TIDMLOOP
RNS Number : 9000X
LoopUp Group PLC
01 September 2022
1 September 2022
LOOPUP GROUP PLC
("LoopUp" or the "Group")
Material Contract Win; Business and Trading Update
LoopUp Group plc (AIM: LOOP), the cloud platform for premium
hybrid communications, is pleased to announce a new material
contract win for the Group, and provide both a strategic business
update for Cloud Telephony, its primary growth line of business,
and a trading update for the six months ended 30 June 2022.
Highlights
-- Meetings: New material contract win expected to generate
c.GBP10 million of revenue and c.GBP5 million of net cash
in the 12 months from October 2022 to September 2023
-- Cloud Telephony: 133% increase in customer wins and 252%
increase in individual contract wins during the second
year post service launch
New material contract win
The Group has entered into a revenue sharing and customer
transfer agreement with American Teleconferencing Services, Ltd.
and Audio Telecommunications Technology II LLC (together "PGi
Connect"), a provider of conferencing services. Under the
agreement, LoopUp has the rights (but not the obligation) to
transfer materially all of PGi Connect's conferencing services
customers (but not its webcasting customers) over to LoopUp.
There is no initial or fixed consideration payable to PGi
Connect for the transfer of its customers to LoopUp. Instead, the
Group has agreed to pay PGi Connect a share of revenue invoiced and
received from successfully transferred customers for a period of
three years.
This is a highly material contract for the Group in terms of its
expected cash generation. After making prudent assumptions for the
expected timing of customer transfers, customer losses due to the
transfer, and general ongoing business attrition, the Group
nevertheless expects this contract:
-- to increase LoopUp's revenues materially from October
2022 onwards, with revenue run rate ramping up thereafter
through to the FY2022 year-end; and
-- in the twelve months from October 2022 to September 2023,
to generate revenue of approximately GBP10 million, at
a gross margin of approximately 60% after both LoopUp's
cost of goods sold and payment of PGi Connect's revenue
share(1) , and provide net cash contribution to the Group
of approximately GBP5 million over the period after other
associated cash costs.
It is not possible to quantify the historical profit from
customers that will ultimately transfer given that inter alia: (i)
the agreement gives LoopUp the option but not the obligation to
transfer customers; (ii) there will be churn of PGi Connect
customers prior to transfer; and (iii) some customers are expected
to be lost during the transfer.
The Group emphasises that while this contract is clearly
material and highly cash generative, it does not alter the Group's
strategic transition towards hybrid communications solutions,
namely Cloud Telephony and Hybridium, and to the contrary, provides
the Group with valuable investment capacity into these long-term
growth lines of business.
Steve Flavell and Michael Hughes, co-CEOs of LoopUp,
commented:
"This is clearly a very significant transaction for the Group as
we continue to manage our business through its strategic transition
to premium hybrid communications. In addition to the material
expected cash generation, it will also bring telecommunications
purchasing scale that will benefit our growing Cloud Telephony
business. PGi Connect has a long history of leadership in the
conferencing services industry and we are excited to bring LoopUp
Meetings to their customers. We thank the PGi Connect team for
working so productively with us to conclude the agreement, and we
look forward to continuing to do so during the customer transition
project ahead."
Michele Dobnikar, President of PGi Connect, commented:
"We are pleased to announce this transaction with LoopUp, who is
one of very few operators capable of taking on and looking after
such a sizable and global customer book to the exacting standards
expected by our customers. We look forward to continuing to work
with the LoopUp team for a smooth and timely transition of the
business."
Cloud Telephony strategic business update
In Q3 2020, the Group launched its Cloud Telephony solution,
which has since developed into its primary growth line of business
for the long-term future of the Group. The Cloud Telephony market
is forecast to grow to GBP29 billion by 2025(2) , and the Group's
aspiration is to become one of a small number of winners in the
multinational mid-market and enterprise segment, providing
customers with single-vendor service provision globally rather than
the status quo of multiple telecommunications carriers in specific
countries and regions.
Since launch, the Group has secured 60 customer wins, comprising
131 individual contracts, and has done so at an accelerating win
rate:
-- 133% increase in customer wins, with 42 won during the
second year post service launch ending August 2022 (18
during the first year post service launch ending August
2021); and
-- 252% increase in individual contract wins, with 102 won
during the second year post service launch ending August
2022 (29 during the first year post service launch ending
August 2021). The greater acceleration in contract wins
versus customer wins reflects the 'layering effect' from
progressive geographic customer rollouts - i.e. approximately
one third of the contract wins in the second year post
launch were from customers won in the first year post
launch.
In aggregate, these 60 customer wins represent:
-- Minimum Annual Recurring Revenue (ARR) of GBP1.2 million
and minimum Total Contract Value (TCV) of GBP4.3 million,
based on minimum contracted levels;
-- Expected ARR of c.GBP2.4 million and expected TCV of c.GBP7.8
million, based on expected rollout levels, where LoopUp
has relatively strong visibility of customer intent based
on conversations, planning and pricing; and
-- Potential ARR of c.GBP5.2 million and potential TCV of
c.GBP16.1 million, based on identified potential rollout
levels but where LoopUp currently has less clear visibility
of customer intent.
Operationally, all customer deployments to date have been
successful, and all rollouts are progressing positively.
In addition to these 60 customer wins, the Group's sales
pipeline of potential new Cloud Telephony opportunities continues
to grow and now stands at more than GBP100 million of additional
potential ARR, of which approximately 15% is at written proposal
stage or later.
The Group is achieving this strong and accelerating commercial
traction in Cloud Telephony due to its differentiated offer for
multinational mid-market and enterprise customers versus
competition from telecommunications carriers and UC platform
calling plans. Specifically, this includes the Group's:
-- licensed and regulated geographic coverage;
-- highest quality and resilient audio routing across 19
tier-1 carrier partners;
-- customer connectivity options - UC-integrated / SIP /
hybrid - for future-proofed customer decision-making at
varied stages of the Cloud Telephony journey;
-- Microsoft 'Advanced Specialization' expertise (level above
gold) in Teams telephony for design, configuration and
implementation customer support;
-- Global Management Portal for consistent service visibility
and administration, globally; and
-- PerfectBundle pricing for spend commitment pooling across
global billing entities.
H1 2022 trading update and outlook
The Group expects revenues of approximately GBP6.6 million for
the six month period ended 30 June 2022, at a gross margin of
approximately 67%, and an EBITDA loss of approximately GBP1.5
million. Net debt was approximately GBP8.0 million at 30 June 2022,
prior to the receipt of an R&D tax credit of c.GBP1.9 million
that the Group expects to receive within the next 60 days.
Given the material contract announced today with PGi Connect,
combined with the development of ARR from Cloud Telephony, the
Group now expects:
-- FY2022 revenue to be marginally above market expectations,
at marginally lower profitability after some additional
required investment associated with the PGi Connect customer
transfer project; and
-- FY2023 revenue to be materially above market expectations
at materially higher profitability.
The Group will announce its unaudited interim results for the
period ended 30 June 2022 by the end of September 2022.
Market abuse regulation:
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK
domestic law by virtue of the European Union (Withdrawal) Act
2018.
(1) Expected to be approximately 13% on a weighted average basis
across different product categories
(2) Source: Gartner, 2022
For further information, please contact:
LoopUp Group plc via FTI
Steve Flavell, co-CEO
+44 (0) 20 7886
Panmure Gordon (UK) Limited 2500
Dominic Morley / Alina Vaskina (Corporate
Finance)
Erik Anderson (Corporate Broking)
+44 (0) 20 7397
Cenkos Securities Limited 8900
Giles Balleny / Dan Hodkinson (Corporate Finance)
Alex Pollen (Sales)
+44 (0) 20 3727
FTI Consulting, LLP 1000
Matt Dixon / Jamille Smith / Tom Blundell
About LoopUp Group plc
LoopUp (LSE AIM: LOOP) is a cloud platform for premium hybrid
communications. The Group's flagship Cloud Telephony solution for
Microsoft Teams enables multinational enterprises to consolidate
their global telecommunications into a single, consistently managed
cloud implementation rather than disparate implementations from
multiple carriers. The Group's hybrid auditorium and events
solution, Hybridium (www.hybridium.com), brings unrivaled
engagement and analytics to larger scale hybrid education, training
and events such as management onsites, departmental kick-offs,
capital markets days and thought leadership seminars.
The Group is listed on the AIM market of the London Stock
Exchange (LOOP) and is headquartered in London, with offices in the
US, Spain, Germany, Hong Kong, Barbados and Australia.
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END
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