LoopUp has announced a very strong H1 period, in line with the previous trading update and reflecting a number of months of exceptional performance. This is allowing the business to invest in the major identified new opportunity, to provide telephony within Microsoft Teams, where the early signs are extremely positive. We look forward to further detail on the Teams pipeline and sales levels over time.
The business delivered H1 revenue of £31.9m, adjusted EBITDA of £12.2m and a net debt position of £5.3m – these figures were all in line with, or fractionally better than those described in the trading update of mid-July. This extraordinarily strong performance was driven by very high volumes of LoopUp meetings as customers’ employees adapted to remote working during calendar Q2 and generated significant revenues, well ahead of previous run-rate figures.
As previously described, LoopUp has identified an opportunity to sell “direct routing” telephony services within Microsoft Teams, and today’s RNS offers a number of positive data points around the early success of this new area of focus. Some 219 opportunities are described as “live”, with an overall contract value (assuming a two-year average) of some £50m. This, to us, seems like a strong start, and the application of LoopUp’s clear strength of delivery and sales process to such a major opportunity should yield dramatic results over time.
Forecasting LoopUp’s performance remains a challenge – the main LoopUp Meetings business is continuing to see good volumes, but the RNS describes an ongoing migration of large customers to fixed-price licence deals (with long-term commitments, but lower pricing); Event by LoopUp is growing strongly, and the Teams business is nascent but full of potential. We make a fractional (£1m) reduction to FY20 revenues to reflect these factors and the recent weakness of the US Dollar (which impacts the Sterling translation of revenue) but leave our profit and cash expectations unchanged.
LoopUp has delivered on a very strong H1, highly profitable and enormously cash generative. We will look for further evidence in coming months around the long-term shape of the LoopUp Meetings revenue base as volumes stabilise, and the style and pace of Teams revenue growth as the business pipeline converts.