WANdisco
Annual Report 2019

Plain-text annual report

WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 W A N D I S C O P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 9 Wide Area Network distributed computing 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. Read more about what we do from page 4 Stay up to date with the latest news and investor information at wandisco.com REASONS TO INVEST IN WANDISCO We are the experts in distributed computing 25 patents granted Our customers rely on us to help them meet the accelerating demand for cloud services We have strong relationships with our customers and partners 70% 25 of CIOs have a cloud-first strategy partners and system integrators We continue to innovate and introduce new products, expanding our addressable market We create value for our customers, employees and partners $8.3m investment in new technology 162 employees Read more about our business model from page 12 CORPORATE GOVERNANCE FINANCIAL STATEMENTS CONTENTS OVERVIEW 02 Our year in review 04 WANdisco at a glance STRATEGIC REPORT 06 Chairman and Chief Executive’s report 08 Our markets 12 Our business model 14 Our partnerships and technology 16 Our strategy 30 Board of Directors 32 Executive Team 34 Vice Chairman’s introduction to governance 35 Corporate governance report 39 Nomination Committee report 40 Audit Committee report 42 Remuneration Committee and remuneration report 19 Key performance indicators 44 Directors’ report 20 Risks 24 Financial review 26 Sustainability 46 Statement of Directors’ responsibilities 47 Independent auditor’s report to the members of WANdisco plc 51 Consolidated statement of profit or loss and other comprehensive income 52 Consolidated statement of financial position 53 Consolidated statement of changes in equity 54 Consolidated statement of cash flows 55 Notes to the consolidated financial statements 88 Five-year record 89 Notice of Annual General Meeting 92 Secretary, advisers and share capital information WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 01 OverviewOUR YEAR IN REVIEW 2019 highlights FINANCIAL HIGHLIGHTS Revenue ($m) $16.2m 19 18 17 16 15 16.2 17.0 19.6 11.4 11.0 Cash ($m) $23.4m 23.4 27.4 19 18 17 16 15 10.8 7.6 2.6 Cash overheads ($m)¹ Adjusted EBITDA ($m)² Statutory loss for the year ($m) $31.7m $(11.7)m $(28.3)m 19 18 17 16 15 31.7 29.8 24.5 23.4 34.6 (16.0) (11.7) (9.4) (0.6) (7.5) 19 18 17 16 15 (28.3) (19.7) (13.5) (9.3) (29.9) 19 18 17 16 15 Note: Throughout this document, alternative performance measures have been used which are non-GAAP measures that are presented to provide readers with additional financial information that is regularly reviewed by management and should not be viewed in isolation or as an alternative to the equivalent GAAP measure. See Note 6 for details. 1 Operating expenses adjusted for: depreciation, amortisation, capitalisation of development expenditure and equity-settled share-based payment. See Note 11 for a reconciliation. 3 The 2019 figures include the adoption of IFRS 16 “Leases” and the prior years have not been restated and are prepared on an IAS 17 basis. See Note 5 for a reconciliation. 2 Operating loss adjusted for: depreciation, amortisation and equity-settled share-based payment. See Note 11 for a reconciliation. Achieved Advanced Technology Partner status with AWS Launched LiveMigrator product $17.5m Raised by subscription for shares $0.75m New contract with Chinese customer 2019 FEBRUARY JUNE JANUARY APRIL JULY Secured first multi-cloud contract win Launch of jointly engineered SQL product launch with IBM $2.15m New contract with Chinese customer New partnerships with Databricks and Neudesic 02 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 OPERATIONAL AND STRATEGIC HIGHLIGHTS • WANdisco Fusion deeply embedded • Partnered with Databricks to provide rapid in Microsoft’s Azure cloud: data migration to Azure Databricks. Learn more about our highlights from page 6 – A native Azure offering, providing a fast and easy way to establish data • Achieved Advanced Technology Partner status with Amazon Web Services. connectivity from on-premises • Secured c$5m in contract renewals to cloud storage. and expansions in China. – Providing seamless customer • Raised $34m in two share placings experience and appearing as a completed at a premium to market native first party Azure service. at the time. – Delivering tight integration, reducing • Appointed Micro-D Master Distributor deployment complexities through for Africa. eliminating the customer need to plan data deployment or accommodate Post period end networking and storage options. • Microsoft Azure LiveData Platform public – Billing delivered through existing Azure preview with expectation to sign over billing service ensures customers do 50 new customers on the Azure platform not require additional vendor approval. over the next twelve months. • LiveMigrator launched enabling uninterrupted petabyte scale data migration to the cloud. • LiveAnalytics launched providing access to Spark-based analytics in the cloud. • Secured first global reseller agreement with a large global systems integrator. • Implemented business continuity measures in response to COVID-19. Launch of LiveAnalytics for cloud migration $1m Contact expansion with Chinese customer SEPTEMBER DECEMBER NOVEMBER Announced jointly developed Microsoft Azure embedded solution Appointed Master Distributor for Africa $16.5m Raised by subscription for shares Stay up to date with the latest news and investor information at wandisco.com WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 03 OverviewWANDISCO AT A GLANCE Consistent data everywhere Keeping data consistent in a distributed environment is a massive challenge. WANdisco Fusion, an enterprise-class software platform, solves the exponentially growing challenge of keeping unstructured data available across diverse IT environments regardless of geographic location, architecture, or cloud storage provider. Used by enterprises worldwide, our technology is based on a high-performance coordination engine called DConE, which uses consensus to keep Hadoop and object store data accessible, accurate, and consistent in different locations across any environment – on-premises, hybrid-cloud, multi-region and multi-cloud. WANdisco Fusion is a foundation for a modern cloud data strategy – a LiveData strategy – because it prevents data disasters, de-risks data migration to the cloud, and simplifies hybrid and multi-cloud data management. WANDISCO FUSION OVERVIEW Protects customers’ investment No downtime, no outages, and no risk with guaranteed near-zero RTO and RPO. Transforms IT economics Create a bedrock for performance by fully utilising hardware previously reserved for backup and recovery. Break through legacy constraints Put all customers’ data to work for the business and innovate without worrying that IT investments will be left behind. 04 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 LIVEDATA STRATEGY WANdisco makes data globally accessible and consistent everywhere with a LiveData strategy. Alleviating the challenges of siloed data, a LiveData strategy ensures that enterprise data stays accurate, accessible, and consistent across your global IT environment. With a LiveData strategy, every user and every application has always-available data, regardless of geographic location, data platform architecture, or cloud storage provider. A PLATFORM FOR ANY IT ARCHITECTURE Geo-distributed data doesn’t need to slow down digital transformation Persona Cloud Architect Security Manager Data Architect Cloud Engineer Data Operator Data Engineer Solutions MultiSite Active Backup Disaster Recovery MultiCloud Data Lake Migration Platform IT assets Ecosystem SECURITY DCONE WEB UI SDK LiveCode LiveData GIT GERRITT SVN LOCAL/NFS HDFS OBJECT STORAGE WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 05 OverviewCHAIRMAN AND CHIEF EXECUTIVE’S REPORT DAVID RICHARDS, CHAIRMAN AND CEO A year of breakthrough 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. 2019 highlights • WANdisco Fusion deeply embedded in Microsoft’s Azure cloud. • LiveMigrator launched enabling uninterrupted petabyte scale data migration to the cloud. • LiveAnalytics launched providing access to Spark-based analytics in the cloud. • Achieved Advanced Technology Partner status with Amazon Web Services. • Appointed Micro-D Master Distributor for Africa. 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. 06 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™, 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. Learn more about our solutions from page 8 Learn more about our partnerships from page 14 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 organisation, 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. The Board’s confidence in our outlook is built upon the convergence of the market opportunity, product readiness, and the commitments from our partners. David Richards Chairman and CEO 29 June 2020 David Richards Chairman and CEO WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 07 Strategic reportOUR MARKETS Enterprise data transformation requires WANdisco Business success now depends on how effectively organisations utilise their data. To do so companies are modernising their data architecture, and moving their Hadoop deployments to the cloud. In the cloud, companies can take advantage of inexpensive, scalable storage and compute platforms leveraging an OPEX model. Cloud service providers ("CSPs") are able to spin massive compute clusters up or down automatically, helping organisations optimise costs and reduce the need for people with deep expertise in managing such deployments. CSPs have also enhanced their big data solutions providing greater functionality over native Hadoop offerings, and greatly simplifying the complexities for organisations having to manage their own Hadoop implementations. While the move to the cloud and machine learning enabled cloud analytics are making companies more competitive, lean and nimble, there are very few big data migrations that can be switched overnight from an on-premises to a public cloud platform without significant business risk. Migrating a petabyte scale data lake to the cloud, with no business disruption, while keeping massive volumes of data consistent with the on-premises platform, presents complex technical challenges, and can require many IT resources, resulting in high costs or potential project delays. These risks are pervasive in manual data migration projects and are preventing some organisations from their big data to cloud migration due to their fear of lost productivity. This presents a significant opportunity for WANdisco. Only WANdisco’s LiveData capabilities deliver zero downtime during migration, zero data loss and 100% data consistency even while data sets are under active change. These capabilities will be essential for successful big data to cloud transformations. MARKET TRENDS According to Gartner, Hadoop deployments in the cloud increasingly use cloud-based object stores; 57% of Gartner Data & Analytics adoption survey respondents are already using cloud object storage and 39% are planning to within the next two years. Top four reasons cited by WANdisco survey respondents for migrating data to the cloud include: 1. Adopt scalable cloud storage 2. Cloud analytics 3. Disaster recovery 4. Hybrid cloud enablement 38% of WANdisco survey respondents indicated they have not yet started to migrate data to the cloud. The #1 reason given was fear of lost productivity. 08 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 USE CASES Hadoop to Cloud Hybrid Cloud MultiCloud According to Gartner, more than IDC estimates Gartner indicates 50% of data migration initiatives will exceed their budget and timeline – and potentially harm the business – because of flawed strategy and execution. 80% of new application deployments will include a hybrid-cloud component. WANdisco survey respondents indicated that top-three items driving their data migration costs are: 1. Create, manage, schedule and maintain custom scripts 2. Manually bring data back into sync 3. Manual intervention for anticipated failures Manual approaches are fraught with business risk. WANdisco’s automated approach greatly reduces the business risk and potential for budget overruns with zero downtime, zero data loss and 100% data consistency. WANdisco’s LiveData capabilities enable true hybrid architectures. Existing on-premises environments can be used as disaster recovery sites, and also continue to be used for production workloads along with the new cloud environments. WANdisco’s LiveData capabilities ensure data is kept consistent across all environments even while under active change. 80% of respondents using public cloud are using more than one cloud service provider (“CSP”). Gartner recommends that data and analytics leaders: “Do not try to restrict the use of multiple clouds; it will be a losing battle”. All trends indicate that multi-cloud deployments will continue to become more prevalent, and integration across clouds will be essential. WANdisco LiveData for MultiCloud is the ideal solution to this challenge. It enables applications to access and modify data in mixed environment object stores (e.g. Azure Data Lake Storage, Amazon S3, etc.) ensuring data is available and consistent across all of them. WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 09 Strategic reportOUR MARKETS CONTINUED ENABLING A DATA-FIRST APPROACH FOR ENTERPRISE CLOUD ADOPTION Typically, we see organisations follow three stages in their big data cloud adoption. The stages promote a data-first approach to migration which aligns with the strategy Microsoft and others are promoting. Without the data, the application migration becomes a pointless exercise. 1 2 Non-blocking migration to the cloud LiveData for hybrid architecture 3 MultiCloud LiveMigrator Hybrid Cloud MultiCloud The first stage is to move on-premises data to the cloud to implement a modern data architecture and take advantage of all the benefits of the cloud as described on the previous pages. WANdisco LiveMigrator enables organisations to do so while greatly reducing their business risk with zero downtime, zero data loss and 100% data consistency even while data sets are under active change. Once the initial data migration has taken place, many customers are choosing to utilise a hybrid architecture where both the existing on-premises environment and new cloud environment are actively used. With WANdisco’s LiveData capabilities organisations are able to ensure their data is kept consistent across the on-premises and cloud environments. Although many companies are already using more than one CSP, most are currently using them for different applications and have not truly integrated the data across those environments. Gartner has pointed out that integration of data across clouds is a “deep challenge”, but that data and analytics leaders must prepare for the complexities. This is a significant long-term opportunity, and WANdisco LiveData for MultiCloud is the ideal solution enabling applications to access and modify data in mixed environment cloud object stores. CASE STUDY Capital Group How could Capital Group migrate its large and rapidly changing data sets to Azure, and replicate data to multiple, geographically distributed cloud instances once it was there? Goal Capital Group has: Owing to the vital nature of the analytics service, regulators insist on high availability. • near-zero RPO and RTO disaster recovery and satisfies regulatory demands; Challenge Capital Group wanted to protect its on-premises business-critical analytics processes, and chose to implement cloud-based backup and disaster recovery on Microsoft Azure. With WANdisco Capital Group deployed WANdisco Fusion to enable near-zero RPO and RTO for disaster recovery, securing its critical analytics data and meeting regulatory demands. • point-in-time backups of current to safeguard against data corruption; • access to a single, consistent version of current data at all endpoints regardless of location; • user and permission details alongside data, ensuring users do not lose access after recovery; and • no vendor lock-in by enabling replication of data to multiple cloud platforms. 10 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 WANdisco Fusion provides the best way to help safeguard against business downtime and disruption in the long term, without implementation downtime. Even as source data changes, WANdisco Fusion ensures we have consistent data at all endpoints, whether on- premises or on Microsoft Azure. Spokesperson Capital Group CASE STUDY WANdisco and Microsoft jointly develop Azure Data Lake Migrator Together with Microsoft, WANdisco is extending its capabilities from being listed on the Azure marketplace to creating a solution where the customer experience is seamless and equivalent to that of a native Microsoft application. Launched post year end, the jointly developed, deeply embedded solution in Microsoft’s Azure cloud will: • act as a native Azure offering, providing the fastest and easiest way to establish data connectivity from on-premises to cloud storage; • provide seamless customer experience and appear like an Azure first party service; • deliver tight integration, reducing deployment complexities through eliminating the customer need to plan data deployment or accommodate networking and storage options; and • allow application developers, for the first time, to be able to rely upon guaranteed data availability at scale and across any data location. This enables the acceleration of distributed application development without fear of data loss or data consistency issues. As such, data availability becomes part of the fabric of application development in the cloud. ADVANTAGES OF DEEP INTEGRATION WITH AZURE Feature Advantage Metered billing through existing Azure billing No procurement process (vendor approvals) – existing Azure subscription ID and agreements used to purchase Security integration (access control, Active Directory, Azure Policies) De facto access to Azure resources and deployed as a “trusted” application Featured in Azure Marketplace and Portal Over 1 billion marketplace and portal users Turnkey development Scaling Zero WANdisco involvement in deploying software When first announced in July, I called this co-development deal “one of the most important and exciting developments in our journey to date” – this remains true today. Close cooperation with Microsoft has been pivotal to bring these advanced capabilities to customers as quickly as possible. This partnership will embed WANdisco Fusion into native Azure for the first time, forming part of the infrastructure of the Azure cloud. WANdisco and Microsoft are delivering data replication with a policy-driven approach, with the ability to manage cloud infrastructure as easily as if it were code, signalling a new era of “data availability as a service”. Simplified deployment choices for performance and throughput needs David Richards Chairman and CEO WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 11 Strategic reportOUR BUSINESS MODEL A strong platform for growth Our foundational technology ensures that an organisation’s data is always available, always accurate and always protected – wherever it is located and at any scale. OUR RESOURCES WHAT WE DO WANdisco Fusion WANdisco Fusion enables a LiveData strategy, which ensures data stays accurate and consistent across all business application environments, regardless of geographic location, data platform architecture or cloud storage provider. Our DConE technology Our game-changing, patented DConE technology, used in WANdisco Fusion and our other products, uses consensus to keep unstructured data accessible, accurate and consistent in different locations. Our key strengths EXPERIENCED WORLD-CLASS LEADERSHIP TEAM SIGNIFICANT SALES RELATIONSHIPS Our strategy We are accelerating the speed to market of solutions co-developed with our partners and exploring how our technology can address challenges in new technologies such as blockchain. Knowledge Our development team has strong domain experience and knowledge in algorithm design and information network security. IP, technology and infrastructure The WANdisco Fusion platform is built on unique, patented technology. Partnerships We have developed a strong network of partnerships to facilitate sales generation through our OEM partners and co-sell arrangements. Read about our partnerships from page 14 Read more about our markets from page 8 12 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 Embed and enable WANdisco technology into cloud fabric to become de-facto standard for data migration. STRONG INTELLECTUAL PROPERTY GLOBAL CUSTOMER BASE Provide insight We create solutions and partnerships that facilitates the use of data for cloud analytics. THE VALUE WE CREATE For customers The ability to put all their data to work for their business all the time, at any scale. $8.3m investment in new technology For employees The growth of the business has provided many opportunities for existing and new colleagues and we continue to invest in developing and retaining our people and strengthening the team. 162 employees For partners We have an expanding network of partners and system integrators, all of which are dedicated to meeting the needs of our customers. 25 partners and system integrators Reinvestment We invest in our business; during 2019 areas of investment included channel strategy and product development. Read more about our value creation from page 1 Read more about our strategy from page 16 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 13 Strategic reportOUR PARTNERSHIPS AND TECHNOLOGY Deepening partnerships Together with our partners, we are growing, innovating and investing in ways to help customers transform their businesses with WANdisco solutions. About the partnership About the partnership About the partnership WANdisco’s partnership with Microsoft helps customers migrate data to the Microsoft Azure cloud rapidly and easily, and exploit the power and capabilities of the Microsoft Azure environment. 2019 update • Microsoft Gold Partner • Launched integrated solution with Azure Databricks • Joint development for embedded Azure Data Lake Migration ("ADLM") solution • Achieved co-sell status for WANdisco LiveAnalytics for Azure Databricks and WANdisco Fusion WANdisco helps customers easily migrate data to Amazon Simple Storage Service (S3) in order to quickly leverage the benefits and capabilities of AWS. The combination of WANdisco LiveAnalytics and Databricks Delta Lake accelerates cloud adoption and modernises big data analytics. 2019 update 2019 update • Exceeded 2019 AWS APN Program requirements • Launched integrated solution with AWS Databricks • Sales momentum and strengthening • Developed LiveAnalytics for both Azure and AWS, an integrated solution with Databricks • Launched LiveDeltaLake for Databricks across multiple cloud environments field alignment in NA and EMEA • Launched Co-Marketing Program • Participant in Big Data Competency Development • Initiated joint field enablement based on co-developed sales assets • Began regional leadership connections and account pursuit 14 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 SYSTEM INTEGRATORS AND DISTRIBUTORS WANdisco works with consulting and system integrator partners which provide expertise, technology skills and solutions that better enable customer success. Our partners can quickly move to market with WANdisco due to their existing Hadoop experience and understanding of the needs of the Hadoop community. WANdisco partners synergistically have existing relationships with clients and client providers to which they provide cloud services such as big data migration, backup, disaster recovery and high availability. 2019 update • Engaged regional and global system integrators directly with several key customers • Embedded WANdisco solution into their migration practice offering • Developed a recruiting and onboarding methodology to scale the partner programme Recruit Ready Engage WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 15 Strategic reportOUR STRATEGY Strong progress across our strategic initiatives DEEPENING PARTNER RELATIONSHIPS Importance 2019 achievements The channel partnerships we have established are significant as: • Improved partner status with Microsoft by embedding Fusion in Azure; Priorities for 2020 • Focus on new partner channel and their development; Link to KPIs • Revenue. • Cash overheads. • they provide WANdisco with access to vast sales teams, adding significant global and horizontal market reach; • Achieved Advanced Technology Partner • Expand channel account manager status with AWS; and model; and • Appointed Micro-D Master Distributor • Expand partner channel further. • they allow us to drive more revenue for Africa. at lower cost; and • their endorsement of WANdisco Fusion strengthens our brand and our portfolio of partners. We continue to seek opportunities to expand our sales channels. CONTINUED CUSTOMER TRACTION Importance 2019 achievements WANdisco’s technology solves critical data management challenges across cloud computing and Big Data for enterprise customers and their service providers. • Launched LiveData for Multicloud at the end of 2018, which was followed by the launch of LiveMigrator and LiveAnalytics during 2019. Priorities for 2020 Link to KPIs • Capitalise on multi-cloud opportunity; and • Revenue. • New products launched to expand addressable market. Our product is a platform for any IT architecture. We identify development projects that will enhance our technology and increase its ease of use and functionality for customers and end users, and we listen to existing customers and potential customers and our channel partners for future requirements. PEOPLE DEVELOPMENT Importance 2019 achievements We want to provide an environment where we attract, retain, develop and enable all our people to demonstrate, grow and apply their capabilities, offering opportunities for everyone to reach their potential. • Enhanced our management team with several key senior hires in product development, marketing, business development and sales; • Provided new opportunities internally resulting in a number of internal job moves and promotions; and • Enhanced our benefits package to employees globally. 16 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 Priorities for 2020 Link to KPIs • Continue to develop our team with • Revenue. internal job moves and promotions; and • Cash overheads. • Enhance our team with quality new external hires. DEEPENING PARTNER RELATIONSHIPS Importance 2019 achievements The channel partnerships we have • Improved partner status with Microsoft established are significant as: by embedding Fusion in Azure; Priorities for 2020 • Focus on new partner channel and their development; Link to KPIs • Revenue. • Cash overheads. and horizontal market reach; • Appointed Micro-D Master Distributor • Expand partner channel further. • Achieved Advanced Technology Partner • Expand channel account manager model; and • they provide WANdisco with access to vast sales teams, adding significant global status with AWS; and • they allow us to drive more revenue for Africa. CONTINUED CUSTOMER TRACTION Importance 2019 achievements Priorities for 2020 Link to KPIs WANdisco’s technology solves critical data • Launched LiveData for Multicloud at the • Capitalise on multi-cloud opportunity; and • Revenue. management challenges across cloud end of 2018, which was followed by the computing and Big Data for enterprise launch of LiveMigrator and LiveAnalytics customers and their service providers. during 2019. • New products launched to expand addressable market. at lower cost; and • their endorsement of WANdisco Fusion strengthens our brand and our portfolio of partners. We continue to seek opportunities to expand our sales channels. Our product is a platform for any IT architecture. We identify development projects that will enhance our technology and increase its ease of use and functionality for customers and end users, and we listen to existing customers and potential customers and our channel partners for future requirements. PEOPLE DEVELOPMENT Importance 2019 achievements We want to provide an environment where • Enhanced our management team we attract, retain, develop and enable all with several key senior hires in product our people to demonstrate, grow and apply development, marketing, business their capabilities, offering opportunities for development and sales; everyone to reach their potential. • Provided new opportunities internally resulting in a number of internal job moves and promotions; and • Enhanced our benefits package to employees globally. Priorities for 2020 Link to KPIs • Continue to develop our team with • Revenue. internal job moves and promotions; and • Cash overheads. • Enhance our team with quality new external hires. Read about how we manage risk from page 20 Find our KPIs on page 19 Summary of achievements Sales channel development Of all the significant developments WANdisco has delivered in 2019, the further execution of our indirect sales plan has been the most strategically important. In 2016, WANdisco was primarily a direct sales organisation, with a market reach that was limited by our finite sales force. During 2017, we won or deepened strategic relationships with market-leading IT and cloud providers, including IBM, Dell EMC and go-to-market partnerships with Amazon Web Services, Microsoft Azure, Google Cloud and Oracle. During 2018 these partnerships were further enhanced. WANdisco entered a new OEM agreement with Alibaba Cloud and also achieved co-sell status through the Microsoft One Commercial Partner Program. In February 2019 WANdisco received Advanced Technology Partner status with Amazon Web Services in the AWS Partner Network, which is the highest tier for Technology Partners that provide software and internet solutions in the AWS Partner Network. During 2019 the relationship with Microsoft was further enhanced 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. The product is now 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. WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 17 Strategic reportOUR STRATEGY CONTINUED Solving data management challenges Summary of achievements continued WANdisco Fusion Sales channel development continued Driving channel sales success: supporting our partners During 2019 we continued to invest in developing our channel strategy, enhancing the dedicated channel account managers for key partner accounts introduced in 2018 and dedicated software engineering teams. Their remit is to work with technology partners on the closer integration of our technologies and to accelerate speed to market with our joint solutions. We will continue to develop this model further including extending to our new partners. Supporting our customers and partners is a more efficient use of our resources and will ultimately drive faster and more profitable revenue growth. The indirect sales plan: a breakdown by channel WANdisco continues to target third party technology companies and cloud platform providers who want to embed, offer or recommend our Fusion product as part of or an extension to their platforms. We will continue to seek opportunities to form closer partnership relationships. Product innovation WANdisco’s technology solves critical data management challenges across cloud computing and Big Data for enterprise customers and their service providers. The ability to continuously replicate at vast scale to the cloud and on-premises data centres with guaranteed consistency, availability and no business disruption, frees companies to innovate in the way they exploit data for new business insights and initiatives. WANdisco Fusion is our next-generation replication platform, an architecture that supports a wider range of data environments than our original Hadoop deployments. WANdisco Fusion for Multicloud In October 2018, we announced the launch of WANdisco LiveData for Multicloud. This enterprise replication software enables a LiveData platform for a multi-cloud environment, ensuring data accuracy and consistency for business applications in any combination of major cloud environments. WANdisco LiveData for Multicloud was borne from the cross-industry imperative to have data accessibility and availability in heterogeneous cloud data environments. In addition, we have introduced greater flexibility in the way our partners and their customers can use our technology. Additional plug-ins mean WANdisco Fusion can address a wider range of use cases, including large-scale data migration between data centres and the use of cloud storage ”appliances”. In January 2019 we announced a new joint engineered solution with IBM to support relational database technology for the first time, significantly expanding our addressable market. The IBM Db2 Big SQL solution was jointly engineered between IBM and WANdisco to extend the capability of IBM Big Replicate (IBM’s product name for WANdisco Fusion) to support scenarios where customers are looking to take advantage of hybrid cloud. 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. 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. Product protection: safeguarding our IP WANdisco’s technology continues to be unrivalled in the marketplace. Until we developed WANdisco Fusion, there was no practical or affordable way for companies to keep mass-scale real-time data consistently and continuously replicated across distance. Our IP – as embodied in WANdisco’s DConE and the products we have built from this – is well protected. To date, we have filed more than 48 patents, and 25 have been granted already. We also have a head start of more than fourteen years over any potential competition. This early foothold, and the ongoing improvements we are making from experience with real-world applications of our technology at massive scale, continue to ensure our market advantage. Product plans for 2020 and beyond Our product strategy will continue to evolve in line with our indirect sales strategy, with further enhancements designed to capitalise on the cross-industry opportunities and high-growth use cases we have identified. Our main focus for 2020 will be to accelerate the speed to market of solutions co-developed with or optimised for our strategic partners. 18 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 KEY PERFORMANCE INDICATORS Building foundations for continued growth Our KPIs reflect our financial performance in 2019 Commentary on the actual performance of the Group against each of these KPIs is set out in the Chairman and Chief Executive’s report and the Financial review. Changes to KPIs this year We have updated our KPIs this year to more accurately reflect our progress and performance. We replaced our bookings KPI with a new KPI which measures subscription as a % of revenue. Revenue ($m) $16.2m 19 18 17 16 15 16.2 17.0 19.6 11.4 11.0 Cash overheads ($m) $31.7m 19 18 17 16 15 31.7 29.8 24.5 23.4 34.6 Subscription as a % of revenue 69% 19 18 69 60 Definition and calculation Definition and calculation Definition and calculation Total of all revenue streams generated by the Group. Operating expenses adjusted for: depreciation, amortisation, capitalisation of development expenditure and equity-settled share-based payment. Total subscription revenue (term licences and maintenance and support) as a % of total revenue. Performance in 2019 Performance in 2019 Performance in 2019 Revenue was marginally lower in 2019, reflecting an increased 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. Cash overheads increased in the year as we continued to make investments in go-to-market resources and engineering. In addition, we invested in our strategic partnerships with additional development. Subscription revenue increased as a % of sales due to our ongoing shift towards cloud-based revenue, which is typically annual recurring in nature. We expect this trend to continue in future periods. Links to strategy Links to strategy Links to strategy Key Deepening partner relationships Continued customer traction People development WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 19 Strategic report RISKS Ensuring risks are assessed and managed The Group’s operations expose it to a variety of risks. Effective risk management aids decision-making, underpins the delivery of the Group’s strategy and objectives, and helps to ensure that the risks the Group takes are adequately assessed and actively managed. The Group regularly monitors its key risks and reviews its management processes and systems to ensure that they are effective and consistent with good practice. The Board is ultimately responsible for the Group’s risk management. The risk management process involves the identification and prioritisation of key risks, together with appropriate controls and plans for mitigation, which are then reported to the Board. As with all businesses, the Group is affected by a number of risks and uncertainties, some of which are beyond our control. The table opposite shows the principal risks and uncertainties which could have a material adverse impact on the Group. This is not an exhaustive list and there may be risks and uncertainties of which the Board is not aware, or which are believed to be immaterial, which could have an adverse effect on the Group. Risk management framework BOARD Leadership of risk management, sets strategic objectives and risk appetite and monitors performance Accountable for the effectiveness of the Group’s internal control and risk management processes Read about corporate governance from page 35 AUDIT COMMITTEE Delegated responsibility from the Board to oversee risk management and internal controls Oversees the effectiveness of the Group’s internal control and risk management processes Monitors the independence and expertise of the external auditor Find the Audit Committee report from page 40 EXECUTIVE DIRECTORS Communicate and disseminate risk policies Support and help management to assess risk Encourage open communication on risk matters Assess materiality of risks in the context of the whole Group and monitor mitigation and controls Find the Board of Directors from page 30 20 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 Risk change Decrease During 2019 we significantly enhanced our team through key hires. In addition, we have enhanced the benefits package to our employees globally and enhanced share option participation. Risk change No change At 31 December 2019 the Group’s cash resources increased to $23.4m (2018: $10.8m). PEOPLE Risk description Potential impact Risk mitigation Our future success depends on retention of senior management and key technical personnel. Whilst much of our proprietary knowledge is documented, our technical experts contribute valuable skills and knowledge and, despite contractual confidentiality agreements, there can be no guarantee that those individuals will not in the future join competitors or establish themselves in competition. This may in turn impact our ability to attract and retain key talent, affecting our achievement of strategic objectives and performance milestones. Our human resources function oversees employee communications to ensure, given our rapidly developing markets, employees’ understanding of our strategic direction enables them to make meaningful contributions to the achievement of our goals. Stock-based compensation has continued to be an important component of retaining, motivating and attracting key talent. During the year the headcount increased from 148 to 162. This movement was a targeted increase in the R&D, sales and customer support teams to provide investment in our product and sales channel strategy. It is essential that we retain and motivate our workforce and attract the right talent in the case of any replacement and new hires in the future. FINANCING Risk description Potential impact Risk mitigation Our product, Fusion, addresses a still-emerging market in which we have limited forward visibility, and we continued to be a loss-making business in 2019. This could adversely impact our ability to fund investment in our business to achieve our strategic goals. Our own and partner sales pipelines continue to grow, and we have continued to build on the OEM relationship established with IBM during 2016 and expanded other partnerships. Operating costs increased during the year due to some targeted investment in R&D, sales and customer support teams. We 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 financial statements. As well as modelling the realisation of the sales pipeline, these forecasts also cover several scenarios. During the year there were two share subscriptions, one in February 2019 which raised $17.5m of gross proceeds and the other in November 2019 which raised $16.5m gross proceeds. Following the year end a share subscription raised $25m of gross proceeds. We maintain close relationships with our principal and potential providers of finance and continue to review the need for additional or alternative funding. See also Note 2(b). Key Deepening partner relationships Continued customer traction People development WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 21 Strategic reportRISKS CONTINUED COMPETITION Risk description Potential impact Risk mitigation There can be no guarantee that competitors will not develop superior products. Competitors may have or develop greater financial, marketing or technical resources, enabling them to successfully develop and market competing products. As the open-source software on which we depend is licensed for free, our ability to sell value-added products may be limited by potential customers opting to rely purely on the underlying open-source software, together with any free extensions that might be developed to address the same challenges that our software resolves. This could adversely impact market share, growth, revenue, margin and overall profitability. We protect our intellectual property by securing patents whenever possible. To date, we have filed more than 48 patents, 25 of which have been granted. We continue to dedicate significant resource to the constant enhancement of our core intellectual property. Senior management devotes considerable time and resource to monitoring product releases by potential competitors in the data replication software market. During the year, we have continued to invest in our technologies and there were further new releases of our products. Risk change No change During 2019 there was no change in our competitive environment. CHANNEL PARTNER ENGAGEMENT Risk description Potential impact Risk mitigation We are in partnership with an array of vendors that offer on-premises and cloud solutions. Some of these partnerships are relatively new business relationships. There is a risk that we mismanage these relationships or that partners decide not to devote significant sales or product integration resource to our offerings. This could adversely impact our partner relationships and the success of these relationships. We have established a customer success team who are focused on supporting our customers and partners, developing new partner relationships and creating new commercial propositions that derive long-term value from these relationships. RESOURCE ALLOCATION AND OPERATIONAL EXECUTION Risk description Potential impact Risk mitigation We address a significant and rapidly growing market, but, as a small company, we have limited people and capital resources. Over time it will be essential to keep adding to and refreshing this resource, but always it will remain essential that we ensure that resource is effectively directed to addressing and delivering on our strategic goals. This could result in the balance of resources not being focused on the right strategic goals. We have a business planning process which aims to ensure the investments we make and the allocation of existing resource are aligned with our strategic goals, which in turn are responsive to the evolution of our marketplace. We continued to improve internal financial reporting and cost control processes. These financial reports are regularly monitored by senior management and the Board. Risk change No change During 2019 we added a new Master Distributor for Africa and embedded Fusion into Microsoft Azure. Risk change No change 22 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 PRODUCTS Risk description The software on which our products is based is complex and the products may contain undetected defects which may be discovered after first introduction. Such defects could damage the Group’s reputation and reduce revenue from subscription renewals and extensions. Many of our products are designed for use with open-source software, whose development, by the open-source community, we do not solely control. Changes to its structure and development path may impair the effectiveness of our products. Regulation of data transfer is rapidly evolving and additional regulations concerning user privacy, content liability, data encryption and copyright protection may reduce the value added by our products. SALES Risk description Any economic downturn may have an adverse effect on the funds available for customers to invest in our products. Increasing budget scrutiny may periodically extend sales cycles, from customers’ evaluations through to commencement of subscription contracts. Variability of sales cycles across different sizes and types of customer may bring volatility to our quarterly results. Any new sales executives joining the business, in a rapidly changing marketplace, may take longer than expected to reach full productivity in concluding sales transactions. COVID-19 Risk description Potential impact Risk mitigation Risk change No change During 2019 we continued to successfully release new versions of our products. If we fail to develop and manage a prioritised strategy for our products that delivers against customer and partner needs, there is a financial risk that customers will go elsewhere. We have invested in quality control processes and training within our engineering team. We have a dedicated team committing code to relevant open-source tools to ensure our products interact well with open-source components and to monitor evolving open-source projects to which we could potentially add commercial value. Our product roadmap is based on requirements expressed by customers and partners with whom we are pursuing sales opportunities. Our product managers are mandated to propose roadmap alterations if regulations render our intended features either more or less relevant. Potential impact Risk mitigation Risk change This could adversely impact our achievement of our revenue goals and expansion of our customer base and use cases. No change Our products enable significant savings on data storage and processing and, therefore, demand should be relatively insensitive to economic conditions. Our strategy is oriented to generating a broad-based set of sales opportunities, across regions, industries, sizes of customer and technology use cases. We have invested in senior management and systems to manage the completion of sales engagement in an efficient and commercially beneficial manner. Potential impact Risk mitigation Risk change The COVID-19 pandemic was declared a global health emergency by the World Health Organization on 31 January 2020. The worldwide spread of COVID-19 has resulted in public health responses in affected regions, including travel bans and restrictions, social distancing requirements and shelter-in-place orders. Global slowdown of economic activity could negatively impact our business, operations and financial performance. Having employees work remotely, cancelling all non-essential employee travel, and cancelling, postponing or holding virtually events and meetings. Strict review of non-essential expenses and cash flow. Significant fundraise post year end. Increase New risk this year. The severity, magnitude and duration of the COVID-19 pandemic, the public health responses and the economic consequences are uncertain, rapidly changing and difficult to predict, and the pandemic’s impact on our operations and financial performance, as well as its impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict. Key Deepening partner relationships Continued customer traction People development WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 23 Strategic report FINANCIAL REVIEW ERIK MILLER, CHIEF FINANCIAL OFFICER Significant progress with partners Significant progress with Microsoft and partnerships underpin the Board’s confidence in our strategy and product focus. 2019 highlights • Targeted increases in expenditure to support our channel and product development. Revenue Revenue was $16.2m (2018: $17.0m), 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. • Successfully raised $34m from existing shareholders in two rounds in 2019. Contract wins continue to exhibit variability in the timing of their completion. • Raised $25m following the year end. Operating costs Revenue for the year ended 31 December 2019 was $16.2m (2018: $17.0m). Deferred revenue from sales booked during 2019 and in previous years, and not yet recognised as revenue, is $3.8m at 31 December 2019, at 31 December 2018 this stood at $4.3m. Our deferred revenue represents future revenue from new and renewed contracts, many of them spanning multiple years. Adjusted EBITDA loss2 was $11.7m (2018: $9.4m), due primarily to the slight reduction in revenue and continued investments in the business. Cash overheads1 increased in the year as we made investments in go-to-market resources and engineering, rising to $31.7m from $29.8m 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 $5.1m in the year (2018: $4.9m). 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. 24 Profit and loss Adjusted EBITDA2 loss for the year was $11.7m (2018: $9.4m). The loss after tax for the year increased to $28.3m (2018: $19.7m), as a result of the lower revenue and increased overheads and share-based payment charge. The exceptional finance loss of $2.0m (2018: $2.8m 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 $8.5m (31 December 2018: $7.4m). This includes $2.8m of trade receivables (31 December 2018: $1.8m) and $5.7m related to non-trade receivables (31 December 2018: $5.6m). Net consumption of cash was $19.4m before financing (2018: $16.7m), resulting in a closing cash balance of $23.4m 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 $2.2m. Subsequent events On 12 June 2020 the Group announced a placing (which was approved by General Meeting on 29 June 2020) for the subscription of 3,100,000 new ordinary shares of 10 pence each in the Company (comprising 2,362,515 placing shares and 737,485 direct subscription shares) at a price of 650 pence (a discount of approximately 12.2% to the Company’s closing share price on 11 June 2020) raising gross proceeds of $25m. This represents 6.4% of the entire existing share capital of WANdisco. The proceeds will be used to support our relationships with strategic cloud partners and provide growth working capital. 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. Erik Miller Chief Financial Officer 29 June 2020 1 Operating expenses adjusted for: depreciation, amortisation, capitalisation of development expenditure and equity-settled share-based payment. See Note 11 for a reconciliation. 2 Operating loss adjusted for: depreciation, amortisation and equity-settled share-based payment. See Note 11 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 5 to the consolidated financial statements for a reconciliation. Revenue ($m) $16.2m 19 18 17 16 15 16.2 17.0 19.6 11.4 11.0 Cash overheads ($m)1 $31.7m 19 18 17 16 15 31.7 29.8 24.5 23.4 34.6 Adjusted EBITDA ($m)2 $(11.7)m (11.7) (9.4) (0.6) (7.5) 19 18 17 16 15 (16.0) Cash ($m) $23.4m 23.4 27.4 19 18 17 16 15 10.8 7.6 2.6 Statutory loss for the year ($m) $(28.3)m (28.3) (19.7) (13.5) (9.3) (29.9) 19 18 17 16 15 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 25 Strategic reportSUSTAINABILITY We are proud of our wealth of talent WANdisco prides itself on its wealth of talent and its retention record. This is important given the competition for good software engineers. We have a strong track record of keeping people challenged, motivated and enthused by the complex scenarios our technology addresses. OUR PRIORITIES The Group recognises that, although its primary responsibility is to its shareholders, it also has responsibilities towards its employees, customers, partners, suppliers and also, ultimately, those consumers who benefit from its products, the broader public and the environment. OUR PEOPLE ENVIRONMENT SOCIAL AND COMMUNITY We want to provide an environment where we attract, retain, develop and enable all our people to demonstrate, grow and apply their capabilities, offering opportunities for everyone to reach their potential. WANdisco’s overriding purpose is to power the LiveData future in a responsible and efficient manner. We aspire to apply sustainability management standards equal to our business ambitions, and every day we strive to make a difference in the communities in which we operate. As a company we have a strong ethos of giving back to the community. This includes fostering the next generation of data scientists. Priorities Priorities Priorities • Attract, retain and develop our people. • Ensure low impact of our business on the environment. • Development of engineering skills in local schools, university and colleges. Outcomes Outcomes Outcomes • A number of successful new hires in the year in key roles. • Grant from Invest Northern Ireland. • Internal promotions with the business. • Investment in technology to collaborate and reduce physical travel to reduce the Group’s environmental footprint. • Work placement students and WANdisco Data Academy. • Platform for employees to promote and raise awareness of charities important to them. 26 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 OUR PEOPLE Delivering relevant talent WANdisco prides itself on its wealth of talent and its retention record. This is important given the competition for good software engineers. We have a strong track record of keeping people challenged, motivated and enthused by the complex scenarios our technology addresses. In addition to providing work that stretches our people, we operate a mentoring scheme for those joining us fresh from university or early in their careers. Our young engineers are given the chance to shadow and work alongside data scientists with PhDs, many of whom have 30 or more years’ real-world experience. Our Chief Data Scientist, Inventor and Co-founder, Dr Yeturu Aahlad, who developed the complex mathematical algorithm that forms the basis of WANdisco’s patented DConE technology, is well known for being highly approachable. Our younger employees say that their day-to-day contact with Dr Aahlad and other senior engineers is more inspiring and useful than weeks of classroom training. Dr Aahlad is recognised as a global authority on distributed computing. He has a PhD in the subject from the University of Texas, Austin, as well as a BSc in Electrical Engineering from the Indian Institute of Technology (“IIT”), Madras. support teams. In Belfast we also have part of our software development team, including the core of the WANdisco Fusion development team. In 2019 we significantly strengthened our engineering team due to the addition of Dr Konstantin Boudnik who joined in September 2019 as our VP and Chief Architect. California: Silicon Valley Silicon Valley is a recognised centre of excellence for open-source development. In San Ramon, California, our engineering heritage goes back to our roots in the Hadoop open-source community. Today, some 11 developers are based here, including our Chief Data Scientist, Dr Yeturu Aahlad. UK Our employees in the UK come from all over the world and include graduates and PhD students from Queen’s University, Belfast, Northern Ireland, which is globally acclaimed for its IT credentials. Sheffield is our European base and home to both our core technology development and customer We continue to look for opportunities to achieve gender balance in our hiring policies, in addition to seeking the best professionals across the age and experience spectrum. Our approach continues to be to match the most appropriate person to the role, but in light of findings that female representation in technology companies is still below 20% in some Western markets, we have taken proactive steps, such as improving our maternity provision, to ensure that our Company policies are not a barrier to women considering IT as a long-term career. In addition, we have continued to take proactive steps during the year to attend local events which aim to encourage more women into careers in engineering. At a grass-roots level, we are also committed to attracting talented new generations to data science and are working with Sheffield Hallam University to support and nurture talent. WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 27 Strategic reportSUSTAINABILITY CONTINUED ENVIRONMENT Reduction in our environmental impact We are committed to managing our use of resources and proactively managing our environmental impact. We continue to focus our commitment on areas that are most relevant to WANdisco, our people and our customers. We have invested in technology to try and encourage collaboration across our business and also with customers and partners to reduce business travel. SOCIAL AND COMMUNITY Delivering on corporate social responsibility WANdisco’s overriding purpose is to power the LiveData future in a responsible and efficient manner. We aspire to apply sustainability management standards equal to our business ambitions, and every day we strive to make a difference in the communities in which we operate. As a company we have a strong ethos of giving back to the community. This includes fostering the next generation of data scientists. This commitment spans both sides of the Atlantic, from Sheffield in the UK, where the Company’s British operations are based (and where CEO David Richards originates from) and the Belfast operation, to Silicon Valley, where WANdisco’s North American operations are headquartered. In 2019, the Company and its employees supported the following charitable and community causes: The Sheffield UTC Academy Trust (University Technical College) Members of our Sheffield team attended meetings with the Director of Computing at UTC Sheffield Olympic Legacy Park to encourage college students to consider careers in tech and widen their horizons on the types of jobs within the industry, and to help provide some ideas for project work. Sheffield Hallam University interaction During 2019 we have continued our practice to take Sheffield University placement students for twelve month placements. We have seen great success with this with students leaving at the end of their twelve months with the necessary skills to obtain employment within WANdisco. One student was taken on as a full-time member of the Customer Success team after their placement and University course was completed. We have engaged with Sheffield Hallam via their Preferred Placement scheme and secured further placement students for 2020. 28 WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 School placements We have provided work experience placements for secondary school children (Tapton Secondary School and Yewlands Academy) in Sheffield. The Sheffield College WANdisco Data Academy The WANdisco Data Academy was launched at the Sheffield College in September 2019. WANdisco has partnered with the college to provide an enhanced learning environment for students at the college. The students enter the academy via application and interview and during their time in the WANdisco-branded classrooms, will receive support from the Company by way of specialist speakers, workplace visits, special projects, masterclasses and interaction with employees. A selection of the students will also be able to take part in a placement year at WANdisco spending one day per week within the office, giving an insight into the business, and working on projects set up by experts in their field. Attendance at the WANdisco Academy has been reported as being high (94%), and feedback from the students has been “incredible”. David & Jane Richards Family Foundation, https://djrff.org Through the charitable David & Jane Richards Family Foundation, WANdisco’s CEO, David Richards, is investing in programmes to improve the way schools inspire children to learn about technology, specifically data science. Although many schools have introduced creative ways to teach coding to even very young children, David wants to see schools inspiring pupils to use data and technology to solve real-world problems – skills he believes will be more useful to the economy in the future. Created in collaboration with both educational and industry experts, the foundation’s pioneering “Get Creative with Data” course is currently being taught to over 1,000 KS3 students in eight schools across Sheffield and South Yorkshire, with ambitious plans for a wider rollout. The Richards are also passionate about ecology and the environment, and are keen to help young people become advocates for a greener society. Amidst an ever-growing concern for the UK’s dwindling bee population, the Foundation is funding the installation and running costs of beehives and bee colonies at a number of schools around Sheffield. WANdisco believes in the importance of giving employees the opportunity to support charities and causes that are important to them and to raise awareness. To enable this, we created a platform for employees to post information on, and which allows other employees to donate to these charities if they wish. In the UK, the Sheffield office donated £3,000 to the Sheffield Children’s Charity for the “Snowflake Switch On” in December 2019. This money raised an astonishing £336,200 for the hospital’s “Build a Better Future” campaign, which will create a new emergency department, cancer ward and helipad. Stay up to date with the latest news and investor information at wandisco.com WANDISCO PLC ANNUAL REPORT AND ACCOUNTS 2019 29 Strategic reportBOARD OF DIRECTORS David Richards Chairman, President, CEO and Co‑founder N Bob Corey Vice Chairman and Senior Non‑executive Director A N R Erik Miller Chief Financial Officer N Age 49 Age 68 Age 60 Length of tenure Appointed 19 November 2018 Length of tenure Appointed 5 December 2016 Skills and experience Erik was the Chief Financial Officer of Envivio, Inc., a NASDAQ-listed provider of video transcoding software, from February 2010 to January 2016, following its acquisition by Ericsson AB. From January 2008 to July 2009, Erik served as Chief Financial Officer at SigNav Pty. Ltd., a component supplier to the wireless industry, where he was responsible for finance and administration functions. From March 2006 to January 2008, he served as Chief Financial Officer at Tangler Pty. Ltd., a social networking company, where he was responsible for finance and administrative functions. Erik received a BS degree in Business Administration from the University of California, Berkeley. External appointments None. Skills and experience Bob brings more than 30 years of executive and financial management experience in public and private companies in Silicon Valley with software and hardware companies. Bob is highly experienced in managing the financial aspects of public companies; he has a strong history with Wall Street, and extensive mergers and acquisitions experience. He also has deep corporate governance acumen and has served on numerous boards in Silicon Valley as Chairman of the Board, Chairman of the Audit Committee, and a member on Compensation and Nomination and Governance Committees. Formerly Bob was Chief Financial Officer of Callidus Software, a $2.4bn acquisition by SAP in April 2018. Until September 2017, he sat on the board and chaired the audit committee for Apigee, a $625m acquisition by Google. He has also served as the Chief Financial Officer of FrontRange Solutions USA Inc., an enterprise software company. Prior to FrontRange, Bob was a member of the board of directors at Extreme Networks, Inc., an ethernet solutions company, ultimately serving as Interim Chief Executive Officer and Executive Vice President and Chief Financial Officer. Bob has also served as a member of the board of directors for AmberPoint, Interwoven, Live Ops and Veraz Networks. Bob began his career at Arthur Andersen, is a California CPA (not current), and has a Bachelor of Business Administration, Accounting from California State University at Fullerton. Bob is a Veteran of the United States Air Force, where he served as an Air Traffic Controller. External appointments None. Length of tenure Appointed 11 May 2012 (Chairman from 6 October 2016) Skills and experience Since co-founding the Company in Silicon Valley in 2005, David has led WANdisco on a course for rapid international expansion, opening offices in the UK, Japan and China. David spearheaded WANdisco to a hugely successful listing on the London Stock Exchange (WAND:LSE) and, shortly after, the acquisition of AltoStor, which accelerated the development of WANdisco’s first products for the Big Data market. A passionate advocate of entrepreneurship, David has established and successfully exited several highly successful Silicon Valley technology companies. David was the founder and CEO of Librados, an application integration software provider, and led the company’s acquisition by NASDAQ-listed NetManage, Inc. in 2005. David is a frequent commentator on a range of business and technology issues, appearing regularly on Bloomberg and CNBC. David holds a BSc in Computer Science from the University of Huddersfield. After Paul Walker, the former Chairman, stepped down from the Board in October 2016, David took the role of Chairman. In 2017 David was awarded an Honorary Doctorate by Sheffield Hallam University in recognition of him being a champion of British technology and a passionate advocate of entrepreneurship. David and his wife Jane founded the David & Jane Richards Family Foundation with the purpose to educate, empower and improve the lives of children through hands-on programmes and targeted assistance. They aim to encourage children to fulfil their potential and make a positive impact on the world around them. The first programmes commenced in 2018 in some state schools in the UK, where they will use new methods to teach computing skills and install beehives as part of a wider teaching curriculum. External appointments With over 20 years of executive experience in the software industry, David sits on a number of advisory and executive boards of Silicon Valley start-up ventures. 30 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 Dr Yeturu Aahlad Chief Scientist, Inventor and Co‑founder Grant Dollens Non‑executive Director A N R Karl Monaghan Non‑executive Director A N R Age 62 Age 41 Age 57 Length of tenure Appointed 23 February 2017 Length of tenure Appointed 9 October 2016 Length of tenure Appointed 5 December 2016 Skills and experience Dr Aahlad is a recognised worldwide authority on distributed computing. He is named in 35 WANdisco patents, including US and international patents, continuations and divisionals. It was Dr Aahlad’s vision and years of persistence that led to the invention of technology that many thought was impossible – that of Active-Active replication (WANdisco’s patented DConE technology). Prior to WANdisco, Dr Aahlad served as the distributed systems architect for iPlanet (Sun/Netscape Alliance) Application Server. At Netscape, Dr Aahlad joined the elite team in charge of creating a new server platform based on the CORBA distributed object framework. Prior to Sun/Netscape Dr Aahlad worked on incorporating the CORBA security service into Fujitsu’s Object Request Broker. Dr Aahlad designed and implemented the CORBA event services while working on Sun’s first CORBA initiative. Earlier in his career, Dr Aahlad worked on a distributed programming language at IBM’s Palo Alto Scientific Center. Dr Aahlad has a PhD in Distributed Computing from the University of Texas, Austin, and a BSc in Electrical Engineering from IIT Madras. External appointments None. Skills and experience Prior to founding Global Frontier Investments, LLC, Grant was an Investment Analyst and member of the investment committee for Ayer Capital, a long/short equity healthcare fund, where he was focused on medical devices, diagnostics, healthcare services, biotechnology and pharmaceutical investments. Prior to Ayer, Grant was an Associate in the healthcare group at BA Venture Partners (now Scale Ventures), where he sourced, evaluated and invested in private medical device, biotechnology, specialty pharmaceutical and healthcare service companies. Before BA Venture Partners, Grant was an Investment Banking Analyst in corporate finance at Deutsche Bank Alex. Brown focused on the technology sector. Grant received his MBA from the Kellogg School of Management at Northwestern University, with majors in Analytical Finance, Management and Strategy, and Accounting. He received his BSc in Biomedical Engineering from Duke University. External appointments Grant founded Global Frontier Investments, LLC, a long-term oriented global equities fund, in 2010 and serves as its Portfolio Manager. Grant is also a member of the board of ColdQuanta, Inc. Skills and experience Karl brings a wealth of capital markets and board experience. Prior to founding Ashling Capital, Karl has worked in corporate finance for Robert W. Baird, Credit Lyonnais Securities, Bank of Ireland, Johnson Fry and BDO Stoy Hayward. Additionally, he trained as a Chartered Accountant with KPMG in Dublin and holds a Bachelor of Commerce degree from University College Dublin. External appointments Karl is currently Managing Partner at Ashling Capital LLP, which he founded in December 2002, to provide consultancy services to both quoted and private companies. Karl is also currently a Non-executive Director of AIM company CareTech Holdings plc. Committee membership key A N R Audit Committee Nomination Committee Remuneration Committee Committee Chairman WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 31 Corporate governanceEXECUTIVE TEAM Strong and experienced leadership team David Richards Chairman, President, CEO and Co‑founder Erik Miller Chief Financial Officer Dr Yeturu Aahlad Chief Scientist, Inventor and Co‑founder Paul Scott‑Murphy VP Product Management – Platform Dr Ramki Thurimella VP Research & Development Read about our Board from page 30 Length of tenure Five years Length of tenure Two years Skills and experience Paul has overall responsibility for WANdisco’s product strategy for platform, including the delivery of product to market and its success. This includes directing the product management team, product strategy, requirements definitions, feature management and prioritisation, roadmaps, co-ordination of product releases with customer and partner requirements and testing. Previously Regional Chief Technology Officer for TIBCO Software in Asia Pacific and Japan. Paul has a Bachelor of Science with first class honours and a Bachelor of Engineering with first class honours from the University of Western Australia. Skills and experience Dr Thurimella has extensive experience in algorithm design and information security. He has published over 50 peer-reviewed papers and three book chapters in these areas. He held various senior positions at the University of Denver, including the Director of Cybersecurity and the Chair of Computer Science, and was Director of Engineering at P2 Energy Solutions and Software Architect and Project Manager at Symphony Media. Dr Thurimella has a PhD in Parallel Graph Algorithms from the University of Texas, Austin, and an MS in Computer Science from IIT Madras. Anne Lynch SVP Human Resources Larry Webster General Counsel and Company Secretary Dr Konstantin Boudnik VP and Chief Architect Length of tenure Three years Length of tenure Six years Length of tenure Less than one year Skills and experience Anne was the VP HR of Envivio, Inc. She was also the VP HR for Harmonic, Inc. as well as the Director General of Harmonic Europe. She has also held senior level positions at Quantum (Seagate), Schlumberger Limited and Computer Sciences Corporation (“CSC”). Anne earned her BA at Clarke University and completed graduate studies in Linguistics at Emory University and postgraduate studies at L’université Paris-Sorbonne. She has a Master of Arts degree in Business Leadership and Ethics from St. Mary’s College of California. Skills and experience Larry previously worked at Wilson Sonsini Goodrich & Rosati, a large California-based law firm, where he provided advice and services both to large corporations and emerging growth technology companies. He also had roles in Gunderson Dettmer, another Silicon Valley firm, and Hughes & Luce, a Dallas law firm. He started his legal career at telecommunications giant Northern Telecom in Texas. Larry holds a JD from Brigham Young University, a BSc in Business Management and a BA in Asian Studies, also from Brigham Young University. Skills and experience Dr Konstantin Boudnik is one of the veteran developers of Apache Hadoop, co-author of Apache BigTop, the open-source framework for creation of software stacks and operation of data processing projects used by all commercial vendors of Hadoop-based platforms. With more than 20 years of experience in software development, Dr Boudnik was awarded with 16 US patents in distributed computing. Over the years, Dr Boudnik has founded a number of technological start-ups, and his consulting business delivers solutions for companies. 32 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 Keith Graham SVP Global Sales Length of tenure Five years Peter Scott SVP Business Development – OEM Sales Daud Khan VP Corporate Development Length of tenure Eleven years Length of tenure Two years Skills and experience Keith previously spent nine years with TIBCO Software in Asia Pacific including serving for over five years as Regional Vice President and Managing Director of Australia and New Zealand. Keith worked at Librados as Vice President EMEA, where he was part of the founding team from start-up until the acquisition by NetManage. He was a Regional Director at Reuters Plc, where he was responsible for Reuters’ $100m+ software solutions business. Keith holds an MA in Management Science and Information Systems Studies from Trinity College, Dublin. Skills and experience Peter was a member of the sales management team at Empirix’s Web Business Unit, which was acquired by Oracle. He was also part of the sales management team at Vecta Software, a CRM and business intelligence software vendor. He began his career with Sales Dynamics, helping early stage venture-backed technology companies establish sales processes that enabled them to achieve aggressive revenue targets. Prior to his career in technology sales, Peter spent six years in the British Army with the Royal Engineers. Skills and experience Daud has spent the majority of his career following and commentating on infrastructure and application software companies and IT service companies. He was a Director in equity research at Canaccord Genuity covering UK technology companies. Previously at Berenberg, where he established its global technology research franchise. Daud has also had senior roles at JP Morgan Cazenove and Merrill Lynch. Daud qualified as an accountant (ACA) from PwC in 1999 and has an MA in Computer Science/ Management Studies from the University of Cambridge. Ian Wild VP Product Management – Customer Experience Justin Holtzinger VP Engineering and Customer Success Van Diamandakis SVP of Marketing Length of tenure Ten years Length of tenure Two years Length of tenure Less than one year Skills and experience Ian has been a part of the WANdisco team for over ten years, in that time progressing through a range of roles including technical sales, engineering and product management. Ian built and managed the rapid expansion of the UK based engineering teams before relocating to California in 2014 where he now owns customer experience as part of the product management function. Skills and experience Justin is a customer-focused leader with more than 20 years of experience and a proven track record of successfully building high-performance technology teams capable of delivering unmatched customer experiences during his seven-year career at EMC, where he held leadership roles in professional services, led their Global Data Migration Practice, and later led the global services product launch for EMC’s high-performance Big Data compute appliance. Justin obtained his Master of Business Administration from St. Mary’s of California. Skills and experience Van is a proven Silicon Valley technology executive with over 25 years of operational experience that draws upon his track record leading global marketing transformations, driving to meaningful financial events including IPOs and acquisitions. Van has been at the forefront of B2B technology marketing. Previously Van was a five-time CMO and held executive marketing positions at Oracle, WebEx, Riverbed Technology, Sage Business Cloud, Joyent and Persado AI. Van is a MBA graduate of The University of Iowa. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 33 Corporate governanceVICE CHAIRMAN’S INTRODUCTION TO GOVERNANCE BOB COREY, VICE CHAIRMAN AND SENIOR NON-EXECUTIVE DIRECTOR Effective governance and leadership As an AIM-listed company the Board has adopted the Quoted Companies Alliance (“QCA”) Corporate Governance Code. • David Richards fulfils the role of Chairman and CEO of the Company. David took on both roles following the resignation of the prior Chairman. Bob Corey was appointed in November 2018 as Senior Non-executive Director and Vice Chairman to better balance the roles of CEO and Chairman. meet with members of the Executive Team and to build on knowledge of the business. There are regular interactive presentations from, and discussions with, the Executive Team and, in 2019, these have included the topics of product strategy, partnerships and engineering progress. During the year under review, we have continued to evaluate the composition of our Board, but no further appointments have been made. In considering refreshment of the Board and succession planning, the Board will have regard to ongoing developments and trends including in relation to matters such as diversity in its broadest sense. Whilst the Company pursues diversity, including gender diversity, throughout the business, the Board is not committed to any specific targets. Instead, the Board will continue to pursue a policy of appointing talented people at every level to deliver high-performance. The Board holds all its strategic decision- making meetings at the Group’s US offices and, as a result, takes the opportunity to Finally, the Annual General Meeting (“AGM”) will be held at the UK Company’s offices on 29 July 2020. Due to COVID-19 restrictions on people gathering, the AGM will be restricted to two attendees, both of whom will be shareholders for the purposes of forming a quorum. Unfortunately, other shareholders must not attend the AGM in person, but shareholders are strongly encouraged to exercise their vote on the matters of business at the AGM by submitting a proxy appointment and giving voting instructions. There will be a section on the Company website allowing shareholders to post any questions they might have. Bob Corey Vice Chairman and Senior Non‑executive Director 29 June 2020 The Corporate governance statement, together with the information provided below and in the Audit Committee report, explains how WANdisco’s governance framework works. As a Board, we recognise that we are accountable to shareholders for good corporate governance, and we seek to promote consistently high standards of governance throughout the Group. The Group promotes this culture within its strategy and management of risks and is continually analysing this, from information provided by the executive management team, to ensure compliance. During the year, we have complied with the QCA Code with the following exception: Board composition 50+ 3 Non-executive Directors Tenure 17+ 1 0–3 years 3 Executive Directors 5 3–5 years 34 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 Sector experience David Richards Bob Corey Erik Miller Dr Yeturu Aahlad Grant Dollens Karl Monaghan Technology Financial management Strategy development Corporate governance Corporate finance Healthcare 50 83 CORPORATE GOVERNANCE REPORT Ensuring the long‑term success of the Group Board effectiveness Meeting attendance Board composition and responsibilities The Board comprises three Executive Directors (including the Chairman) and three Non-executive Directors, two of which are independent (Bob Corey and Karl Monaghan). The Board is responsible for the long-term success of the Group. It sets the Group’s values, standards and strategic aims and oversees implementation within a framework of prudent and effective controls, ensuring only acceptable risks are taken. It provides leadership and direction and is also responsible for corporate governance and the overall financial performance of the Group. The Board has agreed the schedule of matters reserved for its decision, which includes ensuring that the necessary financial and human resources are in place to meet its obligations to its shareholders and others. It also approves acquisitions and disposals of businesses, major capital expenditure and annual financial budgets, and sets dividend policy. An Executive Committee supports the Board in implementing strategy and reports relevant matters to the Board for its consideration and approval. This Executive Committee comprises three Executive Directors and eleven members of senior management. All the Directors have access to the advice and services of the Company Secretary, who is responsible for ensuring compliance with applicable rules, regulations and Board procedures. Directors have the right to request that any concerns they have are recorded in the appropriate Committee or Board minutes. David Richards Bob Corey Erik Miller Dr Yeturu Aahlad Grant Dollens Karl Monaghan Attended Did not attend Not required to attend Board and Committee meetings The table above shows the number of Board meetings held during the year, and the attendance of each Director. See our Committee reports for Audit, Remuneration and Nomination Committee meetings. Board Committees To assist the Board in carrying out its functions and to ensure that there is independent oversight of internal controls and risk management, the Board delegates certain responsibilities to its three principal Committees as shown in the governance framework diagram below. More detail on each of the Committees can be found on pages 39 to 43. Governance framework BOARD EXECUTIVE TEAM Chaired by the Chief Executive Officer, it comprises the three Executive Directors and senior management representation from product, marketing, engineering, business development, finance, legal, HR, sales and support. It assists the Executive Directors in implementing the business plan and policies and managing the operational and financial performance of the Company. Nomination Committee Read more from page 39 Audit Committee Read more from page 40 Remuneration Committee Read more from page 42 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 35 Corporate governanceCORPORATE GOVERNANCE REPORT CONTINUED Ensuring Board effectiveness Board effectiveness continued Board independence, appointment and re‑election There are two Non-executive Directors, who are considered by the Board to be independent of the management and are free to exercise independence of judgement. They have never been employees of the Group and they do not participate in the Group’s bonus arrangements. They receive no other remuneration from the Group other than their Directors’ fees. Each new Director, on appointment, is briefed on the activities of the Group. Professional induction training is also given as appropriate. The Chairman briefs Non-executive Directors on issues arising at Board meetings if required and Non- executive Directors have access to the Chairman at any time. Ongoing training is provided as needed. Directors were updated on a frequent and regular basis on the Group’s business. Directors are subject to re-election at the Annual General Meeting (“AGM”) following their appointment. In addition, at each AGM one-third (or the whole number nearest to one-third) of the Directors retire by rotation. Terms of appointment and time commitment All Non-executive Directors are appointed for an initial term of three years subject to satisfactory performance. After this time, they may serve additional three-year terms following review by the Board. All Non-executive Directors are expected to devote such time as is necessary for the proper performance of their duties. Directors are expected to attend all Board meetings and Committee meetings of which they are members and any additional meetings as required. Further details of their terms and conditions are summarised in the Remuneration report on pages 42 and 43 and the terms and conditions of appointment of the Non-executive Directors are available at the Company’s registered office. Development, information and support All Board Directors have access to the Company Secretary, who advises them on governance matters. The Chairman and the Company Secretary work together to ensure that Board papers are clear, accurate, delivered in a timely manner to Directors and of sufficient quality to enable the Board to discharge its duties. Specific business-related presentations are given by members of the Executive Team when appropriate and external speakers also attend Board meetings to present on relevant topics. As well as the support of the Company Secretary, there is a procedure in place for any Director to take independent professional advice at the Company’s expense in the furtherance of their duties, where considered necessary. As part of the Board evaluation process, training and development needs are considered and training courses are arranged, where appropriate. Board activities throughout the year AT EACH SCHEDULED MEETING Discuss: • Strategic and operational matters • Trading results • Management accounts and financial commentary February March • Treasury matters • Approval of subscription • Approval of annual budget • Legal, Company Secretarial and regulatory matters of new shares • Investor relations • Corporate affairs Review: • Minutes of previous meetings • The implementation of actions agreed at previous meetings • The rolling annual agenda items • Update on product strategy and partnerships 36 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 In line with the Code, we ensure that any new Directors joining the Board receive appropriate support and are given a tailored induction programme organised through the Company Secretary, including the provision of background material on the Company and briefings with management as appropriate. Each Director’s individual experience and background are considered in developing a programme tailored to his or her own requirements. Any new Director will also be expected to meet with major shareholders if required. Succession planning The Nomination Committee focuses on Board succession and composition and succession planning. Board evaluation The performance of the Board was evaluated informally on an ongoing basis with reference to all aspects of its operation including, but not limited to: the appropriateness of its skill level; the way its meetings were conducted and administered (including the content of those meetings); the effectiveness of the various Committees; whether corporate governance issues were handled in a satisfactory manner; and whether there was a clear strategy and objectives. The conclusion was that the Board was performing as expected. Each Director’s performance is appraised through the normal appraisal process. Save for the Chairman and Chief Executive Officer, who was appraised by the Non-executive Directors, the Executive Board members were appraised by the Chairman and Chief Executive Officer. The Non-executive Directors were appraised by the Chairman and Chief Executive Officer. Internal controls and risk management The Board is responsible for the Group’s system of internal controls and for reviewing its effectiveness. Such a system is designed to mitigate against and manage, rather than eliminate, the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. Executive management considered the potential financial and non-financial risks which may impact on the business as part of the quarterly management reporting procedures. The Board received the principal risk outputs of these quarterly management reports and monitored the position at Board meetings. The principal risks are set out on pages 20 to 23. The Board confirms that there are ongoing processes for identifying, evaluating and mitigating the significant risks faced by the Group. The processes, which have been in place throughout the year and up to the date of approval of the Annual Report and Accounts, are consistent, so far as is appropriate for the nature and size of the Group’s business, with the guidance issued by the Financial Reporting Council. The Group’s internal financial control and monitoring procedures include: • clear responsibility on the part of line and financial management for the maintenance of good financial controls and the production of accurate and timely financial management information; • the control of key financial risks through appropriate authorisation levels and segregation of accounting duties; • detailed monthly budgeting and reporting of trading results, balance sheets and cash flows, with regular review by management of variances from budget; • reporting on any non-compliance with internal financial controls and procedures; and • review of reports issued by the external auditor. The Audit Committee, on behalf of the Board, reviewed reports from the external auditor together with management’s response regarding proposed actions. In this manner, it has reviewed the effectiveness of the system of internal controls for the year under review. • Update on engineering and partnerships • Approval of subscription of new shares April May August November December • Update on product strategy and partnerships • Update on product strategy and partnerships • Review and approval of Annual Report and Accounts 2018 • Review and approval of preliminary announcement of 2018 results • Consideration and approval of appointment of external auditor • Review of Non-executive Director fees • Approval of appointment of new auditor WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 37 Corporate governanceCORPORATE GOVERNANCE REPORT CONTINUED Communicating to our shareholders Relations with shareholders WANdisco is committed to communicating openly with its shareholders to ensure that its strategy and performance are clearly understood. During the year, numerous activities were undertaken to engage with shareholders. Results announcements We communicate with shareholders through our full-year and half-year announcements and trading updates. We invite institutional shareholders and analysts to view our full-year and half-year announcements. The presentation slides and a webcast of the presentations are made available at www.wandisco.com/ investors/reports-and-presentations on the day of announcement. Shareholder meetings The AGM is the principal forum for dialogue with private shareholders, and we encourage shareholders to attend and participate. The AGM was held on Wednesday 22 May 2019 key shareholder engagements 2019 at our office in Sheffield, with the results being published on our website, www.wandisco.com/investors. This year’s AGM will be held at 10am on Wednesday 29 July 2020 at our office in Sheffield. Full details are included in the Notice of Meeting, which is sent to shareholders at least 21 days before the meeting. Due to COVID-19 restrictions, the meeting will be restricted to two attendees. However, shareholders are strongly encouraged to exercise their vote. In addition, there will be a section on the Company website allowing shareholders to post any questions they might have. Website and shareholder communications Our website, www.wandisco.com/ investors, provides a range of corporate information on our business, results and financial performance, including copies of our Annual Report and Accounts, announcements and presentations. Meetings, roadshows and conferences The Directors actively seek to build a mutual understanding of objectives with institutional shareholders. Shareholder relations are managed primarily by the Chief Executive Officer and the Chief Financial Officer. A calendar of events is set out below. The Chief Executive Officer and the Chief Financial Officer regularly meet with institutional shareholders to foster a mutual understanding of objectives. In particular, an extensive programme of meetings with analysts and institutional shareholders is held following the interim and preliminary results announcements. Feedback from these meetings and market updates prepared by the Company’s Nomad are presented to the Board to ensure it understands shareholders’ views. The other Non-executive Directors are available to shareholders to discuss strategy and governance issues. Month March 2019 April 2019 May 2019 June 2019 September 2019 November 2019 Communication Type The Global Group UK Investor Show in London Preliminary results Stifel LSE Discovery Conference in New York Annual Report published AGM Result of AGM Oppenheimer Emerging Growth Conference in New York LD Micro Conference in Los Angeles Stifel 2019 Cross Sector Insight Conference in Boston Interim results Craig Hallum Capital Group 10 Annual Alpha Select Conference New York Needham Big Data 1x1 Conference San Francisco December 2019 Stifel UK Technology & Internet Conf New York Meeting RNS Report Conference 38 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 NOMINATION COMMITTEE REPORT DAVID RICHARDS, CHAIRMAN, PRESIDENT, CEO AND CO-FOUNDER Monitoring succession planning The Nomination Committee assists the Board in determining Board appointments and succession planning for Directors. Committee meeting attendance David Richards Bob Corey Erik Miller Grant Dollens Karl Monaghan Attended Did not attend Not required to attend Estimated allocation of time 5+ 5% Performance evaluation 80% Succession planning 15% Structure review Committee composition Committee meetings The Nomination Committee is chaired by David Richards and the other members of the Committee are Bob Corey, Grant Dollens, Karl Monaghan and Erik Miller. Committee responsibilities The Nomination Committee has responsibility for: reviewing the structure, size and composition of the Board and recommending to the Board any changes required; succession planning; and identifying and nominating for approval Board candidates to fill vacancies as and when they arise. The Committee is also responsible for reviewing the results of any Board performance evaluation process and making recommendations to the Board concerning the Board’s Committees and the re-election of Directors at the AGM. The membership of the Nomination Committee comprises the three Non-executive Directors, David Richards and Erik Miller. The Nomination Committee is required to meet not less than twice a year and at such other times as required. It has written terms of reference, which are available for review at www.wandisco.com. The Nomination Committee met two times in the year, with the Chief Executive Officer and Chief Financial Officer in attendance. The Board has considered diversity in broader terms than just gender and believes it is also important to have the correct balance of skills, experience, independence and knowledge on the Board. All Board appointments will be made on merit and with the aim of achieving a correct balance. The Group has formal policies in place to promote equality of opportunity across the whole organisation and training is provided to assist this. Currently, there are no women on the Board. As opportunities arise, the Board will seek to increase the presence of women on the Board consistent with the above policy and the terms of reference of the Nomination Committee. David Richards Chairman, President, CEO and Co‑founder 29 June 2020 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 39 Corporate governance80 + 15 AUDIT COMMITTEE REPORT BOB COREY, VICE CHAIRMAN AND SENIOR NON-EXECUTIVE DIRECTOR Ensuring compliance and effectiveness I am pleased to present the Report of the Audit Committee, which provides a summary of the Committee’s role and activities during the 2019 financial year. Committee composition Bob Corey is the Chairman of the Committee and the other members of the Committee are Karl Monaghan and Grant Dollens. The Board considers Bob Corey to have relevant and recent financial experience, given his biography set out on page 30. Committee responsibilities The Audit Committee (“the Committee”) is established by and is responsible to the Board. It has written terms of reference, which are available for review at www.wandisco.com. Its main responsibilities are: • to monitor and be satisfied that the Group’s financial statements are fair, balanced and understandable before submission to the Board for approval, ensuring their compliance with the appropriate accounting standards, the law and the AIM Rules; • to monitor and review the effectiveness of the Group’s system of internal control; • to make recommendations to the Board in relation to the appointment of the external auditor and its remuneration, following appointment by the shareholders in general meeting, and to review and be satisfied with the auditor’s independence, objectivity and effectiveness on an ongoing basis; and • to implement the policy relating to any non-audit services performed by the external auditor. The Committee is authorised by the Board to seek and obtain any information it requires from any officer or employee of the Group and to obtain external legal or other independent professional advice as is deemed necessary by it. Committee meetings There were two meetings of the Committee during the year scheduled to coincide with the review of the scope of the external audit and observations arising from its work in relation to internal control, and to review the financial statements. The external auditor attended all of these meetings. Since the end of the financial year, the Committee has met once (in February 2020) to consider, amongst other matters, this Annual Report, with the external auditor being present at this meeting. The Committee also met with the external auditor, without the Executive Directors being present, once during the year. Significant work undertaken by the Committee during the year Review of the 2019 financial statements The Audit Committee reviewed and endorsed, prior to submission to the Board, full-year financial statements and the preliminary, interim results and trading update announcements. The Committee considered risk management updates, agreed external audit plans, approved accounting policies and ensured appropriate whistleblowing arrangements and associated policies were in place. Committee meeting attendance Bob Corey Grant Dollens Karl Monaghan Attended Did not attend Not required to attend Estimated allocation of time 5+ 5% Performance evaluation 20% Accounting matters 10% Risk management 15% Internal controls 35% Financial reporting 15% Audit tender 40 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 20 + 10 + 15 + 35 + 15 In reviewing the financial statements with management and the auditor, the Committee has discussed and debated the critical accounting judgements and key sources of estimation uncertainty as set out in Note 4 to the financial statements. As a result of our review, the Committee has identified the following issues that require a high level of judgement or have a significant impact on the interpretation of this Annual Report. Brexit Management reviewed the potential impacts that Brexit could have on the business. The Committee is satisfied with the findings identified and that appropriate disclosures have been made in the Annual Report and Accounts. Going concern The consolidated 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 25. The detailed budget and forecasts formed the basis of the going concern review and management also prepared a sensitised version, which considered a delay in revenue growth and included actions, under the control of the Group, that they could take to further significantly reduce the cost base in the coming year in the event that longer-term revenue is set to remain consistent with the level reported in 2019. Further details are included in Note 2(b). The Committee is satisfied with the findings of the going concern review and that appropriate disclosures have been made in the Annual Report and Accounts. Revenue recognition Under IFRS 15 the Group is required to de-bundle subscription arrangements into the separate licence and maintenance and support performance obligations. The method of allocation requires judgement and is based on prior experience of separate arrangements (e.g. when maintenance and support is sold separately on a perpetual licence) along with market practice. The Committee is satisfied that the judgements made by management are reasonable and that appropriate disclosures have been made in the Annual Report and Accounts. Capitalisation and carrying value of development costs The Group capitalises development costs which meets the criteria required under IAS 38. The carrying amount of the intangible assets is allocated to CGUs. The recoverable amount was calculated using a value in use basis based on financial forecasts. The Committee is satisfied that the judgements made by management in the value in use calculation are reasonable and that appropriate disclosures have been made in the Annual Report and Accounts. In reaching this conclusion the Committee has considered the reports and analysis prepared by management and has also constructively challenged assumptions. The Committee has also considered detailed reporting from and discussions with the external auditor. Committee performance The Committee carried out an annual assessment of its own performance during the year and the conclusion was that the Committee was performing as expected. External auditor During 2019 there was an audit rotation, and BDO LLP was selected and appointed as the Company’s auditor following a review of a number of potential providers. As required, the external auditor provided the Committee with information for review about policies and processes for maintaining its independence and compliance regarding the rotation of audit partners and staff. The Committee considered all relationships between the external auditor and the Group and was satisfied that they did not compromise the auditor’s judgement or independence, particularly with the provision of non-audit services. An internal review of the effectiveness of the external audit process was carried out during the year and no deficiencies were found. Management was satisfied with the external audit team’s knowledge of the business and that the scope of the audit was appropriate, all significant accounting judgements had been challenged robustly and the audit had been effective. All of the above was considered before a recommendation was made by the Committee to the Board to propose BDO for election at the AGM. Internal audit function Given the Group’s size and development, the Board did not consider it necessary to have an internal audit function during the year. The Board will continue to monitor this requirement annually. Bob Corey Vice Chairman and Senior Non‑executive Director 29 June 2020 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 41 Corporate governanceREMUNERATION COMMITTEE AND REMUNERATION REPORT KARL MONAGHAN, CHAIRMAN OF THE REMUNERATION COMMITTEE Determining remuneration policies This report sets out information about the remuneration of the Directors of the Company for the year ended 31 December 2019. Committee meeting attendance Karl Monaghan Bob Corey Grant Dollens Attended Did not attend Not required to attend Estimated allocation of time 5+ 5% Performance evaluation 25% Remuneration policy 70% Share option grant review The Board, as required by the QCA Code, supports the principle of transparency and has prepared this report in order to provide information to shareholders on executive remuneration arrangements. The Remuneration Committee Committee composition The Remuneration Committee is chaired by Karl Monaghan and the other members of the Committee are Bob Corey and Grant Dollens. Committee responsibilities The Remuneration Committee’s primary purposes are to assist the Board in determining the Company’s remuneration policies, review the performance of the Executive Directors and make recommendations to the Board on matters relating to their remuneration and terms of service, the granting of share options, and other equity incentives. Committee meetings The Remuneration Committee met four times in the year, with the other Board members in attendance as appropriate. Remuneration Committee report The content of this report is unaudited unless stated. Remuneration policy The objective of the remuneration policy is to ensure that the overall remuneration of Executive Directors is aligned with the performance of the Group and preserves an appropriate balance of income and shareholder value. Non‑executive Directors Remuneration of the Non-executive Directors is determined by the Executive Directors. Non-executive Directors are not entitled to pensions, annual bonuses or employee benefits. They are entitled to participate in share option arrangements relating to the Company’s shares. Each of the Non-executive Directors has a letter of appointment stating his annual fee and that his appointment is initially for a term of three years, subject to re-appointment at the AGM, renewable for further periods of three years. Their appointment may be terminated with three months’ written notice at any time. Directors’ remuneration The normal remuneration arrangements for Executive Directors consist of basic salary and annual performance-related bonuses. In addition, they receive private healthcare. The Committee intends to make further awards under the Long-Term Incentive Plan (“LTIP”) during 2020. Details of any awards will be disclosed in next year’s Remuneration Committee report. 2019 annual bonus The 2019 Bonus Plan comprised a target bonus based on a % of base salary. The Bonus Plan is based on the achievement of corporate financial performance measures, including revenue and overheads targets. Having regard to the performance of the business, the Remuneration Committee resolved to pay bonuses as set out on page 43. Similar bonus principles will be adopted for 2020. Performance targets and weightings were set by the Remuneration Committee at the start of the year. 42 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 25 + 70 Directors’ interests Details of the Directors’ shareholdings are included in the Directors’ report on page 45. Directors’ share options Aggregate emoluments disclosed below do not include any amounts for the value of options to acquire ordinary shares in the Company granted to or held by the Directors. Details of options for Directors who served during the year are as follows: Executive Directors David Richards Dr Yeturu Aahlad Erik Miller Non-executive Directors Grant Dollens Karl Monaghan Bob Corey 1 All options were granted on 30 April 2019. Directors’ remuneration (audited) Executive Directors David Richards Erik Miller Dr Yeturu Aahlad Non-executive Directors Grant Dollens Karl Monaghan Bob Corey Number of options at 1 January 2019 Exercise price Number of options granted ¹ Number of options exercised Number of Number of options at options 31 December 2019 lapsed £1.90 £0.10 £0.10 £0.10 £0.10 £0.10 £0.10 £0.10 £1.90 £8.39 £0.10 £0.10 £0.10 £0.10 £0.10 £0.10 £0.10 92,771 241,037 18,123 — — 241,037 18,123 — 410,789 423,707 18,123 — — — 22,249 — 22,249 — — — — 29,094 23,764 — — 23,764 — — — 9,904 23,764 — — 7,923 — 7,923 — — — — — — — — — — — — — — — — — — 92,771 — 241,037 — 18,123 — 29,094 — 23,764 — 241,037 — 18,123 — — 23,764 — 410,789 — 423,707 18,123 — 9,904 — 23,764 — — — — — — — 22,249 7,923 22,249 7,923 Payment currency Salary/fees ‘000 Bonus ² ‘000 Benefits ¹ ‘000 31 December 2019 Total ‘000 31 December 2018 Total ‘000 $ $ $ £ £ £ 490 250 150 40 40 50 367 125 — — — — 39 27 20 — — — 896 402 170 40 40 50 891 399 168 40 40 6 1 Benefits include the provision of private health insurance for Executive Directors and their immediate families. 2 50% of bonus due for David Richards and Erik Miller is to be settled via RSUs which have a one-year vesting period. The total Directors’ remuneration for the period ended 31 December 2019, in US dollars, was $1,637,000 (2018: $1,570,000). Approval This report was approved by the Directors and signed by order of the Board. Karl Monaghan Chairman of the Remuneration Committee 29 June 2020 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 43 Corporate governanceDIRECTORS’ REPORT ERIK MILLER, CHIEF FINANCIAL OFFICER The Directors present their report and the audited financial statements for the year ended 31 December 2019 in accordance with the Companies (Jersey) Law 1991. Particulars of important events affecting the Group, together with the factors likely to affect its future development, performance and position, are set out in the Strategic report on pages 6 to 29, which is incorporated into this report by reference together with the Corporate governance report on pages 35 to 38. In addition, this report should be read in conjunction with information concerning employee share schemes, which can be found in the Remuneration Committee report on pages 42 and 43 and in Note 15 to the financial statements, and which is incorporated by way of cross-reference into the Directors’ report. Principal activity The principal activity of the Group is the development and provision of global collaboration software. Business review and future developments A review of the Group’s operations and future developments is covered in the Strategic report section of the Annual Report and Accounts on pages 6 to 29. This report includes sections on strategy and markets and considers key risks and key performance indicators. Financial results Details of the Group’s financial results are set out in the Consolidated statement of profit or loss and other comprehensive income and other components on pages 51 to 87. After making reasonable enquiries and following two share subscriptions during the year, one in February 2019 for raised $17.5m of gross proceeds and the other in November 2019 which raised $16.5m of gross proceeds, the Board has an expectation that the Group and the Company have adequate financial resources together with a strong business model to ensure they continue to operate for the foreseeable future. Accordingly, the Directors have adopted the going concern basis in preparing the financial statements. This is described in more detail in Note 2(b). Annual General Meeting (“AGM”) On pages 89 to 91 is the notice of the Company’s eighth AGM to be held at 10am on 29 July 2020 at the UK Company’s offices, Castle House, 1–13 Angel Street, Sheffield S3 8LN. Directors The Directors who served on the Board and on Board Committees during the year are set out on pages 30 and 31. One-third of the Directors are required to retire at the AGM and can offer themselves for re-election. Information on Directors’ remuneration and share option rights is given in the Remuneration Committee report on pages 42 and 43. Directors’ indemnity arrangements The Directors benefited from qualifying third party indemnity provisions in place during the financial year and at the date of this report. Other than this, and with the exception of employment contracts between each Executive Director and the Group, at no time during the year did any Director hold a material interest in any contract of significance with the Group or any of its subsidiary undertakings. The Group has purchased and maintained throughout the year Directors’ and officers’ liability insurance in respect of all Group companies. None of the Directors had any interest in the share capital of any subsidiary company. Further details of options held by the Directors are set out in the Remuneration Committee report on pages 42 and 43. The middle market price of the Company’s ordinary shares on 31 December 2019 was 445.00 pence and the range during the year was 338.00 pence to 781.00 pence, with an average price of 514.91 pence. Significant shareholders The Company is informed that, at 22 June 2020 (the latest practicable date prior to publication), individual registered shareholdings of more than 3% of the Company’s issued share capital were as follows: Dividends The Directors do not recommend the payment of a dividend (2018: $nil). Invesco Ltd. (Oppenheimer) Davis Capital Partners, LLC T Rowe Price International Lombard Odier Asset Management (Europe) Limited Going concern The Company’s business activities, together with risk factors which potentially affect its future development, performance or position, can be found in the Strategic report on pages 6 to 29. Details of the Company’s financial position and its cash flows are outlined in the Financial review on pages 24 and 25. Conifer Capital Management Swedbank Robur Fonder AB Dr Yeturu Aahlad Grant Dollens1 David Richards Ross Creek Capital Management, LLC UBS Securities 1 Of which 526,384 shares (1.09%) are held by Grant Dollens personally and 1,635,355 shares (3.39%) are held by Global Frontier Partners, in which Grant Dollens is interested (Grant Dollens is currently Managing Member at Global Frontier Investments, LLC, a US-based investment manager, and Portfolio Manager for Global Frontier Partners, LP, a shareholder in WANdisco). 44 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 % of issued ordinary share capital Number of shares 5,000,000 10.36% 3,609,286 3,628,167 2,889,968 2,844,177 2,700,000 2,442,504 2,161,739 2,119,233 2,025,000 1,572,135 7.48% 7.52% 5.99% 5.90% 5.60% 5.06% 4.48% 4.39% 4.20% 3.26% Auditor As recommended by the Audit Committee, a resolution for the appointment of BDO LLP as auditor of the Company is to be proposed at the forthcoming AGM. Audit information Each of the Directors at the date of the Directors’ report confirms that, so far as he is aware, there is no relevant audit information of which the Company’s auditor is unaware and he has taken all the reasonable steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company’s auditor is aware of the information. Subsequent events On 12 June 2020 the Group announced a placing (which was approved by General Meeting on 29 June 2020) for the subscription of 3,100,000 new ordinary shares of 10 pence each in the Company (comprising 2,362,515 placing shares and 737,485 direct subscription shares) at a price of 650 pence (a discount of approximately 12.2% to the Company’s closing share price on 11 June 2020) raising gross proceeds of $25m. This represents 6.4% of the entire existing share capital of WANdisco. The proceeds will be used to support our relationships with strategic cloud partners and provide growth working capital. The Directors’ report has been approved by the Board of Directors on 29 June 2020. Signed on behalf of the Board. Erik Miller Chief Financial Officer 29 June 2020 Directors’ shareholdings The beneficial interests of the Directors in the share capital of the Company at 31 December 2019 and 22 June 2020 (the latest practicable date prior to publication) were as follows: Executive David Richards Dr Yeturu Aahlad Erik Miller Non-executive Grant Dollens¹ Karl Monaghan At 31 December 2019 At 22 June 2020 % of issued ordinary share capital Number of shares % of issued ordinary share capital Number of shares 2,119,233 4.39% 2,119,233 2,442,504 5.06% 2,442,504 27,124 0.06% 27,124 2,161,739 4.48% 2,161,739 53,542 0.11% 53,542 4.39% 5.06% 0.06% 4.48% 0.11% 1 Of which 526,384 shares (1.09%) are held by Grant Dollens personally and 1,635,355 shares (3.39%) are held by Global Frontier Partners, in which Grant Dollens is interested (Grant Dollens is currently Managing Member at Global Frontier Investments, LLC, a US-based investment manager, and Portfolio Manager for Global Frontier Partners, LP, a shareholder in WANdisco). Articles of Association Any amendments to the Articles of Association of the Company may be made by special resolution of the shareholders. Research and development The Group expended $8,263,000 during the year (2018: $8,072,000) on research and development, of which $5,062,000 (2018: $4,910,000) was capitalised within intangible assets and $3,201,000 (2018: $3,162,000) was charged to the income statement. In addition, an amortisation charge of $5,284,000 (2018: $5,725,000) has been recognised against previously capitalised costs. It is the policy of the Group that the training, career development and promotion of a disabled person should, as far as possible, be identical to that of a person who does not have a disability. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Group continues. Health and safety The Group is committed to providing a safe and healthy working environment for all staff and contractors. The Group’s health and safety standard sets out the range of policies, procedures and systems required to manage risks and promote wellbeing. Derivatives and financial instruments The Group’s policy and exposure to derivatives and financial instruments is set out in Note 25. Political and charitable donations During the year ended 31 December 2019 the Group made political donations of $nil (2018: $nil) and charitable donations of $10,170 (2018: $1,715). Employee involvement It is the Group’s policy to involve employees in its progress, development and performance. Applications for employment by disabled persons are fully considered, bearing in mind the respective aptitudes and abilities of the applicants concerned. The Group is a committed equal opportunities employer and has engaged employees with broad backgrounds and skills. Supplier payment policy and practice The Group does not operate a standard code in respect of payments to suppliers. The Group agrees terms of payment with suppliers at the start of business and then makes payments in accordance with contractual and other legal obligations. The number of creditor days outstanding at 31 December 2019 was 19 days (2018: 32 days). WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 45 Corporate governanceSTATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS Directors’ responsibilities The Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the EU (“IFRSs as adopted by the EU”) and applicable law. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of its profit or loss for that period. In preparing the Group financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable, relevant and reliable; • state whether they have been prepared in accordance with IFRSs as adopted by the EU; and • assess the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and use the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 46 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WANDISCO PLC Opinion Audit scope We have audited the financial statements of WANdisco plc (“the Parent Company”) and its subsidiaries (“the Group”) for the year ended 31 December 2019 which comprise the Consolidated statement of profit or loss and other comprehensive income, the Consolidated statement of financial position, the Consolidated statement of changes in equity, the Consolidated statement of cash flows and the notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union (“IFRSs as adopted by the EU”). In our opinion, the financial statements: • give a true and fair view of the state of the Group’s affairs as at 31 December 2019 and of its loss for the year then ended; • have been properly prepared in accordance with IFRSs as adopted by the EU; and • have been prepared in accordance with the requirements of Companies (Jersey) Law 1991. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or • the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group or the Parent Company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. Overview of our audit approach Key audit matters • Revenue recognition. • Capitalisation of development costs. • Carrying value of development costs. • Going concern assessment. • We performed an audit of the complete financial information of three components and audit procedures on specific balances for a further two components. • The components where we performed full or specific audit procedures accounted for 98% of Group loss before tax, 100% of revenue and 98% of Group total assets. Materiality • Overall Group materiality of $375,000, which represents 2% of loss before tax. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. Revenue recognition The Group has reported revenues of $16.2m (FY18: $17.0m) with deferred revenue at 31 December 2019 of $3.8m (FY18: $4.3m). The Group’s contracts with customers can involve multiple deliverables. Therefore, revenue recognition related to each deliverable requires judgement over the assessment of the separate contract deliverables. We assessed revenue recognition as a fraud risk as revenue forms the basis for certain of the Group’s key performance indicators, both in external communications and for management incentives. We identified two specific risks of fraud and error in respect of inappropriate revenue recognition given the nature of the Group’s contracts with customers as follows: • the recognition of revenue in the appropriate period, including the deferral, or accrual, of revenue, i.e. cut-off; and • inappropriate measurement of revenue attributed to each deliverable within a contract with a customer. Revenue recognition is disclosed in Note 8 of the consolidated financial statements and relevant accounting policies in Note 29. How we addressed the key audit matter in the audit • We evaluated management’s determination of whether the nature of the Group’s products results in the provision of a deliverable at a point in time or over a contractual term. This included the assessment of new or one-off transactions. • For a sample of customers, we tested all revenue transactions in FY2019 with the customers to (1) ensure a proper identification of deliverables; (2) proper and consistent allocation of the contract price to the performance obligations satisfied over time and at a point in time; (3) for deliverables, for which revenue is earned over time, accurate calculation of the revenue and deferred revenue based on the progress of the contract; (4) consistent application of the revenue recognition policy; and (5) appropriate period of revenue recognition with reference to contractual documents. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 47 Financial statementsINDEPENDENT AUDITOR’S REPORT CONTINUED TO THE MEMBERS OF WANDISCO PLC Key audit matters continued Revenue recognition continued How we addressed the key audit matter in the audit continued • We performed a search for revenue recorded through journal entries and tested for any unusual entries, or entries that were posted outside of normal business processes. We investigated any unusual items to establish whether any sale had occurred in the financial year to support the revenue recognised. • We performed certain specific procedures to address the risk of management override, which included testing of unusual, new or significant transactions or contractual terms. We obtained management’s analysis for a sample of contracts and assessed the Group’s estimate of the fair value attributed to each identified performance obligation within each sampled contract and the timing of revenue recognition for each deliverable. • We also considered the adequacy of the Group’s disclosures relating to revenue recognition in Notes 8 and 29. Key observations Based on procedures performed, we did not identify any evidence of material misstatement in the revenue recognised in the year. Capitalisation of development costs The Group capitalises internal costs in respect of development projects amounting $5.1m (FY18: $4.9m). The Directors apply judgement in the classification of expenditure as capital in nature rather than ongoing operational expenditure. The significant judgement and related risk is that: Key observations Based on procedures performed, we noted the costs capitalised by management were in line with the requirements of IAS 38. Carrying value of development costs The Group continues to be loss making and, as a result, the Group has tested previously capitalised development costs for impairment. There remains a degree of uncertainty around expected revenues and profits will be realised and be sufficient to ensure recoverability of the assets recognised on the balance sheet. The impairment test of intangible assets including key assumptions and underlying recoverable amounts is disclosed in Note 17 of the consolidated financial statements. How we addressed the key audit matter in the audit • With assistance from a BDO valuation specialist, we performed audit procedures on the reasonableness of the growth rates, margin and discount rate applied including comparison to economic and industry forecasts where appropriate. • We assessed the appropriateness of the key assumptions used in the FY20 forecast including new customer acquisition, upsell/ add-ons and level of loss of customers by assessing these against the results achieved in FY19. • We performed a sensitivity analysis of management’s model in respect of the key assumptions such as discount rate and growth rates to ensure there was sufficient headroom in their calculation. • We considered the appropriateness of the related disclosures provided in Note 17 in the Group financial statements. • Internal costs are capitalised that should be expensed under Key observations the requirements of IAS 38 “Intangible Assets”. Capitalised development costs is disclosed in Note 17 of the consolidated financial statements and relevant accounting policies in Note 29. Based on procedures performed, we did not note any issues with the recoverability of the intangible assets recognised on the balance sheet and concluded that management’s judgements and disclosures were appropriate. How we addressed the key audit matter in the audit Going concern assessment • We assessed the nature of the sampled items capitalised and evaluated the appropriateness of their classification as capitalised costs, having regard to IAS 38 requirements. This included assessing whether major projects are technically feasible and commercially viable by reference to existing orders and future forecasts given the core technology. • We agreed the existence of a sample of employees to contracts including verifying their salary costs and identifying roles and responsibilities to determine if the portion of costs capitalised reflects the work performed on the systems. • We considered the appropriateness of the related disclosures provided in Note 17 in the Group financial statements. The Group has continued to make losses in the financial year, and the net liabilities and deficit financial position at year end indicate that there is an elevated risk associated with the Group’s going concern status. The financial statements explain in Note 2(b) how the Directors have formed a judgement that it is appropriate to adopt the going concern basis of preparation for the Group. That judgement is based on an evaluation of the inherent risks to the Group’s business model and how those risks might affect the Group’s financial resources or ability to continue operations over a period of at least a year from the date of approval of the financial statements. 48 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 Key audit matters continued Performance materiality Performance materiality is the application of materiality at the individual account or balance level set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that performance materiality should be set at 65% of Group materiality, being $244,000. Performance materiality applied to the audits of the three significant components was in the range of $85,000 to $217,000. Reporting threshold We agreed with the Audit Committee that we would report to the Committee all individual audit differences identified during the course of our audit in excess of $19,000. We also agreed to report differences below these thresholds that, in our view, warranted reporting on qualitative grounds. An overview of the scope of our audit Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls and changes in the business environment when assessing the level of work to be performed at each entity. The work on all five components was performed by the Group team. Of the Group’s five reporting components, we subjected three significant components to full scope audits for Group purposes. For the residual two components, we performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile. The coverage obtained from the work performed by us was 98% of Group loss before tax, 100% of Group revenue and 98% of Group total assets. Going concern assessment continued The risks most likely to adversely affect the Group’s available financial resources over this period were: • meeting Board forecasts particularly relating to the timing and value of future, unsecured pipeline sales; and • the achievability of mitigating actions the Directors would take should these, or other, adverse factors materialise. The risk for our audit was whether or not those risks were such that they amounted to a material uncertainty that may have cast significant doubt about the ability to continue as a going concern. How we addressed the key audit matter in the audit • We evaluated the key underlying assumptions used in the Group’s forecasts around the achievement of forecast revenue through robust interrogation of the forecasts and understanding how these were derived. • We considered the Group’s historical budgeting accuracy, by assessing actual performance against budget and understanding the changes in circumstances leading to the forecast revenue. • We performed analysis of changes in key assumptions including a reasonable possible (but not unrealistic) reduction in forecast revenue to understand the sensitivity in the cash flow forecasts. • We considered the appropriateness of the related disclosures by comparing to the key assumptions and key sensitivities as considered by the Directors in their forecasts. Our application of materiality Materiality We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Materiality for the Group financial statements was set at $375,000, determined with reference to a benchmark of the three year average of loss before tax of $18.7m (of which it represents 2%). A 2% benchmark was considered appropriate, as this was the first year of audit for BDO and with the Group being AIM listed. Materiality allocated to the three significant components was in the range of $132,000 to $335,000. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 49 Financial statementsAuditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor’s report. Use of our report This report is made solely to the Parent Company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. David Butcher For and on behalf of BDO LLP Chartered Accountants London, UK 29 June 2020 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). INDEPENDENT AUDITOR’S REPORT CONTINUED TO THE MEMBERS OF WANDISCO PLC Other information The Directors are responsible for the other information. The other information comprises the information included in the Annual Report and Accounts, other than the financial statements and our Auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion: • proper accounting records have not been kept by Parent Company, or proper returns adequate for our audit have not been received from branches not visited by us; or • the Parent Company financial statements are not in agreement with the accounting records and returns; or • we have not received all the information and explanations we require for our audit. Responsibilities of Directors As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group’s or the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. 50 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2019 Year ended 31 December 2019 As restated Year ended 31 December 2018 Continuing operations Revenue Cost of sales Gross profit Operating expenses Operating loss Finance income Finance costs Net finance income/(costs) (Loss)/profit before tax Income tax (Loss)/profit for the year Other comprehensive income Items that are or may be reclassified subsequently to profit or loss: Foreign operations – foreign currency translation differences Pre- exceptional $’000 Exceptional items ¹ $’000 Pre- exceptional $’000 Exceptional items ¹ $’000 9,11 (42,148) 16,155 (1,186) 14,969 (27,179) 604 (527) Note 7,8 9 11 12 12 12 13 Total $’000 16,155 (1,186) 17,019 (1,544) 14,969 15,475 (42,148) (38,712) (27,179) (23,237) Total $’000 17,019 (1,544) 15,475 (38,712) (23,237) — — — — — — — — — — — 604 (2,047) (2,574) 443 (514) 2,793 — 3,236 (514) 77 (2,047) (1,970) (71) 2,793 2,722 (27,102) (2,047) (29,149) (23,308) 2,793 (20,515) 885 — 885 802 — 802 (26,217) (2,047) (28,264) (22,506) 2,793 (19,713) (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 Adjusted earnings before interest, tax, depreciation and amortisation (“Adjusted EBITDA”) 1 See Note 10. 14 11 The notes on pages 55 to 87 are an integral part of these consolidated financial statements. ($0.63) (11,670) ($0.47) (9,397) WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 51 Financial statementsCONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2019 Assets Property, plant and equipment Intangible assets Other non-current assets Non-current assets Trade and other receivables Cash and cash equivalents Current assets Total assets Equity Share capital Share premium Translation reserve Merger reserve Retained earnings Total equity Liabilities Loans and borrowings Deferred income Deferred tax liabilities Non-current liabilities Current tax liabilities Loans and borrowings Trade and other payables Deferred income Current liabilities Total liabilities Total equity and liabilities 31 December 2019 $’000 31 December 2018 $’000 Note 16 17 18 19 20 3,735 4,877 3,016 828 5,516 2,580 11,628 8,924 8,545 23,354 7,399 10,757 31,899 18,156 43,527 27,080 21(a) 7,097 6,361 149,336 115,909 21(c) 21(c) (5,583) (7,348) 1,247 1,247 (121,922) (102,365) 30,175 13,804 22 23 13 22 24 23 2,889 1,188 4 98 1,277 3 4,081 1,378 66 2,212 4,371 2,622 7 3,990 4,860 3,041 9,271 11,898 13,352 13,276 43,527 27,080 The notes on pages 55 to 87 are an integral part of these consolidated financial statements. The financial statements on pages 51 to 87 were approved by the Board of Directors on 29 June 2020 and signed on its behalf by: David Richards Chairman and CEO Erik Miller Chief Financial Officer Company registered number: 110497 52 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2019 Balance at 31 December 2017 Adjustment on application of IFRS 15 6,156 115,196 (4,474) 1,247 (100,658) — — — — 11,029 Attributable to owners of the Company Share capital $’000 Share premium $’000 Translation reserve $’000 Merger reserve $’000 Retained earnings $’000 Note Total equity $’000 17,467 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 Other comprehensive income for the year Total comprehensive income for the year Transactions with owners of the Company Contributions and distributions Equity-settled share-based payment 15(e) Share options exercised Total transactions with owners of the Company — — — — 205 205 — — — — 713 713 — (2,874) (2,874) — — — — — — — — — (19,713) (19,713) — (2,874) (19,713) (22,587) 6,977 — 6,977 918 6,977 7,895 Balance at 31 December 2018 – as restated 6,361 115,909 (7,348) 1,247 (102,365) 13,804 Total comprehensive income for the year Loss for the year Other comprehensive income for the year Total comprehensive income for the year Transactions with owners of the Company Contributions and distributions Equity-settled share-based payment 15(e) Proceeds from share placing Share options exercised — — — — 706 30 — — — — 33,085 342 Total transactions with owners of the Company 736 33,427 — 1,765 1,765 — — — — — — — — — — — (28,264) (28,264) — 1,765 (28,264) (26,499) 8,707 — — 8,707 33,791 372 8,707 42,870 Balance at 31 December 2019 7,097 149,336 (5,583) 1,247 (121,922) 30,175 The notes on pages 55 to 87 are an integral part of these consolidated financial statements. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 53 Financial statementsCONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 Cash flows from operating activities Loss for the year Adjustments for: – Depreciation of property, plant and equipment – Amortisation of intangible assets – Loss on sale of property, plant and equipment – Net finance (income)/costs – Income tax – Foreign exchange – Equity-settled share-based payment Changes in: – Trade and other receivables – Trade and other payables – Deferred income – Deferred government grant Net working capital change Cash used in operating activities Interest paid Income tax received Net cash used in operating activities Cash flows from investing activities Interest received Proceeds from sale of property, plant and equipment Acquisition of property, plant and equipment Development expenditure Net cash used in investing activities Cash flows from financing activities Proceeds from issue of share capital Net repayment of bank loan Payment of lease liabilities (2018: Payment of finance lease liabilities) Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Effect of movements in exchange rates on cash held Note 2019 $’000 As restated 2018 $’000 16 17 13 15(e) (28,264) (19,713) 1,101 5,701 — (77) (885) 1,869 8,707 388 6,475 3 71 (802) (2,517) 6,977 (11,848) (9,118) (1,203) (562) (508) — 281 (925) (1,230) (2) (2,273) (1,876) (14,121) (10,994) (446) 807 (399) 51 (13,760) (11,342) 12 258 — (841) 213 5 (677) 17 (5,062) (4,910) (5,645) (5,369) 22(c) 22(c) 34,163 (1,667) (502) 31,994 918 (111) (95) 712 12,589 (15,999) 10,757 27,396 8 (640) Cash and cash equivalents at 31 December 20 23,354 10,757 The notes on pages 55 to 87 are an integral part of these consolidated financial statements. 54 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 NOTES TO THE 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. The Company’s registered office is 47 Esplanade, St. Helier, Jersey JE1 0BD. These consolidated financial statements 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 (see Note 7). 2. Basis of accounting These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the EU. They were authorised for issue by the Company’s Board of Directors on 29 June 2020. Under Article 105(11) of the Companies (Jersey) Law 1991, a parent company preparing consolidated financial statements need not present solus (parent company only) financial information, unless required to do so by an ordinary resolution of the Company’s members. (a) Accounting policies Details of the Group’s accounting policies are included in Note 29. This is the first set of the Group’s annual financial statements in which IFRS 16 “Leases” has been applied. Changes to the significant accounting policies are described in Note 5. (b) Going concern basis of accounting The consolidated 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 25. 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 fully drawn of $2.2m (2018: debt facility fully 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 revenue 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 date of the approval of these 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 22. The cash flow model includes the injection of $25m of cash which was raised following the year end on 29 June 2020, as detailed in Note 31. 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. 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 date of approval of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the Group financial statements. 3. Functional and presentational currency See accounting policy in Note 29(b). The consolidated financial statements are presented in US dollars, as the revenue for the Group is predominantly 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. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 55 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 4. Use of judgements and estimates See accounting policy in Note 29(c). In preparing these consolidated financial statements, management has made judgements and estimates that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. (a) Judgements Information about judgements made in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes: • Note 8 – revenue recognition. • Note 13 – deferred tax asset. • Note 17 – development costs. (b) Assumptions and estimation uncertainties Information about assumptions and estimation uncertainties at 31 December 2019 that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year is included in the following notes: • Note 8 – revenue recognition: allocation of value to maintenance and support element of subscription arrangements. • Note 17 – impairment test of intangible assets: key assumptions underlying recoverable amounts, including the recoverability of development costs. (c) Measurement of fair values A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. Further information about the assumptions made in measuring fair values is included in the following note: • Note 15 – share-based payment. 5. 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. The details of the changes in accounting policies are disclosed below. For further details see accounting policy in Note 29(q). (a) Definition of a lease Previously, the Group determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Group assesses whether a contract is or contains a lease based on the definition of a lease. On the transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 January 2019. (b) As a lessee As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying assets to the Group. Under IFRS 16, the Group recognises right of use assets and lease liabilities for most leases – i.e. these leases are on balance sheet. 56 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 5. Changes in significant accounting policies – IFRS 16 “Leases” continued (b) As a lessee continued (i) Leases classified as operating leases under IAS 17 At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at 1 January 2019. Right of use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. The Group used the following practical expedients when applying IFRS 16 to leases previously classified as an operating lease under IAS 17: • applied the exemption not to recognise right of use assets and liabilities for leases with less than twelve months of lease term; and • applied the exemption not to recognise right of use assets and liabilities for leases of low-value items. (ii) Leases previously classified as finance leases For leases that were classified as finance leases under IAS 17, the carrying amount of the right of use asset and the lease liability at 1 January 2019 are determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date. (iii) Disclosures Disclosure of the interest expense on lease liabilities is included in Note 12 – Net finance (costs)/income. Disclosure of movements in right of use assets and depreciation are included in Note 16 – Property, plant and equipment. Disclosure of the lease liabilities are included in Note 22 – Loans and borrowings. (c) 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. Retained earnings Property, plant and equipment: right of use asset Trade and other receivables: remove rent prepayment Trade and other payables: remove rent accrual Loans and borrowings – non-current: lease liability due in more than one year Loans and borrowings – current: lease liability due in less than one year Impact at 1 January 2019 Impact of adopting IFRS 16 at 1 January 2019 $’000 1,865 (41) 57 (1,491) (390) — Note 5(c)(I) 5(c)(II) 5(c)(II) 5(c)(III) 5(c)(III) 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. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 57 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 5. Changes in significant accounting policies – IFRS 16 “Leases” continued (d) Impact on the Consolidated statement of profit or loss and other comprehensive income Continuing operations Revenue Cost of sales Gross profit Cash overheads Year ended 31 December 2019 As reported (IFRS 16) $’000 Note Adjustments $’000 Amounts without adoption of IFRS 16 $’000 As restated Year ended 31 December 2018 Amounts without adoption of IFRS 16 $’000 16,155 (1,186) 14,969 — — — 16,155 (1,186) 17,019 (1,544) 14,969 15,475 5(c)(II) (31,701) (632) (32,333) (29,782) Adjusted EBITDA including development expenditure Development expenditure capitalised (16,732) (632) (17,364) (14,307) 5,062 — 5,062 4,910 Adjusted EBITDA Amortisation and depreciation Equity-settled share-based payment Operating loss Net finance (costs)/income (Loss)/profit before tax Income tax (Loss)/profit for the year Other comprehensive income for the year, net of tax (11,670) (632) (12,302) 5(c)(I) 5(c)(III) (6,802) (8,707) (27,179) (1,970) (29,149) 885 (28,264) 1,765 573 — (59) 201 142 — 142 — (6,229) (8,707) (9,397) (6,863) (6,977) (27,238) (23,237) (1,769) 2,722 (29,007) (20,515) 885 802 (28,122) (19,713) 1,765 (2,874) Total comprehensive income for the year (26,499) 142 (26,357) (22,587) (e) Impact on the Consolidated statement of financial position Non-current assets Current assets Total assets Total equity Non-current liabilities Current liabilities Total liabilities Total equity and liabilities Note 5(c)(I) 5(c)(II) 31 December 2019 As reported (IFRS 16) $’000 Adjustments $’000 31 December 2018 Amounts without adoption of IFRS 16 $’000 Amounts without adoption of IFRS 16 $’000 11,628 31,899 (2,591) 9,037 (48) 31,851 8,924 18,156 43,527 (2,639) 40,888 27,080 30,175 142 30,317 13,804 5(c)(III) 5(c)(II), 5(c)(III) 4,081 9,271 (2,334) (447) 1,747 8,824 1,378 11,898 13,352 (2,781) 10,571 13,276 43,527 (2,639) 40,888 27,080 58 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 6. 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. See Note 11 for a reconciliation. • Adjusted EBITDA: Operating loss adjusted for: depreciation, amortisation and equity-settled share-based payment. See Note 11 for a reconciliation. 7. Operating segments See accounting policy in Note 29(e). The Directors consider there to be one operating segment, being that of development and sale of licences for software and related maintenance and support. (a) Geographical segments The Group recognises revenue in three geographical regions based on the location of customers, as set out in the following table: Revenue North America – USA North America – other Europe Rest of the world – China Rest of the world – South Africa Rest of the world – other 2019 $’000 2018 $’000 6,551 13,864 44 2,152 5,036 2,088 284 236 1,785 821 — 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. (b) Major products The Group’s core patented technology, DConE, enables the replication of data. This core technology is contained in all the Group’s products. (c) Major customers Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 No other single customers contributed 10% or more to the Group’s revenue (2018: nil). 2019 % of revenue 19% 13% 11% — — 2019 $’000 revenue 3,117 2,088 1,857 — — 2018 % of revenue 2018 $’000 revenue — — — 32% 15% — — — 5,459 2,471 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 59 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 8. Revenue See accounting policy in Note 29(d). The Group generates revenue primarily from the sale of global collaboration software to its customers; see Note 7. (a) Split of revenue by timing of revenue recognition Revenue Licences and services transferred at a point in time Services transferred over time 2019 $’000 2018 $’000 12,596 3,559 13,472 3,547 16,155 17,019 (b) Contract balances The following table provides information about receivables, contract assets and liabilities from contracts with customers. Receivables, which are included in “Other non-current assets – accrued income” Receivables, which are included in “Trade and other receivables – accrued income” Contract liabilities, which are included in “Deferred income – non-current” Contract liabilities, which are included in “Deferred income – current” 31 December 31 December 2018 $’000 2019 $’000 2,826 2,964 (1,188) (2,622) 2,340 2,654 (1,277) (3,041) (c) Performance obligations and revenue recognition policies Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer. Revenue is recognised either when the performance obligation in the contract has been performed (so “point in time” recognition) or “over time” as control of the performance obligation is transferred to the customer. 9. Expenses (a) Expenses by nature Cost of sales Staff costs Development costs capitalised Amortisation of development costs Amortisation of other intangible assets Depreciation of property, plant and equipment Auditor’s remuneration Other expenses Operating expenses Total cost of sales and operating expenses Note 2019 $’000 As restated 2018 $’000 17 17 17 16 9(b) 1,186 1,544 26,624 23,175 (5,062) (4,910) 5,284 417 1,101 180 5,725 750 388 133 13,604 13,451 42,148 38,712 43,334 40,256 Included in staff costs above are $284,000 (2018: $245,000) relating to payments made to defined contribution plans. 60 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 9. Expenses continued (b) Auditor’s remuneration Audit of these financial statements Amounts receivable by auditor in respect of: Audit of financial statements of subsidiaries pursuant to legislation 10. Exceptional items See accounting policy in Notes 29(b) and (i). Exchange (loss)/gain on intercompany balances 2019 $’000 126 54 180 2018 $’000 93 40 133 2019 $’000 2018 $’000 (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. 11. Adjusted EBITDA and cash overheads Management has presented the performance measures “Adjusted EBITDA” and “Cash overheads” because it monitors these performance measures at a consolidated level and it believes that these measures are relevant to an understanding of the Group’s financial performance. Adjusted EBITDA and cash overheads are not defined performance measures in IFRS. The Group’s definition of adjusted EBITDA and cash overheads may not be comparable with similarly titled performance measures and disclosures by other entities. As we implemented IFRS 16 there was a small reduction in operating expenses 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. (a) Reconciliation of operating loss to “Adjusted EBITDA” Operating loss Adjusted for: Amortisation and depreciation Equity-settled share-based payment Adjusted EBITDA Development expenditure capitalised Adjusted EBITDA including development expenditure (b) Reconciliation of operating expenses to “Cash overheads” Operating expenses Adjusted for: Amortisation and depreciation Equity-settled share-based payment Development expenditure capitalised Cash overheads Note 2019 $’000 As restated 2018 $’000 (27,179) (23,237) 15(e) 6,802 8,707 (11,670) 17 (5,062) 6,863 6,977 (9,397) (4,910) (16,732) (14,307) As restated 2018 $’000 2019 $’000 (42,148) (38,712) 6,802 8,707 6,863 6,977 Note 9(a) 15(e) 17 (5,062) (4,910) (31,701) (29,782) WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 61 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 12. Net finance (costs)/income See accounting policy in Note 29(j). Interest income on cash and cash equivalents Interest income on non-current assets Net foreign exchange gain Finance income Net foreign exchange loss Interest payable on bank borrowings Leases (interest portion) (2018: Interest on finance leases) Finance charges Loan amortisation costs Finance costs Net finance (costs)/income 13. Income tax See accounting policy in Note 29(k). (a) Amounts recognised in profit or loss Current tax expense Current year Changes in estimates related to prior year Income tax (b) Reconciliation of effective tax rate Loss before tax from continuing operations Tax using the Company’s domestic tax rate Effect of tax rates in foreign jurisdictions Tax effect of: Non-deductible expenses Tax exempt (expenses)/income R&D tax credits Losses not recognised for current or deferred tax Changes in estimates related to prior year 2019 $’000 258 346 — 2018 $’000 213 230 2,793 604 3,236 (2,047) (237) (209) — (81) — (321) (15) (63) (115) (2,574) (514) (1,970) 2,722 2019 $’000 2018 $’000 636 249 885 2018 % 21% (1%) 445 357 802 As restated 2018 $’000 20,515 4,308 (186) 2019 $’000 29,149 6,121 (61) (1,476) (7%) (1,400) (317) 351 3% 1% 517 223 2019 % 21% 0% (5%) (1%) 1% (14%) (3,982) (15%) (3,017) 1% 3% 249 885 2% 4% 357 802 Non-taxable (expenses)/income reflects the tax impact of the exceptional foreign exchange translation gain/(loss) included in loss before tax. The changes in estimates related to prior year of $249k (2018: $357k) includes an additional amount now recognised in respect of research and development tax credits relating to prior year of $249k (2018: $320k). 62 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 13. Income tax continued (c) Factors affecting the current and future tax charges Reductions in the UK corporation tax rate to 19% (effective from 1 April 2017) and to 17% (effective from 1 April 2020) were substantively enacted on 6 September 2016. This will reduce the Group’s future current tax charge accordingly. The deferred taxation balance for UK tax resident members of the Group at 31 December 2019 has been calculated based on the rate of 17% (2018: 17%). In December 2017, numerous changes to the tax laws were enacted in the US, including a decrease in the corporate tax rate from 35% to 21%. The deferred tax balance for US tax resident members of the Group at 31 December 2019 has been calculated based on the rate of 21% (2018: 21%). (d) Deferred tax assets and liabilities Deferred tax liabilities are attributable to the following temporary differences in respect of property, plant and equipment: Deferred tax liability 2019 $’000 (4) 2018 $’000 (3) The Group has unrecognised deferred tax assets of $21,491,000 (2018: $16,239,000) in respect of tax losses arising in the Group. The Directors consider that there is not enough certainty over the availability of future taxable profits against which these losses may be offset and no asset has therefore been recognised. 14. 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: Loss for the year attributable to ordinary shareholders Weighted average number of ordinary shares Issued ordinary shares at 1 January Effect of shares issued in the year Weighted average number of ordinary shares at 31 December Basic loss per share As restated 2018 $’000 2019 $’000 28,264 19,713 2019 Number of shares ’000 2018 Number of shares ’000 42,523 40,904 2,608 828 45,131 41,732 As restated 2018 $ 0.47 2019 $ 0.63 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 63 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 14. Loss per share continued (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: Loss for the year attributable to ordinary shareholders Adjusted for: Exceptional items Equity-settled share-based payment Adjusted loss for the year Adjusted loss per share (c) Diluted loss per share As restated 2018 $’000 2019 $’000 28,264 19,713 (2,047) (8,707) 2,793 (6,977) 17,510 15,529 As restated 2018 $ 0.37 2019 $ 0.39 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. 15. Share-based payment See accounting policy in Note 29(g)(ii). (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. Previously, the share-based payment charge was recorded evenly over the vesting period of the respective options, on a straight-line basis. The share-based payment charge now reflects the impact of the graded vesting conditions of the underlying options. 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) Description of share-based payment arrangements 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. 64 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 15. Share-based payment continued (b) Description of share-based payment arrangements continued The terms and conditions of the share option grants between 14 September 2011 (the date WANdisco plc acquired WANdisco, Inc.) and 31 December 2019 are as follows: Date of grant 14 Sep 11 16 May 12 16 May 12 21 Jun 12 7 Dec 12 18 Aug 14 15 Sep 14 22 Dec 14 2 Jun 15 23 Jun 15 23 Oct 15 2 Nov 15 22 Jan 16 28 Jan 16 24 Mar 16 9 Mar 16 16 Sep 16 6 Dec 16 21 Jan 17 13 Mar 17 31 Mar 17 30 May 17 24 Oct 17 11 Sep 17 11 Sep 17 24 Oct 17 1 Nov 17 13 Mar 18 13 Mar 18 4 Apr 18 4 Apr 18 28 Sep 18 28 Sep 18 28 Sep 18 28 Sep 18 2 Oct 18 2 Oct 18 2 Oct 18 2 Oct 18 2 Oct 18 9 Nov 18 9 Nov 18 9 Nov 18 5 Dec 18 29 Apr 19 29 Apr 19 29 Apr 19 29 Apr 19 29 Apr 19 29 Apr 19 29 Apr 19 29 Apr 19 29 Apr 19 29 Apr 19 29 Apr 19 30 Apr 19 30 Apr 19 22 May 19 22 May 19 22 May 19 1 Aug 19 1 Aug 19 1 Aug 19 1 Aug 19 Expected term (years) Exercisable between Commencement 9 9 9 10 10 3 10 3 10 3 3 3 10 3 3 10 10 10 10 10 10 10 10 10 3 3 10 3 3 10 10 10 10 10 10 2 3 3 3 3 10 10 10 3 10 3 3 10 10 10 3 10 10 10 10 3 1 10 10 3 10 3 10 3 22 Jul 11 13 Jan 13 13 Jan 13 21 Jun 12 7 Dec 12 18 Aug 14 15 Sep 14 22 Dec 14 2 Jun 15 23 Jun 15 23 Oct 15 2 Nov 15 22 Jan 16 28 Jan 16 24 Mar 16 9 Mar 16 16 Sep 16 6 Dec 16 21 Jan 17 13 Mar 17 31 Mar 17 30 May 17 24 Oct 17 1 Jul 17 1 Jul 17 24 Oct 17 24 Oct 17 4 Jan 18 19 Feb 18 26 Feb 18 26 Mar 18 9 Apr 18 4 Jun 18 21 May 18 30 Jul 18 23 May 18 23 May 18 9 Jul 18 21 May 18 6 Aug 18 17 Sep 18 15 Oct 18 8 Nov 18 9 Nov 18 19 Nov 18 26 Nov 18 10 Dec 18 11 Dec 18 1 Jan 19 3 Jan 19 8 Jan 19 14 Jan 19 21 Feb 19 4 Mar 19 8 Apr 19 30 Apr 19 30 Apr 19 13 May 19 20 May 19 18 Apr 19 3 Jun 19 24 Jun 19 7 Jul 19 31 Jul 19 Lapse 14 Sep 21 12 Jan 22 30 Jan 22 20 Jun 22 7 Dec 22 17 Aug 24 14 Sep 24 21 Dec 24 1 Jun 25 22 Jun 25 22 Oct 25 1 Nov 25 21 Jan 26 27 Jan 26 23 Mar 26 8 Mar 26 15 Sep 26 5 Dec 26 20 Jan 27 10 Mar 27 28 Mar 27 27 May 27 21 Oct 27 8 Sep 27 8 Sep 27 21 Oct 27 29 Oct 27 12 Mar 28 12 Mar 28 3 Apr 28 3 Apr 28 27 Sep 28 27 Sep 28 27 Sep 28 27 Sep 28 1 Oct 28 1 Oct 28 1 Oct 28 1 Oct 28 1 Oct 28 8 Nov 28 8 Nov 28 8 Nov 28 8 Nov 28 28 Apr 29 28 Apr 29 28 Apr 29 28 Apr 29 28 Apr 29 28 Apr 29 28 Apr 29 28 Apr 29 28 Apr 29 28 Apr 29 28 Apr 29 29 Apr 29 29 Apr 29 21 May 29 21 May 29 21 May 29 31 Jul 29 31 Jul 29 31 Jul 29 31 Jul 29 Exercise price Vesting schedule (see page 66) Outstanding at 31 December 2019 £0.36 £0.36 £0.23 £2.00 £4.55 £0.10 £4.00 £0.10 £2.55 £0.10 £0.10 £0.10 £0.75 £0.10 £0.10 £1.41 £2.00 £1.90 £3.90 £4.58 £4.24 £4.45 £8.20 £6.68 £0.10 £0.10 £8.39 £0.10 £0.10 £8.34 £8.34 £6.40 £6.40 £6.40 £6.40 £0.10 £0.10 £0.10 £0.10 £0.10 £3.60 £3.60 £3.60 £0.10 £5.10 £0.10 £0.10 £5.10 £5.10 £5.10 £0.10 £5.10 £5.10 £5.10 £5.10 £0.10 £0.10 £5.38 £5.38 £0.10 £5.95 £0.10 £5.95 £0.10 1 1 1 2 1 3 1 3 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 4 4 3 4 3 3 3 3 3 3 3 6 7 4 6 4 3 3 3 5 3 4 4 3 3 3 4 3 3 3 3 7 5 3 3 4 3 4 3 4 25,000 175,000 293,735 13,950 84,017 1,955 17,084 5,000 1,666 26,000 27,833 5,000 2,000 5,000 6,667 12,151 10,000 677,230 179,763 420,000 22,080 43,667 62,388 15,527 200,001 20,000 423,707 14,585 150,000 2,000 16,638 10,000 15,000 10,000 2,000 642,766 416,215 9,000 80,346 2,000 21,000 1,444 5,000 44,498 2,000 2,000 5,000 6,000 5,000 3,000 20,000 3,000 14,000 7,000 10,000 614,668 65,576 5,000 5,000 3,500 3,500 10,000 15,000 10,000 5,028,157 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 65 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 15. Share-based payment continued (b) Description of share-based payment arrangements continued The following vesting schedule applies: 1. 25% of option vests on exercisable commencement date; 1/48 of granted option shares vest monthly thereafter. 2. Option vests on third anniversary of the date of grant. 3. Option vests 33% on first anniversary of vesting commencement date, with the balance vesting monthly thereafter until final vesting date. 4. Option vests in three instalments: one-third on first anniversary of vesting commencement date, one-third on second anniversary and one-third on third anniversary. 5. Option vests 100% on first anniversary of vesting commencement date. 6. Option vests in two instalments: 50% on the first anniversary of vesting commencement date and 50% on the second anniversary. 7. Option vests in two instalments: 30% on the second anniversary of vesting commencement date and 70% on the third anniversary. (c) Measurement of fair values The fair value of the employee share purchase plan has been measured using a Black-Scholes option pricing model. The inputs used in the measurement of fair values at grant date of the equity-settled share-based payment plans were as follows: Weighted average share price Exercise price Dividend yield Risk-free interest rate Expected volatility Expected life (years) Weighted average fair value of options granted during the year 2019 2018 $6.39 $0.78 0% 0.73% 30% $8.04 $0.65 0% 0.80% 30% 1-3 years 1-3 years $6.00 $7.88 • The dividend yield is based on the Company’s forecast dividend. • The risk-free interest rate is based on the treasury bond rates for the expected life of the option. • Expected volatility is based on the historical volatility of shares of listed companies with a similar profile to the Company. • Expected life in years is determined from the average expected period to exercise. 66 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 15. Share-based payment continued (d) Reconciliation of outstanding share options The number and weighted average exercise prices of share options (including previous options in WANdisco, Inc.) under the share option plans were as follows: Outstanding at 1 January Forfeited during the year Exercised during the year Granted during the year Outstanding at 31 December Exercisable at 31 December Vested at the end of the year Exercise price in the range: From To Weighted average contractual life remaining (e) Expense recognised in profit or loss Total equity-settled share-based payment charge Weighted average exercise price 2019 $ 2.80 1.77 1.57 0.78 Number of options 2018 4,901,699 (269,824) (1,619,062) 1,649,257 Number of options 2019 4,662,070 (283,257) (229,965) 879,309 5,028,157 2.57 4,662,070 2,983,106 3.41 1,823,334 2,983,106 3.41 1,823,334 2019 $ Weighted average exercise price 2018 $ 2.96 2.52 0.57 0.65 2.80 3.55 3.55 2018 $ 0.13 10.65 0.13 10.65 2019 Years 7.4 2018 Years 8.1 As restated 2018 $’000 2019 $’000 8,707 6,977 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 67 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 16. Property, plant and equipment See accounting policy in Note 29(l) and (q). (a) Reconciliation of carrying amount Cost Balance at 1 January 2018 Additions Disposals Effect of movements in exchange rates Balance at 31 December 2018 Balance at 1 January 2019 Impact of change in accounting policy – IFRS 16 Adjusted balance at 1 January 2019 Additions Disposals Effect of movements in exchange rates Balance at 31 December 2019 Accumulated depreciation Balance at 1 January 2018 Depreciation Disposals Effect of movements in exchange rates Balance at 31 December 2018 Balance at 1 January 2019 Depreciation Disposals Effect of movements in exchange rates Right of use Leasehold assets improvements $’000 $’000 Fixtures and fittings $’000 Computers $’000 Total $’000 — — — — — — 1,865 1,865 1,301 — 3 3,169 — — — — — — (573) — (5) 169 39 (2) — 206 206 — 206 417 — 2 625 (134) (24) 2 — 289 45 (7) — 327 327 — 327 17 — 5 1,164 1,622 593 (34) (9) 677 (43) (9) 1,714 2,247 1,714 — 1,714 407 (2) 20 2,247 1,865 4,112 2,142 (2) 30 349 2,139 6,282 (288) (4) 8 — (644) (360) 25 — (1,066) (388) 35 — (156) (284) (979) (1,419) (156) (40) — (2) (284) (17) — (4) (979) (471) 2 (18) (1,419) (1,101) 2 (29) Balance at 31 December 2019 (578) (198) (305) (1,466) (2,547) Carrying amounts At 31 December 2018 At 31 December 2019 (b) Right of use assets Adjusted balance at 1 January 2019 Additions Depreciation Effect of movements in exchange rates Balance at 31 December 2019 — 2,591 50 427 43 44 735 673 828 3,735 Property $’000 Computers $’000 1,846 1,300 (568) (2) 2,576 19 1 (5) — 15 Total $’000 1,865 1,301 (573) (2) 2,591 68 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 16. Property, plant and equipment continued (b) Right of use assets continued Property leases The Group leases land and buildings for its office space. These leases run between three and ten years. Some leases include the option to renew the lease for an additional period of the same duration after the end of the contract term. Options to renew are only included in the term if it is reasonably certain that the option will be exercised. Some leases provide for additional rent payments based on local price indices. Other leases The Group leases computer equipment, with lease terms of three to five years. For the low-value items, the Group has elected not to recognise right of use assets and lease liabilities for these leases. 17. Intangible assets See accounting policy in Notes 29(m) and (p). (a) Reconciliation of carrying amount Cost Balance at 1 January 2018 Acquisitions – internally developed Balance at 31 December 2018 Balance at 1 January 2019 Acquisitions – internally developed Balance at 31 December 2019 Accumulated amortisation Balance at 1 January 2018 Amortisation Balance at 31 December 2018 Balance at 1 January 2019 Amortisation Balance at 31 December 2019 Carrying amounts At 31 December 2018 At 31 December 2019 (b) Amortisation Other intangible Development costs $’000 assets $’000 Computer software $’000 Total $’000 3,154 43,319 1,689 48,162 — 4,910 — 4,910 3,154 48,229 1,689 53,072 3,154 48,229 1,689 53,072 — 5,062 — 5,062 3,154 53,291 1,689 58,134 (3,154) (37,405) — (5,725) (522) (750) (41,081) (6,475) (3,154) (43,130) (1,272) (47,556) (3,154) (43,130) (1,272) (47,556) — (5,284) (417) (5,701) (3,154) (48,414) (1,689) (53,257) — — 5,099 417 5,516 4,877 — 4,877 The amortisation charge on intangible assets is included in operating expenses in the Consolidated statement of profit or loss and other comprehensive income. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 69 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 17. Intangible assets continued (c) Impairment test The carrying amount of the intangible assets is allocated across cash-generating units (“CGUs”). A CGU is defined as the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups thereof. The recoverable amount of the CGUs is determined using value in use (“VIU”) calculations. As at 31 December 2019 and 2018, the Group had one CGU, the DConE CGU, which represents the Group’s patented DConE replication technology, forming the basis for all products sold by the Group. Other intangible assets arose as part of the acquisitions of OhmData, Inc. in June 2014 and AltoStor, Inc. in November 2012. The intangibles arising as part of these acquisitions are allocated to the DConE CGU. The recoverable amount of the DConE CGU has been calculated on a VIU basis at both 31 December 2019 and 31 December 2018. These calculations use cash flow projections based on financial forecasts, which anticipate growth in the Group’s installed base along with new customer growth, resulting in an average revenue growth of 83% over the five-year period with a 34% increase in cost base over the five-year period, and appropriate long-term growth rates. To prepare VIU calculations, the cash flow forecasts are discounted back to present value using a pre-tax discount rate of 10% (2018: 10%) and a terminal value growth rate of 2% (2018: 2%) from 2025. The Directors have reviewed the recoverable amount of the CGU and do not consider there to be any indication of impairment. A sensitivity analysis was performed for the DConE CGU and management concluded that no reasonably possible change in any of the key assumptions would cause for the carrying value of the DConE CGU to exceed its recoverable amount. (d) Development costs Development costs are predominantly capitalised staff costs associated with new products and services. Development costs are allocated to the DConE CGU, the recoverable amount of which has been determined on a VIU basis as described above. 18. Other non-current assets Due in more than a year Other receivables Accrued income 19. Trade and other receivables See accounting policy in Note 29(n). Due within a year Trade receivables Other receivables Accrued income Corporation tax Prepayments Total trade and other receivables 2019 $’000 190 2,826 2018 $’000 240 2,340 3,016 2,580 2019 $’000 2,773 753 2,964 1,441 614 2018 $’000 1,810 1,059 2,654 1,304 572 8,545 7,399 Information about the Group’s exposure to credit and market risks, and impairment losses for trade receivables is included in Note 25(a)(ii) and (iv). 20. Cash and cash equivalents Bank balances 2019 $’000 2018 $’000 23,354 10,757 70 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 21. Equity See accounting policy in Note 29(o). (a) Share capital Share capital 2019 Number 2019 $’000 2018 Number 2018 $’000 Allotted and fully paid – par value 10 pence 48,240,880 7,097 42,523,003 6,361 Authorised – par value 10 pence 100,000,000 100,000,000 The ordinary share capital of WANdisco plc is designated in sterling. (b) Ordinary shares During the year, 229,965 ordinary shares were issued because of employees exercising share options. On 14 February 2019 the Group announced the subscription of 2,489,499 new ordinary shares of 10 pence each in the Company by existing shareholders at a price of 546 pence (a premium of 9.2% on the closing share price on 13 February 2019) raising gross proceeds of $17.5m. Transaction costs were $57,000. On 25 November 2019 the Group announced the subscription of 2,998,413 new ordinary shares of 10 pence each in the Company by existing shareholders at a price of 425 pence (a premium of 23.2% on the closing share price on 22 November 2019) raising gross proceeds of $16.5m. Transaction costs were $108,000. Following the year end on 12 June 2020 the Group announced a placing (which was approved by General Meeting on 29 June 2020) for the subscription of 3,100,000 new ordinary shares of 10 pence each in the Company (comprising 2,362,515 placing shares and 737,485 direct subscription shares) at a price of 650 pence (a discount of 12.2% on the closing share price on 11 June 2020) raising gross proceeds of approximately $25m. (c) Nature and purpose of reserves Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. Merger reserve The acquisition by WANdisco plc of the entire share capital of WANdisco, Inc. in 2012 was accounted for as a reverse acquisition. Consequently, the previously recognised book values and assets and liabilities were retained and the consolidated financial information for the period to 16 May 2012 has been presented as a continuation of the WANdisco business, which was previously wholly owned by the WANdisco, Inc. Group. The share capital for the period covered by these consolidated financial statements and the comparative periods is stated at the nominal value of the shares issued pursuant to the above share arrangement. The difference between the nominal value of these shares and the nominal value of WANdisco, Inc. shares at the time of the acquisition has been transferred to the merger reserve. 22. Loans and borrowings See accounting policy in Notes 29(n) and (q). Non-current liabilities Secured bank loan Lease liabilities (2018: Finance lease liabilities) Current liabilities Current portion of secured bank loan Current portion of lease liabilities (2018: Finance lease liabilities) Total loans and borrowings 2019 $’000 2018 $’000 555 2,334 2,889 — 98 98 1,667 545 3,889 101 2,212 3,990 5,101 4,088 Information about the Group’s exposure to interest rate, foreign currency and liquidity risks is included in Note 25. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 71 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 22. Loans and borrowings continued (a) Terms and repayment schedule The terms and conditions of outstanding loans are as follows: 31 December 2019 31 December 2018 Borrowing Currency Nominal interest rate Year of maturity Face value $’000 Secured bank loan US dollars US prime rate + 1.5% 2021 Lease liabilities (2018: Finance lease liabilities) Total interest bearing US dollars 8% 3–10 years Carrying amount $’000 2,222 2,879 Face value $’000 4,217 210 Carrying amount $’000 3,889 199 2,318 3,590 5,908 5,101 4,427 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. The bank loan is secured over the assets of Wandisco, Inc. In 2018, the secured bank loan contained a covenant stating that at the end of each quarter the Group’s EBITDA, defined in Note 6, should be within a figure defined by the bank. The Group exceeded this figure in the fourth quarter of 2018. However, management obtained a waiver from the bank on 29 March 2019 and the EBITDA covenant was removed in 2019. (b) Lease liabilities Maturity analysis – contractual undiscounted cash flows Less than one year Between one and five years More than five years Expenses relating to short-term leases recognised in profit or loss were $8,300. (c) Reconciliation of movements in liabilities to cash flows arising from financing activities Balance at 1 January 2019 Impact of change in accounting policy – IFRS 16 Adjusted balance at 1 January 2019 New lease liability Repayment of borrowings Payment of lease liabilities Total changes from financing cash flows Balance at 31 December 2019 2019 $’000 758 1,989 843 3,590 Lease liabilities $’000 199 1,881 2,080 1,301 2018 $’000 110 100 — 210 Bank loan $’000 3,889 — 3,889 — — (1,667) (502) — (502) (1,667) 2,879 2,222 72 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 23. Deferred income See accounting policy in Note 29(d). Deferred income which falls due: Within a year In more than a year Total deferred income Deferred income represents contracted sales for which services to customers will be provided in future years. 24. Trade and other payables Trade payables Accrued expenses 25. Financial instruments – fair values and risk management See accounting policy in Notes 29(n) and (s). (a) Financial risk management The Group has exposure to the following risks arising from financial instruments: • credit risk (see (a)(ii)); • liquidity risk (see (a)(iii)); • market risk (see (a)(iv)); • currency risk (see (a)(v)); and • interest rate risk (see (a)(vi)). (i) Risk management framework 2019 $’000 2,622 1,188 2018 $’000 3,041 1,277 3,810 4,318 2019 $’000 864 3,507 2018 $’000 1,330 3,530 4,371 4,860 The Group’s risk management policies are established to identify and analyse risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. (ii) Credit risk Credit risk is the risk of financial loss to the Group if a customer fails to meet its contractual obligations and arises principally from the Group’s receivables from customers. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 73 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 25. Financial instruments – fair values and risk management continued (a) Financial risk management continued (ii) Credit risk continued Trade receivables The carrying amounts of financial assets represent the maximum credit exposure and approximate to their fair value. Ageing of trade receivables Neither past due nor impaired Past due but not impaired Past due 1–30 days Past due 31–90 days Total not impaired trade receivables 2019 $’000 2018 $’000 2,547 1,478 226 — 255 77 2,773 1,810 There were no credit losses applied to trade receivables in 2019 or 2018 as they were all assessed as low risk. The Group assesses expected credit loss for each individual customer considering their financial position, experience and other factors. All trade receivables are denominated in US dollars. Cash and cash equivalents The Group held cash and cash equivalents of $23.4m at 31 December 2019 (2018: $10.8m). The cash and cash equivalents are held with banks which are rated P-1 for short-term obligations, based on Moody’s ratings. (iii) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will have enough liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Exposure to liquidity risk The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include contractual interest payments. At 31 December 2019 Non-derivative financial liabilities Secured bank loan Lease liabilities Trade payables Contractual cash flows Carrying amount $’000 Total $’000 Less than 12 months $’000 1–2 years $’000 2–5 years $’000 >5 years $’000 2,222 2,879 4,371 2,318 3,590 4,371 1,755 758 4,371 563 709 — — 1,280 — 9,472 10,279 6,884 1,272 1,280 — 843 — 843 The interest payments on variable interest rate loans in the table above reflect market forward interest rates at the reporting date and these amounts may change as market interest rates change. 74 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 25. Financial instruments – fair values and risk management continued (a) Financial risk management continued (iv) Market risk Market risk is the risk that changes in market prices – e.g. foreign exchange rates and interest rates – will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, whilst optimising the return. The Group may be affected by general market trends, which are unrelated to the performance of the Group itself. The Group’s success will depend on market acceptance of the Group’s products and there can be no guarantee that this acceptance will be forthcoming. Market opportunities targeted by the Group may change and this could lead to an adverse effect upon its revenue and earnings. (v) Currency risk The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the currencies in which sales, purchases, receivables and borrowings are denominated and the respective functional currencies of Group companies. The functional currencies of Group companies are primarily US dollars, sterling and Australian dollars. The following table shows the denomination of the year-end cash and cash equivalents balance: 2019 cash and cash equivalents 2018 cash and cash equivalents Euro $’000 935 Sterling $’000 1,177 — 185 Australian dollar $’000 47 18 US dollar $’000 Total $’000 21,195 23,354 10,554 10,757 Had the foreign exchange rate between the US dollar and sterling changed by 5%, this would have affected the loss for the year and the net assets of the Group by $648,000 (2018: $631,000). (vi) Interest rate risk The Group is exposed to interest rate risk on its $2.2m debt drawing (2018: $3.9m), on which interest is charged at 1.5% above the US prime rate. (vii) Capital management The Group defines the capital that it manages as its total equity. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and support the growth of the business. 26. List of subsidiaries See accounting policy in Note 29(a). Set out below is a list of the subsidiaries of the Group: Company name Country of incorporation Proportion of shares Holding held Nature of business WANdisco International Limited UK Ordinary shares 100% Development and provision of global collaboration software WANdisco, Inc. OhmData, Inc. AltoStor, Inc. US Ordinary shares 100% Development and provision of global collaboration software US Ordinary shares 100% Dormant US Ordinary shares 100% Dormant WANdisco, Pty Ltd Australia Ordinary shares 100% Development and provision of global collaboration software WANdisco Software (Chengdu) Ltd China Ordinary shares 100% Development and provision of global collaboration software All of the above entities are included in the consolidated financial statements. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 75 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 27. Commitments and contingencies At 31 December 2019 the Group had no capital commitments (31 December 2018: $nil). The Group had no contingent liabilities at 31 December 2019 (31 December 2018: none). 28. Related parties (a) Transactions with key management personnel Key management personnel compensation comprised the following: Short-term employee benefits Equity-settled share-based payment As restated 2018 $’000 4,314 4,909 2019 $’000 4,842 6,144 10,986 9,223 Further details on the remuneration, share options and pension entitlements of the Directors are included in the Directors’ share options and the Directors’ remuneration tables included in the Remuneration Committee report on page 43, which form part of these audited financial statements. 29. Significant accounting policies The Group has consistently applied the following accounting policies to all periods presented in these consolidated financial statements, except if mentioned otherwise (see also Note 5). (a) Basis of consolidation (i) Business combinations The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. Any contingent consideration is measured at fair value at the date of acquisition. (ii) Subsidiaries Subsidiaries are entities controlled by the Group. The Group “controls” an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. (iii) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. (b) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit or loss and presented within finance costs. (ii) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into US dollars at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into US dollars at an average rate for the year, where this approximates to the foreign exchange rates ruling at the dates the fair value was determined. Foreign currency differences are recognised in other comprehensive income (“OCI”) and accumulated in the translation reserve. 76 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 29. Significant accounting policies continued (c) Use of estimates and judgements The preparation of financial information in conformity with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. (i) Accounting estimates The preparation of financial statements in conformity with adopted IFRSs requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results ultimately may differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The Directors consider the following to be the estimates applicable to the financial statements, which have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year or in the long term: Revenue Key assumption: When allocating revenue between different performance obligations, the fair value of the various components is required, which involves the use of estimates to establish the relative fair values. See Note 8. (ii) Judgements The Group applies judgement in how it applies its accounting policies, which do not involve estimation, but could materially affect the numbers disclosed in these financial statements. The key accounting judgements, without estimation, that have been applied in these financial statements are as follows: Development costs Capitalisation of development expenditure is completed only if development costs meet certain criteria. Full detail of the criteria is in Note 29(m)(i). • Alternative accounting judgement that could have been applied – not capitalising development costs. • Effect of that alternative accounting judgement – reduction of $4,877,000 of assets’ carrying value. Revenue An additional area of judgement is the recognition and deferral of revenue in the situation when different performance obligations are bundled. For example, the carve-out of the term licence in a subscription arrangement from the maintenance and support element. When products are bundled together for the purpose of sale, the associated revenue, net of all applicable discounts, is allocated between the constituent parts of the bundle on a relative fair value basis. The Group has a systematic basis for allocating relative fair values in these situations. • Alternative accounting judgement that could have been applied – alternative methodology to allocate the fair values. • Effect of that alternative accounting judgement – change in revenue figure and deferred income by the same amount. Deferred tax asset The Group has unrecognised deferred tax assets where judgement has been applied around the amount to recognise. Further details are included in Note 13(d). • Alternative accounting judgement that could have been applied – recognition of deferred tax asset. • Effect of that alternative accounting judgement – increase of $21,491,000 in assets. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 77 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 29. Significant accounting policies continued (d) Revenue from contracts with customers The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms and the related revenue recognition policies. The details of the accounting policies in relation to the Group’s various products and services are set out below: Type of product/service IFRS 15 treatment Software licences – perpetual licences Under IFRS 15, revenue on perpetual licences is recognised in full once the licence has been granted and the customer has been provided with access to the software as it is considered that control has been passed at that point in time. Software subscriptions (which include both a term software licence and a maintenance and support contract) Under IFRS 15 subscription arrangements have been split into two performance obligations which are both considered as distinct: • term software licence; and • maintenance and support. The allocation of transaction price between the two performance obligations is based on an adjusted market assessment approach. Term software licences are treated like perpetual licences with revenue being recognised in full once the licence has been granted and the customer has been provided with access to the software as it is considered that control has been passed at that point in time. The maintenance and support component is spread over the life of the contract as the performance obligation is satisfied over time matching the period of the contract. Maintenance and support contracts Maintenance and support revenue is spread over time as the performance obligation is satisfied over the period of the contract. Training, implementation and professional services Sales of training, implementation and professional services are recognised on delivery of the services at a point in time. Royalties Royalties are accounted for on an accruals basis. Under IFRS 15 the recognition of royalties is prohibited until the sale or usage occurs, even if the sale or usage is probable. Sales commissions Under IFRS 15, the costs of obtaining a contract should be recognised as an asset and subsequently amortised if they are incremental and are expected to be recovered. Amortisation is charged on a basis consistent with the transfer to the customer of the licence or services to which the capitalised costs relate. The Group determines the transaction price it is entitled to in return for providing the promised obligations to the customer based on the committed contractual amounts. Customers either pay up-front or in payment instalments over the term of the related service agreement. Contract assets relate to: • accrued income – licence revenue which has been recognised but has not yet been billed to the customer (as is being billed in instalments over the term of the related service agreement) at the reporting date. The contract asset is transferred to receivables when the Group issues an invoice to the customer. Contract liabilities relate to deferred income which is recognised as revenue when the performance obligations are satisfied. (e) Segmental reporting The Directors consider there to be one operating segment, being that of development and sale of licences for software and related maintenance and support. The Group has adopted IFRS 8 “Operating Segments” from the date of transition to IFRS. IFRS 8 requires the Group to determine and present its operating segments based on information which is provided internally to the Chief Operating Decision Maker (“CODM”). The CODM, who is responsible for allocating resources and assessing the performance of the operating segment, has been identified as the Chief Executive Officer. 78 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 29. Significant accounting policies continued (f) Cost of sales Cost of sales includes commissions earned by our salesforce on sales and direct costs relating to software supply. (g) Employee benefits (i) Short-term employee benefits Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount because of past services provided by the employee and the obligation can be estimated reliably. (ii) Share-based payment arrangements The grant date fair value of equity-settled share-based payment arrangements granted to employees is recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market-based performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. (iii) Defined contribution plans Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. (iv) Termination benefits Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognises costs for a restructuring. If benefits are not expected to be settled wholly within twelve months of the reporting date, then they are discounted. (h) Government grants The Group recognises an unconditional government grant related to development costs as deferred income at fair value if there is reasonable assurance that they will be received, and the Group will comply with the conditions associated with the grant; they are then recognised in profit or loss as other income on a systematic basis over the useful life of the asset. Grants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis in the periods in which the expenses are recognised. (i) Exceptional items Exceptional items comprise items of income and expense that are material in amount and that merit separate disclosure in order to provide an understanding of the Group’s underlying financial performance. (j) Finance income and finance costs The Group’s finance income and finance costs include: • interest income; • interest expense; and • the foreign currency gain or loss on financial assets and financial liabilities. Interest income or expense is recognised using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to: • the gross carrying amount of the financial asset; or • the amortised cost of the financial liability. In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit impaired) or to the amortised cost of the liability. However, for financial assets that have become credit impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit impaired, then the calculation of interest income reverts to the gross basis. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 79 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 29. Significant accounting policies continued (k) Income tax Income tax comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI. (i) Current tax Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year (including R&D tax credits) and any adjustments to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax assets and liabilities are offset only if certain criteria are met. (ii) Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; • temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and • taxable temporary differences arising on the initial recognition of goodwill. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset only if certain criteria are met. (l) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less accumulated depreciation and any accumulated impairment losses. If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss. 80 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 29. Significant accounting policies continued (l) Property, plant and equipment continued (ii) Depreciation Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives and is generally recognised in profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. The estimated useful lives of property, plant and equipment for current and comparative periods are as follows: • Computer equipment • Fixtures and fittings Three years Three years • Leasehold improvements Three to five years • Right of use assets Life of lease Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. (m) Intangible assets and goodwill (i) Recognition and measurement Goodwill Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses. Other intangible assets (including computer software) Other intangible assets, including those acquired on acquisition of subsidiaries, have finite useful lives and are measured at cost less accumulated amortisation and any accumulated impairment losses. Development costs Expenditure on research activities is recognised in profit or loss as incurred. Development activities relate to software development and involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if: • development costs can be measured reliably; • the product or process is technically and commercially feasible; • future economic benefits are probable; and • the Group intends to, and has sufficient resources to, complete development and to use or sell the asset. The expenditure capitalised includes direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Otherwise, development costs are recognised in profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses. (ii) Amortisation Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives and is generally recognised in profit or loss. Goodwill is not amortised. The estimated useful lives for current and comparative periods are as follows: • Other intangible assets • Development costs • Computer software Two years Two years Over the life of the software licence Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 81 Financial statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 29. Significant accounting policies continued (n) Financial instruments (i) Recognition and initial measurement Trade receivables are initially recognised when they are originated. All other financial assets and liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (“FVTPL”), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. (ii) Classification and subsequent measurement Financial assets On initial recognition, a financial asset is classified as measured at amortised cost. Financial assets are not reclassified after their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: • it is held within a business model whose objective is to hold assets to collect contractual cash flows; and • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets – business model assessment The Group assesses the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed, and information is provided to management. Financial assets – assessment whether contractual cash flows are solely payments of principal and interest For the purpose of this assessment, “principal” is defined as the fair value of the financial asset on initial recognition. “Interest” is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin. In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers: • contingent events that would change the amount or timing of cash flows; • terms that may adjust the contractual coupon rate, including variable rate features; • prepayment and extension features; and • terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features). A prepayment feature is consistent with the sole payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition. 82 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 29. Significant accounting policies continued (n) Financial instruments continued (ii) Classification and subsequent measurement continued Financial assets – subsequent measurement and gains and losses Financial assets at FVTPL These assets are subsequently measured at fair value. Net gains and losses, including any interest, are recognised in profit or loss. Financial assets at amortised cost These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Financial liabilities – classification, subsequent measurement and gains and losses Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held for trading, is a derivative or is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recorded in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are measured in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. (iii) Derecognition Financial assets The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risk and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. Financial liabilities The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. The Group also derecognises a financial liability when its terms are modified, and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss. (iv) Offsetting Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis to realise the asset and settle the liability simultaneously. (o) Share capital Share capital is denominated in sterling and is translated into US dollars on issue with no subsequent retranslation. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 83 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 29. Significant accounting policies continued (p) Impairment (i) Non-derivative financial assets Financial instruments and contract assets The Group recognises loss allowances for estimate credit losses (“ECL”) on: • financial assets measured at amortised cost; and • contract assets. Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime ECLs. For other financial assets, when determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information. Measurement of ECLs ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset. Credit-impaired financial assets At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit impaired. A financial asset is “credit impaired” when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit impaired includes the following observable data: • significant financial difficulty of the customer; • a breach of contract, such as a default; or • it is probable that the customer will enter bankruptcy or other financial reorganisation. Presentation of allowance for ECL in the statement of financial position Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. (ii) Non-financial assets At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that is largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets in the CGU on a pro rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment had been recognised. 84 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 29. Significant accounting policies continued (q) Leases (i) Policy applicable from 1 January 2019 At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether: • the contract involves the use of an identified asset – this may be specified explicitly or implicitly and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; • the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and • the Group has the right to direct the use of the asset. The Group has this right when it has the decision-making rights that are mostly relevant to changing how and for what purpose the asset is used is predetermined; the Group has the right to direct the use of the asset if either: – the Group has the right to operate the asset; or – the Group designed the asset in a way that predetermines how and for what purpose it will be used. This policy is applied to contracts entered into, or changed, on or after 1 January 2019. At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. (ii) Policy applicable before 1 January 2019 For contracts entered into before 1 January 2019, the Group determined whether the arrangement was or contained a lease based on the assessment of whether: • fulfilment of the arrangement was dependent on the use of a specific asset or assets; and • the arrangement had conveyed a right to use the asset. An arrangement conveyed the right to use the asset if one of the following was met: – the purchaser had the ability or right to operate the asset while obtaining or controlling more than an insignificant amount of the output; – the purchaser had the ability or right to control physical access to the asset while obtaining or controlling more than an insignificant amount of the output; or – facts and circumstances indicated that it was remote that other parties would take more than an insignificant amount of the output, and the price per unit was neither fixed per unit of output nor equal to the current market price per unit of output. (iii) As a lessee The Group recognises a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost, which compromises the initial amount of the lease liability adjusted for any lease payments made on or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right of use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right of use asset or the end of the lease term. The estimated useful lives of right of use assets are determined on the same basis as those of property and equipment. In addition, the right of use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. Lease payments included in the measurement of the lease liability comprise the following: • fixed payments, including in-substance fixed payments; • variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; • amounts expected to be payable under a residual value guarantee; and • the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 85 Financial statementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2019 29. Significant accounting policies continued (q) Leases continued (iii) As a lessee continued The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right of use asset or is recorded in profit or loss if the carrying amount of the right of use asset has been reduced to zero. The Group presents right of use assets that do not meet the definition of investment property in “property, plant and equipment” and lease liabilities in “loans and borrowings” in the statement of financial position. (iv) Short-term leases and leases of low-value assets The Group has elected not to recognise right of use assets and lease liabilities for short-term leases that have a lease term of twelve months or less and leases of low-value assets, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. (v) Under IAS 17 In the comparative period, as a lessee the Group classified leases that transfer substantially all of the risks and rewards of ownership as finance leases. When this was the case, the leased assets were measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Minimum lease payments were the payments over the lease term that the lessee was required to make, excluding any contingent rent. Subsequently, the assets were accounted for in accordance with the accounting policy applicable to that asset. Assets held under other leases were classified as operating leases and were not recognised in the Group’s statement of financial position. Payments made under operating leases were recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received were recognised as an integral part of the total lease expense, over the term of the lease. (r) Operating loss Operating loss is the result generated from the continuing principal revenue-producing activities of the Group as well as other income and expenses related to operating activities. Operating loss excludes net finance costs and income taxes. (s) Fair value measurement “Fair value” is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk. A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities (see Note 25). When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as “active” if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would consider in pricing a transaction. If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price and liabilities and short positions at an ask price. The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Group determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out. 86 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 30. Standards issued but not yet effective Several new standards are effective for annual periods beginning after 1 January 2020 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements. The following amended standards and interpretations are not expected to have a significant impact on the Group’s consolidated financial statements: • Amendments to References to the Conceptual Framework in IFRS Standards (effective date 1 January 2020); • IFRS 17 “Insurance Contracts” (effective date 1 January 2021); • Definition of a Business (Amendments to IFRS 3) (effective date 1 January 2020); • Definition of Material (Amendments to IAS 1 and IAS 8) (effective date 1 January 2020); and • Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7). 31. Subsequent events On 12 June 2020 the Group announced a placing (which was approved by General Meeting on 29 June 2020) for the subscription of 3,100,000 new ordinary shares of 10 pence each in the Company (comprising 2,362,515 placing shares and 737,485 direct subscription shares) at a price of 650 pence (a discount of 12.2% on the closing share price on 11 June 2020), raising gross proceeds of $25m. This represents 6.4% of the entire existing share capital of WANdisco. The proceeds will be used to support our relationships with strategic cloud partners and provide growth working capital. 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. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 87 Financial statementsFIVE-YEAR RECORD 31 December Revenue Revenue growth Deferred revenue Deferred revenue growth Cash Operating loss Amortisation of intangible assets Depreciation of property, plant and equipment Exceptional items 2015 $’000 2016 $’000 2017 $’000 As restated 2018 $’000 2019 $’000 10,994 11,379 19,637 17,019 16,155 (2%) 4% 73% (13%) (5%) 9,757 (13%) 12,492 14,160 28% 13% 4,318 (70%) 3,810 (12%) 2,555 7,558 27,396 10,757 23,354 (30,529) (18,398) (10,603) (23,237) (27,179) 9,600 8,466 6,699 6,475 270 614 174 32 215 — 388 — 5,701 1,101 — EBITDA before exceptional items (20,045) (9,726) (3,689) (16,374) (20,377) Add back equity-settled share-based payment 4,057 2,262 3,109 6,977 8,707 Adjusted EBITDA before exceptional items Development expenditure capitalised (15,988) (8,369) (7,464) (5,860) (580) (9,397) (11,670) (6,303) (4,910) (5,062) Adjusted EBITDA before exceptional items including development expenditure (24,357) (13,324) (6,883) (14,307) (16,732) Note: • The 2018 figures include the adoption of IFRS 15 “Revenue from Contracts with Customers” and the prior years have not been restated and are prepared on an IAS 18 basis. • The 2019 figures include the adoption of IFRS 16 “Leases” and the prior years have not been restated and are presented on an IAS 17 basis. • The 2016 to 2018 equity-settled share-based payment figures are restated as detailed in Note 15(a). 88 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 NOTICE OF ANNUAL GENERAL MEETING Notice is given that the eighth Annual General Meeting of WANdisco plc (“the Company”) will be held at the UK Company’s offices, Castle House, 1–13 Angel Street, Sheffield S3 8LN, on 29 July 2020 at 10am for the following purposes: To consider and, if thought fit, to pass the following resolutions as ordinary resolutions: 1. That the Company’s financial statements for the year ended 31 December 2019, the Strategic report and the reports of the Directors and auditor thereon be received and considered. 2. That David Richards be re-elected as a Director of the Company. 3. That Dr Yeturu Aahlad be re-elected as a Director of the Company. 4. That BDO LLP be appointed as auditor of the Company. 5. That the Directors be authorised to determine the remuneration of the auditor. 6. That, in substitution for all existing authorities but without prejudice to any allotment, offer or agreement already made pursuant thereto, the Directors be and are hereby generally and unconditionally authorised pursuant to Article 2.3 of the Company’s Articles of Association (“the Articles”) to exercise all powers of the Company to allot, grant options over or otherwise dispose of relevant securities (as that term is defined in the Articles) in respect of up to an aggregate nominal amount of £1,711,411, provided that (unless previously revoked, varied or renewed) this authority shall expire on the earlier of the date which is 15 months after the date the resolution was passed and the conclusion of the next Annual General Meeting of the Company, save that the Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such an offer or agreement as if the power had not expired. 7. That, pursuant to Article 58A(1)(b) of the Companies (Jersey) Law 1991 (“the Law”) and Article 13 of the Articles, an ordinary share purchased pursuant to resolution 9 below may be held by the Company as treasury shares in accordance with Articles 58A and 58B of the Law. To consider and, if thought fit, to pass the following resolutions as special resolutions: 8. That, subject to the passing of resolution 6 and pursuant to Article 2.10 of the Articles, the Directors be and are hereby generally empowered to allot, grant options over or otherwise dispose of equity securities (within the meaning of the Articles) wholly for cash, pursuant to the general authority described in resolution 6 above, as if pre-emption rights did not apply to any such allotment, such power being limited to: 8.1 the allotment of equity securities in connection with a rights issue, open offer or pre-emptive offer to holders on the register of the ordinary shares in the capital of the Company (“ordinary shares”) on a date fixed by the Directors where the equity securities respectively attributable to the interests of all those shareholders are proportionate (as nearly as practicable) to their respective holdings on that date subject to any exclusions or other arrangements as the Directors may consider necessary or expedient in relation to fractional entitlements, legal or practical problems under the law of any territory or the regulations or requirements of any relevant regulatory authority or stock exchange in any territory; and 8.2 the allotment (other than pursuant to resolution 8.1 above) wholly for cash of ordinary shares up to an aggregate nominal amount of £513,423, provided that (unless previously revoked, varied or renewed), such authorities shall expire on the earlier of the date which is 15 months after the date the resolution was passed and the conclusion of the next Annual General Meeting of the Company, save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such an offer or agreement as if the power had not expired. 9. That the Directors be and are hereby authorised pursuant to Article 13 of the Articles and Article 57 of the Law as amended to make market purchases of ordinary shares, subject to the following conditions: 9.1 the maximum number of ordinary shares authorised to be purchased may not be more than 15% of the issued share capital of the Company as at the date of this Notice; 9.2 the minimum price (exclusive of expenses) which may be paid for an ordinary share is £0.001; and 9.3 the maximum price (exclusive of expenses) which may be paid for an ordinary share shall not exceed: 9.3.1 an amount equal to 105% of the average middle market quotation for ordinary shares taken from the London Stock Exchange plc Daily Official List for the five business days immediately preceding the date on which such shares are to be contracted to be purchased; and 9.3.2 the higher of the price of the last independent trade and the highest current independent bid on the London Stock Exchange plc Daily Official List at the time, such authority to expire on the earlier of the date which is 15 months after the date the resolution was passed and the conclusion of the next Annual General Meeting of the Company, unless such authority is varied, revoked or renewed prior to such date. 10. THAT with effect from the conclusion of the meeting the draft Articles of Association produced to the meeting and, for the purposes of identification, initialled by the Chairman be adopted as the Articles of Association of the Company in substitution for, and to the exclusion of, the Company’s existing Articles of Association. By order of the Board Larry Webster Company Secretary 29 June 2020 Registered in Jersey under the Companies (Jersey) Law 1991 with company number 110497. Registered office 47 Esplanade St. Helier Jersey JE1 0BD WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 89 Financial statements NOTICE OF ANNUAL GENERAL MEETING CONTINUED Notes The following notes explain your general rights as a shareholder and your right to attend and vote at this Meeting or to appoint someone else to vote on your behalf. 1. To be entitled to attend and vote at the Meeting (and for the purpose of the determination by the Company of the number of votes they may cast), shareholders must be registered in the Register of Members of the Company at close of trading on 27 July 2020. Changes to the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the Meeting. 2. Shareholders, or their proxies, intending to attend the Meeting in person are requested, if possible, to arrive at the Meeting venue at least 20 minutes prior to the commencement of the Meeting at 10am (UK time) on 29 July 2020 so that their shareholding may be checked against the Company’s Register of Members and attendances recorded. 3. Shareholders are entitled to appoint another person as a proxy to exercise all or part of their rights to attend and to speak and vote on their behalf at the Meeting. A shareholder may appoint more than one proxy in relation to the Meeting provided that each proxy is appointed to exercise the rights attached to a different ordinary share or ordinary shares held by that shareholder. A proxy need not be a shareholder of the Company. 4. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s Register of Members in respect of the joint holding (the first named being the most senior). 5. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting. 6. You can vote either: • by logging on to www.signalshares.com and following the instructions; • you may request a hard-copy form of proxy directly from the registrars, Link Asset Services (previously called Capita), on Tel: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. We are open between 9am and 5.30pm, Monday to Friday excluding public holidays in England and Wales; or • in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out below. In order for a proxy appointment to be valid a form of proxy must be completed. In each case the form of proxy must be received by Link Asset Services at 34 Beckenham Road, Beckenham, Kent BR3 4TU, by 10am on 27 July 2020. 90 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 7. If you return more than one proxy appointment, either by paper or electronic communication, the appointment received last by the registrars before the latest time for the receipt of proxies will take precedence. You are advised to read the terms and conditions of use carefully. Electronic communication facilities are open to all shareholders and those who use them will not be disadvantaged. 8. The return of a completed form of proxy, electronic filing or any CREST Proxy Instruction (as described in Note 11 below) will not prevent a shareholder from attending the Meeting and voting in person if he/she wishes to do so. 9. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Meeting (and any adjournment of the Meeting) by using the procedures described in the CREST Manual (available from www.euroclear.com/site/public/EUI). CREST personal members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. 10. In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (“a CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the issuer’s agent (ID RA10) by 10am on 27 July 2020. For this purpose, the time of receipt will be taken to mean the time (as determined by the timestamp applied to the message by the CREST application host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. 11. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Article 34(1) of the Companies (Uncertificated Securities) (Jersey) Order 1999. 15. Any shareholder attending the Meeting has the right to ask questions. The Company must cause to be answered any such question relating to the business being dealt with at the Meeting but no such answer need be given if: (a) to do so would interfere unduly with the preparation for the Meeting or involve the disclosure of confidential information; (b) the answer has already been given on a website in the form of an answer to a question; or (c) it is undesirable in the interests of the Company or the good order of the Meeting that the question be answered. 16. The following documents are available for inspection during normal business hours at the registered office of the Company on any business day from the date of this Notice until the time of the Meeting and may also be inspected at the Meeting venue, as specified in this Notice, from 9.45am on the day of the Meeting until the conclusion of the Meeting: • copies of the Directors’ letters of appointment or service contracts. A copy of this Notice can be found on the Company’s website at www.wandisco.com. Notes continued 12. Any corporation which is a shareholder can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a shareholder provided that no more than one corporate representative exercises powers in relation to the same shares. 13. As at 29 June 2020 (being the latest practicable business day prior to the publication of this Notice), the Company’s ordinary issued share capital consists of 51,342,324 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 29 June 2020 are 51,342,324. 14. In the Company’s Articles of Association, Article 22.5 says: Where so requested in the manner set out in section 527(4) of the UK Companies Act 2006 by members who hold shares representing at least 10 per cent of the paid up share capital of the Company (excluding treasury shares) and who have a right to vote at the general meeting at which the Company’s annual accounts are laid, the Company shall without prejudice to its obligations under the Companies Law publish on its website a statement setting out any matter relating to the audit of the Company’s accounts or any circumstances connected with an auditor of the Company ceasing to hold office, and the Company shall comply with all the obligations relating to the publication of such statement contained in the provisions of sections 527 to 529 (other than sections 527(5) and 527(6)) of the UK Companies Act 2006, provided always that the Company shall not be required to comply with the obligation set out in section 527(1) of the UK Companies Act 2006 where the board believes in good faith that the rights conferred by this Article 22 are being abused. WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 91 Financial statements SECRETARY, ADVISERS AND SHARE CAPITAL INFORMATION Secretary Larry Webster Offices UK office Castle House 1–13 Angel Street Sheffield S3 8LN US office 5000 Executive Parkway Suite 270 San Ramon CA 94583 Registered office 47 Esplanade St. Helier Jersey JE1 0BD Company registered number 110497 Broker Stifel Nicolaus Europe Ltd 150 Cheapside London EC2V 6ET Auditor BDO LLP 55 Baker St Marylebone London W1U 7EU Legal advisers Brown Rudnick LLP 8 Clifford Street London W1S 2LQ Carey Olsen (Jersey) LLP 47 Esplanade St. Helier Jersey JE1 0BD Bankers Silicon Valley Bank Alphabeta 14–18 Finsbury Square London EC2A 1BR HSBC Bank plc Yorkshire and North East Corporate Banking Centre 4th Floor City Point 29 King Street Leeds LS1 2HL Registrars Link Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Share capital The ordinary share capital of WANdisco plc is listed on AIM, a market operated by London Stock Exchange Group plc. The shares are listed under the trading ticker WAND. The ISIN number is JE00B6Y3DV84. 92 WANDISCO PLC AN NUAL REPORT AND ACCOUNTS 2019 CBP002647 WANdisco plc is committed to the environmental issues reflected in this Annual Report. The report is printed on Arcoprint, which is FSC® certified and ECF (Elemental Chlorine Free), and printed in the UK by Park Communications using their environmental printing technology. Both manufacturing mill and the printer are registered to the Environmental Management System ISO14001 and are Forest Stewardship Council® (FSC) chain-of-custody certified. W A N D I S C O P L C A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 9 WANdisco plc 47 Esplanade St. Helier Jersey JE1 0BD 

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