LoopUp has delivered a trading update for H1, highlighting some exceptionally strong activity during the COVID-19 lockdown period, which appears to be at least partly translating into longer-term outperformance. We materially upgrade our forecasts for 2020 and 2021, and look forward to additional detail at the late-July Operational Update webinar.
Revenue increased by 43% to £31.9 million in H1 20E. Adjusted EBITDA increased significantly to £12.2 million reflecting a material increase in gross margin which, in tandem with well controlled expenses, meant that EBITDA margins more than doubled to 38% in H1 20E. The Group ended H1 20E with cash of £8.2 million producing a good reduction in net debt to £5.4 million from £11.4 million six months earlier.
The COVID-19 lockdown was in late March, so Q1 was probably relatively untouched by the “work-from-home effect”, suggesting that later months experienced revenue growth well in excess of even the 43% quoted. We believe that customers are likely to have worked to contain their meeting-related expenses, given this sudden uptake in LoopUp usage (and therefore monthly costs). We assume that some will have pushed for discounted pricing based on volume, some may have negotiated fixed-price “licence” deals, and some may have churned to other platforms without LoopUp’s attributes of quality and reliability, but with much lower cost structures (Microsoft Teams probably most likely, or even Zoom in some cases). Nevertheless, the business is clearly benefiting materially from the changed work dynamics we all see.
Given the H1 performance, but moderated for the dynamics described above, we assume that revenue abates to c£4m per month for H2 2020, and then increases overall by 16% from that rate during the course of 2021. We also assume that the group’s cost base increases moderately, as the business invests for additional growth and to maximise its value creation from the current opportunity.
We increase our revenue estimates by 11% and 6% for FY 20E and FY 21E respectively. Adjusted EBITDA numbers increase by 60% and 12% for the same years.
This is an extremely strong update from LoopUp, highlighting a very profitable period for the group in H1, with positive signs that much of the improvement will persist into the future. We look forward to additional detail in the Operational Update towards the end of July.