12 January 2022

Gamma Communications plc

Trading Update

Full year adj EBITDA and adj EPS anticipated to be in the top half of the range of market expectations

Gamma Communications plc ("Gamma"), a leading provider of Unified Communication as a Service ("UCaaS") products, announces a trading update for the year ended 31 December 2021.

Trading

There is a continued strong demand in the UK and European business markets for Gamma's portfolio of UCaaS products, which through both Direct and Indirect channels have performed well throughout the trading period.

Market expectations were raised following the announcement of Gamma's trading updates issued on 20 May and 13 July 2021.  The Board expects that revenue for the year ended 31 December 2021 will be within the range of current market expectations and adjusted EBITDA and adjusted EPS will be in the upper half of current market expectations*. 

Cash

The closing net cash balance was £49.5m (2020: £48.0m) which was ahead of expectations due to a strong working capital performance.  The year on year net cash increase is particularly pleasing given that during 2021 Gamma spent £49.3m on acquisitions (primarily the acquisition of Mission Labs), increased investment in product development compared to 2020 and paid dividends to shareholders totalling £11.7m (2020:£10.4m), a year on year increase of 12.5%.

Overview of the year

Some of the highlights from the year include:

·    The group performed strongly throughout 2021 despite the ongoing economic uncertainty caused by Covid-19.  Gamma's recurring revenue model has proved robust, and importantly, its product set supports businesses which have a need to both operate and work remotely.  

·    Unit sales of our core UCaaS products have continued to be strong in both the UK and Europe.

·    In our Direct business we have won several new multi-year contracts, including The Berkeley Group (Horizon Contact), NFU Mutual (SDWAN) and also a large central Government department (fully managed Microsoft Teams deployment).

·    In March, Gamma acquired Mission Labs bringing additional technology and product capabilities to the Group (Smart Agent and Circle Loop) as well as adding important software development capabilities.  The integration of Mission Labs has gone well and is proceeding in line with expectations.  Gamma is leveraging Mission Labs' relationship with Amazon to expand its offering into the Enterprise market through the Smart Agent product, which has generated new customers during the period.  The Circle Loop product (which is a digitally based Cloud PBX product aimed at the micro business market) is also growing in line with expectations. Moreover, the Mission Labs team is working well with the existing Gamma technology and product teams which have collectively accelerated progress on product and feature development.

·    The Group has continued to develop its suite of products and has launched Horizon Contact (which is a Contact Centre as a Service product) and has integrated Microsoft Teams to its market leading Horizon Cloud PBX product.

·    Gamma has continued to develop its relationship with Microsoft and launched Microsoft Teams Direct Routing in March - essentially a SIP Trunk which works specifically with Teams.  Gamma was also added to Microsoft's select list of carriers who offer the "Operator Connect" service which is designed to enable seamless and integrated calling between Teams and the local telephony infrastructure (known as the PSTN).  This selection demonstrates the strength of Gamma having both a UCaaS offering as well as an ability to provide integration to the PSTN.

The Board expects to announce results for the year ended 31 December 2021 on Tuesday 22 March.

*Company compiled market expectations for the full year ended 31 December 2021 are revenue (£444.5m-£455.6m), adjusted EBITDA (£90.5m-£96.0m) and adjusted EPS (57.6p-64.0p).

Andrew Taylor, Chief Executive, commented:

"We are pleased that Gamma has grown very strongly throughout 2021 while continuing to invest significantly in our business and executing against all aspects of our strategic plan. The demand for cloud communications across all geographies and market segments is positive and the long-term growth opportunity for Gamma is very significant.

"Our UCaaS product strategy is progressing very well, and we are pleased with the overall performance of our product set, in particular the new products which we launched through the year. Our product set, digital channel and software development capabilities have been strengthened with the acquisition of Mission Labs and we are very pleased with how this is performing.

"I would like to take this opportunity to personally thank our staff and partners for all of their support and hard work throughout the year."

END