dotDigital Group Regulatory News (DOTD)

dotdigital Group plc

("dotdigital" or the "Company")

Trading Update

dotdigital Group plc (AIM: DOTD), a leading omnichannel marketing automation platform, announces the following trading update ahead of its full year results for the year ended 30 June 2018. The trading performance in this statement is based on unaudited initial management estimates.

Highlights

· Group revenues grew c.35% to £43.1m (2017: £32.0m);

· Adjusted EBITDA1 and operating profit2 are expected to be in line with market expectations;

· Strong cash balance at 30 June 2018 of £15.1m which is significantly ahead of consensus even after the acquisition and funding of Comapi for £11.5m (£10.7m acquisition cost);

· Comapi fully integrated and performing in line with expectations;

· ARPU3 continued its upward trend, growing by 18% from approximately £715 per month to £845 per month;

· An increase of 26% in customers signed up in the year to 689 from 548 in the previous period;

· The strong momentum in Q4 has continued into the new financial year giving management confidence that FY19 performance will be in line with market expectations.

Growth Strategy

dotdigital's organic growth strategy continues to be focussed around 3 core areas:

· Product Innovation;

· Geographic Expansion;

· Developing strategic partnerships.

Product Innovation

Recurring revenue from enhanced product functionality and upgrades taken by both existing and new clients has increased by 41% compared with the same period last year. As marketeers place increasing importance on data and omnichannel features, and become more sophisticated in their marketing strategies, we are confident that we will continue to see an increase in platform adoption of these features.

Through the acquisition of Comapi we were able to accelerate the successful integration of omni-channel features, specifically in both the mobile and social space. This enhanced functionality adds to the best of breed email marketing platform. By using the platform, the user is able to personalise and target the recipients with the right message, at the right time, to the right person, through the right channels.

Geographic expansion

EMEA

As previously disclosed, EMEA revenue was impacted in the first half of the financial year by delays in customer spending, ahead of GDPR implementation. As anticipated, the region's sales cycles have normalised delivering double-digit growth in the full year. We can also confirm that the business has seen no material impact on either email volumes or recurring revenues from existing clients, following GDPR implementation to date.

USA

Revenues from the US region were up 43% to $7.1m from $5.0m in 2017. A combination of deepened relationships from our strategic partners and increased resourcing has helped with this acceleration. With a growing client base and deepening partnerships, we have continued to expand and support our partners locally by opening our West Coast office.

APAC

The APAC region has also seen strong growth of 85% to $AUS 2.2m from $AUS 1.2m in 2017. We have continued to gain traction into Far East Asia with our omnichannel offering. Although early days, we are seeing pipelines building, direct clients subscribing to our platform and a strong partner network developing as we continue to focus on ecommerce clients.

Strategic Partnerships

We continue the development of our Magento connector and the Magento partner relationship. We have continued to deepen our relationship with the release of the Magento bundling in November 2017, where the dotmailer platform ships with the core code base to their customers using Magento's version 2.2 or newer. Recently Magento was acquired by Adobe and after speaking to their senior team, we are pleased to report that it is business as usual with the partnership. We continue to see strong signup of customers and ARPU improvement from our clients. ARPUs have increased by 7% to £1,512 per month.

We have also added new connectors and continue to grow our strategic relationships with Shopify, BigCommerce and Shopware. The pipeline continues to build, and our customers are seeing the value from our new connectors. Early signs look promising and this helps expand our addressable market in ecommerce.

As part of our commitment to our B2B Marketing customers, we added new functionality and continued to build our strategic relationship with Microsoft for our integration into Microsoft Dynamics. We have seen our ARPUs from the Dynamics connector clients also increase by 42% to £1,405 per month.

Outlook

The Board is delighted to report that it has seen strong momentum in Q4 from the contracted monthly recurring revenues which have been added, both from existing and new customers. Accordingly, monthly recurring revenue run rates coming into the year give management confidence of continued strong growth in line with market expectations.

 We remain focused on delivering our strategic objectives of investing in our platform and our people, whilst continuing to drive product innovation and identifying suitable growth opportunities, with a focus on broadening our product set and international footprint.

Milan Patel, CEO of dotdigital, commented:

"This year reflects substantial progress against the Company's strategic aims in accelerating our platform capabilities into the omnichannel space, continuing to innovate our product, growing geographically and deepening our relationships with our strategic partners.

Alongside our organic growth strategy, we will continue to look for acquisitions of an earnings enhancing or strategic nature that could add to the platform capabilities.

We look forward to providing a full update on this year's trading and our continued growth strategy when we announce our full results in mid-October.

I would like to take this opportunity to thank all our staff for the tremendous enthusiasm and commitment they have shown over the past year, and in supporting myself to drive the business forward, together with our shareholders for their continued support."

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Prior to this announcement's release, the statement contained inside information for the purposes of Article 7 of Regulation (EU) 596/2014 (MAR) (Market Abuse Regulation).

1. EBITDA is earnings before interest, tax, depreciation and amortisation and adjusted for acquisition costs and share-based payments

2. Operating profit is adjusted for acquisition costs and share-based payments

3. ARPU means Average Revenue Per User