dotDigital Group Regulatory News (DOTD)

FOR IMMEDIATE RELEASE 17 JANUARY 2017

dotdigital Group plc

("dotdigital" or the "Company")

Trading UpdateandNotice of Interim Results : 21 February 2017

dotdigital Group plc (AIM: DOTD), the leading provider of intuitive email and marketing automation software as a service ("SaaS") and managed services to digital marketing professionals, today gives a trading update ahead of the Company's Interim Results for the six months ended 31 December 2016. The trading performance in this statement is based on unaudited initial management estimates.

H1 2017 highlights:

· Overall revenue up 17% to approximately £15.0m (H1 2016: £12.9m);

· EBITDA in line with market expectations and on track for full year;

· Monthly recurring revenues from dotmailer's SaaS based usage up approximately 22% to £12.2m (H1 2016: £10.0m);

· Average revenue per client has grown by 24% from £525 to £650 per month;

· Total number of emails sent by the dotmailer platform up 41% to 5.6 billion from 3.9 billion;

· Strong cash balances at 31 December 2016 of £18.9m (H1 2016: £14.8m); and

· Following approval at the AGM on 20 December 2016, a final dividend of 0.43 pence per ordinary share for the year ended 30 June 2016 plus a special dividend of 0.41 pence per ordinary share, will be paid on 31 January 2017 to those shareholders on the register on 13 January 2017.

dotdigital's organic growth strategy is centred around three core areas:

· Product innovation;

· Geographic expansion; and

· Developing strategic partnerships.

In the six months to 31 December 2016, key performance highlights against these areas were:

Product innovation

· Recurring revenue charges from enhanced product functionality has increased by 71% compared with H1 2016 to annualised revenues of £5.8m; 

· Continued investment in development of existing connectors and to broaden out both ecommerce and CRM connectors;

· Shopify connector in Beta testing and will be fully launched February 2017; and

· Further development and enhancement have been carried out to our self-service proposition and will be piloted in South Africa and other selected territories in Q3 2017.

Geographic Expansion

US

· Revenue from the US region was up approximately 11% to US$2.3m. Revenue growth in region started off slower than anticipated but improved in Q2, with the sales pipeline building following team restructuring, price changes, increasing our indirect channel network whilst broadening the sales proposition to include targeting of customers using both Salesforce and Microsoft Dynamics.

APAC

· Overall revenue growth within the AsiaPac region increased by approximately 139% from AUS$0.22m to AUS$0.52m. Further investment has been made in direct sales, support, account management and marketing specifically in Australia to increase deal conversion and client support;

· More partners were added in the AsiaPac region, with our first partner signed in Singapore however sales conversion remains slightly slower than anticipated through the indirect channel as we continue to build relationships and brand profile; and

· Overall, whilst AsiaPac is still in its early days of growth, we are optimistic about the opportunities within this diverse region and will continue to focus on working with our Magento customers and CRM integrations.

EMEA

· Revenue from the EMEA region was up 13% to £12.8m from £11.4m, as a result of an increased appetite of our customers to purchase more product functionality on an incremental basis;

· Within the UK, we successfully carried out the restructuring of the direct sales department within the leadership level down to splitting the sales team to target high value and number of customers;

· Price changes in the UK are now more competitive, which has led to an increased sales pipeline and conversion rates;

· Account teams now refocused on customer success, leading to higher levels of customer satisfaction and retention; and

· Clear and focused strategy implemented on the key target territories within the EMEA market.

Developing Strategic Partnerships

Magento: Continued investment into the development of the Magento Connector and the partner relationship. The Connector is now used by over 350 clients generating annualised revenues of more than £5.6m. Though the initial uptake of the Magento Version 2.1 connector was slower than expected a good pipeline has been building in Q2 with further growth anticipated in the second half of the year.

PayPal: dotmailer has partnered with PayPal, the world's largest internet payment provider who has 7 million ecommerce business users globally. Our integration offers the ability for our customers to offer one click purchasing in their email campaigns. This is a unique proposition to the market and is expected to add value to our mid-market customers. Currently in Beta testing, the platform is expected be launched in February 2017.

ORO CRM: Strategic partnership signed with ORO CRM, a new US based global leader in CRM solutions for multi-channel business to business sector ("B2B"). Currently in Beta testing, the platform is due to be launched later in 2017.

Milan Patel, CEO of dotdigital, commented:

"I am pleased to report continued strong profitable growth against contracted recurring revenues up 17% and cash generation within the business. With the focus on adding value to our customers we have continued to see the recurring revenues from advanced functionality increase.

Through the strengthening of our strategic partnership with Magento we continue to get brand awareness building internationally which supports the organic growth strategy of the business.

After experiencing a slow start in Q1 in the US we changed pricing and team structure whilst broadening our sales proposition, which led to an improved Q2 with a strong pipeline building.

We are excited about putting a direct sales team and support network in Australia which will act as the hub into broader AsiaPac. Early signs are promising.

Continuing to build strategic partnerships is key and as we start to look out into second half of the year, the partnerships we are building with both PayPal and ORO CRM is also exciting.

The dotmailer platform continues to evolve and innovate, providing highly sophisticated yet 'easy-to-use' marketing automation tools for our clients, combined with releasing our Shopify connector and enhanced self-service offering with a pilot in South Africa and other selected territories in Q3. This will lead to a more diversified market proposition for the international regions.

We look forward to providing a full update on the six months' trading and continued growth strategy when we report our Interim Results for the six months ended 31 December 2016 on 21 February 2017."

This Announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 ("MAR").

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