / Rajpal Padam 

About WANdisco

WANdisco is the LiveData company for machine learning and AI. 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 Fusion 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. 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

2019 was a significant year for WANdisco. We delivered on our primary strategic goal, cementing our partnership with Microsoft to embed Fusion into Azure, allowing customers to use Fusion as if it was a native Azure offering. As an Azure embedded product, customers can deploy WANdisco Fusion just by selecting it from the same Azure menu they use for native Microsoft products, and the charges added on their monthly Azure bill.  No software to install, no new contracts to sign.  Post period end, the product became publicly available as a paid service which we expect to facilitate a greater volume and velocity of deals than we have experienced in prior years.

We have focused our development efforts on products that provide customers with simple, robust transition paths as more and more companies are looking for solutions to move their on-premises Hadoop data to the cloud. Our LiveMigrator product, coupled with our Fusion product, will allow customers to make the transition from on-premises to cloud computing as easy and as seamless as possible.

In June 2019, we introduced LiveMigrator , a solution enabling the migration of petabyte scale live data to the cloud. LiveMigrator's automated process enables enterprises' on-premises data to be seamlessly migrated to the cloud and WANdisco's core Fusion technology keeps the migrated data consistent with on-premises data.   WANdisco LiveMigrator enables for the first time the migration of petabyte scale data to the cloud without interruption to service. Working in harmony with WANdisco Fusion, the Company can now support businesses through their entire live data journey from on-premises to multi-cloud.

In September 2019, we introduced LiveAnalytics to provide live business insights when migrating Hadoop analytic workloads from on-premises to Spark-based analytics in the cloud. This solution allows both migrated and migrating data to be immediately available for analysis. LiveAnalytics works in tandem with WANdisco's LiveMigrator, its petabyte scale, non-blocking, single scan data migration technology.

The launch of these solutions further advances WANdisco's complementary suite of scalable LiveData solutions for cloud. WANdisco's technology covers the entire data journey from on-premises to cloud through LiveMigrator (enabling single scan, non-blocking movement to the cloud), LiveAnalytics (continuous data analytics during cloud migration) and WANdisco's LiveData for Hybrid and Multi-cloud solution.

With WANdisco's suite of complementary technologies, enterprises are now truly free to choose the analytics platform they want in the cloud and make the best decision for the business as a whole.

We have also partnered with Databricks, the leader in unified analytics and founded by the original creators of Apache Spark^TM, to accelerate and dramatically simplify the migration of on-premises Hadoop analytics workloads to Azure Databricks. In combination with our LiveAnalytics solution, enterprises get the best of both worlds - seamless and secure migration of petabyte-sized data to the cloud and the power of strong, cloud-based analytics. With this partnership, enterprises have a powerful option to quickly and painlessly move their organisation to the cloud and take advantage of increased productivity, security and insightful data analytics available to employees anywhere at any time.

We had significant success with new and expansion orders from our customers in China, and have also secured a contract with Micro-D,  one of Africa's most established IT companies. Through its network of resellers and partners, Micro-D will deploy WANdisco's suite of products to enable cloud migration alongside continuous data availability and consistency for customers. This contract marks a significant entry for WANdisco into the high growth African market, with Fusion to be implemented across major enterprises in Africa.

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. To date, we have experienced minimal effects to our customer base and order flow, and have not reduced employee based costs.

Whilst the impact of COVID-19 is still uncertain, we are moving forward this year with continued business momentum as evidenced by our landmark agreement with Microsoft announced in June 2020.

Outlook

Our cloud platform partners, and our ISV partner Databricks have recognised the huge opportunity of moving Hadoop data into the cloud. With the changing dynamics in the Hadoop on-premises market, and companies seeking to leverage cloud economics and scalability, the time to capitalise on this opportunity is now. The embedding of our technology into Azure provides a platform to capitalise on that opportunity with an Azure native service taking advantage of billing and technical integrations. With LiveData Platform for Azure now publicly available we can execute against the growing pipeline of opportunities to move data at scale into the cloud without an interruption to service. Outside of 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 commitments from our partners.

FINANCIAL REVIEW

Revenue for the year ended 31 December 2019 was $16.2 million (2018: $17.0 million).

Deferred revenue from sales booked during 2019 and in previous years, and not yet recognised as revenue, is $3.8 million at 31 December 2019, at 31 December 2018 this stood at $4.3 million. Our deferred revenue represents future revenue from new and renewed contracts, many of them spanning multiple years.

Adjusted EBITDA loss² was $11.7 million (2018: $9.4 million), due primarily to the slight reduction in revenue and continued investments in the business.

Revenue

Revenue was $16.2 million (2018: $17.0 million), reflecting an increasing shift to cloud-based revenues with recurring annual revenues and some deals that were delayed to future years. The small decrease in revenue included strong renewals and new contract growth offset by some deals that were delayed into a future period.

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

Operating costs 

Cash overheads ¹   increased in the year as we made investments in go-to-market resources and engineering, rising to $31.7 million from $29.8 million in 2018.  As we implemented IFRS 16³  there was a small reduction in operating costs from the removal of $632,000 property rent and lease costs, which was offset by $573,000 depreciation expense on the right of use assets.

Product development expenditure capitalised was $5.1 million in the year (2018: $4.9 million). All of this expenditure was associated with new product features.

Our headcount was 162 as at 31 December 2019 (31 December 2018: 148). Headcount increases in the year were principally in sales and marketing and engineering as we added capacity to service our new and expanded channel partner relationships and develop new cloud-focused products.

Profit and loss

Adjusted EBITDA² loss for the year was $11.7 million (2018: $9.4 million).

The loss after tax for the year increased to $28.3 million (2018: $19.7 million), as a result of the lower revenue and increased overheads and share-based payment charge. The exceptional finance loss of $2.0 million (2018: $2.8 million gain) arose from the retranslation of intercompany balances at 31 December 2019, 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 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 2019 were $8.5 million (31 December 2018: $7.4 million). This includes $2.8 million of trade receivables (31 December 2018: $1.8 million) and $5.7 million related to non-trade receivables (31 December 2018: $5.6 million). 

Net consumption of cash was $19.4 million before financing (2018: $16.7 million), resulting in a closing cash balance of $23.4 million at 31 December 2019. The consumption of cash was due primarily to lower revenues and a modest increase in cash overheads.  At 31 December 2019, we had drawings under our revolving credit facility with Silicon Valley Bank of $2.2 million.

Subsequent events

The global expansion of the COVID-19 virus since the fiscal year end has resulted in macroeconomic uncertainty.  Whilst there has been no material impact on the Group as at the date of this report, it is difficult to assess the short to longer-term impact of that uncertainty on the Group's operations.

As at 31 May 2020 the Group had cash reserves of $11.6 million.

Whilst the impact of COVID-19 is still uncertain, we are moving forward this year with continued business momentum as evidenced by our landmark agreement with Microsoft announced in June 2020 . Management expects that the potential of the agreement with Microsoft will overcome any short-term headwinds from the economic uncertainty surrounding the impact of COVID-19.

IFRS 16 "Leases"

Like all companies, as required by the International Accounting Standards Board "IASB" the Group has initially adopted IFRS 16, "Leases" effective 1 January 2019. The effect of initially applying IFRS 16 is mainly attributed to the following:

-  Recognition of a right of use asset on the balance sheet;

-  Removal of the related rent expense and an increase in depreciation and interest expense;

-  Recognition of a liability for the present value of lease payments; and

-  Change to operating ratios in comparison to prior periods.

IFRS 16 establishes a comprehensive framework for accounting for leases. It replaced IAS 17, "Leases", the previous reporting standard. The Group has adopted IFRS 16 using the cumulative effect method, with the effect of initially applying this standard recognised at the date of initial application (i.e. 1 January 2019). Accordingly, the information presented for 2018 has not been restated - i.e. it is presented, as previously reported, under IAS 17, and related interpretations.
 

Consolidated statement of profit or loss and other comprehensive income

For the year ended 31 December 2019

								Year ended 31 December 2019 (Unaudited)				As restated Year ended 31 December 2018 (Audited)
								Pre- exceptional	Exceptional items (Note 5)	Total		Pre- exceptional	Exceptional items (Note 5)	Total
Continuing operations						Note		$'000	$'000	$'000		$'000	$'000	$'000
Revenue						4		16,155	-	16,155		17,019	-	17,019
Cost of sales								(1,186)	-	(1,186)		(1,544)	-	(1,544)
Gross profit								14,969	-	14,969		15,475	-	15,475
Operating expenses						6		(42,148)	-	(42,148)		(38,712)	-	(38,712)
Operating loss						6		(27,179)	-	(27,179)		(23,237)	-	(23,237)
Finance income								604	-	604		443	2,793	3,236
Finance costs								(527)	(2,047)	(2,574)		(514)	-	(514)
Net finance income/(costs)								77	(2,047)	(1,970)		(71)	2,793	2,722
(Loss)/profit before tax								(27,102)	(2,047)	(29,149)		(23,308)	2,793	(20,515)
Income tax								885	-	885		802	-	802
(Loss)/profit for the year								(26,217)	(2,047)	(28,264)		(22,506)	2,793	(19,713)
Other comprehensive income Items that are or may be reclassified to profit or loss:
Foreign operations - foreign currency translation differences								(282)	2,047	1,765		(81)	(2,793)	(2,874)
Other comprehensive income for the year, net of tax								(282)	2,047	1,765		(81)	(2,793)	(2,874)
Total comprehensive income for the year								(26,499)	-	(26,499)		(22,587)	-	(22,587)
Loss per share
Basic and diluted loss per share					7					($0.63)				($0.47)

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

Consolidated statement of financial position

At 31 December 2019

			31 December 2019 (Unaudited)	31 December 2018 (Audited)
		Note	$'000	$'000
Assets
Property, plant and equipment			3,735	828
Intangible assets			4,877	5,516
Other non-current assets		8	3,016	2,580
Non-current assets			11,628	8,924
Trade and other receivables		9	8,545	7,399
Cash and cash equivalents			23,354	10,757
Current assets			31,899	18,156
Total assets			43,527	27,080
Equity
Share capital			7,097	6,361
Share premium			149,336	115,909
Translation reserve			(5,583)	(7,348)
Merger reserve			1,247	1,247
Retained earnings			(121,922)	(102,365)
Total equity			30,175	13,804
Liabilities
Loans and borrowings		10	2,889	98
Deferred income		11	1,188	1,277
Deferred tax liabilities			4	3
Non-current liabilities			4,081	1,378
Current tax liabilities			66	7
Loans and borrowings		10	2,212	3,990
Trade and other payables			4,371	4,860
Deferred income		11	2,622	3,041
Current liabilities			9,271	11,898
Total liabilities			13,352	13,276
Total equity and liabilities			43,527	27,080

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

 

Consolidated statement of changes in equity

For the year ended 31 December 2019

	Attributable to owners of the Company
	Share capital	Share premium	Translation reserve	Merger reserve	Retained earnings	Total equity
Audited	$'000	$'000	$'000	$'000	$'000	$'000
Balance at 31 December 2017	6,156	115,196	(4,474)	1,247	(100,658)	17,467
Adjustment on application of IFRS 15	-	-	-	-	11,029	11,029
Adjusted balance at 1 January 2018	6,156	115,196	(4,474)	1,247	(89,629)	28,496
Total comprehensive income for the year
Loss for the year	-	-	-	-	(19,713)	(19,713)
Other comprehensive income for the year	-	-	(2,874)	-	-	(2,874)
Total comprehensive income for the year	-	-	(2,874)	-	(19,713)	(22,587)
Transactions with owners of the Company
Contributions and distributions
Equity-settled share-based payment	-	-	-	-	6,977	6,977
Share options exercised	205	713	-	-	-	918
Total transactions with owners of the Company	205	713	-	-	6,977	7,895
Balance at 31 December 2018 - As restated	6,361	115,909	(7,348)	1,247	(102,365)	13,804
Unaudited
Total comprehensive income for the year
Loss for the year	-	-	-	-	(28,264)	(28,264)
Other comprehensive income for the year	-	-	1,765	-	-	1,765
Total comprehensive income for the year	-	-	1,765	-	(28,264)	(26,499)
Transactions with owners of the Company
Contributions and distributions
Equity-settled share-based payment	-	-	-	-	8,707	8,707
Proceeds from share placing	706	33,085	-	-	-	33,791
Share options exercised	30	342	-	-	-	372
Total transactions with owners of the Company	736	33,427	-	-	8,707	42,870
Balance at 31 December 2019	7,097	149,336	(5,583)	1,247	(121,922)	30,175

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

Consolidated statement of cash flows

For the year ended 31 December 2019

			Year ended 31 December 2019 (Unaudited)	As restated Year ended 31 December 2018 (Audited)
		Note	$'000	$'000
Cash flows from operating activities
Loss for the year			(28,264)	(19,713)
Adjustments for:
-  Depreciation of property, plant and equipment			1,101	388
-  Amortisation of intangible assets			5,701	6,475
-  Loss on disposal of property, plant and equipment			-	3
-  Net finance costs			(77)	71
-  Income tax			(885)	(802)
-  Foreign exchange			1,869	(2,517)
-  Equity-settled share-based payment		12	8,707	6,977
			(11,848)	(9,118)
Changes in:
-  Trade and other receivables			(1,203)	281
-  Trade and other payables			(562)	(925)
-  Deferred income			(508)	(1,230)
-  Deferred government grant			-	(2)
Net working capital change			(2,273)	(1,876)
Cash used in operating activities			(14,121)	(10,994)
Interest paid			(446)	(399)
Income tax received			807	51
Net cash used in operating activities			(13,760)	(11,342)
Cash flows from investing activities
Interest received			258	213
Proceeds from sale of property, plant and equipment			-	5
Acquisition of property, plant and equipment			(841)	(677)
Development expenditure			(5,062)	(4,910)
Net cash used in investing activities			(5,645)	(5,369)
Cash flows from financing activities
Proceeds from issue of share capital			34,163	918
Net repayment of bank loan			(1,667)	(111)
Payment of lease liabilities (2018: Payment of finance lease liabilities)			(502)	(95)
Net cash from financing activities			31,994	712
Net increase/(decrease) in cash and cash equivalents			12,589	(15,999)
Cash and cash equivalents at 1 January			10,757	27,396
Effect of movements in exchange rates on cash and cash equivalents			8	(640)
Cash and cash equivalents at 31 December			23,354	10,757

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 2019

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 2019 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 International Financial Reporting Standards ("IFRSs") in issue, as adopted by the European Union ("EU") and effective at 31 December 2019, this announcement does not itself contain sufficient information to comply with IFRS.

The Group expects to publish full Consolidated financial statements in June 2020. The financial information set out in this preliminary announcement does not constitute the Group's Consolidated financial statements for the years ended 31 December 2019 or 31 December 2018.

The financial information for 2018 is derived from the consolidated accounts for the year ended 31 December 2018 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 2019 is derived from the consolidated accounts for the year ended 31 December 2019, 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 2019 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 EU. The Group has applied all accounting standards and interpretations issued by the IASB and International Financial Reporting Committee relevant to its operations and which are effective in respect of these Financial statements.

The preliminary announcement has been prepared using the accounting policies published in the Group's accounts for the year ended 31 December 2018, which are available on the Company's website.  From 1 January 2019 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 2019 have been adopted:

-  IFRS 16 "Leases"

-  IFRIC 23 "Uncertainty over Income Tax Treatments"

-  Annual Improvements to IFRS Standards 2015-2017 Cycle

-  Long-term Interests in Associates and Joint Ventures (Amendment to IAS 28)

-  Prepayment Features with Negative Compensation (Amendments to IFRS 9)

-  Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)

Apart from IFRS 16 "Leases" where the impact is detailed in Note 3 below, these standards and amendments to standards have not had a material impact on these Financial statements.

This is the first set of the Group's financial statements where IFRS 16 "Leases" has been applied. Changes to significant accounting policies are described in Note 3.

 (ii) New and amended standards and interpretations issued but not effective for the financial year beginning 1 January 2019 and not early adopted

A number of new standards are effective for annual periods beginning after 1 January 2019 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.

b Going concern

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 10.

As at 31 December 2019 the Group had net assets of $30.2m (31 December 2018: $13.8m), including cash of $23.4m (2018: $10.8m) as set out in the consolidated statement of financial position, with a debt facility drawn of $2.2m (2018: debt facility drawn of $3.9m). In the year ended 31 December 2019, the Group incurred a loss before tax of $29.1m (2018: $20.5m) and net cash outflows before financing of $19.4m (2018: $16.7m).

During 2019, the performance of the Group declined, with revenues reducing by 5% to $16.2m (2018: $17.0m) and operating loss increasing to $27.2m (2018: $23.2m).

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 expected date of the approval of the 2019 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 10.  The cash flow model includes the injection of at least $20m 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 and COVID-19) shows that following the proceeds from the proposed share placing, the Group will have sufficient cash to remain within its facilities, in the event that revenue growth is delayed (i.e. revenue does not increase from the level reported in 2019) 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 revenue were set to remain consistent with the level reported in 2019. 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 and 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 expected 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 a material uncertainty exists that may cast significant doubt over the Company's ability to continue as a going concern.

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.

-  Adjusted EBITDA: Operating loss adjusted for: depreciation, amortisation and equity-settled share-based payment.

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, except for new significant judgements and key sources of estimation uncertainty related to the application of IFRS 16, which are described in Note 3.

3.  Changes in significant accounting policies - IFRS 16 "Leases"

Except for the changes below, the Group has consistently applied the accounting policies to all periods presented in these consolidated financial statements.

The Group applied IFRS 16 with a date of initial application of 1 January 2019.  As a result, the Group has changed its accounting policy for lease contracts as detailed below.  The Group applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019.  As a result, the comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4. 

a  Impacts on financial statements

The effect of initially applying this standard is as follows:

(i)  recognition of a right of use asset and depreciation of this asset;

(ii) removal of rent prepayment / accrual and charge to Statement of profit or loss; and

(iii) recognition of lease liability non-current and current and interest on this liability.

The following table summarises the impact of transition to IFRS 16 on retained earnings at 1 January 2019.

			Impact of adopting IFRS 16 at 1 January 2019 (Unaudited)
Retained earnings		Note	$'000
Property, plant and equipment: Recognition of right of use asset		3(a)(i)	1,865
Trade and other receivables: Remove rent prepayment		3(a)(ii)	(41)
Trade and other payables: Remove rent accrual		3(a)(ii)	57
Loans and borrowings - non-current: Lease liability due in more than one year		3(a)(iii)	(1,491)
Loans and borrowings - current: Lease liability due in less than one year		3(a)(iii)	(390)
Impact at 1 January 2019			-

The following tables summarise the impacts of adopting IFRS 16 on the Consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2019 and the Consolidated statement of financial position for each of the line items affected. There was no material impact on the Consolidated statement of cash flows for the year ended 31 December 2019.

b  Impact on the consolidated statement of profit or loss and other comprehensive income		Year ended 31 December 2019 (Unaudited)			As restated Year ended 31 December 2018 (Audited)
		As reported (IFRS 16)	Adjustments	Amounts without adoption of IFRS 16	Amounts without adoption of IFRS 16
Continuing operations	Note	$'000	$'000	$'000	$'000
Revenue		16,155	-	16,155	17,019
Cost of sales		(1,186)	-	(1,186)	(1,544)
Gross profit		14,969	-	14,969	15,475
Cash overheads	3(a)(ii)	(31,701)	(632)	(32,333)	(29,782)
Adjusted EBITDA including development expenditure		(16,732)	(632)	(17,364)	(14,307)
Development expenditure capitalised		5,062	-	5,062	4,910
Adjusted EBITDA		(11,670)	(632)	(12,302)	(9,397)
Amortisation and depreciation	3(a)(i)	(6,802)	573	(6,229)	(6,863)
Equity-settled share-based payment		(8,707)	-	(8,707)	(6,977)
Operating loss		(27,179)	(59)	(27,238)	(23,237)
Net finance (costs)/income	3(a)(iii)	(1,970)	201	(1,769)	2,722
(Loss)/profit before tax		(29,149)	142	(29,007)	(20,515)
Income tax		885	-	885	802
(Loss)/profit for the year		(28,264)	142	(28,122)	(19,713)
Other comprehensive income for the year, net of tax		1,765	-	1,765	(2,874)
Total comprehensive income for the year		(26,499)	142	(26,357)	(22,587)

c  Impact on the consolidated statement of financial position		31 December 2019 (Unaudited)			31 December 2018 (Audited)
		As reported (IFRS 16)	Adjustments	Amounts without adoption of IFRS 16	Amounts without adoption of IFRS 16
	Note	$'000	$'000	$'000	$'000
Non-current assets	3(a)(i)	11,628	(2,591)	9,037	8,924
Current assets	3(a)(ii)	31,899	(48)	31,851	18,156
Total assets		43,527	(2,639)	40,888	27,080
Total equity		30,175	142	30,317	13,804
Non-current liabilities	3(a)(iii)	4,081	(2,334)	1,747	1,378
Current liabilities	3(a)(ii), 3(a)(iii)	9,271	(447)	8,824	11,898
Total liabilities		13,352	(2,781)	10,571	13,276
Total equity and liabilities		43,527	(2,639)	40,888	27,080

4.  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:

		Year ended 31 December 2019 (Unaudited)	Year ended 31 December 2018 (Audited)
Revenue		$'000	$'000
North America - USA		6,551	13,864
North America - other		44	236
Europe		2,152	1,785
Rest of the world - China		5,036	821
Rest of the world - South Africa		2,088	-
Rest of the world - other		284	313
		16,155	17,019

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

	Year ended 31 December 2019 (Unaudited)	Year ended 31 December 2019 (Unaudited)	Year ended 31 December 2018 (Audited)	Year ended 31 December 2018 (Audited)
	% of revenue	Revenue $'000	% of revenue	Revenue $'000
Customer 1	19%	3,117	-	-
Customer 2	13%	2,088	-	-
Customer 3	11%	1,857	-	-
Customer 4	-	-	32%	5,459
Customer 5	-	-	15%	2,471

No other single customers contributed 10% or more to the Group's revenue (2018: $nil).

e Split of revenue by timing of revenue recognition

		Year ended 31 December 2019 (Unaudited)	Year ended 31 December 2018 (Audited)
Revenue		$'000	$'000
Licences and services transferred at a point in time		12,596	13,472
Services transferred over time		3,559	3,547
		16,155	17,019

f Contract balances

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

		31 December 2019 (Unaudited)	31 December 2018 (Audited)
		$'000	$'000
Receivables, which are included in "Other non-current assets - Accrued income"		2,826	2,340
Receivables, which are included in "Trade and other receivables - Accrued income"		2,964	2,654
Contract liabilities, which are included in "Deferred income" - non-current		(1,188)	(1,277)
Contract liabilities, which are included in "Deferred income" - current		(2,622)	(3,041)

5.  Exceptional items

			Year ended 31 December 2019 (Unaudited)	Year ended 31 December 2018 (Audited)
			$'000	$'000
Exchange (loss)/gain on intercompany balances			(2,047)	2,793

The exceptional (loss)/gain arose on sterling-denominated intercompany balances. These balances were retranslated at the closing exchange rate at 31 December 2019, which was 1.31, a 3% increase compared to the rate of 1.27 at 31 December 2018. Sterling to US dollar exchange rates reduced during 2018 compared to 2017. Due to the size and nature of the exchange (loss)/gain in both years, it has been included as an exceptional item.

The exceptional (loss)/gain on intercompany balances in the Consolidated statement of profit or loss is offset by an equivalent exceptional exchange gain/(loss) on the retranslation of the intercompany balances, which is included in the retranslation of net assets of foreign operations, included in the other comprehensive income.

 

6.  Non-GAAP profit measures - "Cash overheads" and "Adjusted EBITDA"

			Year ended 31 December 2019 (Unaudited)	As restated Year ended 31 December 2018 (Audited)
a Reconciliation of operating expenses to "Cash overheads":		Note	$'000	$'000
Operating expenses			(42,148)	(38,712)
Adjusted for:
Amortisation and depreciation			6,802	6,863
Equity-settled share-based payment		12	8,707	6,977
Development expenditure capitalised			(5,062)	(4,910)
Cash overheads			(31,701)	(29,782)

			Year ended 31 December 2019 (Unaudited)	As restated Year ended 31 December 2018 (Audited)
b Reconciliation of operating loss to "Adjusted EBITDA":		Note	$'000	$'000
Operating loss			(27,179)	(23,237)
Adjusted for:
Amortisation and depreciation			6,802	6,863
Equity-settled share-based payment		12	8,707	6,977
Adjusted EBITDA			(11,670)	(9,397)
Development expenditure capitalised			(5,062)	(4,910)
Adjusted EBITDA including development expenditure			(16,732)	(14,307)

7.  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:

		Year ended 31 December  2019 (Unaudited)	As restated Year ended 31 December 2018 (Audited)
		$'000	$'000
Loss for the year attributable to ordinary shareholders		28,264	19,713
Weighted average number of ordinary shares		Number of shares  '000	Number of shares  '000
Issued ordinary shares at 1 January		42,523	40,904
Effect of shares issued in the year		2,608	828
Weighted average number of ordinary shares at 31 December		45,131	41,732

		2019 $	2018 $
Basic loss per share		$0.63	$0.47

b Adjusted loss per share

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

			Year ended 31 December 2019 (Unaudited)	As restated Year ended 31 December 2018 (Audited)
Adjusted loss for the year:		Note	$'000	$'000
Loss for the year attributable to ordinary shareholders			28,264	19,713
Adjusted for:
Exceptional items		5	(2,047)	2,793
Equity-settled share-based payment		12	(8,707)	(6,977)
Adjusted loss for the year			17,510	15,529

		2019 $	2018 $
Adjusted loss per share		$0.39	$0.37

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.

8.  Other non-current assets

			31 December 2019 (Unaudited)	31 December  2018 (Audited)
Due in more than a year:			$'000	$'000
Other receivables			190	240
Accrued income			2,826	2,340
Total other non-current assets			3,016	2,580

9.  Trade and other receivables

				31 December 2019 (Unaudited)	31 December 2018 (Audited)
Due within a year:				$'000	$'000
Trade receivables				2,773	1,810
Other receivables				753	1,059
Accrued income				2,964	2,654
Corporation tax				1,441	1,304
Prepayments				614	572
Total trade and other receivables				8,545	7,399

10.  Loans and borrowings

			31 December 2019 (Unaudited)	31 December 2018 (Audited)
			$'000	$'000
Non-current liabilities
Secured bank loan			555	-
Lease liabilities (2018: Finance lease liabilities)			2,334	98
			2,889	98
Current liabilities
Current portion of secured bank loan			1,667	3,889
Current portion of lease liabilities (2018: Finance lease liabilities)			545	101
			2,212	3,990
Total loans and borrowings			5,101	4,088

At 31 December 2019, the $2.2m of bank loan (2018: $3.9m) represents term debt drawn down with Silicon Valley Bank. The facility comprises $2.2m (2018 $3.9m) 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.

11.  Deferred income

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

			31 December 2019 (Unaudited)	31 December 2018 (Audited)
Deferred income which falls due:			$'000	$'000
Within a year			2,622	3,041
In more than a year			1,188	1,277
Total deferred income			3,810	4,318

12.  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 2019.

			Year ended 31 December 2019 (Unaudited)	Restated Year ended 31 December 2018 (Audited)
			$'000	$'000
Total equity-settled share-based payment charge			8,707	6,977

a Prior year adjustment

The 2018 share-based payment charge has been adjusted to correct the accounting for options with graded vesting on grants awarded prior to 1 January 2018.

The impact of the prior year adjustment are:

- The 2018 share-based payment charge was increased by $1,120,000 to $6,977,000, resulting in an increase in both operating expenses and operating loss by the same amount in the Consolidated statement of profit or loss and other comprehensive income.

- The Consolidated statement of changes in equity for 2018 also reflects the same increase in the share-based payment charge by $1,120,000 to $6,977,000.

- Basic and diluted loss per share for 2018 was increased from $0.45 to $0.47.

- As a non-cash item, there is no impact on cash flow, retained earnings, net assets or KPIs.

b Summary of share options outstanding

		2019	2018
Number of share options outstanding:		Number of options (Unaudited)	Number of options (Audited)
Outstanding at 1 January		4,662,070	4,901,699
Granted during the year		879,309	1,649,257
Forfeited during the year		(283,257)	(269,824)
Exercised during the year		(229,965)	(1,619,062)
Outstanding at 31 December		5,028,157	4,662,070
Exercisable at 31 December		2,983,106	1,823,334
Vested at the end of the year		2,983,106	1,823,334

13.  Contingent liabilities

The Group had no contingent liabilities at 31 December 2019 (31 December 2018: None).

14.  Post balance sheet events

The global expansion of the COVID-19 virus since the fiscal year end has resulted in macroeconomic uncertainty.  Whilst there has been no material impact on the Group as at the date of this report, it is difficult to assess the short to longer-term impact of that uncertainty on the Group's operations.

As at 31 May 2020 the Group had cash reserves of $11.6m.

Despite the significant challenge COVID-19 presents we are moving forward this year with continued business momentum as evidenced by our landmark agreement with Microsoft announced in June 2020. Management expects that the potential of the agreement with Microsoft will overcome any short-term headwinds from the economic uncertainty surrounding the impact of  COVID-19.

 

END

 

 

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