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CIRATA PLC Interim / Quarterly Report 2020
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Interim / Quarterly Report
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National Storage Mechanism | Additional information 
RNS Number : 2338Z
WANdisco Plc
17 September 2020
17 September 2020
WANdisco plc
("WANdisco", the "Company" or the "Group")
Interim unaudited results for the six months ended 30 June 2020
WANdisco announces the launch of LiveData Migrator on the AWS platform
WANdisco launches deeply embedded service into Microsoft Azure
Strong balance sheet provides platform to accelerate conversion of cloud opportunity
WANdisco (LSE: WAND), the LiveData company, announces interim unaudited results for the six months ended 30 June 2020.
Financial summary
| · | Revenue for the period $3.6 million (H1 2019: $6.0 million) |
| · | Cash overheads1 of $17.9 million (H1 2019: $15.5 million) |
| · | Adjusted EBITDA2 loss of $11.9 million (H1 2019: $7.6 million) |
| · | Operating loss of $17.7 million (H1 2019: $16.5 million) |
| · | Cash at 30 June 2020 of $33.6 million (31 December 2019: $23.4 million) |
| · | Debt of $1.4 million (31 December 2019: $2.2 million) |
| · | Raised gross proceeds of $25 million through an oversubscribed placing to accelerate the Company's growth ambitions and to pursue near term opportunities with channel partners |
Operational and strategic highlights
| · | Announced the limited public preview of WANdisco LiveData Platform for Azure: |
| 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 to be delivered through existing Azure billing service ensures customers do not require additional vendor approval |
| · | Data and Cloud capabilities driving meaningful commercial interest and momentum: |
| o | Contract worth $1 million won with a division of one of the world's largest media and telecommunications companies to migrate data into the Microsoft Azure cloud |
| o | Secured a reseller agreement with a large global systems integrator to support growth across all major cloud platforms |
| o | Secured a contract with one of the world's largest airlines to migrate analytical data to the Microsoft Azure cloud |
| o | Signed a contract worth up to $1 million with a major British supermarket for both on-premises and migration to the Microsoft Azure cloud |
Post period end
| · | Strong uptake for the Company's Azure Cloud platform, with 46 organizations registered. Open Public preview is scheduled to commence over the coming weeks |
| · | Became the first independent software vendor ("ISV") to achieve AWS Competency Status in the area of data migration |
| · | Launched the new LiveData Migrator, the next generation data lake migration product that enables data to begin migration within minutes and manages data changes during the migration regardless of scale |
| · | LiveData Migrator launched on the AWS platform, securing GoDaddy as the first customer representing a highly complex on-premises Hadoop environment migrating to S3. Please see separate release for more details |
David Richards, Chief Executive Officer and Chairman of WANdisco, commented:
"Today, we proudly announced the launch of LiveData Migrator on the AWS platform and as the business alluded to in our recent fundraise, we have strengthened our strategic relationship with AWS and see a building pipeline of customers on the platform. With the formal launch of our new LiveData Migrator product, we became the only ISV to achieve competency status in the revamped migration category and have already secured GoDaddy as the first customer. The business remains focused on capitalising on opportunities with AWS, Microsoft and other Tier 1 partners as our relationships continue to deepen.
"In H1 we have continued to fortify our partnership with Microsoft through the creation of a new core service, the LiveData Platform for Azure. Deepening these relationships with cloud partners remains our primary strategic goal, positioning the Group for significant scalable growth. The Board expects the LiveData Platform to become publicly available as a metered service over the next few weeks.
"In the period the Group secured a significant reseller agreement with a large global systems integrator who has relationships with many Global 200 companies as a provider of cloud integration services. We have also signed significant initial contracts with a large media company and British supermarket chain.
"With the backdrop of the COVID-19 pandemic, we have seen an accelerated business shift towards cloud as companies look to take advantage of the agility and scalability that cloud provides. The Board remains confident that while revenue in FY2020 will be below expectations, the combination of our market opportunity, product readiness, and deepening commitments from cloud partners provides a strong platform to deliver significant revenue growth in FY2021 with the Board expecting a minimum revenue of $35 million."
| 1 | Operating expenses adjusted for: depreciation, amortisation, capitalisation of development expenditure and equity-settled share-based payment. See Note 5 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 5 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
FTI Consulting +44 (0)20 3727 1137
Matt Dixon / Chris Birt / Kwaku Aning
Stifel (Nomad and Broker) +44 (0)20 7710 7600
Fred Walsh / Richard Short
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 LiveData Platform keeps geographically dispersed data at any scale consistent between on-premises and cloud environments allowing businesses to operate seamlessly in a hybrid or multi-cloud environment. 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. www.wandisco.com
BUSINESS REVIEW
In H1 2020, we delivered on our primary strategic goal of cementing our partnership with Microsoft to create a new core Azure service, the LiveData Platform for Azure, which allows customers to use our software as if it were a native Azure offering. As an Azure core service, customers can deploy WANdisco's LiveData products by selecting it from the same Azure menu used for native Microsoft services such as compute and storage, and the charges added on their monthly Azure bill. No software to install, no new contracts to sign. The new service is close to open preview, meaning that our Azure service will be available to all customers. As a result we anticipate this to facilitate a greater volume and velocity of deals than we have experienced in prior years.
We continue to focus our development efforts on products that provide customers with simple, robust transition paths as an ever greater number of companies are looking for solutions to move their on-premises Hadoop data to the cloud. Our LiveData Migrator product launched alongside AWS and GoDaddy as the launch customer, coupled with our LiveData platform, will allow customers to make the transition from on-premises to cloud computing as easy and as seamless as possible.
We have signed a reseller contract with a major global systems integrator with a significant cloud migration practice. Our new LiveData Migrator product will unlock a previously difficult to service market for them for large, on-premises to cloud migrations as well as our LiveData Platform providing hybrid and inter cloud data consistency solutions. We have also secured contracts with a large media company and a British supermarket chain.
The Company has continued to see 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 systems integrator 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.
The global nature 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. Nonetheless, 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. To date, we have experienced minimal effects to our customer base and order flow, and have not reduced employee-based costs.
Outlook
Our cloud platform, System Integrator, and ISV partners 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 creation of a native Azure service with our technology provides a platform to capitalise on that opportunity, taking advantage of billing and technical integrations. With the LiveData Platform for Azure close to open preview, 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, in particular AWS, 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 deepening commitments from our partners.
With the imminent launch of metered billing on the Azure platform, we have seen an increasing number of customers waiting on its availability before concluding their purchasing decision. While the company remains confident that these deals will be concluded successfully, there will be an impact on revenue recognition vs. our traditional subscription licence, where the majority of revenue is recognised on delivery under IFRS 15, versus a SAAS revenue model where revenue will be recognised over time, shifting recognition of a greater proportion of the Company's expected revenue into 2021. As a result, we expect FY20 revenues to be lower than current market estimates.
For FY21, we expect to migrate in excess of 100PB of data to the Azure cloud (with more than 50 customers signed over the year) and greater than 30PB into the AWS cloud. Combined with the flow of metered billing from Q4 this year we expect a minimum revenue of $35m in FY21.
KPIs
As our business continues to evolve, the metrics we use to measure our success also need to change. As we enter into 2021, we expect to provide additional metrics that best represent our business progress. These KPIs include the number of customers, the volume of data being migrated, the attach rate to migration and hybrid cloud and eventually the amount of metered revenue vs. subscription revenue.
FINANCIAL REVIEW
Revenue for the period ended 30 June 2020 was $3.6 million (H1 2019: $6.0 million).
Adjusted EBITDA2 loss was $11.9 million (H1 2019: $7.6 million), primarily due to lower revenue and the strategic investments we made to strengthen our channel partner relationships to drive future growth.
Revenue
Revenue was $3.6 million (H1 2019: $6.0 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.
Deferred revenue from sales booked during the first half of 2020 and in previous years, and not yet recognised as revenue, is $3.2 million at 30 June 2020 (H1 2019: $4.7 million). Our deferred revenue represents future revenue from new and renewed contracts, many of them spanning multiple years. Given our impending shift towards metered billing, deferred revenue will no longer be a relevant KPI. As described above the company will present new KPIs to measure the success of the business.
Operating costs
Cash overheads1 increased in the period as we made modest investments in Sales and Engineering to capitalise on the opportunities with our cloud partners, rising to $17.9 million from $15.5 million in the first half of 2019.
Product development expenditure capitalised in the period was $2.6 million (H1 2019: $2.3 million). All of this expenditure was associated with new product features and was capitalised.
Our headcount was 174 as at 30 June 2020 (December 2019: 162, June 2019: 152). 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 $11.9 million (H1 2019: $7.6 million).
The loss after tax for the period decreased to $14.0 million (H1 2019: $16.7 million), due to an exceptional finance gain of $3.9 million and decreased share-based payment charge, offset by increased overheads. The exceptional finance gain of $3.9 million (H1 2019: $0.1 million loss) arose from the retranslation of intercompany balances at 30 June 2020, reflecting the decrease 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. An equal and opposite translation gain on the net assets of overseas net assets in reserves result in no impact on the Group net assets.
Balance sheet and cash flow
Trade and other receivables at 30 June 2020 were $6.6 million (31 December 2019: $8.5 million). This includes $0.7 million of trade receivables (31 December 2019: $2.8 million) and $5.9 million related to non-trade receivables (31 December 2019: $5.7 million).
Net consumption of cash was $12.5 million before financing (H1 2019: $9.5 million), resulting in a closing cash balance of $33.6 million at 30 June 2020. 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 2020 we had drawings under our revolving credit facility with Silicon Valley Bank of $1.4 million (31 December 2019: $2.2 million).
Consolidated statement of profit or loss and other comprehensive income
For the six months ended 30 June 2020
| Six months ended 30 June 2020 (Unaudited) |
Six months ended 30 June 2019 (Unaudited) |
Year ended 31 December 2019 (Audited) |
||||||||||||
| Pre- exceptional |
Exceptional items (Note 4) |
Total | Pre- exceptional |
Exceptional items (Note 4) |
Total | Pre- exceptional |
Exceptional items (Note 4) |
Total | ||||||
| Continuing operations | Note | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | ||||
| Revenue | 3 | 3,625 | - | 3,625 | 5,966 | - | 5,966 | 16,155 | - | 16,155 | ||||
| Cost of sales | (322) | - | (322) | (376) | - | (376) | (1,186) | - | (1,186) | |||||
| Gross profit | 3,303 | - | 3,303 | 5,590 | - | 5,590 | 14,969 | - | 14,969 | |||||
| Operating expenses | 5 | (21,043) | - | (21,043) | (22,127) | - | (22,127) | (42,148) | - | (42,148) | ||||
| Operating loss | 5 | (17,740) | - | (17,740) | (16,537) | - | (16,537) | (27,179) | - | (27,179) | ||||
| Finance income | 32 | 3,939 | 3,971 | 240 | - | 240 | 604 | - | 604 | |||||
| Finance costs | (180) | - | (180) | (278) | (78) | (356) | (527) | (2,047) | (2,574) | |||||
| Net finance (costs)/income | (148) | 3,939 | 3,791 | (38) | (78) | (116) | 77 | (2,047) | (1,970) | |||||
| (Loss)/profit before tax | (17,888) | 3,939 | (13,949) | (16,575) | (78) | (16,653) | (27,102) | (2,047) | (29,149) | |||||
| Income tax | (30) | - | (30) | (8) | - | (8) | 885 | - | 885 | |||||
| (Loss)/profit for the period | (17,918) | 3,939 | (13,979) | (16,583) | (78) | (16,661) | (26,217) | (2,047) | (28,264) | |||||
| Other comprehensive income Items that are or may be reclassified to profit or loss: |
||||||||||||||
| Foreign operations - foreign currency translation differences | (30) | (3,939) | (3,969) | (201) | 78 | (123) | (282) | 2,047 | 1,765 | |||||
| Other comprehensive income for the period, net of tax | (30) | (3,939) | (3,969) | (201) | 78 | (123) | (282) | 2,047 | 1,765 | |||||
| Total comprehensive income for the period | (17,948) | - | (17,948) | (16,784) | - | (16,784) | (26,499) | - | (26,499) | |||||
| Loss per share | ||||||||||||||
| Basic and diluted loss per share | 6 | ($0.29) | ($0.38) | ($0.63) | ||||||||||
The notes form an integral part of these condensed consolidated interim financial statements.
Consolidated statement of financial position
At 30 June 2020
| 30 June 2020 (Unaudited) |
30 June 2019 (Unaudited) |
31 December 2019 (Audited) |
||
| Note | $'000 | $'000 | $'000 | |
| Assets | ||||
| Property, plant and equipment | 3,133 | 2,718 | 3,735 | |
| Intangible assets | 4,962 | 4,870 | 4,877 | |
| Other non-current assets | 7 | 2,656 | 2,401 | 3,016 |
| Non-current assets | 10,751 | 9,989 | 11,628 | |
| Trade and other receivables | 8 | 6,593 | 6,087 | 8,545 |
| Cash and cash equivalents | 33,634 | 17,868 | 23,354 | |
| Current assets | 40,227 | 23,955 | 31,899 | |
| Total assets | 50,978 | 33,944 | 43,527 | |
| Equity | ||||
| Share capital | 7,481 | 6,696 | 7,097 | |
| Share premium | 172,897 | 133,288 | 149,336 | |
| Translation reserve | (9,552) | (7,471) | (5,583) | |
| Merger reserve | 1,247 | 1,247 | 1,247 | |
| Retained earnings | (133,237) | (113,587) | (121,922) | |
| Total equity | 38,836 | 20,173 | 30,175 | |
| Liabilities | ||||
| Loans and borrowings | 9 | 2,028 | 2,850 | 2,889 |
| Deferred income | 10 | 1,075 | 2,016 | 1,188 |
| Deferred tax liabilities | 3 | 3 | 4 | |
| Non-current liabilities | 3,106 | 4,869 | 4,081 | |
| Current tax liabilities | 58 | 7 | 66 | |
| Loans and borrowings | 9 | 1,907 | 2,195 | 2,212 |
| Trade and other payables | 4,934 | 3,997 | 4,371 | |
| Deferred income | 10 | 2,137 | 2,703 | 2,622 |
| Current liabilities | 9,036 | 8,902 | 9,271 | |
| Total liabilities | 12,142 | 13,771 | 13,352 | |
| Total equity and liabilities | 50,978 | 33,944 | 43,527 |
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 2020
| Attributable to owners of the Company | ||||||
| Share capital |
Share premium | Translation reserve | Merger reserve | Retained earnings | Total equity |
|
| Six months ended 30 June 2020 (Unaudited) | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 |
| 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 | 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 |
| Six months ended 30 June 2019 (Unaudited) | ||||||
| Balance at 1 January 2019 | 6,361 | 115,909 | (7,348) | 1,247 | (102,365) | 13,804 |
| Total comprehensive income for the period | ||||||
| Loss for the period | - | - | - | - | (16,661) | (16,661) |
| Other comprehensive income for the period | - | - | (123) | - | - | (123) |
| Total comprehensive income for the period | - | - | (123) | - | (16,661) | (16,784) |
| Transactions with owners of the Company | ||||||
| Contributions and distributions | ||||||
| Equity-settled share-based payment | - | - | - | - | 5,439 | 5,439 |
| Proceeds from share placing | 321 | 17,127 | - | - | - | 17,448 |
| Share options exercised | 14 | 252 | - | - | - | 266 |
| Total transactions with owners of the Company | 335 | 17,379 | - | - | 5,439 | 23,153 |
| Balance at 30 June 2019 | 6,696 | 133,288 | (7,471) | 1,247 | (113,587) | 20,173 |
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 2020
| Six months ended 30 June 2020 (Unaudited) |
Six months ended 30 June 2019 (Unaudited) |
Year ended 31 December 2019 (Audited) |
||
| Note | $'000 | $'000 | $'000 | |
| Cash flows from operating activities | ||||
| Loss for the period | (13,979) | (16,661) | (28,264) | |
| Adjustments for: | ||||
| - Depreciation of property, plant and equipment | 601 | 507 | 1,101 | |
| - Amortisation of intangible assets | 2,531 | 2,953 | 5,701 | |
| - Net finance costs | 148 | 38 | (77) | |
| - Income tax | 30 | 8 | (885) | |
| - Foreign exchange | (3,870) | (205) | 1,869 | |
| - Equity-settled share-based payment | 11 | 2,664 | 5,439 | 8,707 |
| (11,875) | (7,921) | (11,848) | ||
| Changes in: | ||||
| - Trade and other receivables | 1,530 | 613 | (1,203) | |
| - Trade and other payables | 712 | (851) | (562) | |
| - Deferred income | (598) | 401 | (508) | |
| Net working capital change | 1,644 | 163 | (2,273) | |
| Cash used in operating activities | (10,231) | (7,758) | (14,121) | |
| Interest paid | (157) | (232) | (446) | |
| Income tax received | 672 | 910 | 807 | |
| Net cash used in operating activities | (9,716) | (7,080) | (13,760) | |
| Cash flows from investing activities | ||||
| Interest received | 15 | 240 | 258 | |
| Acquisition of property, plant and equipment | (36) | (367) | (841) | |
| Development expenditure | (2,616) | (2,307) | (5,062) | |
| Net cash used in investing activities | (2,637) | (2,434) | (5,645) | |
| Cash flows from financing activities | ||||
| Proceeds from issue of share capital | 23,945 | 17,714 | 34,163 | |
| Net repayment of bank loan | (833) | (833) | (1,667) | |
| Payment of lease liabilities | (349) | (257) | (502) | |
| Net cash from financing activities | 22,763 | 16,624 | 31,994 | |
| Net increase in cash and cash equivalents | 10,410 | 7,110 | 12,589 | |
| Cash and cash equivalents at 1 January | 23,354 | 10,757 | 10,757 | |
| Effect of movements in exchange rates on cash and cash equivalents | (130) | 1 | 8 | |
| Cash and cash equivalents at the end of the period | 33,634 | 17,868 | 23,354 |
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 2020
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 2020 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 2019 ("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 16 September 2020.
b Going concern
These interim 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 at 30 June 2020 the Group had net assets of $38.8m (31 December 2019: $30.2m), including cash of $33.6m (31 December 2019: $23.4m) as set out in the interim consolidated statement of financial position, with a debt facility drawn of $1.4m (31 December 2019: $2.2m). In the six months ended 30 June 2020, the Group incurred a loss before tax of $13.9m (H1 2019: $16.7m) and net cash outflows before financing of $12.4m (H1 2019: $9.5m).
Revenue for H1 2020 was $3.6m (H1 2019: $6.0m), with an operating loss of $17.7m (H1 2019: $16.5m), mainly due to an investment in operating expenses and reduced revenue.
The Directors have prepared a detailed budget and forecasts 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 revenues, the Board's sensitivity modelling (which considered the impact of Brexit) shows that the Group can remain within its facilities in the event that revenue growth is delayed 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 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 sales revenues, cash 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 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:
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 5 for a reconciliation. |
| - | Adjusted EBITDA: Operating loss adjusted for: depreciation, amortisation and equity‑settled share-based payment. See Note 5 for a reconciliation. |
e Use of judgements and estimates
In preparing these Financial statements, management has made judgements and estimates that affect the application of the Group's accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.
3. Revenue and segmental analysis
a Operating segments
The Directors consider there to be one operating segment, being that of development and sale of licences for software and related maintenance and support.
b Geographical segments
The Group recognises revenue in three geographical regions based on the location of customers, as set out in the following table:
| Revenue | Six months ended 30 June 2020 (Unaudited) $'000 |
Six months ended 30 June 2019 (Unaudited) $'000 |
Year ended 31 December 2019 (Audited) $'000 |
| North America - USA | 2,571 | 3,059 | 6,551 |
| North America - other | 36 | 3 | 44 |
| Europe | 715 | 792 | 2,152 |
| Rest of the world - China | 201 | 1,925 | 5,036 |
| Rest of the world - South Africa | 32 | - | 2,088 |
| Rest of the world - other | 70 | 187 | 284 |
| 3,625 | 5,966 | 16,155 |
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 2020 (Unaudited) |
Six months ended 30 June 2020 (Unaudited) |
Six months ended 30 June 2019 (Unaudited) |
Six months ended 30 June 2019 (Unaudited) |
Year ended 31 December 2019 (Audited) | Year ended 31 December 2019 (Audited) | |
| % of revenue |
Revenue $'000 | % of revenue |
Revenue $'000 |
% of revenue |
Revenue $'000 |
|
| Customer 1 | 21% | 770 | - | - | - | - |
| Customer 2 | 14% | 508 | - | - | - | - |
| Customer 3 | 9% | 323 | 11% | 667 | 8% | 1,227 |
| Customer 4 | 3% | 124 | 27% | 1,599 | 19% | 3,117 |
| Customer 5 | 1% | 31 | - | - | 13% | 2,088 |
| Customer 6 | - | - | - | - | 11% | 1,857 |
No other single customers contributed 10% or more to the Group's revenue (2019: $nil).
3. Revenue and segmental analysis (continued)
e Split of revenue by timing of revenue recognition
| Revenue | Six months ended 30 June 2020 (Unaudited) $'000 |
Six months ended 30 June 2019 (Unaudited) $'000 |
Year ended 31 December 2019 (Audited) $'000 |
| Products transferred at a point in time | 2,168 | 4,329 | 12,596 |
| Products and services transferred over time | 1,457 | 1,637 | 3,559 |
| 3,625 | 5,966 | 16,155 |
f Contract balances
The following table provides information about receivables, contract assets and liabilities from contracts with customers:
| Six months ended 30 June 2020 (Unaudited) $'000 |
Six months ended 30 June 2019 (Unaudited) $'000 |
Year ended 31 December 2019 (Audited) $'000 |
|
| Receivables, which are included in "Other non-current assets - Accrued income" | 2,508 | 2,173 | 2,826 |
| Receivables, which are included in "Trade and other receivables - Accrued income" | 3,172 | 2,863 | 2,964 |
| Contract liabilities, which are included in "Deferred income" - non-current | (1,075) | (2,016) | (1,188) |
| Contract liabilities, which are included in "Deferred income" - current | (2,137) | (2,703) | (2,622) |
4. Exceptional items
| Six months ended 30 June 2020 (Unaudited) |
Six months ended 30 June 2019 (Unaudited) |
Year ended 31 December 2019 (Audited) |
||
| $'000 | $'000 | $'000 | ||
| Exchange gain/(loss) on intercompany balances | 3,939 | (78) | (2,047) |
The exceptional gain/(loss) arose on Sterling denominated intercompany balances. These balances were retranslated at the closing exchange rate at 30 June 2020 which was 1.23 (compared with 1.31 at the end of 31 December 2019). In the prior half year, rates were 1.27 (compared with 1.27 at the end of 31 December 2018). Due to the size and nature of the exchange gain(loss), they have been included as exceptional items.
The exceptional gain/(loss) on intercompany balances in the Consolidated statement of profit or loss is offset by an equivalent exceptional exchange (loss)/gain 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.
5. Non-GAAP profit measures - Cash overheads and Adjusted EBITDA
| Six months ended 30 June 2020 (Unaudited) |
Six months ended 30 June 2019 (Unaudited) |
Year ended 31 December 2019 (Audited) |
||
| a Reconciliation of operating expenses to "Cash overheads": | Note | $'000 | $'000 | $'000 |
| Operating expenses | (21,043) | (22,127) | (42,148) | |
| Adjusted for: | ||||
| Amortisation and depreciation | 3,132 | 3,460 | 6,802 | |
| Equity-settled share-based payment | 11 | 2,664 | 5,439 | 8,707 |
| Development expenditure capitalised | (2,616) | (2,307) | (5,062) | |
| Cash overheads | (17,863) | (15,535) | (31,701) |
5. Non-GAAP profit measures - Cash overheads and Adjusted EBITDA (continued)
| Six months ended 30 June 2020 (Unaudited) |
Six months ended 30 June 2019 (Unaudited) |
Year ended 31 December 2019 (Audited) |
||
| b Reconciliation of operating loss to "Adjusted EBITDA": | Note | $'000 | $'000 | $'000 |
| Operating loss | (17,740) | (16,537) | (27,179) | |
| Adjusted for: | ||||
| Amortisation and depreciation | 3,132 | 3,460 | 6,802 | |
| Equity-settled share-based payment | 11 | 2,664 | 5,439 | 8,707 |
| Adjusted EBITDA | (11,944) | (7,638) | (11,670) | |
| Development expenditure capitalised | (2,616) | (2,307) | (5,062) | |
| Adjusted EBITDA including development expenditure | (14,560) | (9,945) | (16,732) |
6. 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 2020 (Unaudited) |
Six months ended 30 June 2019 (Unaudited) |
Year ended 31 December 2019 (Audited) |
|
| $'000 | $'000 | $'000 | |
| Loss for the period attributable to ordinary shareholders | 13,979 | 16,661 | 28,264 |
| Weighted average number of ordinary shares | Number of shares '000s |
Number of shares '000s |
Number of shares '000s |
| Issued ordinary shares at 1 January | 48,241 | 42,523 | 42,523 |
| Effect of shares issued in the period | 307 | 1,903 | 2,608 |
| Weighted average number of ordinary shares during the period | 48,548 | 44,426 | 45,131 |
| Basic loss per share | $0.29 | $0.38 | $0.63 |
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:
| Six months ended 30 June 2020 (Unaudited) |
Six months ended 30 June 2019 (Unaudited) |
Year ended 31 December 2019 (Audited) |
||
| Adjusted loss for the period: | Note | $'000 | $'000 | $'000 |
| Loss for the period attributable to ordinary shareholders | 13,979 | 16,661 | 28,264 | |
| Adjusted for: | ||||
| Exceptional items | 3,939 | (78) | (2,047) | |
| Equity-settled share-based payment | 11 | (2,664) | (5,439) | (8,707) |
| Adjusted basic loss for the period | 15,254 | 11,144 | 17,510 |
| Adjusted loss per share | $0.31 | $0.25 | $0.39 |
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.
7. Other non-current assets
| 30 June 2020 (Unaudited) |
30 June 2019 (Unaudited) |
31 December 2019 (Audited) | ||
| Due in more than a year: | $'000 | $'000 | $'000 | |
| Other receivables | 148 | 228 | 190 | |
| Accrued income | 2,508 | 2,173 | 2,826 | |
| Total other non-current assets | 2,656 | 2,401 | 3,016 |
8. Trade and other receivables
| 30 June 2020 (Unaudited) |
30 June 2019 (Unaudited) |
31 December 2019 (Audited) | |||
| Due within a year: | $'000 | $'000 | $'000 | ||
| Trade receivables | 741 | 1,092 | 2,773 | ||
| Other receivables | 1,160 | 716 | 753 | ||
| Accrued income | 3,172 | 2,863 | 2,964 | ||
| Corporation tax | 731 | 468 | 1,441 | ||
| Prepayments | 789 | 948 | 614 | ||
| Total trade and other receivables | 6,593 | 6,087 | 8,545 | ||
9. Loans and borrowings
| 30 June 2020 (Unaudited) |
30 June 2019 (Unaudited) |
31 December 2019 (Audited) | ||
| $'000 | $'000 | $'000 | ||
| Non-current liabilities | ||||
| Secured bank loan | - | 1,389 | 555 | |
| Finance lease liabilities | 2,028 | 1,461 | 2,334 | |
| 2,028 | 2,850 | 2,889 | ||
| Current liabilities | ||||
| Current portion of secured bank loan | 1,389 | 1,667 | 1,667 | |
| Current portion of finance lease liabilities | 518 | 528 | 545 | |
| 1,907 | 2,195 | 2,212 | ||
| Total loans and borrowings | 3,935 | 5,045 | 5,101 |
At 30 June 2020, the $1.4m of bank loan (31 December 2019: $2.2m) represents term debt drawn down with Silicon Valley Bank. The facility comprised $1.4m term debt (31 December 2019: $2.2m), 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.
10. Deferred income
Deferred income represents contracted sales for which services to customers will be provided in future periods.
| 30 June 2020 (Unaudited) |
30 June 2019 (Unaudited) |
31 December 2019 (Audited) | ||
| Deferred income which falls due: | $'000 | $'000 | $'000 | |
| Within a year | 2,137 | 2,703 | 2,622 | |
| In more than a year | 1,075 | 2,016 | 1,188 | |
| Total deferred income | 3,212 | 4,719 | 3,810 |
11. 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.
| Six months ended 30 June 2020 (Unaudited) |
Six months ended 30 June 2019 (Unaudited) |
Year ended 31 December 2019 (Audited) |
||
| $'000 | $'000 | $'000 | ||
| Total equity-settled share-based payment charge | 2,664 | 5,439 | 8,707 |
Summary of share options outstanding
| Six months ended 30 June 2020 (Unaudited) |
Six months ended 30 June 2019 (Unaudited) |
Year ended 31 December 2019 (Audited) |
|
| Number of share options outstanding: | Number | Number | Number |
| Balance at the start of the period | 5,028,157 | 4,662,070 | 4,662,070 |
| Granted | - | 834,216 | 879,309 |
| Forfeited | (68,566) | (91,779) | (283,257) |
| Exercised | (1,444) | (112,187) | (229,965) |
| Outstanding balance at the end of the period | 4,958,147 | 5,292,320 | 5,028,157 |
| Exercisable at the end of the period | 3,750,873 | 2,531,533 | 2,983,106 |
| Vested at the end of the period | 3,750,873 | 2,531,533 | 2,983,106 |
12. Contingent liabilities
The Group had no contingent liabilities at 30 June 2020 (30 June 2019: None, 31 December 2019: None).
13. Post-balance sheet events
There are no significant or disclosable post-balance sheet events.
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