Latest signs are promising from WANdisco (WAND:AIM). In an upbeat trading update the big data and application lifecycle management (PLM) company flags last quarter bookings up 97% to $6.1m and second half to 31 December bookings up 109% to $9.6 million, roughly double the equivalent periods in 2015. Pleasingly, hard graft on the cost base means cash burn has been slashed to $0.2m in Q4 from $6.9m a year ago.
The share price is up nearly 19% today at 266p, valuing the business at £93m. But there will be plenty of sceptics among investors.
WANdisco is the clever technology firm that has developed a clever way of instantly replicating digital content across many computer servers, no matter where they are in the world. This means IT projects can be worked on simultaneously from any where (helping organisations lower development costs) and provides instant back-ups if servers go down.
Been here before
This is a fallen star stock (details here). It initially captured the market's imagination in a big way, the share price soaring to peak at more than £15.00 in December 2013. It IPO'd in June 2012 at 180p.
The problem has been that growth has stubbornly refused to emerge. Revenues for 2015 were flat at about $11m and running costs of around $1m a month saw operating losses soar to $40m, prompting one analyst to say about the company that 'it's like watching a car crash in slow motion.'
Things to watch
But there are reasons to believe that WANdisco may have solved its growth dilemma, and these are the pointers investors need to watch. First, cash. The fourth quarter between October and December is typically the busiest period closing new business for software companies. So how much of the Q4 cash burn progress is down to lower running costs, how much from bumper upfront payments from new business.
The company has cash of $7.6m on the books (presumably net, although that's not totally clear) compared to $1.1m this time last year, but there was also a $15m placing in June. So how likely is another cash call?
Lastly, and I think most important to the firm's long-run chances of success, it has developed a growing partner network with big names now reselling its technology. These include giants IBM, Oracle and Amazon Web Services, and even more importantly, we have seen new business flow through as a result.
With a board room kerfuffle (read about that here) now behind it, management might at last be close to delivering on the company's early promise.