REG - LoopUp Group PLC - Material Contract Win; Business and Trading Update

LoopupAnnouncement

01/09/2022 07:00

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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.£10 million of
               revenue and c.£5 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 £10 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 £5
               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 £29 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 £1.2 million and minimum Total
         Contract Value (TCV) of £4.3 million, based on minimum contracted levels;
 ·       Expected ARR of c.£2.4 million and expected TCV of c.£7.8 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.£5.2 million and potential TCV of c.£16.1 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 £100 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 £6.6 million for the six month
period ended 30 June 2022, at a gross margin of approximately 67%, and an
EBITDA loss of approximately £1.5 million. Net debt was approximately £8.0
million at 30 June 2022, prior to the receipt of an R&D tax credit of
c.£1.9 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

 Panmure Gordon (UK) Limited                         +44 (0) 20 7886 2500
 Dominic Morley / Alina Vaskina (Corporate Finance)
 Erik Anderson (Corporate Broking)

 Cenkos Securities Limited                           +44 (0) 20 7397 8900
 Giles Balleny / Dan Hodkinson (Corporate Finance)
 Alex Pollen (Sales)

 FTI Consulting, LLP                                 +44 (0) 20 3727 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 (http://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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