Dotdigital Trading Update

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dotdigital Group plc is pleased to provide the following trading update for the year ended 30 June 2021 (FY21), ahead of the publication of its full year results in November. The trading performance in this statement is based on unaudited management accounts.

Highlights

·       Revenue from operations grew by c.23% to £58.1m (2020: £47.4m)

o  Recurring revenue as a percentage of total revenue remained consistent YoY at 93%;

o  ARPC1 continued its upward trend, growing by 16% from approximately £1,083 per month to £1,251 per month;

o  Functionality recurring revenue (from license fees and enhanced bolt-on functionality) grew 31% to £18.9m (2020: £14.4m);

·       Adjusted EBITDA2 and adjusted operating profit3 from operations are both expected to be comfortably ahead of market expectations;

·       Strong cash balance of £32.0m at 30 June 2021, ahead of market expectations;

·       Intention to pay a final dividend in line with policy, with the expected pay-out linked to EBITDA growth;

·       dotdigital has become the first customer engagement platform to be awarded ISO27701 on privacy information management, ISO27001 information security management and ISO14001 environment management certifications;

·       Year-end revenue run rate is above expectations, due to the strong financial performance highlighted above, meaning the Group has strong momentum as it starts the new financial year.

Notes

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

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

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

4. The closure of the Dynmark business is now complete

Overview

The Board is pleased to report a strong performance in the year to 30 June 2021, which represents a full financial year since the onset of the pandemic and compares well against a strong performance in the prior year. The Board anticipates 23% revenue growth as a result of continued execution against each pillar of the Group’s growth strategy, being Product Innovation, Geographic Expansion, and Strategic Partnerships.

In the year, while COVID-related restrictions in the territories we operate in have ebbed and flowed, we have continued to see an acceleration in the shift towards Digital Marketing, a trend that has persisted as trading conditions began to normalise in the second half. The use of data, platform adoption and automation capabilities are rising, and we continue to enhance the dotdigital ‘Engagement Cloud’ to ensure it excels in these areas. For those marketeers seeking the means to launch relevant and targeted campaigns, ensuring brands have a relevant, personalised message at every touchpoint with their customer or prospect, and a strong return on investment, our product has cemented itself as the platform of choice.

As part of its ongoing commitment to security and privacy, the Group has achieved its goal of extending the scope of its current information management system to now include ISO 27701 Privacy Information Management certification, an internationally recognised standard designed to help organisations build and maintain their privacy program in line with international best practice. Being certified demonstrates that a company meets the requirements and has put in place a comprehensive system to manage data privacy and comes shortly after the Group was re-certified against the universal ISO 27001 and ISO 14001 standards. The Group continues to focus on operational excellence in the areas of privacy, security and sustainability.

Growth Strategy

Product Innovation

The Group is making good progress in increasing the number of customers using our enhanced functionality, including an increasing number of data connectors through our IPaaS (Infrastructure Platform as a Service) capabilities. We continue to educate the market through live sessions and digital marketing content, on how to adopt new features to enhance messaging. As a result, recurring revenue from enhanced product functionality and upgrades, taken by both existing and new customers, increased by 31% to £18.9m (2020: £14.4m).

The platform continues to go from strength to strength, delivering on the needs of our customers and maintaining our competitive advantage.

Geographic expansion

The Group saw strong revenue growth across all key global regions, despite the wider economic impact of COVID-19, and continued its diversification of international exposure. In EMEA, revenues grew 23% to £44.6m (2020: £36.3m). Sales cycles normalised during the lockdown and we have seen an uptick in momentum both from a pipeline and sales conversion perspective.

Revenues from the Americas were up 19% to $12.5m (2020: $10.5m). We continue to strengthen the customer facing teams in North America and build strong relationships with partners in-region with a focus on enhancing brand awareness.

The APAC market saw high levels of growth in the year, with revenues growing 47% to$7.7m (2020:  $5.2m). We further increased dotdigital’s presence in the region through expanding the team and see a growing pipeline in Japan and the Far East, through our team based in Singapore.

Strategic Partnerships

Revenues from customers using a data connector from one of our strategic partners grew 14% to £25.4m in the year.

Enhanced brand awareness alongside the additional functionality that we have developed for ecommerce merchants has allowed us to continue growth in the Magento 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 a net new 66 Magento customers to the platform, taking the total to 782, as at the end of June 2021 (versus 716 as at end of June 2020). In the year, revenue from Magento customers grew 11% from £13.0m to £14.3m.

Our Shopify relationship continues to go from strength to strength. 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 132 customers using the Shopify connector versus 83 this time last year. In the year, revenue from Shopify customers grew 79% from £1.2m to £2.1m.

As BigCommerce’s global elite partner, we continue to deepen our strategic relationship, formulating a joint go-to market plan through offers for ecommerce merchants, and joint marketing efforts to the user base. We saw a 249% increase in revenue from BigCommerce connected customers in the year to £0.4m (from £0.1m in June 2020).

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 that is only just beginning to take off. Revenues from customers using our Dynamics connector increased 12% to £4.3m in the year, from £3.8m in the prior period.

Outlook

The market opportunity available to us has been augmented over the past year as organisations accelerated their move to digital marketing capabilities in order to engage with customers in a lockdown environment. This irreversible trend continues at pace, and we are experiencing continued strong sales momentum as we enter the new financial year.   

The Group benefits from high levels of recurring revenue, a healthy balance sheet, and strong cash generation, providing the flexibility to maintain or increase strategic investment in the business to both capture market share and drive forward our platform.

Milan Patel, CEO of dotdigital, commented:

“The Group delivered a consistently strong period of profitable growth, in a year characterised by wider macro-economic instability, reflecting an intensified shift toward digital marketing initiatives on behalf of organisations and demonstrating the attractiveness of dotdigital’s comprehensive enterprise-level offering within the industry.

“This performance was made possible by our people, who are our greatest asset, and I would like to thank everyone at dotdigital for their commitment and drive in making this a business we can all be proud of.

“Whilst we remain vigilant to the varied wider economic context, we enter the new year with solid business foundations and are laser-focus on our three-pillared growth strategy. With a significant market opportunity available, a robust balance sheet and strong trading momentum, we are confident in the Group’s ongoing success.”

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