Trading Update and Notice of Half Year Results

 dotdigital Group plc

("dotdigital" or the "Company")

Trading Update and Notice of Half Year Results

 Organic growth underpinned by strategy

dotdigital Group plc (AIM: DOTD), the leading 'SaaS' provider of an omnichannel marketing automation platform, announces a trading update ahead of the Company's half year results for the six months ended 31 December 2018 ("H1 2019").

The trading performance reported in this statement is based on unaudited management accounts.

Financial highlights

·      Group revenue up by 33% to £24.9m (H1 2018: £18.8m)

·      Organic revenue up by 15% to £20.1m (H1 2018: £17.5m)

·      Adjusted EBITDA¹ in line with market expectations: the core business has outperformed although tempered by a shortfall in Comapi's² revenues, which is a lower margin business, primarily driven by challenging retail market conditions

·      Cash balance at 31 December 2018 of £16.6m up 58% (H1 2018: £10.5m)

·      ARPU³ up by 16% to £876 per month (H1 2018: £757 per month) driven by an increase in existing client spend and new customers

·      Following approval at the AGM on 18 December 2018, a final dividend of 0.64 pence per ordinary share (up by 16%) for the year ended 30 June 2018 will be paid on 31 January 2019 to those shareholders on the register on 11 January 2019 (FY17 final dividend: 0.55 pence per ordinary share)

Operational highlights

Product innovation

·      Further integration of functionality into the Engagement Cloud platform, significantly advancing progress toward offering a fully integrated omni-channel customer engagement platform

·      Launched new artificial intelligence and machine learning features for ecommerce merchants enabling customers to drive additional ROI from their marketing

·      Introduced customer-led, GDPR marketing functionality driving enhanced, end-customer engagement

·      New real time reporting for our Communication Platform as a Service (CPaaS) customers and the ability to integrate to Twitter's direct messaging platform  

·      R&D continues to underpin dotdigital's growth strategy with functionality recurring revenues growing by 50% to £5.7m from £3.8m in the period

·      Core business SMS volume was up over 100% in the period

Geographic expansion

·      International sales represented 30% of total sales (excluding Comapi), up from 25% in the comparative period

·      Organic international revenue up by 37% to £6.0m (H1 2018: £4.4m)

·      Core EMEA business continued to grow double digit at approximately 10% despite the introduction of GDPR in May, Brexit uncertainties and reduced retail consumer spend

·      Revenue from the US region grew organically by approximately 30% to $4.3m, (H1 2018: $3.3m) driven by Channel partners and system integrators for Magento and Shopify

·      APAC sales, Channel team expansion and Channel partners drove revenue from the region, which grew organically by approximately 80% to AUS$1.6m, (H1 2018: AUS$0.9m)

 Strategic partnerships

·      Deeper integration into the Magento commerce platform provides further scalability, and includes support for split databases, a key requirement for Adobe customers  

·      Strengthened our joint proposition with Shopify:

o  providing a seamless approach to merchants' process automation across commerce and marketing platforms

o  improved personalisation of automated push notifications

·      Revenue from the new connectors (Shopify, Big Commerce and Shopware) grew 372% albeit from a small base to £1m in the 6 months. The company is seeing a strong pipeline building on these connectors.

·      Sales through strategic partners increased by 43% to £10.3m (H1 2018: £7.2m);

·      dotdigital named as Big Commerce's first Global Elite partner in Europe.

Notice of 2019 half year results

dotdigital Group plc will announce its Half Year results for the period ending 31 December 2018 on 19 February 2019.

Milan Patel, CEO of dotdigital, commented:

"Last week we rebranded dotmailer to the dotdigital Engagement Cloud, which reflects the integrated global company that we are today. We see customer engagement as the future of marketing automation and an omnichannel offering as the conduit.

"I am pleased to report strong growth in our core business as we continue to win market share, despite a challenging retail backdrop in H1 2019. However, revenues from our Comapi operations were impacted by external factors, primarily due to a few of our large household name, retail customers going into administration and some minor slippage in volumes, as a consequence of retail sector weakness. Despite this, Group profits remain in line with market expectations, as Comapi is a c.10% operating margin business.

"Notwithstanding short-term headwinds, the rationale for the acquisition of Comapi was to provide an industry leading solution offering fully integrated omni-channel and conversational commerce support to marketers and we are pleased to report that Comapi has been fully integrated into dotdigital's Engagement Cloud. As a result, we are beginning to see a good pipeline of growth and sales building from additional channels.

"Elsewhere during the period our strategic partnerships have moved forward as we have strengthened our relationships with Magento, Shopify and Microsoft. These partnerships continue to increase our addressable market in all our regions and it is pleasing to see new connectors were added, building strong recurring revenues.

"Alongside our organic growth strategy, we will continue to look for acquisitions that are either earnings enhancing or strategic in nature which can add to platform capabilities or assist us with market share and people in geographic territories that are strategic to us.

"I look forward to providing more detail of our results and plans at our half year results for the six months to 31 December 2018, which will be announced on 19 February 2019."

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

¹ Consensus adjusted EBITDA as at 21 January 2019, for the year ending 30 June 2019, is approx. £16.2 million. EBITDA means earnings before interest, tax, depreciation, amortisation, and before restructuring, other non-recurring costs and certain non-cash items.

² Comapi was acquired in November 2017

³ ARPU means average revenue per user/customer

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