Dotdigital Group (LSE:DOTD) — Interim Results Presentation

0:01 Good morning, ladies and gentlemen. Welcome to the DOTDIGITAL GROUP PLC interim results investor presentation. Situated on the right hand corner of your screen. Please 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. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I would like to submit the following poll. As usual, if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Milan Patel. Good morning, sir. Thanks, Jake. Firstly, I'd like to say good morning to everybody, and thank you so much for spending the time to attend our interim results presentation.

0:52 Firstly, I'll take you through some of the highlights. And for some of the some of the listeners, I think it it may be the first time. So I'll give you a quick snapshot of what the company does and then move

1:04 through the presentation, taking you through some of our organic growth pillars and some of the things that we we are seeing over the last six months, but as we move into h two. So if we look at the half year, very strong profitable growth continuing to come through, and that's the theme that we've always had. It's all about sustainable growth for us, not hypergrowth. Some of the things we have been seeing in the last six months, we've continued to see that healthy demand pipeline building across all three of our regions, whether it be North America, whether it be our EMEA market or within APAC. We've continued to add from a product innovations perspective. And as we go through the presentation, we'll talk a little bit around the product road map as it from a longer term theme perspective and some of the things that we've been doing.

1:52 In terms of the macro environment, what we continue to see is marketing's marketing is getting a lot more sophisticated. They're also looking at platforms or marketing stats that really help demonstrate that return on investment, whether it's optimization of what they're doing, whether it's really building communication at every touch point that they have with the end customer regardless of whether it's a transactional message or a marketing message. Some of the things we highlighted this time last year, we were seeing some headwinds in the North American market. And as over the last six to twelve months, we really address them with the labor market. I guess there's a lot more softening. It gives us the ability to really hire the talent that we need across the regions to really scale up as we look forwards.

2:43 In terms of for us, we always look at our recurring revenues, and 95% of our group revenues is now recurring. And Alistair will go through some of the, revenue mix and also some of that which is contracted, some of that transaction driven. In terms of for us, we will continue to invest within the organization, both from an organic standpoint as we've now as we've now got more of the management bandwidth. But we also have a robust balance sheet that allows us to really invest, really look at what we need to do next and take those opportunities. In terms of outlook, we see that very positive with pipelines of higher deals coming on board. But if we look at the half year, 9% organic growth in the period.

3:33 We continue to see that profitable growth coming through EBITDA margins of just over 30%, operating margins of over 20% and that ARPC continues to grow. In terms of cash balance, that's grown 24 in the period and sitting on about just up shy of 50,000,000.

3:57 So who we are? We started out life back in '99 as a web design development house, originally built the product for the BBC. And since then, we've continued to add, r and d in regards to really building on the vision, really building on the market evolution where it probably just started as an email marketing platform to really drive the marketing automation and then giving our customers the omnichannel ability to really connect with their end recipients. Have over 400 global employees across nine international locations. We have three main hubs, EMEA being sorry. 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. Now when we when we describe hubs, that's having every single department in the region, which you can then really scale from as you push further into the continent or within the territory that you operate.

4:54 For us, we've built our business on three main organic growth pillars, one being geographic expansion, secondly, being around product innovation, and thirdly, strategic partnerships. And for us, the strategic partnerships either represent 10% of our group revenues or have the opportunity to represent 10% of our group revenues. But we have also an ecosystem of other partners, which are very important to us around agency partners that really build the websites or build the ecommerce websites or around technology partnerships that operate around the ecosystem. In terms of where we're focused, we're very much focused in that mid market. What we are seeing over the last six months more so than ever before is that increase in enterprise customers that are using our platform.

5:44 In terms of the platform, there's four main parts of the platform. Over the last twelve months sorry. Over the last, eighteen months, we've been building our customer data platform, which allows our customers to really bring data in from many different business systems easily into the platform without having to speak to IT. And then having that aggregation of data so you can really understand who you're speaking to, really look at buying behavior, whether it's flat file data that is being brought in based on, whether it's your CRM, ecommerce, whether it be point of sales if you're a bricks and mortar store, but as well as ecommerce where you're trying to combine all of that data to really provide a relevant and personalized experience.

6:30 The second part to the platform is around orchestration. That's about building marketing automation back of like a drip campaign where you can continue testing, really optimizing what you're doing, having the ability to create that content, and then giving all the different channels, whether it be email, SMS, in app push, our own chats platform, landing pages, surveys, messenger platforms like WhatsApp, as they open up a little bit more around marketing messaging. We continue to see that demand, and I'll take you through some of the stats that we're seeing. So what we've continued to see, we have over 4,000 brands that use our prod product sorry, brands that use our platform, over 50,000 active monthly users.

7:19 If we look at the three KPIs that we look at against the organic growth drivers, we continue to expand from an international perspective. That has accelerated in the period over the last six months. And from a strategic partnership perspective, we've seen over half of our customers are now connected of some sort. We'll never get to a 100%. We have expertise across many different industries, but some of the industries are driving ROI through communication to communities like your government, like your police forces, etcetera. But the characteristics of connected clients versus nonconnected, they're a lot more stickier. They're a lot more sophisticated in what they wanna do. They're very targeted and, use the data to create relevancy and personalization, and the ARPC is a lot higher.

8:12 Also, what we can see from the 95 recurring revenues, there's two main component parts to to that recurring. One being the license fee and functionality, which continues to grow in the period. That's where the license fees are based on a number of contacts that they're bringing into the platform. As the contacts continue to increase or our brands drive more marketing to to increase their subscriber base, that in turn means ARPU expansion or ARPC expansion. And the rest comes from data that is being brought into the system and bolt on functionality that our customers may use. In terms of messaging, that's outside of SMS.

8:58 That's a committed volume at a fixed monthly price, use it or lose it. But if we look at our ten year trend, that continues to be double digit top line growth with double digit bottom line, and a focus on that cash conversion.

9:17 So as I mentioned earlier, we do have expertise across many different sectors. These are probably names you can recognize. And one of the questions I get, well, how much do you we talk in the context of ecommerce because it's easier to understand. Around about 35% of our revenues comes from retail and e ecommerce. The rest is split with many different sectors. The platform from a functionality standpoint is built not only for b to c marketers, but also b to b marketing. We have about 50% of our customers in b to c marketing, about 50% of our customers in b to b. So what are we actually seeing from a macro dynamic perspective? There's a slight change. You know, prior to some of the macro uncertainties, it was all about winning lots more customers from a customer to drive customer acquisition.

10:12 I think as we've continued to see, there's a lot more emphasis now more than ever around retention and loyalty from a marketing standpoint. A lot of, our customers as well as just the general, market is really looking at cost effective, looking at quicker to deploy solutions to drive that optimization in ROI. We commissioned, Forrester to carry out independent, total economic benefit analysis. You can download that on our website. And, effectively, our customers, that use DOTDIGITAL platform receive a 409% return on investment from what they're making within nine month period.

10:57 So you can see that independent analysis on our website. Email still continues to drive the highest return on investment out of all the different channels, but we are now starting to see our customers and marketers really drive additional channels to augment the experience. For every pound spent on email marketing generates £42 return. For a dollar spent on email marketing generates $50 or just over $50 return. Now, obviously, the more relevant you are, the more personalized you are, the use of data helps you achieve some of those larger numbers, but you still have some of the marketers that are going through that journey. In terms of for our customers, we continue to see it with the customer data platform.

11:44 That has increased in adoption quite significantly. The importance of data and bringing data in in, into platforms is still very much a higher priority for marketers. So that's some of the things high level that we're seeing, but you're also starting to see things like landing pages, surveys that are being used to really drive zero party, first party data. And digital marketing as a proportion of overall marketing budget continues to increase. Some of that is displacement of areas like advertising budget, some of your traditional marketing tactics that you may have used, things like magazine, paid syndication, TV, radio advertising. That is going to digital marketing where it is more cost effective. You can measure the return on investment, and you know who you're talking to.

12:39 So we've had presubmitted questions around competitive landscape. So I'm gonna spend a bit of time, in terms of what the landscape looks like. And there's three main segments, platforms are really optimized for, whether it's down that that small or micro business, which is typically a credit card sign up. You don't really talk to anybody. And there is a level of functionality that really helps you get the basics right and then allows you to do a little bit more sophistication, but doesn't give you the complete flexibility. And that's where platforms that are really built for the mid market come into play. It that's around deeper functionality, whether it's getting closer to an all in one platform, not quite the all in one platform.

13:26 That's around best of breed partnerships that really help drive relationships and ultimately return on investment for our marketers. These logos haven't really changed. What you are seeing in the marketplace is some of the private equity backed, VC backed businesses have, I guess,

13:47 moved away from just pure hyper growth at any cost to really driving operating leverage through the business, reducing cash burn as cost of debt goes up, and, naturally, money is a little bit more harder to come by. So natural place would be layoffs. That does create toxic culture when you start making redundancies, layoffs within organizations. So some of them may be slightly distracted. In terms of other areas, down at the small business, it's about providing product differentiation. It's about making it easy for our cost for prospects to migrate to a more sophisticated system. Where we win, it's around having the expertise, having the people to help customers migrate, also product functionality against some of the the competitors that play in the small business space.

14:46 Typically, we find customers that are spending over a thousand dollars a month or thousand pounds a month. That's where they're starting to see the full breadth and depth and the value, from our platform where they are using data, they're starting to use those channels, they're starting to automate campaigns. In terms of around the mid market, it's certainly, we all come from a different heritage where we've put most of our r and d. We've obviously added additional functionality or areas. So each one of them comes from a different environment. So Braze, for example, used to be called AppBoy. They came from building mobile apps. So they're they're deeper in terms of functionality around in app push, but less so in the email marketing or SMS arena where we play very strong in that marketing automation. We have capabilities in in app push.

15:43 And as we look forwards from a product innovation perspective, we'll continue to, enhance the other channels that we have. In terms of Immersus, more recently, around about two years ago, was bought by SAP. So we're now starting to see some of those clients looking at platforms that can really help solve some of their use cases that they have. So part of what we've been doing is really building up functionality from a product differentiation in that mid market to drive 1,000 or to drive value prop for that midsize. The other element that helps us win against some of the mid market is around our expertise and functionality that really helps them get more efficient within the marketing department. So if you look at our TEI study, you're naturally seeing efficiencies with the drag and drop technology that we have, the how easy we make it to bring data into the platform. The platform does most of the heavy lifting and giving them the predictive capabilities to suggest what to do next.

16:50 In terms of at the higher end, larger enterprise, most of those platforms are really built for customization. It's about really driving all of your business systems, continuing to customize to your business processes. A lot of the platforms, including ours, we probably have 94, 95% of that functionality any one of those in enterprise cloud has. And in today's market, a lot of the enterprise clients are really looking at, are they seeing value from what they've obviously invested in? They are looking at more cost effective, quicker to deploy solutions that can drive that return on investment.

17:33 So some of the things that really stand out from a DOTDIGITAL platform is the real time insights. We've done a lot of work around the platform architecture to drive real time behavioral data, whether it's real time synchronization of data. We've also put quite a lot around personalization, whether it's content personalization, some of the work that we're doing around predictive capabilities to drive a more relevant experience, and we make it seamless across different channels. One of the last times we were speaking, it was around single customer view or customer data platform that can really aggregate all of that information. So previously, we had email address, telephone numbers to stitch all that data together.

18:22 And as we look forward, we'll be getting to no key or any key. One of the presubmitted questions, well, who do you normally see most? Or if I phrase it, what's the most dangerous competitor? I think everyone comes from a different angle. So it depends on what the customer needs. It depends on what the customer is trying to solve, in which case, we may win accord and sometimes some of our competitors win in the space. But if we look at the the graduation path or those customers that are moving from small business to mid market solution, we typically see Klaviyo coming up, where there is a graduation path.

19:11 In that mid market, we're at the moment seeing Braze as a, in some of our deals or more more of our deals. Less so. I think that's a displacement, as contracts come up for renewal, but we do see in the mid market. And I guess across the the the larger enterprise, we will, at some point, see some of those. They don't come up in every single deal, but they do pop up in some of the deals. So I'm gonna let, Alastair go through more detail around the financial model and what we've seen around the half year. Great. Thank you very much, Milan. So except as we've presented our full year results back in November, but I appreciate many of you may not have seen that. So I'll cover off a bit of history before we get into the detail of the half year.

20:11 The company's had a very successful long term growth profile. The ten year CAGR on both revenue and profit is close to 20%. And cash generation has grown sort of fairly steadily through that period as well as the cash flow profile has been consistent relative to the P and L. What we've seen in recent years is a trend whereby we've probably kept broadly consistent customer numbers, but we've been replacing some of our, legacy low value customers with more higher value customers. And also sort of on average moving up in the market as Milan describes with some of the functionality gains that we've had in recent years.

20:58 This has driven the average revenue per customer to increase period on period. And once again, that's happened in this half year. So average revenue per customer growing broadly in line with total revenue growth in the period. We've the story which has been exciting, I've only been in business for just five, six months now. The story here I think is really good. It's not just a question of absolute revenue growth, but revenue quality as well. We've 95% of our revenues are recurring in some way. And of those of total revenue, about 79%, nearly 80% now, is contracted recurring revenues on forward contracts where we have good visibility of revenue. There's still potential to get overages and additional revenue from those customers, but the contracted amount is obviously protected for the life of that contract.

21:53 We've been growing those contracted amounts at double digit rates in recent growing the recurring amounts at double digit rates in recent years. And our total revenue growth rate should tend back to that kind of level. ARR growth, as you can see over the last couple of years, has grown at 9%, which is underpins the future revenues of the company. And looking at that, it gives us great deal of confidence in the numbers we have in the market, both to the end of this year and also for next year. Our cash generation has continued to be strong. We're now up to well, at the time of these at the half year point, we are up close to GBP 50,000,000. We protect that asset by having it distributed between various banks in different jurisdictions, but also optimizing where that money is kept to make sure we both have can use it strategically if the opportunities arise, but also maximize the interest return we get from the asset.

23:00 In the periods, we saw very slight erosion of our gross margin percentage, but really this is due to revenue mix. We had a very strong performance in some of our lower margin transactional lines, which is a nice problem to have. It's only a margin percentage, which is slightly diluted by that. I think the shape of the rest of the P and L remains broadly consistent with previous periods. We continue to manage the business and will continue to manage the business to achieve a 20% plus operating margin, 30% plus EBITDA margin. And we believe that, that is consistent and can be maintained whilst getting back to consistent double digit growth of our on our top line.

23:50 I think the only other point to note there is our admin expenses, and this drives the profile of profit in the year versus prior year. We hired well, in the prior year, we actually had an exceptionally high EBITDA margin in the first half of the year because there were quite a few open roles. This year, we managed to hire very early. So we actually had the cost of a high proportion of the people we want to hire in the year already there through much of the first half.

24:19 Think Lance already referred to the headcount growth or he hasn't referred to it, it's in our interim accounts. We added circa 45 people during the first half of the year, and many of those came in Q1. But we the benefit of this is we now have great visibility of our cost base at the end of the year. We've got very limited plans to add further people through the rest of the year. So we've got a good view of our exit cost run rate, and therefore, already well into our sort of budget planning for next year, which is going well.

24:52 Balance sheet is continues to be very healthy. From an operational perspective, I'm interested in the debtor balance. I think debtors are a great leading indicator of customer satisfaction and the health of the customer base in general. I think whilst our debts have grown marginally, that's only a result of our total revenues growing. The aged debtor balances and the aging of the balances has not deteriorated at all. So we're happy that we've still got good credit control in place. And despite stress that's reported in the wider economy, that so far is not playing out on our balance sheet, and it's also not had any material impacts on our churn rates, which have been controlled, even actually declining over the last few months.

25:39 As discussed, we've now got close to GBP 50,000,000 of cash. This is obviously before paying the dividend. So that's actually dipped very slightly since then, just under GBP 3,000,000, but it's building back up one per month. And of course, we remain debt free.

25:59 Cash generation, a little bit lower in the half year, but largely because we had a we were about if you look to the full year numbers, it was about 108%, which was exceptional because we had a small working capital benefit right at the end of the year to do with the timing of invoicing and payments of our so our SMS suppliers. So a small reversal in that profile in the period. But we still the underlying generation cash generation of the business, we still see has been at or around 100% cash conversion, which we're happy with. And now we have this cash, obvious question is what we plan to do with it. We're working hard on various M and A opportunities at the moment. We think there's opportunities in with adjacent technology and valuations of smaller businesses are starting to become a little bit more realistic than they were probably twelve, eighteen months ago.

26:54 So we're working hard on that pipeline ongoing. And with that, I'll pass back to Milan to talk through some of the growth opportunities for the company in the coming months.

27:04 Thanks, Alastair. So if we look at what I described in summary, our three organic growth pillars being around product innovation, geographic expansion, strategic partnerships, and we'll take them in turn in terms of what's been happening over the last half year. But for us, it's continuing to grow our customer base globally, especially with the talent that we've now put in from a go to market perspective and customer success, whether it be in North America, whether it be in APAC or into EMEA. Very much focused on our relationships,

27:34 making sure we're delivering on what our customers either have chosen us for or what they're trying to drive from a marketing standpoint as they look forward, from their planning perspective. So that allows building better relationships, but folk really focused on that cross selling. In terms of for us, we continue to expand our products. We we spend about 11% to 12% of our revenues on r and d. So for us, it's about incremental approach to r and d instead of massive step changes.

28:04 In terms of globalizing our talent, very, very important as we put, as Alastair mentioned, over 45 people. That's about really, them buying into the vision or believing in the vision that we're trying to do, whether it's around expansion in territories or regions, whether it's around product vision, but also the general culture of our organization. For us, it's the people and the platform that really make us successful. And some of the the strategic partnerships, that's continuing to deepen those relationships, working on joint go to market. And for us, it's not a traditional reseller model with any of these strategic partners. Strategic partners really help endorse the platform. It allows us to do joint marketing to the the customer base to really drive brand awareness.

28:53 And the end client or the end prospect is then referred in to us, whether it's through agencies, whether it's, that are building the websites or, deploying CRM, or it's a tech partnership ecosystem that are quite influential in those referrals. But, generally, our direct sales will close those deals. In terms of growth by acquisition, I think Alastair has touched on it slightly. For us, there is still that focus on organic growth. Right? That's the bread and butter of the business, but we do see opportunities around synergy technology or adjacent technology that really help,

29:35 from accelerating our vision to really being that customer experience data platform as we look forwards. So geographic, what has actually happened? Very strong, growth within the APAC market, and that's a continuous as brand awareness continues to build within the ANS market or Australia, New Zealand, we're now continuing to see that demand generation coming through and ultimately paying clients. However, we always talked about Far East Asia. You know, the hub, within Australia then provides some of the resourcing to our Singapore offices, and we were starting to see demand pull in the Far East Asia market.

30:20 One of the things we talked about at the annual results was really dipping our toe in the water within the Japanese market, whether it's around testing our value proposition, it was around building partnerships to drive brand awareness as well as really optimizing on the pricing strategy and the marketing strategy as we look forward. What we can say now, the demand continues to build. We're unique in a proposition that we have user interface against some of those competitors that you saw,

30:51 earlier in the presentation where we do have user interface that's translated into Japanese. We have sales enablement collateral, partner enablement collateral, but also a lead in region that can really continue building from a country manager perspective and really executing on the strategy that we have. And that's building very nicely. In terms of North America, as I mentioned, when we had the headwinds probably this time last year where the labor market was a little bit stronger than it is today, and it was a bit more competitive to get more talent. What we've, we've continued to see is staff attrition across the whole organization coming down quite significantly, which is great position to be in, but we've also been able to hire in region.

31:41 And at the time, we were seeing headwinds. It was all about protection of existing annuities. So what we've now seen, a flat year in half, that's because the compounding of the new bookings, obviously, that takes time when we turn the tap back on as we put more salespeople and customer success people. And what we're now starting to see is the bottom of the u as the compounding comes through. So that gives us good visibility to the end of the year. We'll start to see growth by the end of twelve months, and then you start to carry on the momentum from there as you look forward. In terms of EMEA, we're seeing improved retention of our customers, strong client growth, whether that's around, data that's coming into the platform, around contact sizes increasing, but also more functionality being used from an adoption perspective.

32:37 And what we are seeing is higher value deals.

32:41 One, not only have we, over the last six months, really, from a product innovation perspective, built functionality, but continued to enhance our functionality to drive the use cases of enterprise clients. We've naturally done brand positioning work with the depth of the platform that we have today. Other areas within the EMEA market predominantly are CRM connectors, where, obviously, UK, we are the largest for what we do. That's where we've got quite a lot of brand awareness. That's where we've we've been born out of. So we've continued to work with Microsoft to really deepen those relationships, working on specific verticals or industry types to drive brand awareness within a targeted segment of clients or prospects, and then you push out and increase that addressable market. So some of the areas we've been working with Microsoft on are around non for profit, around government, around education.

33:44 And as we look forward, we're continuing to add more from the sales and marketing dollars that we can deploy. In the period, as we go into the strategic partnerships, I'll talk you through, well, what does that actually do to our recurring revenues. So from a product innovation perspective, some of the pleasing percentages to see. If we had looked at number of customers using more than one channel this time last year, That was just around about 25% or just under a quarter of our customers. That continues to increase. Just over a third of our customers now use more than one channel. What's also nice to see is a quarter of our customers now use more than two channels. Now what do we mean by that?

34:32 You know, typically, marketers combine SMS with email to drive that experience and a richer experience. We're now starting to see more use of landing pages, more use of surveys to really understand the recipient and the experiences that they're driving and engaging with the brand. I think as we look forward, some of the the demand, They're still being educated, and and people are trying to work out how they use additional channels as part of their end to end customer journey. But we are starting to see more demand around in that push where they've built mobile applications and they want that consistency in messaging, but also WhatsApp as that opens up from a marketing standpoint.

35:19 So lots more work has been going around on around the data capabilities. It's about driving predictive capabilities. So lots of lots of work has been done there and the analytics to really optimize on a conversion optimize the conversion on, our platform. Other areas to to pull out here, 13% increase in volume growth from emails, 18% increase in SMS volume growth, but also g two crowds use customer feedback, customer reviews to really give out some of the accolades. And it's nice to see globally, we're seen as a leader within mid market, a leader within enterprise, and also one of the top 50 marketing products across the globe. The actual number's number 10.

36:14 So in terms of longer term road map, and it's it's very difficult to kind of give you specific functionality, but we do have themes within the organization of what we're trying to achieve with the r and d dollars that we're spending and potentially acquisitions to really augment the acceleration to where we want to be, whether it's around bringing data in easily into the platform, having more off the shelf connectors, that are doing a lot of the heavy lifting behind the scenes to really drive that relevancy and personalization, whether it's continuing to enhance our customer data platform. I talked a little bit around real time, events that are being captured to then drive marketing automation on the back of that or whether it's around pulling all that data together so that you can then visualize from a end recipient perspective.

37:08 So a lot of work has been going on, but we'll continue to add more, around data insights, around predictive capabilities. So making sure we give the the right analytics for our marketers to really understand the return that they're making. And around channels, you know, I've talked a little bit around in app push, WhatsApp, and that's continuing to enhance those channels as we look forward in and we start to see customers coming on board. So if you look at the the marketing environment or marketing industry, everybody is talking about customer experience. Everybody is describing it very differently.

37:55 And what I wanted to do is really give you guys what we describe our customer experience platform to be as we look forward. It's about unifying that data. It's about looking at pockets of that data to really see who's from an intent perspective, it's using predictive capabilities then to drive better decision making, elements of behavior modeling around AI, machine learning, but that's more to do with making faster and quicker, better decisions, really to automate and reach further the recipients across that whole customer journey, which allows our customers then to convert at scale. So strategic partnerships, that was up 17% in the period.

38:42 One of the questions I can see come up is what do you mean by connected clients when I I I went through the summary? What's happened with elements of Salesforce and Microsoft Dynamics? What's what's influenced the growth in the period? So what when we talk about connected client, just for a general definition perspective, we talk about a a client that is using one of the connectors that we've built, whether it's in, into our strategic partnerships. So in the periods, ecommerce connectors, obviously, we've we've, we've built connectors into whether it's Magento now known as Adobe Commerce, Shopify, BigCommerce, WooCommerce, commerce tools, BigCommerce.

39:35 Effectively, what we have today is the ability to address at least 60 to 70% of that mid market ecommerce merchant with the integrations that we have. And within the CRM space, we are adding more, but predominantly is led by Microsoft Dynamics and Salesforce. And some of the newer connectors that are coming are with areas like SugarCRM, for example. In the period, we still see double digit growth from our ecommerce connectors. So outside of EMEA, it's very much focused on ecommerce. So international markets are very much focused on ecommerce. It gives us a more focused approach and deployment of marketing dollars to take that segment.

40:22 And then we can expand further with areas like our CRM connectors, etcetera. In the period, from an EMEA perspective, which has led most of that growth in CRM connectors, that's, predominantly led by Microsoft Dynamics. And what we've been doing is very, very much working with Microsoft to really push into those verticals that I mentioned earlier. That continues to broaden. That continues to deepen in terms of relationships to really drive brand awareness amongst their their CRM user base. But it's nice to see 32% increase, in the period as we push further into that arena. Some of the other integrations that there's obviously wider than that. You can have a look at our public road map. You can see quite a lot of investment dollars being spent around integrations and within the tech ecosystem around our partners, but also some of the newer ones that we're working through, integrations into NetSuite, integrations into Zendesk, and that will continue to come through as we look forward.

41:35 So looking ahead and saving time for questions, very much continued momentum into the start of H2, very much building on demand gen across all three of our regions. Solid financial position, 95% of our group revenues is recurring, No debt on the balance sheet. We continue to see that cash conversion coming through. Very much a differentiated offering against some of our competitors, whether it be down at that small micro level and you're seeing the graduation across product differentiation from the mid market or even being able to provide the functionality in the platform for those larger enterprises. In terms of addressable market, that continues to increase. Digital marketing as a proportion of overall marketing budgets continues to increase.

42:25 A lot more focus around retention marketing as well as customer acquisition, but loyalty and retention marketing, and we're very well placed for that. Very much a clear strategic vision, whether it's around organic, growth opportunities or whether it's around acquisition growth opportunities. Jake, shall I pass over to you to provide any questions? Absolutely. Thank you very much, and Alistair as well. Thank you very much indeed for your presentation this morning. And, Alistair, if I may just ask you just to bring back up your camera, then that'd be great. Thank you very much, sir. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the top right hand corner of your screen. But just while the team take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

43:21 Milan, Alister, as you can see there in the q and a tab, we have received a number of questions throughout your presentation this morning. So thank you to everyone on the call for taking the time to submit their questions. And guys, if I could just hand back to you to address those where it's appropriate to do so, and then I'll pick up from you at the end. Thank you. Thank you. I I I can pick up a few of these, then I'll I'll we'll we'll get through what we can. And as and as when we run out of time, we'll we'll review the rest after the call and and publish answers as as we as best we can. So starting from the bottom of list, to what extent is your investment in the team driven by extra headcount? And to what extent is it a function of paying the existing team more? Well, early in the year, we did award the team pay rises of in the order of 12%. There was some variation based on performance and so on. But broadly it was a 12% pay rise. So the rest of the headcount or the rest of our cost increase is due with additional people.

44:19 No other major structural changes apart from that. International growth is 19%, whereas the rest of it has the highest region is only 17%. I think the difference there is it depends on which currency you look in. So in pounds, our international growth was 19%. In local currency, it was the values that you can see if you look at the segment analysis in the interim results. So I that explains the reason. Obviously, had some benefits from strength of the dollar. I should highlight, although that benefits our revenue, there's very little impact of FX on our profits because our costs are also distributed in dollars, Australian dollars, Singaporean dollars and so on.

45:11 Are there any new strategic partnerships in the pipeline in terms of geographic growth? And are these delivering on growth internationally? If that's you, Mana. Yeah. So as I mentioned earlier, there is some of the integrations that we've really built with NetSuite, whether it's around Zendesk. Those are probably live, and discussions are still continuing to happen. But some of the newer partnerships that we've we've added, one being BigCommerce, so, that's new to market. That's continuing to build, on a top line perspective. And naturally, that will help our international regions as we look forward because they are very much focused on that e commerce market.

46:01 Thanks. Can you comment on any changes to the product pricing in the last six months and in which regions? I can't. We haven't changed our product pricing in the last six months by region. Now, the achieved price we get is obviously subject to small variations in commercial pressure. And in general, we as you see from the average revenue per customer stats, we have been winning larger customers with better pricing. We're not seeing any significant change in discounting being applied. So I think fairly consistent achievement there. We will be reviewing pricing as part of a wider review of the packages we offer and the functionality we offer to customers over the coming months.

46:50 Are there any signs of softening revenues as reported by some industries currently? Well, I think we've we've taken the revenues we've achieved in the ARR we see at the end of the period, which is the best leading indicator we have on that. So I would say, at the moment, we're still on that kind of high single digit growth. I think there's signs of signs of improving performance, or should I say ramping performance of the new hires in the sales organizations in Singapore and North America in particular. And then also the, like, very, very positive early signs in Japan. So if if that bears fruit, then hopefully the the revenue growth will accelerate with it.

47:37 But also we have a diversified customer base across many different industries and no one customer is a significant proportion of our revenues from a margin perspective. There has been corporate activity amongst your peers over time as the largest independent mid market player. Can you elaborate on if there have been outside approaches or interest in DD in the last few years? If no, why do you think not? If yes, what was the opportunity they were exploring for DOTDIGITAL under different ownership? I'm not not sure we can shed a great deal of light on that.

48:23 Milan, have you got any comments? No. Think on that. Obviously, we can't being a public company, we cannot answer that question in quite a lot of detail. But with the fundamentals that we have, it'd be surprising if people didn't look at you, whether we feel it's the right time or we've got more value to be had. At the end of the day, what we focus on as a management team is really running the business, driving that growth through opportunity Yeah. And then the rest looks after itself. Yeah. As as things stand, we we are not capital constrained. We have cash available. So the ownership structure is not a thing that's holding us back particularly. We've got great growth opportunities in the regions we've moved into. So we're pursuing those all the energy we have.

49:19 Going on to that question, there was a question that came in. Any thoughts on listing in The US to amplify status there? At this moment, there is no intention to go on to The US markets. We're very committed to the London markets at this moment in time. What do you mean by connected clients? And are these ones that you CRM like Salesforce or MS Dynamics? Yeah. So, obviously, I answered that question through the presentation when we got to the strategic partnerships. But connected clients, just to to reiterate, that is a customer that is using one of our integrations, whether it's into our into our strategic partners.

50:09 Okay. I I think you possibly covered this already, but if you'd like to add anything to, there's a pre submitted question. What is your competitive advantage? Who is are your most dangerous competitors? I think you've probably covered that already. Yeah. I did quite a lot of detail on the competitor slide, but just to summarize and conclude, down at the small end, we probably see more of Clavier than any one of those other competitors in the mid market. We'd probably see a bit more of Braze and around Demarsis. And then at the top end, we'll probably see any number of them. Okay.

50:55 In disaggregating the revenue growth, could you tell us what is happening with the customer numbers over the past three years, please? How much is price driven? I think I I touched on this. Our absolute customer numbers have largely been been stable. So small fluctuation, but largely stable, but with a move towards large customers, larger agreements. In the last couple of r and s's, you referred to a mere improved retention. What has been happening here with customers? Why have they been leaving? I mean, they they haven't particularly. I think there's there's been a I think it was good and it's getting better. I think we had any particular burning platforms in the near real problems that needed solving.

51:40 I mean, across the group, we've got price retention in the very high eighties, which is a great start for the business in our market with average customer size that that we we deal with. So we're we're we're pretty happy with the way that team's been performing in the in the longer term. Yeah. Just to add to that, though, some of the reasons they may leave, one, a new head of marketing or a marketing director, CMO has come in, and they've used a platform in the past. So, effectively, that's more of the common reason. And you win some because, obviously, the customers that have been using your platform have gone to a different brand or different customer. So we see that. But that's more of the primary reason, not led really by functionality.

52:36 We've been doing quite a lot of work around the product innovation that we've been doing to future proof, some of where we see the market moving. Sometimes down at the small end, if I'm completely honest, you might see customers not using the depth of the platform, so they won't see the complete value, and they'll look look to base their procurement decision on price, which is fine. There are cheaper platforms down at the micro small business level. However, they don't have the full functionality depth. So if people aren't adopting more of that, then they will leave to go to more of a small business platform. There might be sometimes at the the kind of larger end where a CMO has made a decision to move to one of those large enterprise, whether it be an Oracle stack, whether it be Adobe stack, etcetera.

53:34 And that's sometimes the case where they would be choosing a stack to work with, and they may leave us at that point. Okay. Thank you. Can you comment on the ARPC differences between regions and whether those larger customers you're winning are specific to one particular region? I think our average revenue per customer is highest in North America. But that's largely because our some of our customers some of our oldest, most tenured customers, let's say, in in Europe were relatively small. And I think that just reflects the some of the history of the business. So that dilutes the total of the average revenue per customer in The UK in particular.

54:24 We've actually seen good growth in average revenue per customer in APAC recently. And I think a testament to the work that Rowan and the team have done there in growing the brands there. Obviously, it's our kind of most recent addition as a region. And therefore, as the brand becomes more established, we're able to target we have the opportunities to target larger deals. We're getting more valuable RFPs and getting some success for those. I think he's the one who's managing to drive the biggest increase at the moment. But in absolute terms at the moment, it's still North America. That's I think probably the largest deals, the absolute largest deals we win are probably still generally UK based.

55:11 But but really, they tend to be global deals, the largest ones by their nature. So it's a little bit arbitrary which which region you say they're in because the revenues actually are quite often global for those largest deals. You mentioned acquisitions could be around adjacent technologies. Does this change the percentage of revenues in our R and D if you were to close a product acquisition or the team just moves onto other projects? I think I think we would look at that on a case by case basis is the honest answer. If if a product we buy, if a company we buy has a really well established product which can be incredibly easily integrated into our own, then we would hopefully not need to see any particular bump in R and D at all. And we could continue maintaining exactly the same margin profile we have whilst driving the sales site synergies.

56:12 If there was a significant amount of integration work to be done to realize full value from an acquisition, it would be negligent of us not to invest behind the decision to make that acquisition. So I think the answer is we play that by ear, depending on the opportunities we find at the time. But I think subject to an acquisition's change, broadly our approach to R and D and margin management remains consistent, which is we're targeting that 20% plus operating margin. Why do you think that why do you think that customer numbers were flat, especially given the ROI from the platform? Is it because the choice of other products?

57:00 I I would largely be guessing if that would I think I think that that that we are managing to maintain customer numbers despite having a a large number of very tenured customers. So some of whom had quite low contract values, and that we're managing to replace all of those with higher value new contracts using under the full functionality of the platform. I think it's actually kind of testament to the the work the marketing team has done in positioning the product to to sort of show its new capabilities, which are are really fundamentally different and extended versus the historical DOTDIGITAL product.

57:50 So I think we've we've done well in continuing to say larger value customers. It will it will always be harder to win higher value contracts than to the kind of no touch, very, very low value kind of online only sale model that that some of our competitors, for example, do. But, obviously, the lifetime value when we do win those larger customers and we have a relationship with the individuals there, which can last many years, that's that's really good for us. So that's pretty much all the questions we can see on screen. Milan, Alisa, absolutely. And thank you very much indeed for being so generous of your time then addressing all of those questions that came in from investors this morning. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended for you to review to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all of those responses on the platform.

58:51 But, Milan, perhaps before just redirecting those on the call to provide you their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that would be great. Yes. No problems at all, Jake. In terms of some of the key messages, obviously, through the presentation, it's been a continuous period of profitable growth. And we will continue looking at the business from sustainable growth approach where we look at top line growth, we look at the relevant investments we need to make to really drive that 20% plus operating margin, 30% plus EBITDA margin, and also focusing on that cash conversion because naturally, happy customers pay on time, which kind of tells you the health of our annuity. In terms of, what we've seen in the period, really good progress achieved against our growth strategy in the first half, whether it's around geographic, whether it's around product innovation, whether it's around strategic partnerships.

59:45 Whilst, obviously, from a macro environment perspective, we will continue monitoring. Right? We're not at the end of that, but we can continue to see some positivity in the market trends, whether it's digital marketing growing as a proportion of overall marketing budgets, whether it's, you know, the focus on retention marketing as well as acquisitions, and definitely looking at, marketers looking at more cost effective solutions that are really driving that conversion optimization. And then if we look at entering the second half, you know, we feel as we've gone into h two, we've definitely strengthened the foundations of our operations. We've put the go to market teams and custom success teams, and we'll continue to obviously train them to get them ramped up to really hitting consistent numbers from a go to market perspective. But we're seeing good trading momentum, whether it's pipelines building across the regions, whether it's the opportunities we see from our strategic partnerships.

1:00:47 And probably, finally, you know, we will continue to assess acquisitions that really accelerate our vision to customer experience data platform from an adjacent technology perspective and really focused on h two from really driving top of the funnel demand over the last twelve months. We've done quite a lot of changes, whether it whether it be brand positioning and really telling the story of where the platform is today, whether it's working through our partnerships to drive go to market. Thank you so much, everyone, for attending DOTDIGITAL's interim results presentation. I'm glad we got through pretty much all the or actually, the questions, and we look forward to seeing you at our next results presentation.

1:01:37 Hey, Lan. That's great. And Alastair as well, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in all 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 would like to thank you for attending today's presentation. That now concludes today's session, so good morning to you all.