dotDigital Group Regulatory News (DOTD)

23 July 2020

dotdigital Group plc

("dotdigital" or the "Group")

FY 2019/20 Trading Update

dotdigital Group plc (AIM: DOTD), the leading 'SaaS' provider of an omnichannel marketing automation and customer engagement platform, is pleased to provide the following trading update ahead of the publication of its full year results for the year ended 30 June 2020 in November. The trading performance in this statement is based on unaudited management accounts.

Highlights

Notes

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. ARPC means Average Revenue Per Customer (including new customers added in period and existing customers)

Growth Strategy

dotdigital's organic growth strategy continues to be focused around three key areas:

Product Innovation

Recurring revenue from enhanced product functionality and upgrades, taken by both existing and new customers, has increased by 16% compared with the same period last year. As marketeers' business models adapted to the pandemic and as lockdown restrictions continue to ease, we have witnessed a shift towards an increasing importance on Digital Marketing. The dotdigital platform is well-placed to deliver on marketeers' requirements and assist in driving return on investment from their marketing campaigns. We continue to see an increase in the use of data, platform adoption and automation capabilities, as marketing strategies become more sophisticated in ensuring they have a relevant and targeted message at every touchpoint between the customer or prospect and the brand.

The Group is making encouraging progress in increasing the number of customers using our newer messaging capabilities, such as SMS and Live Chat. We continue to educate the market, for example through live sessions and digital marketing content, on how it can combine these different messaging capabilities to deliver a more cohesive message to customers, as we see interest and demand growing.

The platform continues to go from strength to strength, delivering on the needs of our customers and maintaining our competitive advantage. In May, dotdigital was independently rated as a "Strong Performer" in the 2020 Forrester Wave for Email Marketing Service Providers report, an important endorsement of our competitive edge in the space.

Geographic expansion

EMEA

EMEA revenue grew 9% to £36.3m despite the impact of COVID-19 in the second half of the financial year. Sales cycles lengthened during the lockdown as prospects delayed technology decisions and existing customers delayed project completions. As the lockdown has started to ease, we have seen an uptick in momentum both from a pipeline and sales conversion perspective.

USA

Revenues from the US region were up 17% to $10.5m from $9.0m in 2019, again despite the impact of COVID-19. We have continued to build on a strong team in North America with continued investment in Partnerships within the Microsoft Dynamics space and in the management of the region through hiring a seasoned General Manager in-region to create more management bandwidth and allow us to scale. We are continuing to build strong relationships with partners in-region and remain focused on increasing brand awareness.

APAC

The APAC market saw high levels of growth in the year, albeit from a smaller base, with revenues growing 37%, from $3.8m in 2019 to $5.2m. We continue to increase dotdigital's presence in the region and see a growing pipeline in the Far East through our local team in Singapore.

Strategic Partnerships

Enhanced brand awareness alongside the additional functionality that we have developed for ecommerce merchants has allowed us to continue growth in the Magento space; all new Magento customers now ship with not only dotdigital messaging capabilities but with our chat functionality pre-installed, providing us with an additional route to market and source of lead generation in the conversational commerce space. Our respective teams continue to work together on our joint marketing strategy and enhanced development of our integration. Signup of customers in all regions remains strong - in the year we added 206 Magento customers to the platform, taking the total to 716, as at the end of June 2020. In the year, revenue from Magento customers grew 10% from £11.8m to £13.0m.

With the inclusion of the dotdigital platform in Shopify's Plus Certified App Program, which is intended to make it easier for Shopify Plus merchants to discover carefully selected, best-of-breed apps, our relationship continues to go from strength to strength. In addition, we have seen an increasing pipeline resulting from the integration that we have built with Shopify Flow, which allows ecommerce merchants a seamless connection to easily deploy campaigns from the dotdigital platform. We continue to build relationships with system integrators in the ecosystem. We now have 83 customers using the Shopify connector versus 56 this time last year. In the year, revenue from Shopify customers grew 36% from £0.9m to £1.2m.

As Big Commerce's global elite partner, work continues in deepening our strategic relationship, formulating a joint go-to market plan through offers for ecommerce merchants, and joint marketing efforts to the user base. This will enable us to increase our addressable market across all regions.

As part of our commitment to our B2B Marketing customers, we hired a partner manager to build our strategic relationship with Microsoft for our integration into Dynamics 365 in North America, where we see a significant opportunity. Revenues from customers using our Dynamics connector were broadly flat at £3.8m in the period and we expect to see this grow with the addition of our new partner manager.

Outlook

We remain focused on delivering our strategic objectives of continuing to drive product innovation, identifying suitable growth opportunities through partners and continuing to expand our international footprint.

The management team continues to monitor the effects of the current pandemic, not only on our business but also our customers. Our business has performed resiliently against a backdrop of macro-economic uncertainty to date, but the pandemic remains a fluid situation and it is difficult to predict with any certainty how it will evolve, over what time frame and how our customers will be impacted.

We enter the new financial year with encouraging sales momentum, a robust pipeline, a strong balance sheet, a high proportion of recurring revenues and strong cash generation. Therefore it is our intention to invest as we look into 2021, to secure new business and grow revenue over future years.

Milan Patel, CEO of dotdigital, commented:

"We continue to operate remotely with virtually no impact on our operations and are fortunate enough that we have not had to furlough any staff or introduce any cuts because of the pandemic. I would like to again thank our 340 colleagues around the world who have all risen to the challenge of the past few months superbly.

"These results demonstrate the value our customers attach to our platform, the benefits of our recurring revenue business model and our ability to withstand a severe macro-economic shock. Against a challenging backdrop, we have continued to deliver strong growth, profitability, and cash generation. Uncertainty is likely to persist for some time, but as the world returns to some form of normality, we expect to be in a strong position."

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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.