dotDigital Group Regulatory News (DOTD)

FOR IMMEDIATE RELEASE 18 July 2017

dotdigital Group plc

("dotdigital" or the "Company")

Trading Update

"Strong organic growth in line with market expectations"

dotdigital Group plc (AIM: DOTD), the leading provider of intuitive email and marketing automation software as a service ("SaaS") and managed services to empower digital marketing professionals, today gives a trading update prior to the Company's full results for the year ended 30 June 2017. The trading performance in this statement is based on unaudited initial management estimates.

Highlights:

· Overall revenues grew by 19% organically to approximately £32.0m (FY16: £26.9m);

· EBITDA* is expected to be in line with market expectations;

· Monthly recurring revenues from dotmailer's SaaS-based usage up approximately 23% to £26.0m (FY16: £21.1m);

· Strong cash balances at 30 June 2017 of £20.4m (FY16: £17.2m);

· Growth of 48% in revenue outside of the UK;

· Recurring revenue now represents 81% of group revenues , of which 90% is contracted;

· Professional services revenues grew by 6% to £3.3m (FY16: £3.1m), representing approximately 10% of group revenues;

· Average revenue per client continued its upward trend, growing by 24% from approximately £575 to £715 per month;

· Total revenue earned from clients using the Magento connector has increased by 56% to £6.7m (FY16: £4.3m);

· The total number of emails sent by the dotmailer platform grew by 38% to 11.9 billion (FY16: 8.6 billion), reflecting the change in the mix of clients;

· Margins have been maintained partially as a result of our technology architecture migration to the cloud; and

· Revenue from enhanced functionality charges rose by 53% to £6.3m. 

A summary of approximate revenues by region for the full year to 30 June 2017 is provided below:

 * EBITDA is the profit before tax adjusted for depreciation, amortisation, finance income, finance expenses relating to share option schemes

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

· Product innovation

· Geographic expansion

· Developing strategic partnerships

In the 12 months to 30 June 2017, key performance highlights against these three areas were:

Product Innovation

· Recurring revenue charges from enhanced product functionality options and upgrades to both existing clients and new clients has increased by 53% compared with the same period last year. Recurring revenues from enhanced product functionality now represents annual revenues of £6.3m.

· We continued to invest in the development of existing connectors as well as develop new ecommerce and CRM platform connectors with a particular emphasis on ecommerce platforms. In the year, we have launched connectors into Shopify, Big Commerce, Woo Commerce and Shopware increasing our addressable market in the UK and overseas.

· We have invested in our technology through the addition of headcount in our software development team. This will allow us to accelerate functionality development and allow us to continue to have new innovative functionality giving us technology advantages over our competitors.

· Another area of product development during the year included enhancing our "self-service"/"self-sign-up" proposition which will allow us to conduct low cost pilots in new international markets. This provides low cost feasibility testing of new markets thus allowing us to assess market, pricing, resourcing and any marketing strategy. This functionality will also create opportunities to integrate a white-labelled version of dotmailer into more of the high-volume e-commerce platforms.

Geographic Expansion

North America

· Revenue from the US region was up 16% to US$5.0m for the full year following successful changes during the period. H2 grew by 22% compared to 11% in the first half (in constant currency). The sales pipeline in the region continues to build strongly whilst we continue to broaden out the sales proposition to include other ecommerce platform connectors.

APAC

· Overall revenue growth within the APAC region increased by approximately 112%, from AUS$0.6m to AUS$1.2m, due to having a direct sales approach to the market. The team for the APAC region has also been further strengthened by support, a customer success team and marketing.

· We continued to develop stronger relationships with our Australian partners with new partners coming on-board across the APAC region. More focus has been given to Singapore where we have signed several partners and clients.

· Overall, whilst APAC is still in its early days of growth, we are optimistic about the opportunities in the region and will continue to focus on ecommerce customers and our CRM integrations.

EMEA

· Revenue from the EMEA region was up 15% to £27.3m from £23.8m.

· H2 growth increased by 18% compared to 13% in H1, as a result of improved sales lead optimisation and increased customer satisfaction.

· Although it is still early days, continued focus in the Nordics and Benelux region has resulted in us signing up strong partners and a growing number of direct customers coming from those territories. Early signs are promising for this market.

Developing Strategic Partnerships

Magento: We continued to invest in the development of the Magento Connector and the Magento partner relationship. The connector is now used by over 460 clients generating annualised recurring revenues of more than £6.2m. Though the initial uptake for Magento 2.0 was slower than expected we saw an increase of new customer sign ups using the connector in H2 with a good sales pipeline after Magento released version 2.1. The average revenue per month from Magento customers increased by 6% to £1,420 per month.

Salesforce and Microsoft Dynamics: As part of our commitment to our customers in the B2B marketing space we continued to add new functionality and build on our strategic relationships with the system integrators. These connectors are now used by over 440 clients generating annualised recurring revenues of more than £4.2m. The average revenue per month from these customers is approx. £1,000 per month.

Other ecommerce connectors: We have continued to develop relationships with other ecommerce integration partners and will maintain this development as we go into the next financial year.

Milan Patel, CEO & CFO of dotdigital, commented: 

"After my first full year as CEO I am delighted to announce strong organic revenue growth of 19% and a strong cash position. This illustrates that our profitable organic growth strategy continues to perform well on the three key aspects of product innovation, geographic expansion and now developing strong strategic partnerships. I am also satisfied that the building blocks are now in place for a strong performance over the next 12 months.

The dotmailer platform continues to evolve and innovate, providing highly sophisticated yet 'easy-to-use' marketing automation tools that empower our clients and this we believe is part of the true essence of our continued success.

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

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

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

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Ends