'Every cloud has a silver lining' and Covid19 restrictions present a timely opportunity for online conference provider Loopup (LON:LOOP) and spark a reversal of fortunes.

It was a decline in their customers’ usage that caused a drop in profitability last summer but Covid19 has dramatically changed the market dynamics. LoopUp weren’t able to quantify the effect of this as it’s still early days and changing on a daily basis. Nevertheless, they revealed that new customer inquiries are up as the deficiencies of VoIP conference calls are experienced and firms look for a more reliable and higher call quality service. This is precisely the service that Loopup (LON:LOOP) offer and that following investment last year they have plenty of capacity to meet this increased demand. It achieves it's superior conferencing quality by routing the voice channel over more reliable telecom PTSN and the data over the Internet.

The recent preliminary results also give us a much better understanding of the root cause of the profit warning. Basically, there were two:

>> Macroeconomic factors: A slow-down in deals in the professional services sector; and

>> Substitution: Microsoft Teams has displaced some usage by clients for internal conference calling whilst still using LoopUp for external client conference calls.

What has also become apparent from this is that Loopup (LON:LOOP) has two very distinct user groups within their customer base:

>> Professional Services Sector: This group has distinct needs to which LoopUp uniquely caters by supporting online conferences with external clients; and

>> Other Sectors: That may have the same needs but to a far lesser extent.

The continuing growth in the former group is being masked by the decline in the latter. Similarly, the churn rate and customer acquisition cost (CAC) are far better for Professional Services clients but hidden in the overall metrics by the poorer performing Other Sectors. The key factor is the need for online conferences with external clients – the simplicity, reliability and call quality of LoopUp are unique differentiators from the other mass-market providers.

Loopup (LON:LOOP) have thus adapted their strategy to focus much more on this their competitive advantage and targeting their sales effort on the Professional Services Sector. Undoubtedly, Covid19 is hastening the trend towards online conferencing, with virtually no face-to-face meetings due to the current ‘lock-down’…

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