D4T4.L Regulatory News (D4T4)

30 November 2022

D4t4 Solutions plc

Half-year results for the six months to 30 September 2022

D4t4 Solutions Plc (AIM: D4t4, "the Group", "D4t4"), the AIM-listed data solutions provider, announces its half year results for the six months to 30 September 2022 ("H1 FY23").

Financial highlights

Operational highlights

· Launch of CX VaultTM, a cookie-less solution to address customer needs as cookies continue to be restricted due to evolving regulations

· Release of CDP version 9.6 incorporating new Customer Experience and Productivity innovations

· Launch of Always-On Insights, a new offering combining the capabilities of Pegasystems' Customer Decision Hub™ with Celebrus CDP

· Several key contract wins in the period including the sale of Celebrus CDP to a US-based health group, and upsell of Celebrus FDP biometrics functionality to an online retailer

Outlook

· Post period-end contract wins with a Top 10 global bank, including a CDP renewal and conversion to a 3-year term Enterprise License Agreement, and a production trial of Celebrus FDP.

· Recent launch of Celebrus Customer Data Infrastructure (CDI) for Salesforce in the Salesforce AppExchange.

· Year to date contract progress and the high visibility of opportunities expected to close in the second half underpin the Board's confidence in achieving full year expectations and continuing to drive incremental growth in ARR

Bill Bruno , CEO of D4t4 Solutions, commented:

"Our first half has laid the foundation to ensure we are setting the right course for the future of our business. We will continue to invest in Sales and Marketing to support both direct and indirect growth of both the Celebrus CDP and FDP software revenues on an ARR basis.

Whilst the Board remains alert to the global economic environment and associated downside risks, our year-to-date contract progress and highly visible pipeline of opportunities means we are confident of achieving full year expectations*** and delivering another year of growth in ARR."

* ARR (Annual Recurring Revenue) is the amount of revenue at a point in time that is expected to recur within the next twelve months.

** Adjusted profit before tax and EPS are calculated before amortisation of intangibles, one-off reorganisation costs, foreign exchange gains/(losses) and share based payment charges.

 *** For the purpose of this announcement, the Group believes market consensus for FY23 to be revenue of £28.0m, and adjusted profit before tax of £4.2m.

About D4t4 Solutions plc

D4t4 Solutions plc (AIM: D4t4) was founded around a passion for helping global enterprises derive value from their data assets.

Supporting customers in financial services, retail, travel, healthcare, and telecommunications across 27 countries, D4t4 enables businesses to make smarter, informed decisions via Celebrus, the Group's flagship first party data product suite. Celebrus CDP automatically captures, contextualises, and activates user-based behavioural data in real-time across all digital channels. Through behavioural biometrics and analytics, Celebrus FDP helps companies prevent fraud before it happens. Celebrus CDM provides an enterprise platform that automates the integration and transformation of customer data from all relevant data sources, whether on-premises or cloud, to deliver customer and regulatory analytics.

The Group has offices in the UK, USA, India, and Australia with key talent in all markets to drive the growth of the business. Celebrus is fully compliant with all major data privacy regulations and the Group is accredited to ISO27001: Information Security Management.

For more information, please see www.d4t4solutions.com  

Operational review

Overview

During the period we laid the foundations on which we can build for accelerated and consistent growth across the business. Systems, processes, and efficiencies have continued to be a focal point while also ensuring we have the right people and leaders across our business.

Our continued investment in Sales and Marketing has built a solid pipeline of both direct and indirect opportunities and we continue to advance our partner program to not only include technology partners but also solution integrator partners that will assist us with scale around the globe. The direct sales approach has created better visibility into our pipeline and has also provided greater clarity into how to close these deals as many of them are now within our control.

While we continue to be a second-half weighted business in this financial year, we have taken further strides to smoothing this out and are expecting to see a move towards a 40/60 split in future years. We also have successfully converted our final targeted existing accounts to term-based ARR licenses for Celebrus CDP improving the overall quality of our revenue.

Finally, we were thrilled to launch our Celebrus CDI for Salesforce partner offering after the period end.

Strategy

Our focus as a business is to drive accelerated and consistent growth of our Celebrus CDP and FDP licenses. The majority of our contracts will continue to be multi-year commitments and we have innovated and simplified our Sales and Pre-Sales processes to make it easier to demonstrate the capabilities of our platform to our prospects, clients, and partners. For FDP, we have simplified the sales process considerably as well as our messaging as we continue to evolve the sales process based on customer feedback. Our FDP wins have been made as a result of customers' increasing needs to address Scams, Behavioral Biometrics, Bot Detection, and Account Takeover.

As businesses increasingly move away from on-premise hardware deployments, we have innovated within our Customer Data Management (CDM) division and launched the Celebrus Cloud. This allows us to enable our software for customers quickly in a single-tenant private cloud instance that we manage on their behalf. This deployment method whether in Celebrus Cloud or a customer's own private cloud will over time become our primary offering.

Contract wins and ARR

There were several contract wins in the period including the sale of Celebrus CDP to a US-based health group, and upsell of Celebrus FDP biometrics functionality to an online retailer.

ARR for the period increased to £15.8m (H1 FY22: £10.4m, FY22: £14.0m).

Since the period end we have seen a contract win with a Top 10 global bank which includes a CDP renewal and conversion to a 3-year term Enterprise License Agreement as well as a production trial of Celebrus FDP.. These together added USD 0.6 million to ARR and USD 6.0 million in total contract value to the order book.

Pipeline visibility, measurement and management has vastly improved with the implementation of new CRM software at the start of the period. This allows for better analysis, understanding, and ability to adjust investments of time and other resources based upon the data we review bi-weekly.

Celebrus Customer Data Platform ("CDP")

With the launch of version 9.6, innovation in the period included our new cookieless solution CX Vault. Consumers continue to opt-out of data capture and cookies. When that happens, brands are unable to capture any data for marketing purposes and thus are not able to use that data to deliver a positive experience on the websites and mobile apps with which consumers interact. With CX Vault, Celebrus provides an opportunity to leverage the machine learning in the platform and rules to improve customer experiences without any cookies or any data capture allowing users to remain anonymous throughout an entire session, with no information ever being shared or sent to a server. CX Vault is an ethical innovation that meets privacy regulations and respects consumers who opt-out of cookie usage, whilst still ensuring brands can connect with their customers.

We continue to emphasise and innovate upon our digital identity and profile capabilities, and that was a core driver of our new technology partnership with Salesforce, which is described below.

Celebrus Fraud Data Platform ("FDP")

In version 9.6 of our platform, further innovation in our FDP included Sense and Trace enhancements, Call detection, and additional behavioral biometrics. Sense and Trace is a key feature that allows organisations to spot typical bad actors and enables an ongoing watch for similar situations that might require intervention. Call detection is key for Scams or Mule Fraud when odd behaviors within a mobile app combined with that same individual being on the phone could be an opportunity to catch the fraudster before the fraud. Behavioral Biometrics combined with our digital identity and profile capabilities continues to be a differentiator for our platform and we will continue to focus on enhancing it in the future. Our pipeline is largely focused on direct deals at this point in time with a couple of active campaigns generating interest for paid production pilots.

From a Sales perspective, we are focused on identifying a data gap in an organisation and educating them on how our platform solves for that gap. As a result, these initial Sales are very focused on a use case which then allows us to land and expand in those accounts.

The numerous awards that FDP has received during the period are testament to the product and provide additional credibility as we focus on building market share.

Partnerships

We are thrilled to have recently launched our new partnership with Salesforce which is initially focused on landing our digital identity and profiles into the Salesforce Marketing Cloud.

Celebrus CDI for Salesforce is a Customer Data Integration ("CDI") application on Salesforce AppExchange, empowering customers with the real-time, first-party, digital data they need to close identity and data gaps. Celebrus CDI for Salesforce delivers data to a customer's Salesforce Marketing Cloud that can be sued to fill those digital identity gaps to build robust interaction profiles, and to inform and empower marketing activities with the contextualised, first-party digital data necessary.

With Pega, we were the foundational partner for the "Always-On Insights" program launched early in the period. We have also further integrated with Teradata to bring our data into the VantageCloud and ClearScape Analytics.

We have been working to incentivise our partner program focused on technology and consulting partnerships. As we build for better scale around the globe, we intend to onboard additional global and regional solution integrator partners, with many already in various stages of activation.

M&A

While there is nothing imminent, we continue to evaluate our product roadmap and look for opportunities to buy versus build in the right situation where the business benefit would be clear.

People

We are grateful for the fantastic talent across the globe within our business and their efforts to help build upon the vision for the Group. We continue to invest in changes to increase employee satisfaction, retention and motivation.

We have completed the transition to a hybrid working environment as this is increasingly an important factor for employees, and we continue to invest in training and development to ensure we are supporting our people and leadership around the globe, and making the business truly scalable.

We have continued to restructure the business, not only to create efficiencies but also to create opportunities for key individuals to grow in their roles and increase their contributions to the business.

Finally, we have also formally rolled out our annual share option schemes for employees to incentivise and connect people more directly to the success of the business.

Current Trading & Outlook

The advancements we have made to the CDP and FDP Version 9.6 in the first half, position us at the heart of customers evolving requirements. We will continue to grow the business through our brand recognition directly and our partner networks which we have built on post period end with CDI for Salesforce in the Salesforce AppExchange.

Whilst the Board remains alert to the global economic environment and associated downside risks, our year-to-date contract progress and highly visible pipeline of opportunities means we are confident in achieving full year expectations and delivering another year of growth in ARR.

Financial review

Revenue and Gross Margin

Revenue for the period was £8.1m (H1 FY22: £7.6m), with a change in mix, as shown in note 2, that affected the gross margin percentage.

Own-IP license revenue, which is high margin, was down to £1.0m (H1 FY22: £1.8m). License revenue is recognised for the full year in the month of sale or renewal, so the lower number for the current period simply reflects the lower level of new sales and the multi-year renewals achieved in the period. Conversely, the third-party products revenue, which is low margin, was higher at £1.9m (H1 FY22: £0.7m). Delivery services, and support and maintenance combined totaled £5.2m (H1 FY22: £5.0m).

The changes in revenue mix resulted in a gross margin of £3.1m (H1 FY22: £4.0m) or 38.3% (H1 FY22: 53.2%).

Administration expenses and Profit before Tax

Administration expenses overall were stable at £4.3m (H1 FY21: £4.4m). Within Administration expenses, the Operating costs increased to £4.5m (H1 FY21: £3.9m) principally due to increased headcount added over the last year. In other Administration expenses there was a foreign exchange gain of £0.8m (H1 FY21: £0.1m), and a share-based payment charge of £0.5m (H1 FY21: £0.3m).

The reduced gross margin therefore led to an adjusted Loss before tax of £1.3m (H1 FY21: profit of £0.1m).

Annual Recurring Revenue

Annual Recurring Revenue ("ARR") at the end of the period was £15.8m, (H1 FY22: £10.4m; Full year FY22 £14.0m). The increase of £1.8m in the period is comprised of £0.4m of new wins, most of them upsell to existing customers, and a revaluation of USD denominated contracts at the period end exchange rate.

The Board is confident of ARR increasing in the second half on the back of signing new contracts currently under negotiation.

Balance Sheet, Cash and Interest income

The major changes in the balance sheet from the last period end were the unwinding of the high trade debtor balance, which was down from £25.0m to £1.8m due to receipts during the period, along with a reduction in accruals for major projects and a reduction in deferred income as project delivery has taken place and associated revenue recognised.

The Group remains debt-free and the net cash balance at 30 September 2022 was £26.2m, an increase of £10.1m from the same period last year (H1 FY21: £16.1m), and an increase of £14.8m from the start of the year. A dividend of £0.8m was paid in the period and a further special dividend of £5.0m was paid in October.

With interest rates rising, the healthy cash balances have been put to good use generating £134,000 of interest income in the period (H1 FY22: £11,000).

Foreign exchange rate movements

The Group seeks to mitigate currency risk as far as reasonably possible. The exposure to transactional foreign exchange risk is monitored and managed at a Group level. Natural hedging is employed, to the extent possible, to minimise net exposures; however, where significant exposures arise it is Group policy to enter into formal hedging arrangements.

This has been a period of significant exchange rate volatility with the USD/GBP rate moving from 1.316 to 1.164, a move of 11.5%. The average rate for the period was 1.238 (H1 FY22: 1.389), a change of 10.9%. These rate changes impacted the income statement. On a constant currency basis, the revenue would have been lower at £7.8m, whilst the Cost of Sales would have been lower at £4.6m. This would have produced a gross margin of £3.3m, compared to £3.1m on an actual currency rate basis. Operating expenses would have been £4.4m rather than £4.5m resulting in an adjusted PBT loss of £1.1m compared to the loss of £1.3m reported.

At the start of the period, the Group had Deferred income of £14.2m which reduced to £10.4m at the end of the period. Under IFRS, the revenues released into the income statement during the period were done so at historic higher rates of 1.348, from the date of invoicing. If the revenues had been recognised at actual rates in the period, the reported revenue would have been £8.5m against the £8.1m reported and the Adjusted PBT would have been a loss of £0.9m.

Dividend

As a Group, D4t4 continually monitors the balance between delivering on a progressive dividend policy whilst at the same time balancing investment in the business for future growth.

During the period, the Group paid a final dividend of 2.07p per share, and after the period end in October 2022 the Group paid a special dividend of 12.5p per share.

For this current half year, the Board is pleased to declare an interim dividend of 0.88p per share, a 3.5% increase over the comparative period last year. This will be paid on 12 January 2023 to members on the register as at 9 December 2022. The shares will become ex-dividend on 8 December 2022.

Consolidated income statement for the period ended 30 September 2022 (unaudited)

Consolidated statement of comprehensive income for the period ended 30 September 2022 (unaudited)

Consolidated statement of changes in equity attributable to Equity Holders of the Parent for the period ended 30 September 2022 (unaudited)

Consolidated statement of financial position as at 30 September 2022 (unaudited)

Consolidated cash flow statement for the period ended 30 September 2022 (unaudited)

Notes to the financial statements

1. Basis of preparation

These consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the UK and on a historical basis, using the accounting policies which are consistent with those set out in the Group's annual report and accounts for the year ended 31 March 2022. The interim financial information for the six months to 30 September 2022, which complies with IAS 34 'Interim Financial Reporting', has been approved by the Board of Directors on 29 November 2022.

The unaudited interim financial information for the period ended 30 September 2022 does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The comparative figures for the year ended 31 March 2022 are extracted from the statutory financial statements which have been filed with the Registrar of Companies and contain an unqualified audit report and did not contain statements under Section 498 to 502 of the Companies Act 2006.

2. Business and geographical segments

Whilst having three product groups, the Group operates the business as a single business with no separation into divisions or allocation or people or assets to a particular division. The management team is responsible for all three product groups with no individual having responsibility for a particular product group. This is consistent with the internal reporting for management purposes. Management does however monitor revenues by revenue type.

The revenue analysis set out below is consistent with that provided to the Board of Directors.

The geographical revenue segment is determined by the domicile of the customer.

3. Administration expenses

4. Adjusted profit before tax

5. Earnings per share

5. Earnings per share (continued)

6. Trade and other receivables

7. Trade and other payables

8. Dividends

A special dividend of 12.5p per share was paid on 27 October 2022 to shareholders on the register as at 7 October 2022.

An interim dividend of 0.88p per share will be paid on 12 January 2023 to Members on the Register as at 9 December 2022. The shares will become ex-dividend on 8 December 2022.