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5 March 2024
Dotdigital Group plc
("Dotdigital" or
the "Group")
Interim results
for the six months ended 31 December
2023
Strong growth in line with expectations
and expanded addressable market
Dotdigital
Group plc (AIM: DOTD), the leading SaaS
provider of an all-in-one customer experience and data
platform (CXDP), announces its unaudited interim results for the
six months ended 31 December 2023 ("H1 FY24").
Financial
Highlights
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Group revenue increased 15% to £38.7m (H1
FY23: £33.8m)
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Organic revenue (excluding Fresh Relevance)
increased 11% in constant currency (9% on a reported basis) to
£36.9m
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Recurring and repeating revenue as a
percentage of total revenue was 94% (H1 FY23: 95%) and contracted
recurring revenue represents 79% of total revenue (H1 FY23:
79%)
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ARPC1 increased 9% to £1,709 per
month (H1 FY23: £1,573 per month), not materially affected by the
Fresh Relevance acquisition
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Adjusted EBITDA2 of £12.4m up 13%
from £11.1m
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Adjusted profit before tax3 of
£8.9m, in line with management expectations and 16% above prior
year (H1 FY23: £7.7m), driven by revenue growth and increased
interest income
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Net cash balance of £37.1m on 31 December 2023
(H1 FY23: £49.6m) following acquisition of Fresh Relevance (of
which £18.8m was in cash)
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Operational
Highlights
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Healthy demand with total bookings ahead of
last year, and particularly strong contribution from new customers
as the broader platform offering gains traction in higher value
deals
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Fresh Relevance integration on track with
joint offering delivering new, larger enterprise customer
wins
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International footprint delivering growth in
all markets, with organic international revenue growth of 11.5%
(18% in constant currency) driving total international revenues to
£12.9m (H1 FY23: £11.5m), representing 33% of total revenue (H1
FY23: 34%)
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Ongoing product innovation with a focus on
predictive analytics and real time automation
functionality
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Growing new business pipeline, including
larger enterprise opportunities, with trading at the start of H2
tracking in line with Board and market expectations4 for
the full year
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Milan Patel,
CEO of Dotdigital, commented:
"We're
pleased to report on a period of continued financial growth
alongside the acceleration of our product roadmap and a growing
market opportunity. We have invested into broadening and enhancing
our platform offering, and we are seeing good levels of uptake,
particularly from new customers, and our strengthened foundations
across territories are translating into growth.
The
acquisition of Fresh Relevance during the period added highly
complementary personalisation technology to our offering,
delivering early new business and cross selling success and a
growing pipeline of larger value deals. Our proposition is now even
further aligned with the market-wide demand for an all-in-one
digital marketing platform, complemented by our sophisticated AI
and machine learning tools.
We enter the
second half with continued momentum, in line with Board
expectations. Whilst cognisant of wider macroeconomic conditions
across our markets, our robust financial position, comprehensive
product offering servicing a diverse customer base and an expanded
pipeline of opportunities leave us confident in the Group's
continued success."
Analyst
Briefing and Investor Presentation
Management will be hosting a live online
presentation for analysts today at 9am GMT. To register to attend
the analyst presentation, please contact
dotdigital@almastrategic.com.
Live presentation to investors: Management
will host a live online presentation to investors via the Investor
Meet Company platform on Thursday, 7 March 2024 at 4pm GMT. The
presentation is open to all existing and potential shareholders.
Investors can sign up to Investor Meet Company for free and add to
meet Dotdigital via this link.
1: ARPC: Average revenue per customer (including new
customers added in the period and existing customers) based on our
December billing
2: Adjusted EBITDA Earnings before interest, tax,
depreciation and amortisation, adjusted for exceptional items such
as acquisition costs and share based payments
3: Adjusted Profit before tax: Profit before tax adjusted for
exceptional items and share based payments
4: Market Expectations: market consensus for Revenue for the
year to 30 June 2024 is £78.5m; and market consensus for adjusted
PBT is £15.7m
For further information please
contact:
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Dotdigital
Group Plc
Milan Patel, CEO
Alistair Gurney, CFO
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Tel: 020 3953 3072
investorrelations@dotdigital.com
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Alma
Strategic Communications
Hilary Buchanan
David Ison
Kieran Breheny
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Tel: 020 3405 0210
dotdigital@almastrategic.com
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Canaccord
Genuity (Nominated Advisor and Joint
Broker)
Bobbie Hilliam, Corporate Finance
Jonathan Barr, Sales
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Tel: 020 7523 8000
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Cavendish
Capital Markets Limited (Joint Broker)
Jonny Franklin Adams, Corporate Finance
Sunila de Silva, Equity Capital
Markets
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Tel: 020 7220 0500
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Singer
Capital Markets (Joint Broker)
Shaun Dobson, Corporate Finance
Alex Bond, Corporate Finance
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Tel: 020 7496 3000
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About
Dotdigital
Dotdigital Group plc (AIM: DOTD) is a leading
provider of cross-channel marketing automation technology to
marketing professionals. Dotdigital's customer experience and data
platform (CXDP) combines the power of automation and AI to help
businesses deliver hyper-relevant customer experiences at scale.
With Dotdigital, marketing teams can unify and enrich their
customer data, identify valuable customer segments, and deliver
personalised cross-channel customer journeys that result in
engagements, conversions, and loyalty.
Founded in 1999, Dotdigital is headquartered
in London with offices in Croydon, Manchester, New York, Melbourne,
Sydney, Singapore, Tokyo, Amsterdam, Cape Town, and Warsaw.
Dotdigital's solutions empower over 4,000 brands across 150
countries.
Operational
Review
The Group reports a period of strong
operational and financial progress in the first half of the year,
in line with management expectations. In addition to further
building out our Customer Experience and Data Platform (CXDP), we
have continued to grow in all regions, demonstrating the demand for
Dotdigital's digital marketing proposition despite tough
macroeconomic conditions.
We delivered double-digit revenue growth of
15% to £38.7m (H1 FY23: £33.8m), with underlying organic revenue
growth (excluding Fresh Relevance) of 11% in constant currency (9%
reported). This follows major enhancements to our platform offering
following prior year investment in the product portfolio and
business operations. As expected, adjusted profit before tax was
£8.9m (H1 FY23: £7.7m). Cash generation continues to be
strong, and the Group ended the period with a net cash balance of
£37.1m, in line with Board expectations, following the acquisition
of Fresh Relevance during the period (for up-front cash of
£18.8m).
A core focus of our investments in the half
has been to enhance our product offering as we build out a
comprehensive CXDP platform to address a larger addressable market.
Having implemented and enhanced our AI capabilities,
personalisation and omni-channel functionality during the first
half, Dotdigital is positioned with a significantly enhanced
competitive edge within our market, characterised by strong
underlying demand for AI and machine learning capabilities across
all spheres of marketing, as organisations look to optimise their
campaigns and improve efficiency and ROI.
More broadly, we observe a continuation of the
shift to digital marketing, with marketers increasing their portion
of spend towards digital channels, particularly around retention
marketing, favouring Dotdigital's proposition.
In September, we acquired personalisation
software provider Fresh Relevance to accelerate our CXDP offering.
Fresh Relevance's cross-channel personalisation and web technology
is highly complementary to the Group's existing proposition, and
through the additional capabilities and technical expertise brought
about by the acquisition we are now better positioned to grow our
addressable market and attract higher value customers and
contracts.
The integration of Fresh Relevance has
progressed well to date, and we have made significant headway to
drive further growth both in combining our proposition for
customers through a unified onboarding, single sign-on process, and
the establishment of a joint go-to-market strategy.
The acquisition has brought 66 new people to
the Group and, with the teams having a strong existing relationship
prior to September, we are pleased to see the benefits of further
collaboration. We now have established cross-heritage teams,
including within our product and engineering teams, enabling
Dotdigital and Fresh Relevance employees to learn from each other,
share best practices and share workload. The integration of our
finance functions has also progressed well, and we are slightly
ahead of schedule with delivering tangible cost savings from the
process of integration.
Customer feedback has been very positive, and
Fresh Relevance is already contributing to new agreements with
customers in larger segments, alongside cross-selling to existing
customers.
We have signed a number of new joint customers
across e-commerce and not for profit organisations, cross-sold in
the EMEA region and now have three 'beta' customers signed up in
APAC, with a significant and increasing pipeline for further
agreements ahead. At the time of acquisition, we reported that
Fresh Relevance was expected to add c.£6.0m of annual revenues to
the Group, and the business is performing in line with expectations
of revenue and profitability for FY24.
Looking ahead, our achievements in the first
half and strengthened proposition have laid the groundwork for
further growth into H2, with Dotdigital now better positioned to
grow within its verticals and ability to attract larger customers.
At the same time, the Board has the flexibility to continue
investing in the organic and inorganic growth opportunity through
its strong cash generation and high visibility of future
venues.
Market
Digital marketing represents the core priority
for marketing budgets, with marketing professionals across all
sectors set to further increase their portion of spend towards
digital channels. Supporting this, research shows that 76% of
business leaders plan to invest more or the same into digital
marketing in 20241, with a recognition that this channel
generates the highest return on their investment. Equally, with
global economic conditions remaining unsteady, there is a
reinforced focus on retention marketing alongside customer
acquisition in order to deliver tangible ROI.
We operate in a large and growing market,
estimated to be worth $6.5bn in 2023 and forecast to be worth
$9.5bn in 20272. Alongside this, the personalisation
market is forecast to grow by over 23% annually from $943m in 2022
to $5.6bn by 20303. Our focus within these markets lies
primarily in the mid-market and enterprise segments, which form the
bulk of value within this market.
AI, machine learning and data-driven analytics
are increasingly becoming more important to power campaigns and we
are seeing growing levels of inbound interest in our AI-enabled
platform. According to recent research, 63% of marketers plan to
invest in generative AI in the next two years4.
Alongside this, many organisations are looking to consolidate their
Martech stack to more cost effective and quicker to deploy
all-in-one solutions, positioning Dotdigital well for further
traction as it builds out its CXDP.
Email marketing continues to be the primary
channel for customer engagement with the highest return on
investment. According to Litmus (2023), 87% of brands say that
Email Marketing is very critical to business success5.
Email marketing still generates one of the highest returns from
digital marketing activity for every $1 spent generates a $36
return6. Email Marketing continues to become more highly
personalised through the use of data across their business systems
and the use of AI functionality to create content. Dotdigital has
continued to enhance the platform in both of these areas to help
our customers drive efficiencies and ROI from their Marketing
campaigns.
Alongside this, demand for omnichannel remains
strong, with continued adoption of SMS and a growing pipeline for
WhatsApp and In-app Push messaging capabilities across all regions.
Reports show 63% of marketers have started or plan to implement
omnichannel as part of their marketing strategy in the next 6-12
months7, reflecting the growing opportunities in these
areas. The Group will shortly be introducing the capability for
customers to deploy campaigns through WhatsApp native to the
platform. These campaigns are based on pre-approved templates
approved by WhatsApp, reducing the need for verification, which are
expected to increase adoption rates across Dotdigital's
customers.
1https://www.webfx.com/blog/marketing/digital-marketing-spend-insights/
2
https://www.researchandmarkets.com/report/marketing-automation?gclid=Cj0KCQjwtJKqBhCaARIsAN_yS_kZE2sqsfplTecCX23s4zuRyN4g
3
https://www.statista.com/statistics/1415357/personalization-software-market-size-worldwide/
4https://digitalmarketingsolutionssummit.co.uk/briefing/63-of-marketing-leaders-plan-to-invest-in-generative-ai-in-next-two-years/
5https://www.litmus.com/resources/state-of-email-workflows
6
https://www.litmus.com/resources/email-marketing-roi/
7
https://www.digizuite.com/blog/omnichannel-statistics
Strategy
The Group growth strategy centres around its
three strategic pillars: geographic expansion, product innovation,
and building on our strategic partnership relationships.
Geographic expansion
Regional
breakdown reported in local currency
The Group is pleased to report growth in all
regions.
EMEA, the Group's largest market, organically
grew 9% to £27.7m, in line with our expectations. Including
acquired revenues, growth was 16% to £29.3m. We saw a good level of
new bookings in the region, particularly from higher value new
customers, as organisations increasingly opt for a more
comprehensive, all-in-one marketing solution. We were also pleased
to see a recovery in professional services to more normalised
levels as customers re-initiated delayed projects.
The Group's momentum in North America
continued to accelerate from FY23 levels, with revenues organically
growing 8% to $7.0m. Including acquired revenue, growth was 13% to
$7.3m. Following investment in the region and the bedding in of our
regional team, we are delighted to the see the re-established
pipeline converting to sales, with the foundation now in place for
a return to double-digit growth over the medium term.
APAC continues its strong trajectory of
double-digit growth, increasing 33% to AUS$6.9m. Whilst it is a
newer market for us, growing from a smaller base, we see good
potential in the region to take market share across the ANZ and Far
East Asia market. The Group continues to invest in its sales teams
in Japan and Singapore to support this expansion.
Product Innovation
As we work towards our vision of building the
leading CXDP for marketers, R&D efforts during the period were
focused on two main product releases: the release of '23three',
launched in September, which was a milestone for Dotdigital's
unified customer data platform through the acquisition of Fresh
Relevance; and the release of '24four', launched in November just
before the busy peaks of Black Friday & Cyber
Monday.
A continuous pace of product updates and new
functionality continues to unlock new value opportunities, both
with new customers and up- and cross-selling within the Group's
extensive customer base. Existing customers expanding their
engagement of our platform offering is demonstrated by the increase
in functionality recurring revenue3, which grew
organically 8% to £13.2m (22% to £14.9m including Fresh Relevance)
(H1 FY23: £12.2m). Key innovation highlights achieved during the
period include:
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Single Sign On between the Dotdigital &
Fresh Relevance platforms, enabling a seamless authentication
experience between the products. This has now been adopted by
over 30% of existing and new joint customers.
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WinstonAI™ our marketing intelligence engine
now includes enhancements to its generative AI by providing
customers with campaign content grammar checking, the ability to
rewrite for tone, change the length of content, rephrase content,
add emojis and, in one-click, convert an email to an SMS campaign.
This is supported by user experience enhancements which have made
WinstonAI™ even easier to use and find in-app.
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The launch of a new Connect area to easily
allow customers to manage, browse & install integrations built
by Dotdigital and verified technology partners. Customers can now
integrate their data with 170+ technologies within their existing
Martech stack.
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MMS (Multimedia Messaging Service) is now
available as a native marketing channel within the platform to
enable rich communication to audiences within North America.
Early adopting customers have enjoyed up to 28x ROI from
their campaign deployments with increase engagement rates.
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SMS/MMS now can be personalised with liquid
scripting to enable highly advanced personalisation use cases such
as abandoned cart, booking notifications and order notifications on
the SMS/MMS channel.
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The initial phase of product
integration of the Fresh Relevance platform was completed in H1 and
the second phase will continue into H2 with a focus on the
homogenisation of user experience between the products, streamlined
onboarding and further updates to the cross-platform data exchange
of customer data. We expect the final phases of product
integration roadmap work to be complete by the end of calendar
2024.
We are pleased to report that global software
marketplace G2 recently announced Dotdigital as a Winter 2024 Grid
Leader in the Marketing Automation, Transactional Email, Email
Deliverability, Email Template Builder, Landing Page Builder and
CPaaS (Communications Platform As A Service) categories while also
being highly placed in; Customer Data Platform, SMS Marketing,
Personalization Engines, Mobile Marketing and Customer Journey
Analytics. G2 reviews are based on customer feedback and the
awards demonstrate our continued innovation and the successful
execution of our all-in-one CXDP strategy.
Strategic Partnerships
Revenue from strategic partnerships continued
to grow, albeit more modestly than in H1 FY23, with growth in CRM
connectors offset through the larger e-commerce connectors. As a
result, revenue through strategic partners grew 8% to £16.7m (H1
FY23: £15.5m). The strategic partnerships assist in driving brand
awareness and provide global reach to complement our direct
marketing channels. The Group saw growth in both the verticals that
we focus on. Our customers using the e-commerce connectors grew 7%
in the period from £10.6m to £11.4m. Over the same period we also
saw strong growth in customers using the CRM connectors which grew
11% in the period from £4.8m to £5.3m.
As we look forwards, we will continue to
enhance our strategic partnerships into other business systems to
make it very easy for our customers to bring data into our customer
data platform and see value in the combined offering.
We have also over the last six months
strengthened our partner program which is focussed around adding
agency and technology partners that work within the various
ecosystems.
M&A
In line with the ongoing enhancement of the
Group's CXDP proposition, the Board continues to appraise
acquisition opportunities to supplement organic growth at
appropriate target valuations.
As previously stated, the Group's acquisition
strategy is broadly focused on the following key categories:
adjacent CXDP-related technologies that will drive ARPC expansion
and deepen our international markets; for talent and brand to
expand geographical coverage; and specialist functionality for
target verticals.
Current
trading and outlook
Having significantly strengthened our offering
in H1, we enter the second half with good trading momentum and the
ability to attract higher value deals, underpinned by continuous
product enhancements to drive cross- and up-sells from the existing
base. Supporting this are the long-term market drivers, with
customers increasing their digital marketing spend and exploring
the range of sophisticated AI and machine learning tools available
to enhance their campaigns and deliver better ROI.
Our focus in the second half continues to be
around enhancing our proposition, progressing the integration of
Fresh Relevance capabilities into the Group's platform, growing our
presence across all of our regions and capturing the increased
opportunities now available to the Group. At the same time, we
continue to appraise acquisition opportunities to accelerate our
product development and unlock new verticals for the
Group.
We remain confident in the Group's ability to
continue to execute against its stated strategy and meet market
expectations and look forward to updating shareholders on our
progress in H2.
FINANCIAL
REVIEW
Revenue
Revenue during the period grew 15% to £38.7m
from £33.8m in H1 FY23. The acceleration vs prior periods was
driven by the acquisition of Fresh Relevance. Organic Growth
was 9% as acceleration in North America and APAC was in part offset
by adverse FX rate movement.
Recurring and repeating revenue continues to
represent c.94% of revenues which is substantially unchanged by the
acquisition of Fresh Relevance. The gross retention rate has
remained stable despite macro-economic pressure which is testament
to the strength and diversity of our customer base. This same
pressure can be seen in relatively low growth rates to messaging
volumes vs previous years, however net retention rates and ARPC
growth (now £1,709, up 9% from £1,573) have been maintained by
strong positive movement in pricing and upsell of additional
functionality.
International revenue represented 33% of total
revenues in the period, from 34% in H1 FY23. Rapid growth in APAC
and strengthening in North America (33% and 13% growth respectively
in local currency) increased the proportion of international
revenues in the Group, but this was in part offset by changes to FX
rates and the relatively higher proportion of Fresh Relevance
revenue which is UK based. North American revenue was $7.3m
(H1 FY23: $6.5m), while APAC revenue was AUS$6.9m (H1 FY23:
AUS$5.2m). EMEA revenues grew 16% in the period to £29.3m (H1 FY23:
£25.3m) largely accelerated by the Fresh Relevance
acquisition.
Gross
Margin
Product gross margins remain consistent with
the prior period. Total Gross margin was 79.3% (H1 FY23:
79.1%) as Fresh Relevance gross margin was consistent with
Dotdigital organic margins.
EBITDA
We are pleased that the Group achieved an
adjusted EBITDA margin of 32% and an adjusted operating profit
margin of 22% in the first half, which was in line with management
expectations. The Group saw the full period impact of costs which
ramped through the prior year as well as the impact of the Fresh
Relevance acquisition which had lower margins. We have experienced
cost inflation in many areas which is consistent with levels
reported for the wider economy, however this has been substantially
mitigated through rationalisation of certain back office costs
negotiation with our suppliers and partners. Exceptional
costs in the period are driven by share based payments, acquisition
and integration costs of Fresh Relevance.
EBITDA growth of 13% to £12.4m (H1 FY23:
£11.1m) is ahead of our organic revenue growth, while Fresh
relevance is expected to contribute positive EBITDA in future
periods as cost synergies are realised.
Balance Sheet
& Cash Position
Dotdigital continues to generate strong cash
flow from operations with an interim period end net cash balance of
£37.1m. Whilst there has been a brief period of normalisation of
working capital balances following the acquisition of Fresh
Relevance, the Group's historical strong cash generation has
continued and so we retain strategic options, particularly
involving opportunities to explore potential acquisitions of
relevant adjacent technologies.
Cash management has been an increasing
priority over the past 18 months such that we can optimise
returns. We now use a mix of accounts at banks with the
highest credit ratings to balance security, accessibility and
interest income. Interest in the period increased to £0.6m vs
£0.2m in H1 FY23, despite having a lower balance following our
acquisition of Fresh Relevance.
The Group continues to prioritise product
development and so we have increased spend broadly in line with
revenue such that we spent c.£4.4m on development (compared to
£4.0m in H1 FY23).
Dividend
Policy
A dividend of 1p per ordinary share (FY23:
0.98p) was proposed by the Company at the time of its Final Results
in November last year, demonstrating a commitment from the Board to
deliver value by focusing on total shareholder return. This
dividend was approved by shareholders at the Annual General Meeting
on 19 December 2023 and paid on 31 January 2024.
The Group will review the dividend at year
end; therefore, in line with previous years the Board is not
proposing an interim dividend. We expect to maintain our dividend
policy of growing the full year dividend in line with
EBITDA.
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