Release Date: March 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gamma Communications PLC (STU:6GC, Financial) reported a strong revenue growth of 11% for FY24, reaching £579.4 million.
- The company achieved an adjusted EBITDA increase of 10% to £125.5 million, despite incurring additional costs.
- Gamma's enterprise division saw a 15% revenue growth, with significant new logo wins including Morrison's and the AA.
- The company has successfully expanded its presence in Germany through strategic acquisitions, achieving scale with over half a million cloud seats.
- Gamma maintains a high recurring revenue rate of 89%, supported by its subscription-based model.
Negative Points
- Gamma Communications PLC (STU:6GC) is experiencing softness in the SME segment, particularly at the lower end of the market.
- The company faces challenges in the Netherlands, a mature market with high cloud penetration, impacting growth prospects.
- Gamma's service provider business, while growing, operates at a lower gross margin compared to other segments.
- The PSTN switch-off in the UK has been delayed, potentially affecting the timing of related revenue opportunities.
- Gamma's expansion in Germany is hindered by the country's slower cloud adoption and underdeveloped fiber infrastructure.
Q & A Highlights
Q: Can you elaborate on the potential for growth in Germany, considering the slower adoption of cloud services compared to other European markets?
A: (CFO) We are optimistic about Germany's growth potential, given its large SME sector and low cloud penetration of 15-20%. While cloud adoption has been slower, we have seen high single-digit growth even in challenging economic conditions. We believe the market will continue to grow steadily, supported by potential fiscal stimulus and improving political stability.
Q: What is the situation in the Dutch market, and why is it not performing as well as other regions?
A: (CFO) The Dutch market is highly penetrated, with cloud adoption close to 70%. Competitors like KPN have established a strong presence early on. While it's a mature market with limited growth for us, we continue to explore opportunities like Operator Connect. However, the market size is smaller compared to Germany and other regions.
Q: Can you provide more details on the average revenue per user (ARPU) and how it has evolved with new partnerships and products?
A: (CFO) Our ARPU varies across products. For example, our IPE list price is around GBP7.50, while Phone Line Plus ranges from GBP3.95 to GBP6.95. Microsoft Teams adds about GBP2.50. Overall, our ARPU averages around GBP8-9, with additional revenue from bolt-ons like Horizon Contact.
Q: What is Gamma's strategy for network infrastructure in Germany, and how does it compare to the UK?
A: (CFO) In Germany, we have dedicated data centers and voice service infrastructure, similar to the UK. We partner with major mobile operators like Deutsche Telekom and Vodafone. However, fiber rollout in Germany is less advanced, and we are exploring partnerships to enhance connectivity.
Q: Why is Gamma retaining its business in Spain, and wouldn't it be more beneficial to focus resources on Germany?
A: (CEO) Our Spanish business is attractive to partners and is growing, albeit not as rapidly as Germany. It supports our broader European strategy, and while we continue to explore consolidation opportunities, the business is self-sustaining and provides valuable market insights.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
