Gamma Communications Plc · LSE:GAMA
Gamma Communications — H1 2023 Earnings Presentation
33 slides from Gamma Communications's earnings presentation, Sep 5, 2023
Slide 1: Gamma Half Year 2023 Results
Gamma Half Year 2023 Results 5 September 2023 Andrew Belshaw, CEO Bill Castell, CFO Working smarter, together.
Slide 2: Agenda
HY 2023 Business Update 01. Andrew Belshaw HY 2023 Results 02. HY 2023 Financial Highlights Bill Castell Strategic update and market trends Agenda 03. Andrew Belshaw ESG 04. Andrew Belshaw Business Outlook 05. Andrew Belshaw Q&A 06. Andrew Belshaw and Bill Castell 2
Slide 3: Half year 2023 Business Update
Half year 2023 Business Update Andrew Belshaw, CEO 3
Slide 4: Half Year 2023 Business Update – Business Highlights
Half Year 2023 Business Update – Business Highlights • UK Business continues to grow • High levels of recurring revenue and margin • Continue to add Cloud PBX seats (Horizon) and voice enablement of MS Teams (and other applications) • Attachment rates of Horizon Add Ons continues to increase – prote
Slide 5: H1 2023 Business Update
H1 2023 Business Update Gamma Group Business* Enterprise* Europe Up to Up to Up to Up to £256.2m £164.8m £53.0m £38.4m +9% growth +10% growth +9% growth +8% growth Gamma Group revenue 64% of Group revenue 21% of Group revenue 15% of Group revenue • Gamma Business continues to see strong growth; high
Slide 6: Half Year 2023 Financial Highlights
Half Year 2023 Financial Highlights Bill Castell, CFO
Slide 7: H1 2023 Financial Highlights
H1 2023 Financial Highlights Revenue Adjusted EBITDA Adjusted EPS Up Up Up 9% 9% 5%* to £256.2m to £56.5m to 37.5p Cash generated by operations Cash balance Interim Dividend Up £123.5m Up 15% As at 30 June 14% to £57.1m (net cash of £121.7m) to 5.7p * The growth rate has been impacted by the change
Slide 8: Income Statement
Income Statement £m Six months ended 30 June 30 June 2023 2022 Year ended 31 December Half on half 2022 Growth Revenue 256.2 234.7 484.6 9% • Recurring revenue grew to £229.7m of Cost of sales (125.0) (114.3) (236.9) the £256.2m, 90% of total revenue (H1 Gross profit 131.2 120.4 247.7 9% 2022: 89%)
Slide 9: Business (UK SME)
Business (UK SME) 170 Revenue (£m) 165 • Strong 10% growth in revenue 160 • Growth primarily driven by UCaaS 155 150 • Gross profit increased 8% from £80.2m 145 to £86.8m 140 H1 2022 H2 2022 H1 2023 • Gross margin broadly consistent at 53% • Encouraging early growth of our micro Gross Profit (£m) bu
Slide 10: Enterprise
Enterprise (Large Corporate and Public Sector) Revenue (£m) 54 • Delivered healthy 9% revenue growth 52 driven by key contract performance 50 • H2 2022 revenue bolstered by higher 48 than usual levels of hardware sales 46 • Gross profit increased by 6% H1 2022 H2 2022 H1 2023 • Gross margin fluctuat
Slide 11: Europe
Europe Revenue (£m) • Revenue growth 8% (3% at constant 39 currency) 38 • Gross profit grew headline 17%, 7% at 37 constant currency (also taking into 36 account a £0.8m reclassification between 35 cost of sales and operating expenses in 34 H1 2022) H1 2022 H2 2022 H1 2023 • Solid German and Spanish
Slide 12: European Revenue
European Revenue • Overall good UCaaS revenue growth (Cloud PBX and SIP) in the period supported by price rises • UCaaS strong in Spain (+18%) supported by NeoTel acquisition in H2 2022 (+6% excl. Neotel) • Germany (+8%) relating to SIP growth and solid cloud volume offset by Netherlands (-5%) • Tra
Slide 13: Balance Sheet
Balance Sheet • Strong cash reserves – £123.5m • Net cash of £121.7m • Notional IFRS 16 liability (i.e. future lease payments – largely on buildings) of £10.5m (H1 2022: £11.7m) • Contingent consideration decreased to £4.5m due to Mission Labs payments 13
Slide 14: Capital Expenditure and Development Costs
Capital Expenditure and Development Costs Capital expenditure ("Capex") increased by £2.7m to Research and development spend increased by £10.5m from H1 2022 with the continued investment in £3.0m to £16.2m. Within that capitalised spend our own voice applications products (including future increase
Slide 15: Cashflow
Cashflow • Generated £57.1m cash from operations, Cash conversion 101% supported by favourable working capital movements • Taxation cashflow lower as a result of refund relating to prior year • Capex (incl. intangibles) increased in line with guidance as a result of the continued investment in softw
Slide 16: Analyst Modelling Guidance
Analyst Modelling Guidance • Overall expectations for the full year 2023: • Within the top half of the company compiled consensus range* for adjusted EBITDA (range £110.4m – £117.2m; mid-point £113.8m) and adjusted EPS (range 70.0p – 77.0p; mid-point 73.5p) as at 5 September 2023 • UK Corporation Ta
Slide 17: Update on Strategy and Market Trends
Update on Strategy and Market Trends Andrew Belshaw, CEO 17
Slide 18: Gamma's 2026 strategic priorities
Gamma’s 2026 strategic priorities We will develop We will develop We will become a We will create an a common multiple routes trusted partner to organisation that European to the market in Enterprises across engages all our product set for each country in Europe, people with a UCaaS and which we ope
Slide 19: Developing a common European product set gives us opportunity for upsell
Developing a common European product set gives us opportunity for upsell Opportunities to increase wallet share from Horizon users Horizon - Cloud Horizon MS Teams Call Horizon PBX Collaborate Integration Recording Contact List Price* c£8.00 c£3.00 c£1.00 c£1.50 c£18.00 per user per user per user pe
Slide 20: Cloud Communications – Performance in the UK
Cloud Communications – Performance in the UK Horizon (Cloud PBX) Collaborate MS Teams Integration Up Up Up 3% 4% 29% to 777k cloud seats to 76k seats to 9k cloud seats Voice Recording Horizon Contact PhoneLine+ Up Up Up 13% 27% 167% to 108k users to 14k seats to 8k seats • Percentages shown are comp
Slide 21: Voice Enablement – Performance in the UK
Voice Enablement – Performance in the UK SIP Trunks Enabling SIP Trunks Enabling MS Teams Enablement Hardware PBX non-Gamma Cloud PBX Down Up Up 1% 3% 11% to 1,042k SIP Trunks to 378k SIP Trunks to 394k cloud seats • Market continues to perform as expected – growth is now from enablement of Cloud se
Slide 22: European Performance
European Performance SIP Trunks Cloud PBX MS Teams Enablement (Hardware PBX) Up Up Up 1% 5% 500% to 163k seats to 192k SIP Trunks to 6k users • Growth in Cloud PBX seats in Germany but no significant large installations completed in H1 2023 • Netherlands business focussing on opportunity for Operato
Slide 23: Gamma's 2026 strategic priorities
Gamma’s 2026 strategic priorities We will develop We will develop We will become a We will create an a common multiple routes trusted partner to organisation that European to the market in Enterprises across engages all our product set for each country in Europe, people with a UCaaS and which we ope
Slide 24: H1 Notable Deals with Enterprise and Public Sector customers
H1 Notable Deals with Enterprise and Public Sector customers Re-sign New Business 24
Slide 25: Acquisition of Satisnet – Cyber Security Capability
Acquisition of Satisnet – Cyber Security Capability • Cyber Gap Analysis • Continual Security • Incident Response Investment Validation • Penetration Testing NIST Cybersecurity Framework • Managed Next Generation Firewalls • Turnkey Secure Access Service Edge (SASE) • 24x7 Managed SOC Solution • Con
Slide 26: Gamma's 2026 strategic priorities
Gamma’s 2026 strategic priorities We will develop We will develop We will become a We will create an a common multiple routes trusted partner to organisation that European to the market in Enterprises across engages all our product set for each country in Europe, people with a UCaaS and which we ope
Slide 27: Working smarter, together.
Working smarter, together. 27
Slide 28: ESG Update
ESG Update Andrew Belshaw, CEO
Slide 29: Communications with a Conscience
Communications with a Conscience Social Governance Environmental • “You Belong” employee • Our Top 100 suppliers have been • Targeting Carbon net-zero in communities held their first assessed for modern slavery 2042 for Scope 1, 2 & 3. Targets sessions and child labour risks, once submitted to SBTi
Slide 30: Business Outlook
Business Outlook Andrew Belshaw, CEO
Slide 31: Business Outlook
Business Outlook Our strategy builds on our core strengths to exploit existing opportunities for growth in the markets we serve Robust business model with strong recurring Satisnet acquisition allows us to sell Cyber revenue and margin, cash generative and with Security Managed Services into our Ent
Slide 32: Q&A
Q&A Andrew Belshaw, CEO Bill Castell, CFO
Slide 33: Thank you.
Thank you. Working smarter, together.