We have delivered strong results, and while executing very well against our short-term business and financial objectives, we have continued to invest widely across our business and make significant progress against our strategic objectives.
I am pleased to report another excellent set of financial results for 2021 and to highlight the great progress that we have made in the development and execution of our shorter term operational and longer term strategic objectives.
Despite the very strong performance, the year was once again impacted by the pandemic, and I am very pleased with how the whole Group responded to the challenges and opportunities that this presented. At some point in the year, each country in which we operate was in lockdown, and although our overall business performance was very robust, both our direct and indirect partner sales efforts were impacted to some degree.
The level of support and engagement from all our staff and key stakeholders has been excellent throughout, and I want to give my thanks and gratitude to the entire Gamma team for how they have responded to what has been a challenging but highly successful year.
Development of our UCaaS suite
As our Chair has set out in his report, we released a number of our in-house developed UCaaS products and services in 2021 which complement our growing UCaaS portfolio. Gamma partners and end-customers can now purchase:
- Our core market-leading Cloud PBX product – Horizon
- Horizon Call recording – a fully integrated product with Horizon
- Horizon Collaborate – a fully integrated product to Horizon which adds a suite of additional features including instant messaging and video conferencing
- Horizon Contact – also fully integrated with Horizon, this CCaaS product was designed for “informal” call centres but has functionality which will support any user who needs omnichannel capability (i.e. e-mail, social media, web chat, text, etc.)
- PhoneLine + which is a cloud-based product designed to enable partners and end-customers to replace a single telephone line, which presents a significant market opportunity over the next 2-3 years.
I am very happy to report that attachment rates for new sales of Horizon Collaborate and Horizon Contact are 20% and 10% respectively which is very pleasing and making an increasing contribution to ARPU levels. Our strategy is very much focused on maintaining and driving higher attachment levels with both new, and importantly, existing Horizon customers. This will enable us to both maintain and grow current ARPU levels, while ensuring that we provide an opportunity for channel partners to up-sell and cross-sell additional features and functionality to end-users.
I am delighted with the continued investment and progress we have made throughout 2021, to both expand and strengthen our technology, platforms, products and services, and delivery capabilities across Gamma.
Partnering with global providers
Gamma differs from pure providers of UCaaS software because we have the capability in each of the countries in which we operate to send and receive calls from the public telephone network. This enables us to not only provide the UCaaS product set which is used by our customers, but we can also provide high quality voice calls. Our ability to provide both sets of services is important to customers who need quality and reliability alongside functionality.
Many providers of UCaaS software do not have this capability and hence they partner with an organisation like Gamma to ensure that their customers can get the best from their software. Whilst Gamma works with organisations like 8x8, Vonage and Five9 to provide these services, we also focus on two partnerships which have developed strongly during 2021 – Amazon and Microsoft.
Amazon Connect is an omnichannel cloud contact centre that helps larger Enterprises provide customer service at a lower cost. As part of our acquisition of Mission Labs we have acquired a market leading technology and software application called SmartAgent. This is an in-house developed software product which provides our customers’ contact centre agents with all of the data, information and reporting that they need to provide excellent levels of customer experience. We have two revenue streams associated with this product – software license fees and professional services associated with the development and implementation of the product. Current customers include large online retailers and travel companies, and we see strong demand in many other business sectors.
Unlike pure software companies, Gamma is able to use its network capability to route calls to and from the agents using Amazon Connect. This means that not only can Gamma assist businesses who wish to deploy Amazon Connect to get the most from the application but we can also provide connection to the PSTN.
This product complements our Horizon Cloud Contact offering which is aimed at the SME end of the market whereas Smart Agent is designed for larger businesses.
Gamma has always maintained a strong relationship with Microsoft Gamma has always maintained a strong relationship with Microsoft to ensure that our products work seamlessly with Microsoft products, and as a result of the increasing customer demand that we saw for Microsoft Teams, in February 2020 we acquired Exactive Holdings to support and strengthen our reputation and capabilities in this space. Our relationship with Microsoft is important and strategic to us and is focused on three core areas:
- Microsoft Teams Direct Routing. In October 2020, we launched Microsoft Teams Direct Routing which is a variant of SIP which allows Microsoft Teams users to make and receive calls from the PSTN network (i.e., using phone numbers). We sell this service to the business market both directly and via our channel partners and are considered a market leader in this space, with examples of some very significant Enterprise and Public Sector deployments.
- Microsoft Operator Connect. We were delighted that in September 2021 Microsoft added Gamma to the Operator Connect for Microsoft Teams programme (and we are presently one of a small number of partners globally on the programme), which is a new operator-managed programme designed to enable seamless and integrated PSTN calling to Teams. Customers using Operator Connect benefit from an augmented set of services from Gamma (e.g., Gamma native fraud management and Gamma enhanced Teams Phone capabilities through our SIP Trunk Call Manager).
- Horizon Cloud PBX and Teams Integration. Some Teams users require full PBX functionality, and this can now be achieved because Gamma’s Horizon Cloud PBX product can now be integrated into Teams. For those customers who need a complete managed service, we also offer the Exactive Cloud UCX product.
I am pleased to report that each of our businesses has performed strongly throughout 2021.
UK Indirect Business
UK Direct Business
The UK Indirect Business accounted for 60% of our Group revenue in 2021, with gross profit up 8% to £143.2m and revenue up by 9% to £270.2m. Gross margin reduced slightly from 53.5% to 53.0% due to mix.
Our indirect channel partners have provided Gamma with a robust and reliable platform for growth, and in the face of a challenging economic and business environment, they have adapted their businesses well and delivered strong financial results. They have focused on providing excellent customer support, and as a result have delivered strong retention levels, net positive product growth and very low levels of attrition and bad debt. In addition, their strong business models have enabled them to invest in order to strengthen their businesses and maximise growth in what is a highly attractive marketplace.
Our channel partners continue to benefit greatly from Gamma’s product development programme, including the successful launch of those new UCaaS products highlighted earlier, coupled with new fixed and mobile access products (e.g., SoGEA and Gamma Mobile) which we launched during 2021. Gamma’s current technology and product capabilities and our exciting product roadmap, coupled with our very targeted partner support programme is designed to strengthen partner capabilities and enable them to compete and win against the competition in the marketplace. Our partners have demonstrated real commitment and success in embracing our new products and successfully up-selling and cross-selling these to existing customers, while winning new customers in both existing and new market segments. It has been pleasing to see high and increasing product attachment levels, and continued strong engagement from the channel as we drive sales and marketing to both existing and new end-customers.
We have continued to increase the number of active Gamma partnerships, while being very focused on expanding the business that we do with existing channel partners. With those larger more strategic partners we have been very successful in re-signing new contracts which are delivering increased rates of growth for Gamma (opening new product and market segments for both Gamma and the partner) and ensuring a joined-up approach that maximises our long-term growth opportunities,
Relationships across the indirect channel have continued to strengthen, reflecting our overall consistency and loyalty as a strategic partner, which is evidenced by us receiving a record number of industry awards in 2021. This included “Best Carrier Sales Team” at the Global Carrier Awards and winning both “Best Wholesale Provider” and “Best UCaaS Platform” at the Comms National Awards.
The immediate and longer-term market opportunity for the channel and for Gamma is significant and is driven by several structural growth drivers which Gamma and our channel partners are both strategically and operationally well positioned to benefit from. These include:
- An acceleration of the adoption of UCaaS across all markets and business segments to support remote and flexible working.
- rapid roll-out of fibre which will substitute legacy broadband products and services with new high-speed replacements.
- The wider roll-out and rapid adoption of 5G mobile services which will be transformational in supporting businesses.
- BT 2025 switch off which will drive a significant opportunity to provide new cloud-based communication product and services to businesses of all size.
The UK Direct Business accounted for 24% of our Group revenue in 2021, with gross profit up 14% to £52.6m and revenue up by 7% to £104.8m. Gross margin increased from 47.2% to 50.2% as we had fewer lower margin installations in the year.
Overall, we have delivered a strong financial performance in 2021, and despite the impact of the pandemic which delayed customer decision making and new sales during 2020 and H1 2021, our team delivered a strong sales performance in H2, and we therefore enter 2022 with a very positive and high-quality contracted order book. As part of our growth strategy, a key feature of our performance has been the high-level of cross-selling and up-selling that we achieved with existing customers. Our customers are fully benefiting from Gamma’s broad and growing product portfolio, which included the acquisitions that we made recently to extend our UCaaS, CCaaS and overall Microsoft and Amazon product and service capabilities. In addition, we have been very pleased with the quality of new customers that we have won during the period, all of which are procuring multiple products and services from Gamma.
We have won several multi-year, multi-product contracts, including those with NFU Mutual (SDWAN), The Automobile Association (Inbound), Carr’s Group (SDWAN & UCaaS) and CJ Lang & sons (SDWAN & UCaaS).
In addition, in the Public Sector we have made excellent progress and were awarded a significant number of contracts across local, regional, and central Government, including a very large and strategic UCaaS (Managed Microsoft Teams) deployment for the DWP. Other notable contract awards included:
- Five new County Councils who contracted for a mix of SIP and UCaaS.
- Seven NHS trusts who contracted for a mix of UCaaS, SIP and connectivity.
- Three further central Government agencies who contracted for a mix of SIP and mobile services.
- We have also been awarded over 14,000 mobile connections via the Public Sector procurement frameworks, demonstrating the strength of Gamma’s new mobile product within this sector.
As highlighted previously, the acquisition of Exactive in 2020 significantly enhanced Gamma’s Microsoft capabilities, and we are now one of the largest providers of Microsoft Teams Direct Routing in the UK. Exactive is now fully integrated as a Microsoft “centre of excellence” within Gamma, and we are providing services to a broad set of customers and partners across all business segments, and as highlighted previously, in October 2021 Gamma’s direct routing service became available directly from the Microsoft Teams platform via their Operator Connect service.
We include the results of CircleLoop the digital UCaaS service and channel which we acquired with Mission Labs in our Direct business. We now have almost 4,000 customers who are using the CircleLoop service via our digital platform.
We continue to be pleased with the development and growth of our European business. The growth was predominantly through the inclusion of a full year of trading from acquisitions made in 2020, with gross profit increasing 47% to £32.7m and revenue increasing by 50% to £72.7m. Gross margin decreased from 46.0% to 45.0% because of a full year of lower gross margins from Epsilon, the mobile focused distribution business which we acquired as part of our acquisition of HFO in Germany. In 2021 our overseas business represented 16% of our Group revenue and 10% of our Group adjusted EBITDA.
Despite the impact of COVID-19 throughout the year, we have made very good progress in transforming our German business from a pure SIP provider to a provider of cloud communications. We are achieving this through the implementation of a multi-product strategy and by investing and strengthening our indirect channel capabilities, including investment in our channel sales and marketing efforts. This is designed to fully support our partners and their end-customers in their transition to the cloud and ensure that we collectively build the strong business, operational and sales and marketing foundations which are required to maximise what we see as a significant long-term market opportunity.
As part of our structured Group operating model, our team in Germany has been fully involved in the planning and implementation of our broader Group technology and product strategy, and in 2021 we integrated the German component of GnTel (the Dutch/German cloud PBX business which we acquired in July 2020) into our German operations. This now forms an important part of our cloud product portfolio and our go to market sales and marketing capabilities in the German market. Although small, this is performing well, and we have well-defined plans to introduce other Group products which will enable us to broaden our market and business segment reach.
Our Epsilon mobile distribution business has delivered a very strong performance throughout 2021. As a part of this we have continued to focus investment into our IOT (Internet of Things) business (Fusion IOT) which provides IOT solutions to the SME business segment. Although early days, the business is performing well, and we have closed some very encouraging customer wins and have signed longer-term partnership agreements with Vodafone Global and Telefonica Spain.
Throughout 2021, and as part of our M&A integration plan, we have been planning to transition to a full Gamma brand in the German market. This will be implemented during the first half of 2022, in addition to launching a reinvigorated wholesale cloud partner proposition across the marketplace. This proposition is designed to appeal to IT integrators within the channel who prefer a wholesale model where they own the end-customer, and where we believe Gamma can provide a key differentiator in the market.
Notwithstanding the more difficult COVID-19 related trading conditions in Spain throughout 2021, we have been pleased with the performance of our Spanish business.
Importantly, our cloud business has performed well, and similar to our cloud growth strategies in our other Gamma markets, we have continued to strengthen and invest in developing both our product capabilities and existing and new direct and indirect channels to market. For example, we have launched a reseller programme which is targeting PBX resellers, and providing them with the best cloud communication product, marketing tools and financial support to succeed in the UCaaS market. Initial partnership contracts were signed during 2021 and we expect more partners to be onboarded in 2022. Our efforts are beginning to deliver results and we continue to see a significant long-term growth opportunity.
Overall, our cloud and mobile product performance has been positive, and we delivered strong net growth from both existing and new channel partners. We established a new channel partnership with Másmóvil (one of Spain’s largest mobile network operators) which is strategic and delivered excellent results for both cloud and mobile sales throughout 2021. On the mobile side, this relationship enables us to compete very well in the market, while we have established a wholesale cloud capability that enables Másmóvil to deliver bundled mobile and cloud products and services directly to their business customers. A true partnership!
In H2, we launched a second channel programme aimed at Microsoft partners who are expanding their business by adding telephony services to their customers (through MS-Teams). This programme is one of the first in the Spanish market and is generating a lot of interest in the sector. In addition to this, we launched Microsoft Teams integration, enabling any Gamma customers in Spain who are using our cloud PBX or SIP products to use the Teams application to make and receive calls in a seamless and easy way. Additionally, we have integrated cloud contact centre features to our UCaaS product.
The non-cloud part of our Spanish business (Comymedia and VT Andalucía) has been more severely impacted by COVID-19 and underperformed against our expectations in 2021. Our sales performance and overall outlook improved through H2, and we have taken actions to ensure an improved performance of these businesses in 2022.
The COVID-19 pandemic had a more serious impact on the economy and overall business market in the Netherlands, resulting in restrictions and lower levels of cloud growth in the market. Notwithstanding this, we delivered positive net growth across our key cloud and mobile products.
Our multi-tenant business (Schiphol Connect and Nimsys) benefited from increased activity at Schiphol airport and from businesses optimising their way of working. During the year we signed several large long-term contracts and focused on crossselling and up-selling to existing customers, all of which delivered net new business, improved retention, and an overall stronger performance for the business.
Throughout the year, and building on our work in 2020, we have continued to focus on developing and strengthening both our cloud and overall wholesale partner proposition in the market. Examples were the launch of Collaboration and voice recording as part of our Cloud PBX offering, while we also launched Microsoft Teams Direct Routing to support the increasing demand for Microsoft services in the market. Looking forward, and as part of our Group Operating Model, we have an exciting roadmap of new products and features which we are planning to launch in the market during 2022.
As well as being focused on strengthening our sales and overall go to market activities, after making several acquisitions during the last years, we have made good progress in moving towards a more simplified and fully integrated operating environment. We have integrated Dean One, GnTel, Schiphol Connect and Nimsys, and in Q4, we launched the new Gamma Benelux brand in the market. Alongside our brand launch, we also introduced a renewed wholesale partner program which supports our ambitious partners with dedicated initiatives in marketing, lead generation and training.
In addition to strengthening our cloud products, we also renewed our long-term partnership contract with T-Mobile, which will enable us to continue to deliver a strong and competitive retail and wholesale mobile offering to our mobile dealers and channel partners.
Summary and outlook
I am particularly pleased with how we have performed as a business in 2021. We have focused on maximising opportunity, while responding to challenges and mitigating risk. We have delivered strong results, and while executing very well against our short-term business and financial objectives we have continued to invest widely across our business and make significant progress against our strategic objectives. Importantly, I am absolutely delighted with our continued focus on supporting our staff, our channel partners, and our end-customers.
Looking forward, we will stay focused on developing and strengthening our technology and product capabilities across the Group. We have created a strong technology and software development capability and although this is work in progress, we do have an exciting product roadmap, which will reinforce and further enhance our market credentials. We have launched several new products and features during 2021 which have been positively received by the market, and these are now making a meaningful contribution to our product and financial performance, and I expect this to continue in 2022. As part of our Group operating model, we plan to launch these products across all Gamma markets.
Within our Indirect business, we will continue to evolve and adapt our partner proposition to support growth opportunities across all markets, ensuring that our channel partners have the tools to compete and be successful. Within our Direct business, we have seen delays to some projects for our Enterprise customers caused by the global chip shortage; this means that sometimes it takes longer than we had anticipated for billing to start and this may affect growth in 2022.
As an important part of our strategy, we will continue to assess acquisition opportunities that enable us to strengthen our technology and product capabilities and expand and strengthen our position in our core UK and European markets. We believe that scale in these key markets is important, and this will continue to be a key focus for Gamma during 2022 and beyond. The technology and product-based acquisitions we have made, have enabled us to accelerate our strategy and fundamentally strengthen our technology, product, and software development capabilities across Gamma. This is a core foundation that will support our strategy to deliver long-term sustainable growth and long-term shareholder value.
We continue to see the structural changes in the UCaaS market as very positive and reinforcing our strategy and future growth opportunities. The awareness and adoption of cloud communication services, and the shift towards a more flexible and remote way of working, we believe will support significant growth in the market and an acceleration towards cloud communications. The significant benefits of the UCaaS, CCaaS and fixed and mobile access products that we sell across the UK and Europe have never been more important, and notwithstanding the risks of possible economic and business market headwinds, we continue to see a positive business and long-term market outlook.
As a final point, I would like to personally thank our staff, partners and customers for their contribution and ongoing support.
Andrew Taylor Chief Executive Officer