dotDigital Group Regulatory News (DOTD)

dotdigital Group Plc

("dotdigital", "Company" or the "Group")

Acquisition of Comapi

dotdigital Group Plc (AIM:DOTD), the leading provider of intuitive software as a service ("SaaS") and managed services to digital marketing professionals, through the 'dotmailer' platform, announces that it has completed the acquisition of the Comapi group of companies, ("Comapi") a fast-growing business focused on the omni-channel messaging and cloud communication market, for a cash consideration of £11 million (the "acquisition"). Potential further consideration of up to £1.2 million in share options is also payable to the management team dependant on them achieving specific performance targets over a 2 year post-acquisition period and remaining with the business.

Headquartered in Cheltenham with approximately 30 employees, Comapi has built a scalable software platform that allows businesses to communicate with their consumers across multiple conversational messaging channels including the growing market for live chat. Comapi's heavy investment in technology allows it to compete in the CPaaS (communication platform as a service) and ARN markets (alerts, reminders and notification), providing a flexible API (application programming interface) based omni-channel messaging platform and toolkit that facilitates easy integration and rapid deployment to businesses requiring a personalised and two-way customer engagement solution.

Acquisition highlights

The Directors believe the acquisition will:

Financial Information

Comapi had revenues of £7.8 million which are primarily recurring and EBITDA of £1.2 million for the year ended December 2016. Revenues for Comapi in the current financial year are growing at approximately 15% based on their SAAS business model. The board expect there to be opportunities to further expand revenues once the integrations have been completed. Comapi has just completed a £2.7million R&D programme and on completion of the transaction will have a positive net asset position. The two subsidiaries combined are currently cash breakeven after spending roughly £1.0 million on R&D in the current year.

dotDigital Chief Executive Officer, Milan Patel, commented:

"By adding Comapi to our business, dotdigital is executing on its vision to be an omni-channel marketing automation platform. Comapi has built an impressive platform that, integrated with our software, will allow our customers access to the next generation of consumer engagement marketing technology aiding retention and boosting our competitive advantage in securing new customers.

In particular, this supports our KPI to grow both ARPU ("Average revenue per user") and recurring revenues. We are pleased to welcome the Comapi team and look forward to supporting their business plan and introducing their technology to our global customers."

Acquisition Rationale

dotdigital is committed to the ongoing enhancement of its product platform to ensure it can meet the needs of the most innovative and sophisticated marketers. The acquisition allows dotdigital to better fulfil that aim by extending omni-channel communications on its platform, helping customers communicate via email, SMS, social messaging apps and live chat. This move will allow dotdigital to keep pace with ever growing demand for personalised and relevant communications experiences, and positions the Group as the most advanced platform for these services on the market. In allowing dotdigital and its subsidiaries (the "Group") to offer a more comprehensive range of services, the acquisition will help embed dotdigital at the heart of its customers' marketing operations, enabling longer and more durable relationships.

dotdigital has previously stated its strategic ambition of expanding in geographies beyond the UK. The acquisition supports this aim by enabling easier access to more mobile-centric markets including those in Asia where the Group is focusing considerable attention. This is reinforced by recent research by MarketsandMarkets which forecasts that the global mobile marketing market will grow from USD 28.63 billion to USD 98.85 billion by 2021, with the fastest growing region expected to be APAC.

While the acquisition allows dotdigital to access another high-quality and highly visible subscription-based revenue stream, it also presents a significant benefit to both dotdigital's and Comapi's existing customers. While the former will now be able to gain easier access to the in-demand conversational messaging ecosystem, the latter will be able to gain more easily interact with dotdigital's core dotmailer product.

Terms of the acquisition and funding

Under the terms of the acquisition, dotdigital will pay £11 million in cash from the Group's existing reserves to acquire the businesses and is confident that under its ownership it can accelerate the businesses revenue and profit growth. Comapi is profitable and will be managed as a wholly owned subsidiary of dotdigital. The current management team is staying on to support the product integration plan and to deliver the exciting business plan to be a leading player in the fast growing CPaaS market.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

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