Gamma Communications Plc · LSE:GAMA
Gamma Communications — H1 2022 Earnings Presentation
35 slides from Gamma Communications's earnings presentation, Sep 6, 2022
Slide 1: Gamma Half Year 2022 Results
Gamma Half Year 2022 Results 6 September 2022 Andrew Belshaw, Interim CEO Bill Castell, CFO Working smarter, together.
Slide 2: Agenda
HY 2022 Business Update 01. Andrew Belshaw HY 2022 Results 02. HY 2022 Financial Highlights Bill Castell Growth drivers Agenda 03. Andrew Belshaw ESG 04 Andrew Belshaw Business Outlook 05. Andrew Belshaw Q&A 06. Andrew Belshaw and Bill Castell 1
Slide 3: Half year 2022 Business Update
Half year 2022 Business Update Andrew Belshaw, Interim CEO 2
Slide 4: Half year 2022 Business Update - Business Highlights
Half year 2022 Business Update - Business Highlights • Strong financial performance with high levels of recurring revenue and margin – Reinforced by a robust business model • Effect of inflation limited to date – Some wage pressure seen – limited effect on 2022 but will affect 2023 run rate – Some e
Slide 5: Half year 2022 Business Update – Business Units
Half year 2022 Business Update – Business Units Gamma Group UK Indirect UK Direct Europe Up to Up to Up to Up to £234.7m £143.7m £55.4m £35.6m +8% growth +10% growth +7% growth +1% growth Gamma Group revenue 61% of Group revenue 24% of Group revenue 15% of Group revenue • UK Indirect business experi
Slide 6: Half year 2022 Financial Highlights
Half year 2022 Financial Highlights Bill Castell, CFO 5
Slide 7: 2022 First Half Financial Highlights
2022 First Half Financial Highlights Revenue Adjusted EBITDA Adjusted EPS Up Up Up 8% 13% 16% to £234.7m to £51.9m to 35.6p Cash generated by operations Cash balance Interim Dividend Up £75.6m Up 15% As at 30 June 14% to £49.5m (net cash of £72.6m) to 5.0p 6
Slide 8: Income Statement
Six months ended Year ended 30 June 30 June 31 December Half on half 2022 2021 2021 Growth Income Statement Revenue 234.7 217.4 447.7 8% Cost of sales (114.3) (105.7) (219.2) • Revenue and gross profit grew by 8% Gross profit 120.4 111.7 228.5 8% • Gross margin maintained above 51% Gross profit marg
Slide 9: Indirect
Revenue (£m) 160.0 140.0 Indirect 120.0 100.0 • Strong 10% growth (half on half) in 80.0 60.0 revenue driven by UCaaS, mobile and 40.0 data product growth 20.0 • Healthy momentum with rate of growth 0.0 H1 2020 H2 2020 H1 2021 H2 2021 H1 2022 of cloud “bolt ons” increasing faster than core product G
Slide 10: Direct
Revenue (£m) 58.0 56.0 Direct 54.0 52.0 50.0 • Returns to gross profit growth from H2 21, 48.0 with some large Public Sector wins: DWP 46.0 and Home Office 44.0 • Step up in H1 22 Enterprise delivery 42.0 H1 2020 H2 2020 H1 2021 H2 2021 H1 2022 performance on key contracts as lock down impact reduce
Slide 11: Europe
Revenue (£m) 40.0 35.0 Europe 30.0 25.0 20.0 • Cloud seat growth inline with the market 15.0 • Gross profit H1 21 to H1 22 +£0.1m 10.0 5.0 • Impacted by less favourable exchange 0.0 rates. In local currency delivered 4% H1 2020 H2 2020 H1 2021 H2 2021 H1 2022 revenue and gross profit growth Gross Pr
Slide 12: European Revenue
2020 2021 2021 2022 H1 22 vs H2 H1 H2 H1 H2 21 €m €m €m €m European Revenue UCaaS • Good UCaaS revenue growth in the NL 4.3 4.5 4.0 4.1 2% period; Germany (+6%) and Netherlands ES 5.0 5.5 5.4 5.2 -4% (+2%). DE 6.0 7.0 7.2 7.6 6% • Cloud seats grew by 7% in the period Subtotal 15.3 17.0 16.6 16.9 2%
Slide 13: Snapshot of H1 2022 income statement costs
Snapshot of H1 2022 income statement costs Cost of Sales Overheads • With Gross Profit margins stable, COS (H1 22: • Active cost control kept operating expense £114.3m, H1 21: £105.7m) grew in line with growth at 4% (H1 22: £68.5m, H1 21: revenue, 8% £65.7m) • The 3 largest components of our COS at
Slide 14: Balance Sheet
Balance Sheet as at 30 June 30 June 31 Dec (£m) 2022 2021 2021 Non-current assets (incl. PPE) 191.7 205.1 197.6 Balance Sheet Receivables and inventories Cash 122.8 75.6 109.6 30.8 111.4 52.8 • Strong cash reserves - £75.6m Current assets 198.4 140.4 164.2 Total assets 390.1 345.5 361.8 • Net cash o
Slide 15: Cashflow
Cashflow • Cash conversion increased to 95% as a result of close working capital management Cash Flow Statement as at 30 June 30 June 31 Dec £m 2022 2021 2021 • Taxation cashflow decreased slightly as a result Adjusted EBITDA 51.9 46.0 95.4 of R&D tax credit receipts Cash generated by operations 49.
Slide 16: Analyst Modelling Guidance
Analyst Modelling Guidance • Macroeconomic inflationary pressures give challenges around employee salary inflation: – Not expected to materially impact 2022; but – May slow the growth in our Adjusted EBITDA for a short time • Overall expectations for the full year 2022 unchanged: – Upper half of ran
Slide 17: Growth Drivers
Growth Drivers Andrew Belshaw, Interim CEO 16
Slide 18: Five drivers of long-term growth
Five drivers of long-term growth 1 2 3 European market is Favourable customer under-penetrated which presents trends and behaviours present Cloud Comms remains a us with an opportunity to grow us with an opportunity to growing market in UK European revenues as the both upsell and improve ARPU market
Slide 19: 1. Cloud Communications remains a growing market in the UK
1. Cloud Communications remains a growing market in the UK Continued growth of cloud adoption in communication technologies Q2 2022 2026 40% 88% UCaaS UCaaS penetration penetration *data from Cavell Q4 2021 Cloud Comms report 18
Slide 20: 2. European market is under-penetrated compared to UK
2. European market is under-penetrated compared to UK • Projected growth rates lower than 100 previously thought BUT overall market size 90 remains significant – will take longer to 2026 achieve sizeable revenues 80 70 • Germany is largest European market – by Market Penetration (%) 60 2026 will sti
Slide 21: Cloud Communications
Cloud Communications Gamma's performance in Europe – H1 2022 European Cloud Seats • Launched Operator Connect in Netherlands – Up Operator Connect is a Teams enablement product 7% • Plan to launch Circle Loop in Netherlands and to 137k cloud seats Germany later in 2022 20
Slide 22: 3. Favourable trends allow us to improve ARPU
3. Favourable trends allow us to improve ARPU 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 per user per user Basic seat
Slide 23: Cloud Communications - Performance in the UK
Cloud Communications - Performance in the UK Horizon (Cloud PBX) Collaborate MS Teams Integration Up Up Up 6% 10% 175% to 716k cloud seats to 69k seats to 5k cloud seats Voice Recording Horizon Contact Up Up 24% 100% to 83k users to 8k seats • Rate of growth of "bolt ons "increasing faster than core
Slide 24: 4. Technology changes are a growth opportunity
4. Technology changes are a growth opportunity As SIP users migrate there is an opportunity to increase ARPU Existing SIP Customer c£8.00+ per User* c£1.25 per User* Three migration paths c£5.00 per Trunk* c£2.50 per User* Approximation based on 4 users to 1 SIP channel 3 party UCaaS provider rd • *
Slide 25: 5. Microsoft Teams adoption is growing in Enterprise
5. Microsoft Teams adoption is growing in Enterprise We see this as an opportunity Microsoft rely on third parties to provide voice capabilities for Teams. As more organisations “voice enable” their solution we have the opportunity to gain revenue. Voice for Teams Users Professional Services and int
Slide 26: ESG Update
ESG Update Andrew Belshaw, Interim CEO 25
Slide 27: Committed to delivering the business in the right way
Committed to delivering the business in the right way Environment Social Governance • TCFD-aligned disclosure published • Gamma became member of the • Launched a consistent approach • Energy and Carbon Review Employers Network for Equality to policy completed and Inclusion (ENEI) • Implemented a lea
Slide 28: Business Outlook
Business Outlook Andrew Belshaw, Interim CEO 27
Slide 29: Gamma is well placed to deal with expected macro-economic headwinds
Gamma is well placed to deal with expected macro- economic headwinds Recession Inflation Pricing Supply chain • Seeing the very early • Wage inflation not • Limited price rises where • Secured hardware supply signs of recessionary expected to impact 2022 possible – some long term as far as possible
Slide 30: Business Outlook
Business Outlook Recession highly likely in all European Cloud PBX penetration in UK remains below markets which changes dynamics of market 50% and Europe significantly lower – market growth, but creates opportunity – cloud service growth will ultimately come even if recession slows it preferable to
Slide 31: Q&A
Q&A Andrew Belshaw, Interim CEO Bill Castell, CFO 30
Slide 32: Thank you.
Thank you. Working smarter, together.
Slide 33: Appendix – Our products and services
Appendix – Our products and services 32
Slide 34: What do we actually do?
What do we actually do? Solve customer problems Customer needs Connectivity "I need..." Voice “…stable reliable connectivity” communication “…my customers to reach me easily and efficiently” Internal “…to reach out to my customers and suppliers” conversations “…my employees to work together” Externa
Slide 35: I need to collaborate with my colleagues and clients
I need to I need to give a collaborate with my Microsoft Amazon great customer colleagues and Teams Voice Enablement Connect Enablement experience clients Horizon Horizon Collaborate Contact Horizon Mobile GAMMA NETWORK Public & Private PhoneLine+ Connectivity I need to talk to I need to connect my