Dotdigital Group (LSE:DOTD) — Full Year Results 2023

0:00 Good morning, and welcome to the DOTDIGITAL GROUP PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time by the Q and A tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. Have the company review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll.

0:25 I'd now like to hand you over to Milan Patel, CEO. Good morning, sir. Good morning, Antoine. Good morning, everyone, and thank you for attending today's annual results presentation for DOTDIGITAL. We'll start with a summary. I know some of you would have followed the story, but for the people that haven't, I'll give you a quick summary of what we do, where we are, a little bit of history of the company, and then go straight on to key highlights, strategy of the business, and what we see coming forwards. If I just move on to the first slide, In terms of we've been playing within the digital marketing sector, more specifically in the martech space, over twenty years. We're a global business centered out to three main hubs, UK being our hub into EMEA, our New York offices being our hub into North America, and our Sydney offices being our hub into APAC.

1:17 Now we when we describe hubs as having every single department that you can really scale from as you either drive more market share in the region that you're operating or pushing further into the continent as you see demand. In terms of number of employees, we have over 470 employees now at the time of writing this presentation, predominantly focused around product and engineering, sales and marketing for the go to market, small team around professional services, and then the rest in back office. Eight international locations. So as I went talked about the hubs, from the New York hub, we have offices in the West Coast, so into LA. They predominantly sell into North America. And then a little bit of demand that we're seeing within the LatAm market. From The UK, hub, we serve, our offices in The Netherlands, into Poland, South Africa, from an EMEA standpoint.

2:12 And then into APAC, we also have offices in Singapore, some of the newer territories that we're playing in into one of them being Japan, where we've we've got some exciting things building in the Japanese market, and we'll talk you through shortly. In terms of for us, we're very much focused in the mid market and enterprise segment of the the verticals, but we also have many different use cases for the platform itself. If I describe the platform, I tend to look at the platform in four main areas. One, being around the data. So we have customer data platform that will be aggregating data, whether it's behavioral data, whether it's

2:56 data that's coming in from their CRM, whether it's data coming from ecommerce platforms. But for us, it's about making it really easy to bring data in so that you can be very relevant, and targeted in the communications that you're doing. In terms of the middle layer of the platform, we describe it as the orchestration engine. That's where you can start creating either one off campaigns that you may be wanting to send or really driving automation through the customer journeys that you're building. Whether it's around customer acquisition, whether it's around retention marketing, everything can be set off in the orchestration layer. The third part of the platform is really providing all the different channels that you can communicate on, whether it's email, you wanna do email marketing, drive a transactional experience from an email standpoint.

3:45 But pretty much every single channel that you can kind of communicate on today is all within the platform, whether it's, SMS, in app push, it's plugging into Messenger software like WhatsApp, etcetera. And then you've got the reporting and analytics layer, which really brings everything together. It's really helping our customers optimize on the return on investment they're making, but also really allowing them to understand what is working, what's not working, and the ability to continuously experiment with their marketing to really drive relevancy. And some of the reasons why people choose us, well, it's not just the technology. It's also the expertise and people. That technology and people proposition really makes us successful.

4:35 In terms of the three key areas for, organic growth is around three main pillars, whether it's around geographic expansion, strategic partnerships, and product innovation. So we measure that by revenues, both from a growth standpoint and a proportion of overall, group revenues coming from these different continents. Just over a third of our revenues now come from international markets, and part of the strategy to diversify more revenues outside of The UK. From a strategic partnership, this is not OEM models or true reseller. Our strategic partners really help us endorse the platform, help us market within the user base, and connect for our customers to really use our best of breed integrations to connect the data together.

5:25 We have just over half of our customers now integrated into one of the platforms that we've built integrations into. In terms of the third area around the r and d, we spend about 12% of our group revenues on r and d, really focused on driving functionality not only for what the mid market requires today, but also what we are, from what we're building to innovate into the future and what things are coming to three years down the line, as well as really driving, competitive advantage through the functionality set and the depth of the platform. What we talk about is sustainable growth opposed to hyper growth. It's really driving double digit top line growth with high profitability margins and then generate that into cash.

6:19 If we look over the ten years, but also over the fifteen years, we've continued to deliver double digit growth with a 20% plus operating margin, 30% plus EBITDA margin and a close to 100% EBITDA to net cash from operations generated. Over the ten years, we've CAGRs of top line 19%, strong EBITDA CAGRs of 17%, and strong cash CAGRs of 24%. So for us, it's about helping the diff, many different verticals for the use cases and the challenges these customers are trying to solve. It's really making it easy for marketing departments without having the expertise in house to really drive marketing communication across the different touch points that they have with their end recipients.

7:09 We like that. We like the diversified mix. Our largest customer represents less than 2% of, from a margin standpoint of the group revenues. Top 100 customers represent just over 17 of group revenues. So we're not reliant on any one customer across the different, variety of different verticals. Have over 4,000 brands that use the platform, over 50,000 active users on a monthly basis. So just taking you through the highlights of the financial year, strong double digit growth performance, strong cash generation, through the period. You would have seen some of the uses of cash. Acquired two months ago, we acquired a company called Fresh Relevant.

7:57 And as we go through the presentation, we'll talk about the rationale and why we felt that was a strong acquisition to really drive product differentiation and depth in the platform. We have strong leadership team experience. One of the areas two years ago that we we had some challenges in was North America. We really addressed that through the last two years, driving, not only strong leadership and experienced leadership team, but also a team that supports the execution layer. Data and analytics is where if if you would have attended our presentation around eighteen months ago, that's where we were focused. We really built out the data capabilities within the platform. And over the last twelve months, we've really been enhancing the functionality around artificial intelligence, machine learning, really making our marketers a lot more efficient in the campaigns that they're sending, which naturally has led to a higher uptick in return on investment.

8:59 If we take the where the market has evolved and how did the market start. So, originally, it was about email marketing, sending one content to everybody. Then it was around marketing automation. So really automating some of those campaigns, understanding a little bit more about the subscriber base, and effectively being able to tailor content. Two, omnichannel, where you can then use lots of different channels to communicate on.

9:31 Where the believe the market is going over the next three to five years is really building on the customer experience at every touch point that you have with your end recipient, whether it's a positive experience, negative experience that you're really trying to drive into a positive one, whether it's transactional messaging or around marketing messaging. And post period, the acquisition really drives through the use of fresh relevance or augmenting both of the functionality sets. It's about also driving your web experience. We have a very strong balance sheet, no debt in the organization, which really leaves, for me, capital deployment around organic and future acquisitions that we may be willing to do. Over the last twelve months, 10% organic growth, strong recurring revenues of 94%, and Alistair will go into a lot more detail around how the makeup, but also strong profitability.

10:28 We've also seen average revenue per customers increasing, and that's a combination of existing clients increasing volume of messages, more data coming into the platform, or whether it's a subscriber base that continues to grow, as well as larger value customers or larger customers that are looking to consolidate their stack to DOTDIGITAL. Terms of cash that, grew 20% in the period, and we've, kept the dividend in line with our EBITDA growth, so progressive dividend policy and recommend a one p dividend per ordinary share. So I'm gonna pass you over to Alastair to go through more of the financials. Hi. I'm Al Sigheny for those of you who haven't spoken to you before. Joined the business a little bit over a year ago as CFO, and I've been sort of trying to focus on how we can can optimize our recurring revenue growth and high margin revenue growth whilst maintaining the very strong shape of the p and l that the business has has nurtured over the over recent times. So Melan has touched on some of this already, but just to highlight the the strength the strength of the business over a sustained period of time and how we've managed to to maintain some of these metrics.

11:50 So revenue growth has been very stable. There's been some positive lumps as we had some one off revenues benefiting at the start of COVID. But even since then, the the CAGR for the last three years has been 14%. The average revenue per customer growth is slightly ahead of overall revenue growth. And what we're seeing is some of the legacy customers who signed up with the business when we had a much simpler proposition, much, most, sort of less complex use case, I ideal customer profile. Some of those customers have have not grown with the business necessarily and and simply look for the lowest possible price from some of our competitors. Whilst it's a shame if those customers leave us, it's not entirely unexpected.

12:40 And the the flip side of that is that we now compete for many harp far higher value opportunities with larger enterprises and smaller business, but with much more complex requirements from their from their vendors. And as as such, we're winning high contracts higher value contracts to replace any of the small contracts that we lose. And so we see the revenue per customer increase slightly ahead of revenue in in most, well, certainly in recent years. Cash generation remains strong. By the end of the year, we were close to 53,000,000 of cash. Obviously, we've deployed about 90,000,000 of that post year end, which we'll speak more about later.

13:26 Now the the make up of the revenue is good. So we have about 94 and a half percent of our revenue is what I would describe as recurring or repeating. 79¢ of the revenue is forward contracted recurring software revenues, which we get about 90% gross margin on. The balance between that and the 95 is repeating revenues, which typically relate to SMS SMS messaging, where it may not be forward contracted with a customer, but we have a strong trading history with that customer. We have fairly predictable volumes from them. To put it in context, over the last three years, that volume has gone approximately 8,000,000, 9,000,000, 10,000,000 in round numbers. So it's fairly it's it's a predictable revenue stream, if not a full contracted one.

14:15 It is, however, a slightly lower margin than the contracted software revenues where where it's pure transactional SMS. That might be in the order of 15%, up to 20%. And whereas marketing SMS messages, which I'll talk on in a little bit more detail shortly, that that margin could be between 2550%. Now cash conversion is still it's it's a shade under a 100% this year. It's 99.6, and only because one one debtor that told us that we're gonna pay on the last day of the year paid two days late. So I'm I'm frustrated by that near miss, but, still a still a good statistic overall. So revenue growth top line revenue growth was 10%. It was marginally ahead of the expectations we have for the year, and and part of that was supported by some of the the SMS growth we had. Now, thankfully, most of the SMS growth we're having is is in the marketing SMS space. So we've got two two buckets of SMS, transactional stuff, which is like if you have a parking if you park your car, you get a message that says you've got ten minutes before you need to to get back to your car or or you can increase your or increase the length of time by paying some more.

15:29 And then there's marketing SMS. This is where we're providing an additional channel to our our platform customers who want to communicate in an omnichannel way with their with their customers. Where we're selling an SMS to these people, it's good whilst it is marginally margin dilutive to us, because as I say, it's between 2550% margin depending on the part of the world you're in, it it shows the customer is more embedded with us. They're using us for a broader range of functionality, and those customers typically have lower churn. So we're we're although it's not as high margin growth as selling pure software, it's it's definitely it shows the strengthening of our customer base when that happens, and that's what's driven the the growth in excess of the second 9% we guided the markets to.

16:16 Now and it's that mix effect which has been the the relative drag on the gross profit margin, I should add. We've touched on average revenue per customer already, but if we look at the the regional the regional mix. Now in North America, we had we got back to a stage of revenue growth. Now I know 2% is a very modest number, but we were doing this on the back of a period of stabilization. We'd lost much of the sales team a couple of years ago in North America. We rebuilt that team. They've been ramping up. There was a if you looked at this on a half by half basis, there was a small dip, a flat bit, and now we're back into that growth stage. So the actual

16:54 period on period growth, if I look at bookings, this is the contract we're signing as opposed to the revenue we're recognizing. That growth, h two on the prior h two, was approximately 25%. So a real change in trajectory is GMR, general manager there, has built brought in a new team and ramps them to see to start to see a positive outcome there. That'll take a little while before the whole team is firing and delivering the full quotas, and it's only at that point we'll pile in more resources behind them, but very promising progression from that team on the ground. Our administrative costs grew year on year. There's a few drivers in there. One is the return of travel and expenses. Obviously, the prior year, we had a a lot of constraints as a consequence of COVID restrictions. So return to travel and face to face meetings, the full year effects or the the effects of a pay rise that was awarded around the business for approximately 12% in the at the start of the financial year.

17:52 If you think back to July last year, we're kind of peak peak cost of living panic, relatively high staff attrition, and and at that time, the economy hadn't softened. So there was still a very, competitive labor market. So there's been no equivalent pay increases at the start of this year, so we do expect to see some a little bit more sort of leverage of our headcount coming through this year. And then we'll see significant growth in headcount through the year, which spoke about, and we'll we'll speak more about as we go through this presentation. Balance sheet is strong. Basic working capital profile remains very similar to to prior years. There's always bumps bumps around the year end depending on the exact phasing of invoicing, both both invoicing of overages to our customers and invoicing of SMS consumption to us.

18:45 But no no shocks or surprises in there, and I think that's why you can see that's the case by looking at the cash flow. Now the cash balance is that we're now running at kind of mid thirties, having spent a large portion of a large a large portion of the the money we had at year end on fresh relevance. Fresh relevance isn't is not cash consumptive, so it's not a a drag on our ongoing cash flows. Albeit, it will be marginally, margin dilutive in this year. So it has a lower operating profit margin than the rest of the DOTDIGITAL GROUP, but that will that will be normalized back to group levels by FY twenty five. And as as Milan already highlighted, we remain debt free.

19:33 Now the cash flow side here, I think, largely speaks for itself. I think we've we've spoken about most of the themes on here as we've gone through the the performance of the business. So I won't dwell on this, but it's in the presentation. If there's any questions, do feel free to raise them. Anything I would highlight is, obviously, we're we still have a significant cash balance even having spent a chunk of it and are working hard on on building the m and a pipeline to try and deploy that. And we'll then talk about the strategic the strategic route we're taking and what we are looking for in that work. Cool. Thank you, Alastair. So just going through some of the strategic updates. One of the things I wanted to bring to the forefront is, I guess, there's uncertainties in the current climate around what goes on, what's your long term market drivers.

20:26 Of the questions I've been getting is, well, what happens to marketing budgets more specifically around digital marketing as you have more uncertain world and it's discretionary spend for quite a lot of businesses? So what we've continued to see is digital marketing as a proportion of overall marketing budgets continuing to increase. So displacing some of your traditional marketing budgets or even in advertising coming into more digital where you you know who you're speaking to. There's also been a focus not just on customer acquisition, also on retention marketing, really driving experiences at the different touch points as I mentioned at the start of the presentation. However, I've got a few industry stats and also independent surveys that have been carried out. 76% of business leaders plan to either invest more or keep the same amount of budget within digital marketing. Still generates the highest return on investment from all digital marketing, sorry. Email still generates the the highest ROI from all digital marketing channels and digital marketing from an overall spend perspective from a marketing landscape, that also generates the highest return because you can measure it. It's more cost effective. You know who you're speaking to.

21:39 Also, what we we continue to see is an increased take up of different channels, within the overall customer experience, whether it's around SMS, whether it's, WhatsApp in some of the Asia, countries that we operate within, but also in app push where a brand has, not only a website experience, but also a mobile application. It's be making sure that you have that consistent message across every touchpoint that you have with the end recipient. You're seeing an increased, usage of data, more and more data coming in, drive for zero party, first party data, But, also, the industry in its own right continues to grow. The TAM is estimated depends on which research you look at, but the TAM is estimated at about 6,500,000,000 and growing at a CAGR of about 10%.

22:34 The fresh relevance side of things is a little bit more greenfield. It's, still early in in the journey of life cycle of a market where you're really driving based on data that you have on a person, a a unique experience or one to one experience when they not only visit the website, but also the campaigns that are being sent out. That represents about a TAM of about a billion growing at around 23% year on year. And what you've consistently seen more in the uncertain times is really people looking to consolidate their stack, choosing a vendor that can serve majority of their use cases, but it's a bit more all in one than just different point solutions that they may be using.

23:24 One, to drive efficiencies across their marketing department, that you only have to learn one platform instead of multiple platforms, but it also allows you to really piggyback on the full experience opposed to just looking at different point solutions and how you integrate that data into one place. So the go growth strategy, I mentioned it at the start. Very focused. Keep it simplistic within the organization around the three growth pillars, geographic, product innovation, and strategic partnerships from an organic standpoint, really expanding expanding our product suite, making sure our sophisticated marketeers are doing more with their marketing strategies to really drive that return on investment, very much focused on building on those customer relationships, really delivering what our customers have chosen us as their vendor of choice or partner.

24:16 But, also, what we describe as our land and expand strategy as we've seen the pipeline continue to build with whether it's larger enterprises or higher value customers who are deploying the platform out across many different territories, many different brands. We're very focused in making sure we continue to deliver. GROUP customer base globally, and we've continued to see that across the three geographic areas which continue to grow. And, really, as I mentioned at the start, our proposition for go to market is not just the platform. It's also the people that really bring everything to life. So continue to globalize our talent pool. Very much focused on our strategic partners, whether it's the integrations we have within the ecommerce platform space or integrations into CRM, but that continues to increase. As we look into the the future or in the next twelve months, we've really built in, integrations into ERP solutions, into point of sales as, retail customers are trying to marry up in store data with online data as well as into customer service software.

25:33 So whilst we're focused on organic and, that continues to, grow double digit, We also look at complementing our organic growth through acquisitions, and you would have seen that through the acquisition we did two months ago. Majority of our acquisitions that we look at is really to, enhance the functionality set for our customers within the platform. So looking at adjacent technology more from a bolt on perspective that give us gives us product differentiation, but also ultimately what customers are looking for. So if we turn to geographic expansion, we've already touched on some of the areas that, or some of the challenges that we had two years ago as other competitors that weren't really focused on profit margins were really driving higher base salaries, etcetera.

26:27 We weren't playing in that market. You fast forward to where things are today. It's more of a level playing field. People are looking at profitability of customers opposed to just pure discount and buy market share at any price. We've seen, and Dallas had touched on it. We've seen an increase in the bookings rate. But also as you look into q one, that's growing quite strongly. If we last time at the presentation, I was talking about a u shaped recovery in the North American market, and we see that now coming through. So where we had, some of the challenges that came that the growth rate was double digit, came down to about 3%. In the half year, it came to, flat, so we didn't decline in region. It was really much focused around the existing customers as we put more sales and customer success teams back in, to the region as we rebuilt it.

27:20 Obviously, there was time in terms of ramp up or enablement within the the region. Second half grew faster in order to come back to a 2% in local currency growth. And as we go into q one, that's grown even further from there. So very much happy with what's going on. We have highly experienced team and very much that have been playing in the marketing automation space. EMEA growth, very strong, 9% in period. Whilst ecommerce, I talked about the the sales cycles for ecommerce procurement is slightly longer than it has ever been. However, that that opportunity has not gone away. So they are taking longer, which means a higher pipeline value, and that grew 3% in the period. However, what we saw in the EMEA market where we are the largest for what we do, we saw the CRM connectors grow over 20%.

28:19 That was 7% the year before that. And that's a combination of like for like sales cycles as well as a bit more focus from a sales and marketing perspective around noncommerce customers. In terms of APAC, that led the charge in terms of growth. That grew 19% in the period. Strong growth from the ANS market, so that's where we operate from. However, some of the, Asia regions, that we've been investing over the last twelve months, both from a go to market perspective, but also, professional services teams in region has continued to grow quite strongly. One of the areas, obviously, still very nascent in or smaller proportions of the the APAC revenue is Japan, where we started to dip our toe in the water, as I like to call it, where we can understand the proposition, what our market viable product looks like, what our pricing pricing and marketing strategy needs to look like.

29:19 That early indication is very strong. We have a translated UI into Japanese. We have local people in region, but it's been one of the fastest growing from any country that we've we've gone into in terms of building that partnership network. Also, if we look at some of The U unit economics in terms of sales, the percentage attainment to sales targets has been very strong in the Japanese region. Also, the customers within the Japanese market are a lot larger from an ARPU perspective, so close to $4,500 per month in region compared to the overall book of business, which is around £1,600. I just wanted to take you through an example of what we're seeing as the market changes to consolidate stack, but also you see some of the large enterprises where, from a behavioral perspective, are not just looking at customization.

30:19 They're looking at more SaaS products that either serve 94, 95% of the overall functionality set. I can't name the conglomerate. However, this conglomerate has over eight different fashion brands, operate across the many different territories across the globe. We originally signed them up in APAC and then signed a a different brand in the EMEA market. What they were were internal advocates when procurement started in North America. They were looking to really consolidate the Martech stack across all of their brands, across the different territories. That obviously led to an RFP. We, closed that in q one of this new financial year.

31:07 That resulted in the customer stat spend from around about a $100,000 on an annual contract value, so annually, to $900,000. So you can see that the platform scales. It can cater for the larger enterprises and the number of users. But, also, we continue to have a strategy on not just winning new business, driving existing customer growth, but also landing, building those relationships, and expanding across the different regions. So looking at product innovation. Over the last twelve months, I touched on quite a lot of the AI features. I will, talk you through some of that because a lot of companies go out and just build one bit of functionality and call themselves AI companies whilst we've infused a lot of the functionality across the the whole platform. And we'll take you through some of the examples and how that helps make our customers' marketing departments a lot more efficient.

32:07 Lot of work has been going on around the reporting and analytics layer. In the r and s, I talked about the total economic impact study that we did with Forrester that we commissioned. Our customers generate about 409% return on their spend over a three year period, which is one of the strongest in the whole competitive landscape. We've also seen strong adoption of the integrations that we've been building. So it's two types. Strategic partners are very deep integrations, and, typically, the end user does not leave the platform where they can kind of piggyback on our functionality. And then we also have other integrated technology partners or other technologies business systems where there's a lot more in terms of data synchronization coming in for driving that relevancy across their marketing campaigns.

33:02 We saw a 100% increase in adoption of the integrations that we've built. Some of the accolades, independent, verifications with g two Crowd is based on customer feedback or customer reviews that really differentiates us into the different categories that we are leaders within. However, one of the areas we measure from the r and d we spend and the monetization is what we describe as a functionality recurring revenues. That's a combination of license, that's a combination of data, and bolt on functionality our customers are using. As they become more sophisticated or their business grows, as they are successful, that generally, in turn, means we're more successful. That grew 11% in the period.

33:52 So Winston AI, is as I said at the start, we've got various different, functionality points. So it could be through the algorithms and functionality built through our data science teams as well as, using ChatGPT

34:10 across the platform, natural language. So lots and lots is going on around AI and what we've built. So things like content creation, things like data sorry, subject line recommendations, using Winston AI to drive split testing and making sure you're getting the highest return on whether it's the the subject lines and then making sure all of the campaigns go out with the higher open rates, or it could be a many different metrics as well as content review from a tone perspective. So we're getting a lot more marketers using

34:47 using that functionality. Could even be turning an email campaign into a 160 character text. You can ask Winston AI to turn that into an SMS whilst making more efficiencies. As well as as we look into the future, lots more

35:04 functionality is still gonna come through in analyzing data. It could be recommending areas that that you can really drive a further, more personalized campaign. So lots of work going on in there. But as well as using ChatGPT across the platform to make departments more efficient, We have lots of different other smarts, as I call it, so a functionality point. We have over 80 smarts in in the platform that are really driving AI efficiencies across the platform usage. That has been one of the fastest adopted, since launch ever, from the functionality that we've put out into the marketplace.

35:49 That's being used now 25,000 times a month considering we have 4,000 customers.

35:56 I'm not gonna go through all the road map themes, but key areas we we we focus on is really bringing data in seamlessly into the platform, allowing our customers to scale and grow with the functionality that we build out, But, also, as we as we've built lots more functionality and depth to the platform is being able to really discover that as part of the the usage and adoption. We are looking to use some of the kind of PLG or product led growth motions as we look forwards to really drive a

36:27 higher rate growth rate as well as really allowing our customers without having any expertise in house to drive that exceptional content and personalized real time experiences. So strategic partnerships, that grew 8% in the period. We already talked about some of the key areas. One of the questions, I believe, we've got already is around the Shopify connector. That led the charge in the ecommerce connector space that grew 19% in the period, and that continues to grow pretty strongly. But also some of our other ecommerce connectors, things like Magento, BigCommerce,

37:05 commerce tools. We're connected and have a a more agnostic approach, building those deep partnerships, making sure we continue to deliver on the use cases of our ecommerce clients. In terms of CRM, that was led. That grew 22% in the period led by Microsoft Dynamics, and that's been the focus around,

37:26 working closer together, with Microsoft to really drive brand awareness across their user base. I believe I've had another question in terms of what other ERP systems do we connect into. That's things. So we connect into the Microsoft ERP stack. We connect into NetSuite, which is a recent, integration that we've done.

37:50 So we have been accelerating a bit more of the investment around the r and d, on integrations, really making it easy across business systems to aggregate data, use that data, and then triggering off or continuing a marketing automation journey.

38:12 So we've touched on it, and we talk about technology and people. If we see what we have, spread across the the different, territories that we operate in, predominantly in technology sales and customer success, was also nice nice to see at the peaks, we're probably, when the media was talking about the great resignation elements of that, we're probably peaking at about 22% annual attrition within our our organization. That's now come down to less than 12%,

38:45 and it's probably close to 10% after the first quarter. So a lot of work has been done around that. Average tenure, obviously, we we hired quite a lot of people, really taking advantage of the talent that, unfortunately, some of the SaaS businesses that were really focused on the hyper growth model were laying off. We were fortunate that we are profitable. We talk about sustainable growth model, really taking advantage of the talent. We added about net 70 people through the period. But what's also nice to see and I'm proud of is it's a highly engaged workforce. It's really believing in the vision and us continuing to deliver against the vision of what we're looking to do over the next number of years.

39:34 So we we touched on a little bit around fresh relevance. When I took over CEO of the business around eight years ago, we really started building up building up the ecosystem, whether it's around our partners, whether it's around our technology. One, to test the thesis of, what our existing clients are willing to buy or want more of as well as what helps us complete the proposition from a new customer acquisition perspective. And one of the partners there, was Fresh Relevance. We've been a partner for five years. They have 300 customers, and we've got 60 joint customers to date. I guess where I talked about the cuss the Martech stack being consolidated, more and more customers are or prospects are looking for an all in one solution.

40:26 It made total sense to really bring to the forefront whilst we had a lot of the outbound channels, some of the inbound channels, really using all of that data points,

40:38 using the functionality to then drive a more personalized web experience. So what does it do? Well, it drives a higher ARPU. It creates, more enterprise deals with the capabilities that it can do not just from the campaigns and engagement that they're sending out, but also augmenting the customer experience from a, website perspective. It broadens the sector coverage and really increases the customer stickiness. Also, we've identified strong opportunities within upsell, in our own customer base. Obviously, we've had the benefit of the 60 customers looking at at the the characteristics of those. It adds for for the ARPU spend, it adds in the further 50% to the ARPU when the customer chooses both the technologies together.

41:30 But with DOTDIGITAL, the other bit it does is really by integrating the two technologies together, it enriches our customer data. So with DOTDIGITAL, you're talking to identified customers, whether it's identified through other interactions or data you're bringing into the platform or people that are, that are engaging with your campaigns. In terms of fresh relevance, a lot of the visitors are anonymous. So by tallying both of those two data points, it then identifies more visitors on your website, really bringing that end to end journey, but also a higher return from the data that is being used. So a lot of you that have attended the presentation previously would have seen the platform and the functionality in the the core areas that I talked about, whether it's around data, the orchestration layer, the different channels.

42:24 And for us, there's a number of things that the Fresh Relevance acquisition adds from a technology standpoint, whether it's around the website channel, whether it's around the orchestration layer in terms of real time personalization across the different channels, dynamic content, being able to really put things like smart blocks as we describe it. It's a block that comes in that can be changed based on behavior and also the start of UGC or user generated content. So whether it's product reviews that you want to bring in, whether it's company reviews, it allows us to really bring all of that information into one place to then drive a more personalized experience.

43:10 So looking ahead, we like to focus, not try and do everything all at once. The the key priorities for us for f y twenty four is really converting some of that larger, higher value pipeline that's been coming into the funnel. Really growing our whilst we continue to build the technology, the depth in the technology, it's growing that awareness and of the capabilities across the different regions. Very much focused in the r and d around the CXTP or customer experience data offering. Ongoing appraisals of potential acquisitions, talked about around synergy technology bolt on acquisitions that can really give us even more product differentiation, greater depth in the customer experience space, and maximizing on the benefits of the Fresh Relevance acquisition.

44:01 So what have we got? A very strong playing on the front foot, strong growth in the the different regions, strong monetization opportunities around the platform, growing strategic partnership base, but also pro positive trading momentum as we've gone into q one of the financial year. Higher value, customers coming on board, but also existing customers sending more messaging, momentum in the industry, digital marketing growing as a proportion of overall marketing budgets, a growing pipeline for the enhanced proposition, really delivering and continuing to, deliver against those organic growth pillars I talked about, whether it's around geographic, product innovation, or strategic partnerships. We do have strong favorable market growth strategy, sorry, growth drivers, but also a strategy to support the execution of those opportunities.

44:54 Highly visible SaaS, revenues, 94% recurring, of which 79% is forward contracted. Robust balance sheet, no debt, so giving us the ability to continue to invest organically and through acquisition points. Alessandro, I'll hand back over to you. Perfect. Milan, Alastair, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab, which is situated on the top right hand corner of your screen. But just for the company to take a few moments to review those questions that have been submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. As you can see, we've received a number of questions throughout today's presentation. Milan and Alistair, if I could just ask you to read out those questions and give responses where it's appropriate to do so. I'll pick up from you both at the end.

45:47 Yeah. Do you wanna Fine. First question we have, how is growth of revenue from Shopify trending? We well, so growth growth of revenue from Shopify is strong well, was very strong until last year. Right? So the last year, we have seen some stress in ecommerce world. That's not just us. That's the ecommerce vendors themselves. So it's been level of challenge in, well, in Shopify, in BigCommerce, anyone we see too. I think we've still achieved 19% from our Shopify connectors, which is, I would say, ahead of expectations for the market. If you if you break down their overall revenue growth and you pull out payments, I think we would be doing very well within their ecosystem and particularly so in some of the regions that are not as well served by the large North American competitors to us. So your your Asian markets in particular.

46:53 Just to add to that, obviously, we've got we play within the Shopify Plus space, not just in the the kind of core Shopify. So our ICPF clients is more mid market. We're still early on that opportunity. So whilst there might be, decision making that's taking longer, we're still being able to convert across the whole Shopify customer base. Next question. Have we will summarize. Have we modeled a scenario in which we cut back investments to maintain steady ARR? Mean, yes, I've modeled lots of scenarios. It's a it looks great for a year or so. You can make several million pounds a year by not spending anything on sales. You could pay back r and d and marketing as well, But we think it would be a pretty quick race to the bottom when we've got a group of competitors internationally who invest well and invest a lot. So I think it would be a it'd be a very it'd be very challenging indeed to maintain the existing customer base we have unless we continue to innovate, continue to show momentum in a marketplace, and and demonstrate our relevancy in that marketplace.

48:10 So it's I mean, you you suggest it might be unwise in your question. We agree it'd be very unwise, so we're not gonna do it. However, adding to that, what we've consistently done is talked about a double digit organic growth rate with 20% plus operating margin that we've consistently delivered, fifteen years of us being a public company. So revenue growth, does get invested back. That's, we can see the CAC to LTV ratios going in the right direction. So for us, we will consistent or continue to produce a 20% plus operating margin, 30% plus EBITDA margin. The rest of the growth will be invested back. I mean, to to to the extent there's largely a trade off between revenue growth and margin, that's not perfectly one to one, but it's not far off.

49:03 I think in general, a balance of a good growth rate and a positive margin is a good thing in today's economy. I think having growth only but no margin is probably a little bit scary, and having lots of margin but no growth is certainly not very appealing to investors. So hence hence, we'll stay with the middle ground that we have. So one of the other questions we got, which ERP systems do you currently connect into? So I I believe I tried to answer that as we went through the presentation. But, just a reminder, Microsoft ERP, NetSuite ERP, we have whilst Salesforce, talk about really building out the the different categories into a wider ERP. We we connect into Salesforce as well.

49:56 And we'll continue to look at what demand our customers have and the areas. There is also whilst those are more deep integrations, there's the ability to use, our integrations platform as a service element to connect into any any ERP solution. We have a number, from a basic data synchronization into the platform as well as they have their own ability to connect into the APIs to push data into the platform. Question on headcount growth. Do we expect similar headcount growth increase in f y twenty four? No. It's it's a very short answer. There will be from a reported point of view, which looks at the average through the year, it will look like headcount's going up.

50:46 And, also, the acquisition of fresh relevance carries brings with it around 70 people, so the headcount will increase as a result of that. But if I look at it on a like for like organic basis, actually, our exit run rate from f y '23 plus or minus a dozen roles will probably be our exit run rate from '24 as well. So so as reported, it will look like it goes up, but we're not really hiring except backfill roles or or reallocate resource with there's no there's very limited net growth at this moment in time. And for us, it's about growing into the headcount that we've added, making sure that they're enabled and are are producing more from a go to market perspective.

51:34 The other question that we have is Potential for upselling. Can I take that one? Yeah. Go for it. Yeah. How much potential is there for upselling more functionality to existing customers? Is there a lot of headroom for growth just from existing customers? Yes. There is. So I'll I'll say there's broadly three buckets that I would put the headroom into. One is a increased volume of consumption of existing products. That is people having more contacts, more messaging requirements. We see that trend every year. It's one of our major drives of growth and one of the the reason we like the pricing model we have, which which will increase the cost of the platform depending on how much you put through it and how much you use it.

52:22 I think people are generally much better at acquiring new contacts than they are at cleansing their databases, and that is great for us. So so there's growth in that area. There's taking more functionality that we already have, And this is taking our customers on a journey from a relatively basic use case of needing a list of customers and send some emails to it through to giving them a true omnichannel solution using SMS, MMS, and all the other channels and using some far more nuanced data segmentation capabilities and and some of the functionality, which is can be driven once you've done that data work. And now that that adoption profile is something we we work very hard on. It's one of the things that really justifies the work we do on r and d. And I think our the proportion of customers we have in our top bundle, if you like, is growing very effectively at the moment. So we're we're deploying that, and you see that with new product releases around AI. We will, in due course, be building various tiers of that into our our pricing strategy and and working with it. Final category is additional functionality, which we don't currently offer. So this is like fresh relevance was. So it's extra adjacent functionality we don't currently have.

53:37 Now to the extent there is a market, and in some cases, it's a brownfield market to kinda take over displace the market to take over that functionality. Obviously, that's money that's already being spent by the customer. It's just getting it to move to us or acquiring the business that they're already spending it with. And and, obviously, a significant growth there because, for all of as of a total global marketing spend point of view, we represent an absolutely minute size because there is a lot of other functionality we could potentially offer. Yep. So another another question is if ecommerce connectors grew by 2%, but Shopify connector grew by 19%, which connectors contracted? So we saw a slight contraction in the Adobe Commerce connector partly because they have larger customers.

54:26 One of the things we have seen, obviously, with larger customers, there's a lot more people involved in decision making. So whilst in a period at the moment, we've seen that contract, We're seeing higher value opportunities that could come from that where they're in the pipeline. Yeah. So that's one area that has contracted. The other thing I'd highlight there is there's a there's a real asymmetry in terms of size of some of these connections. So 19% of one doesn't mean that another one went down by 19%. Yeah. I think it was more like minus 2% offsets to plus 19 because Shopify, as we said, is starting from a smaller base. It's been much it's a much newer relationship for us than the Magento one. Can you please elaborate on your tax rate?

55:12 Why is it so low, and what do you expect going forward? So, obviously, the the for most of the year, we just reported, we were still enjoying 19% corporation tax rate. Also, there's r and d tax credits, the big the big thing that goes on, which reduces that further. So there will be an increase in that tax rate of time because the mainstream corporation tax rate has increased, And we will continue to work to take advantage of whatever tax tax credits and tax optimization, let's say, is available with, well, with our own knowledge and the advisers we use. So Cool. For the SMEs that wants to improve its digital marketing ability from basic CRM used exploiting your omnichannel platform, is there some form of road map you offer? There must be loads of potential customers in this situation.

56:11 Yeah. So whilst we talk about our our ICP or sweet spot customers being in the mid market and enterprise, we also have small business that are graduating to a mid market platform. So the way we've built the platform is you don't have to have any expertise. So the step up, from a drag and drop technology perspective is not as big, from when you you use a I'm just throwing some names out there that are really optimized platforms for the small business segment, like a Mailchimp or a Klaviyo or Constant Contact. You won't see a big leap in terms of the ability to create campaigns efficiently.

56:57 The other bit is we then take them on an incremental journey. So do you wanna add a integration? You just need to put your username and password on, and then we do all the heavy lifting. And then you can start to then really deploy the different omnichannel. So there isn't a big step up for small businesses that want to use our platform and get get using it. Where Alistair mentioned we are losing some of the small business, that's where they don't, their marketing strategies are still very still are in the developing stages, so they won't see the advantage or the value in the depth of the platform because they're not trying to they just wanna get a campaign out single content to everybody.

57:43 So that's where where probably the pricing curve would work better with a a small a small business vendor. However, as you want to drive more experiences across your customer base or recipients, that's where the pricing cut curve optimizes, and you see the value in the technology. So I think oh, we've got a, we've got a few more. Any plans for a capital markets day to show shareholders the AI and fresh relevance functionality? Yes. At the moment, in terms of the integration, there's there's a number of things that have been done from a platform perspective. One being, obviously, we they were a partner of ours, so quite a lot. Some of the functionality actually is integrated into our campaign editing, as well as the marketing automation customer journeys.

58:37 One of the more recent things we've been doing is the single sign on so you can kind of you don't have to leave the platform. You you you're able to then piggyback, offer the different functionality points, whether you're a DOTDIGITAL customer or a FreshRelevance customer. As we look into the next six to twelve months, we'll be integrating more of the functionality to, to drive an all in one platform in order to take advantage in the depth of where the market is today. To simply answer the question, yes, we will be doing a capital markets a to do the demos of the platform, but that probably is about three to six months out. I think on that, we're probably out of time for further questions, unfortunately. Yeah. Milan, Alastair, thank you very much for being very generous. I think you've addressed all those questions you can from investors. And, of course, the company will review all the questions submitted today, and we'll publish those responses on the investor meet company platform.

59:33 But just before redirecting investors to provide you with their feedback, which is particularly important to you both, Milan, could I just ask you for a few closing comments? Yeah. Thanks, Alexandre. So for us, some of the the key messages for the last twelve months, it was a year of double digit growth, strong cash generation through the period, 94% recurring revenues. And we've continued to execute against our growth pillars, whether it's the progress in product innovation to push further into the CXDP space, whether it's growth across all of our regions, North America, EMEA or APAC, but also the strategic partnerships, more so in the last twelve months around the CRM partnerships that we have. For us, the opportunity from a market perspective continues to be favorable and growing.

1:00:19 The digital marketing budgets as a proportion of overall marketing budgets continues to grow. In terms of for us, the new year has started well with a robust financial position. The company is now strong stronger in business, both from a foundational perspective, but also opportunities with a more comprehensive offering and a clear growth path. Thank you very much, everyone, for attending today's annual results presentation. Thank you. Perfect. Thank you once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of DOTDIGITAL GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.

1:01:07 Thank you very much, everyone.