We spoke to Stuart Fenton, Founder and CEO of Microsoft Dynamics consultancy QUANTIQ. Statutory accounts for calendar 2020 are yet to be released, but Fenton elaborated on another stellar year as operating profits and revenues increased to £2.1m (£3.3m after tax credits, 2019: £0.8m/£1.7m on same basis) and £31.4m (+31%) respectively due to an early decision to stay the course and strong sales execution through the crisis. Momentum continued to build through the year, with the company exiting 2020 on a 30%+ growth trajectory and a £19m+ professional services backlog. Looking ahead, good traction within its managed services proposition, an increasing presence in the US (recently established in Phoenix), and a nascent Azure engineering practice should support another year of strong growth. Fenton guided for revenues of £37-40m (+18-27%) at a similar or slightly improved operating margin.
An independent Microsoft Gold Partner
QUANTIQ is a London-based Microsoft Gold Partner that provides implementation, migration and managed support services around the Microsoft Dynamics 365, Azure, Power Platform and Business Intelligence suite across Cloud, hybrid and on-premise environments. It primarily serves upper mid-market to enterprise scale organisations across a wide range of industry verticals including life sciences, retail & manufacturing, supply-chain, healthcare, IT services and SIs, and not-for-profits, with a growing presence across central and local government organisations. The majority of its revenues are generated within the UK, but a small (circa 15%) and growing amount are derived from an international customer base across the US and Europe.
QUANTIQ was formed in 2014 when current CEO and majority shareholder Stuart Fenton acquired the UK Dynamics operations out of Tectura Corporation and has since gone on to acquire certain assets from peer PES in August 2018, employing over 270 staff.
Growth accelerates in a robust 2020
Statutory accounts to December 2020 are yet to be released, but CEO Stuart Fenton provided us with the management accounts numbers. This highlighted a turnover of £31.4m, up 31% on 2019, and a 12pp acceleration in the growth rate. Performance was materially above the £28m guided to us in May, reflecting early decisions by management to continue investing despite the slower early summer months, growth in its Managed Services proposition (+42%) and the launch of a new Microsoft Azure practice.
Starting with the former, and Fenton elaborated further on the company’s investment strategy through COVID-19. The early stages of the crisis focused on supporting its existing customers and staff, with Fenton highlighting the importance of the latter in a mid-sized, people-based organisation. Indeed, with no external investors on board and a healthy balance sheet coming into the crisis, management took the view operating conditions would normalise and improve in the medium term (though this turned around sooner than expected) and invested in its Sales and Marketing function. It also capitalised on a rare buyer’s market for scarce Microsoft talent, recruiting heads into its technical delivery team throughout the crisis.
These investments began to bear fruit as conditions improved through the summer months, further aided by its focus on high growth and resilient verticals such as Life Sciences, Systems Integrators and the Public sector. It saw particular strength in its managed services proposition, which grew 42% to over a quarter of total revenues by the year end. The improving trends also supported the go ahead on its international growth ambitions (currently circa 15% of turnover comes from outside the UK), with an office established in Phoenix (Arizona) as it looks to build its North American presence. This will continue to be a key focus for the group going forward given the market opportunity.
Developing a broader customer proposition
Meanwhile, Fenton also sought to complement QUANTIQ’s core Microsoft business applications business with proactive managed services and technical capabilities. This saw the company add an engineering centre in Hyderabad (India) to its existing Manila (Philippines) managed services hub, as well as develop a nascent Azure practice. The latter is focused on tackling more extensive Cloud migration projects and application modernisation efforts as customers seek to modernise the broader digital estate, with the division already reaching breakeven despite launching in the latter half of 2020.
Momentum building for another strong year
The improvement in the demand environment for Microsoft’s business software solutions has supported continued growth in the backlog and pipeline through the early stages of 2021. With a professional services order book in excess of £19m, pipeline in excess of £120m, growing traction for its Managed Services, and growth in core verticals, Fenton outlined expectations for revenues of £37-40m in calendar 2021 (+18-27%). This is expected to be achieved at a similar or slightly higher operating profit margin.
The decision to stay the course early in the crisis combined with strong sales and marketing execution has paid dividends at QUANTIQ, with the performance in fiscal 2020 showing an improving trajectory on an already impressive 2019. The most interesting bit for us is the extension into Azure engineering services and the US expansion given the scale of the market on the other side of the pond. However, there is still plenty to go after in the UK. Indeed, QUANTIQ continues to increase its presence within ecommerce and the Public sector, whilst balancing professional services opportunities with annuity-based revenues through growth in its managed services proposition.