Dotdigital Group (LSE:DOTD) — Dotdigital Group PLC Interim Results Presentation

0:00 Good afternoon and welcome to the DOTDIGITAL GROUP PLC interim results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand 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. How the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Paragatman, CFO and Milan Patel, CEO.

0:33 Good afternoon to you both. Good afternoon, Alexandra. Thank you very much for handing over to us, and welcome all to our DOTDIGITAL GROUP PLC first half interim results presentation. For some of you, this will be a recap, but for some of the newer investors or looking to invest, I'll take you through for from history to what we do and our growth strategy. Originally formed in '99, was a very simple marketing tool made for the marketing departments, where they were able to send bulk messages to people on their subscriber list. To today, where the market has evolved and the platform has evolved, it's a very sophisticated platform that captures data into the platform, allows the marketing teams to understand who they're communicating to, and gives them the full complete tool set in order to use that data to be highly relevant and personalized and given gives them all of the different channels that they can communicate to. It's about sending the right message at the right time to the right person through the right channels.

1:40 In terms of the business, centered out to three main, global hubs. UK is a hub into EMEA. Our New York offices is a hub and our Sydney offices is a hub into APAC. We have over 340 employees globally, predominantly in sales and marketing, IT and development, small amount of people in professional services, and the back office. Have eight offices across the world, very strong network of tech and solution partners around our strategic partners within the integrations that we have within ecommerce and also within the CRM, space as well. As we look forward, we will talk about some of the newest strategic partnerships that are coming on. We're very much focused in that mid market and upper upper mid market where we know the cost of acquisition, to lifetime value makes sense.

2:32 In terms of some of the KPIs that we look at, this the organic growth strategy is centered around three main pillars, whether it's around geographic expansion, whether it's around our strategic partnerships or product innovation. We talk about not only our domestic market, which is around EMEA, predominantly in The UK, expansion into The US and further into, LatAm. And in terms of APAC, further push into Far East Asia and also some of the newer where we're dipping our toe in the water into areas like Japan. In terms of what we measure from a strategic partnerships perspective is the number of our customers that are using the integration within whether it's our ecommerce platforms like Magento, which is now owned by Adobe or Adobe Commerce, in terms of some of the partnerships that we have with Shopify and BigCommerce in the ecommerce space or Microsoft Dynamics and Salesforce in the CRM space.

3:28 What we've continued to do is really expand on the recurring revenues we have from the business predominantly in two main forms, whether it's what we describe as our functionality recurring revenues, and that's based on licenses and additional function functionality our customers are buying or data, that they're bringing in, which in turn increases our license fees that we charge our customers. Terms of messaging, there's two main parts, what we describe as premium messaging, which is around our SMS and WhatsApp messaging, or around our core email and other 90% plus gross margin message charges. In terms of what we continue to do over the last ten years is we talk about profitable growth.

4:17 Over the last ten years, CAGR from a revenue perspective is in that 19%. In terms of profitability, around the 20%, and we continuously increase the cash from a conversion perspective. You can see some of the the customers we help. We also help mid market companies that you may not recognize. But part of what we are seeing as we look at new business that is coming on board, we're seeing higher value mid market companies as they're getting more sophisticated, but also larger enterprises that are using our platform, whether they're deploying it on multiple territories or multiple brands as they expand out.

4:55 In terms of last last half, saw 10% organic growth, strong profitability. We were if we look at the financial results for the full year, there was some one off spike in SMS from the pandemic. But effectively, as we go through the presentation, we'll talk about that and the unwinding of that. We continue to win larger value business, complemented from our existing customers in terms of expanding the product adoption, very much focused on our people and continue to invest behind our people. For us, it's the successful ingredients of not only platform, but also the people that really gives it the value proposition and the success that we've had in the business. In terms of, if anybody attended my last presentation, we were talking about building a customer data platform. That proposition is out and have has beta customers now on that. And our product managers are now working out the monetization strategy from the CDP side of things and as we look forward and building out those use cases and how we're generating return on investment for our marketeers.

6:03 For us, we continue to deepen our strategic partnerships, but also broaden on our existing partnerships that we have both from the ecommerce and CRM and some of the newer strategic partnerships that we have with the sales and service clouds. For us, our pipeline is underpinned by our recurring SaaS business model. If we look at some of the statistics, we're seeing strong growth, in the half. We're seeing strong profitability. Recurring revenues as a total revenue from a group perspective is continuing to increase. So 94% of our group revenues is now recurring. Functionality recurring revenue continues to grow very strongly, 22% in the period. That's a combination of existing customers adding more, but also newer customers buying more functionality from when they start with us. Strong cash position, no debt within the organization of 40,000,000.

6:59 So if we cover cover some of the the evolving backdrop and some of the headwinds we've seen in the first half, a lot of companies have seen headwinds from a people perspective, whether it's salary inflation, whether it's around retention. We have seen a slight increase in employee attrition. However, we've done quite a lot around around the attrition and reducing this as we look forwards. Terms of salary benchmark analysis has already started. We've implemented recommendations. We've increased our benefits packages in our international regions. We're using, share options as a way of retaining from an overall remunerations package. More importantly, we look at how much of the staff are engaged with the business. Three main metrics I look at or we look at is around employee engagement.

7:51 We see over 90% there. 97% of our employees are proud to work for the business, and 92% would recommend us to their friends or other people that they may know. So very strong engagement of our staff within the business. In terms of The US, it is a competitive labor market. All business are facing that. What we did see in the first half was a slightly higher, attrition in our management in that region and customer success and salespeople. What we've done, we've got new management in place now. They are from industry who are making a difference in that business unit. We've added a VP of growth. We've added a head of customer success in the region. We've now got back to the same levels we had from a customer success perspective.

8:39 And in between, we are now starting to increase the salespeople that we have in region as the demand has been created. We've increased the resourcing we have from an in house recruitment perspective. We've added people in these regions to continue hiring and building a pipeline of great talent that we can bring into the business. In terms of the other factor, compounding The US sorry, compounding is in this year, now that The UK has opened up from, from the COVID perspective and also quarantining elements have come out, effectively, are seeing some of the one off pandemic related messages diluting our marketing SMS growth. We've seen over a 100% growth in the last six month period in customers from a marketing perspective adopting more of the SMS.

9:32 We continue to see newer omnichannel, channels like in app push as more and more brands build applications on Android or iOS so that they can provide that single consistent message across all channels and that single content and personalization across every, touch point that they have with their end customer regardless of whether it's a transactional message, whether it's a marketing message, and we continue to see that adoption increasing as we look into the future.

10:06 So what is the marketeer's challenge now? And I guess as more and more more and more marketers are engaging with their end customer, whether it's using email, whether it's using all digital forms, it's the battle into inboxes. It's about being very personalized. It's about understanding who you're talking to and using that data that they have on the recipient to be very highly targeted. In terms of more and more marketeers are now trying to create customer journeys at every touch point that they have, effectively, what we have is a platform that's that is not able to not only able to personalize at each of these different touch points, we give them all of the different channels to communicate on. We give them the data to really understand who they're speaking to, which allows them to have those real time optimizations as well as all of the data integrations off the shelf that they are using today.

11:04 And we continue to invest in our r and d to build out integrations into other business systems. If we look at the platform, it's about bringing data into the platform. We take all of the heavy lifting in terms of data hygiene. We give them the information to really get personalized from marketing automation perspective. It allows them to action the data that they have. It allows them to learn through AI and machine learning capabilities that we have. It allows them to predict to build a higher return on investment, but also have more of their recipients engage with their brand and really analyze the campaign effectiveness to reaction the marketing automation from an efficiency perspective. Lots and lots of functionality around empowering our customers to drive better, marketing models or enhance their marketing strategies, give them all the tools to communicate, and build on the outcomes that they're looking to, whether it's around growing, customers, whether it's around driving people to events, whether it's about disseminating information, and it's about retaining.

12:13 What we have seen in the marketplace from a marketing department perspective is not only about customer acquisition. Retention marketing is coming higher up the priority from a strategy perspective. Effectively, with the tools that we provide, they can continue the influential side of things and build on the influences that they are building and continue that brand awareness as they use the platform in the territories that they they operate in.

12:43 So what does the competitive landscape look like? We all have a target segment that we build our platform for. You've got some of the the competitors like Mailchimp and Constant Contact, which are really building their platform for the small small business market. You've got platforms that work and dip them and build functionality in that mid market, as well as you've got players that really go after the large enterprise. As I mentioned at the start of the presentation, for us, it's been very focused in that mid market, upper mid market, and we continue to see an increase in larger enterprises deploying our platforms between different brands that they may have or even different territories that they're using our platform in.

13:32 In terms of our growth strategy, as I mentioned earlier in the presentation, our organic growth is focused around three main pillars, whether it's around product innovation, whether it's around our strategic partnerships and geographic expansion from the hubs that we have. When we describe a hub, for our geographic territory, it's scaling from the foundations that we have. It's having every single department in that, territory to really scale from understanding the customer and making sure that we're delivering on the needs and the reason they choose DOTDIGITAL as a platform of choice. We continue to expand our product suite. We can see that coming through in our functionality, recurring revenues. Platform adoption is increasing, which really provides us for organic growth into the future, very much deepening our relationships focused on cross selling, upselling, as well as allowing our customers to unlock more value at the platform through adoption, but working with them on their strategies to drive drive a higher return on investment.

14:34 We continue to grow grow our customer base globally, increasing our global market presence. The platform is well received in different territories, but we also see demand as we, piggyback on the coattails of our global partnerships that we have. In terms of deepening our strategic partnerships, it's about building integrations, making it very easy for our marketeers to bring data into the platform, but as well as working out the areas that mid market find challenges challenges in the data silos that they may have and making it easy to remove those silos. For us, it's also important to continue globalizing our talent, making sure we're onboarding, building that culture that we have within our business, and expanding that out, which really makes us successful as we look forward.

15:24 So we're very much focused on organic growth, but we also look at acquisitions that really make sense for the business, not just from an arbitrage perspective, but real synergies that our marketers could have in having additional functionality from a adjacent technology perspective, whether it's building foundations from a people or from a business perspective and territories that are strategic to us through consolidation or deeper functionality that we may be missing today that would take us a multiple of years to really build.

16:00 So if we look at what's happening from a product innovation perspective, we saw revenue growth of over 22% in the period from a recurring perspective continuing to increase as platform adoption is being increased or customers bringing in more contacts into the database as well as increasing the level of data that is being brought into the platform. We've continued to in enhance our user experience end to end, whether it's the customer journeys we have with our end customers. From the start point, they start using DOTDIGITAL, and we handhold them all the way through to their more sophisticated marketing strategies. In the year or in the last six months, we've launched our customer data platform, as I mentioned earlier. We're working with customers in driving user case studies, how they can use that plat that data to really get hyper personalized on a one to one basis with their end recipients or their customers.

16:58 If we look at what's happening from a metrics perspective, we're seeing more and more customers using more than one channel. Over 20% of our customers are increasing the channel usage, within their own marketing strategies. You're seeing more and more product data, continuing to come into the platform, and we continue to see that rise in email volumes of over 18% in the last six months, but that continues to accelerate into the second half and as we look into the future. In terms of building pipeline for us and continuing our market reach, we have a very strong foothold in The UK. We are the largest for what we do. Most marketing departments would have heard of us or know of us.

17:45 And, effectively, we have a blueprint of international expansion through strategic partners, whether it's in our North American market, whether it's in our APAC market, where they help drive brand awareness within their user base. We continue to add value from a proposition perspective and see those clients seeing real value from the platform that they they are using and effectively continue to build on that. We're seeing strong growth across all of the integrations that, we have, whether it's in the ecommerce space, in Magento, some of the newer connectors that we have that is continuing to increase from a compounding perspective. We've seen an increase in customers using our Shopify integration.

18:32 That continues to feature and accelerate. In terms of some of the other areas, Microsoft Dynamics, and some of our new integrations that we've been doing with our strategic partners, we're now starting to build connectors within the sales and service clouds as more and more customers are storing conversations, using those keywords in those conversations to really drive marketing automation. So one of the newer, strategic partners that we are excited about and we see real opportunity for is around our integrations with Zendesk, and that will continue to feature as we look forward.

19:11 In terms of our growth in the different regions, all three regions grew. APAC, very strong growth of 27%, and we continue to push further not only into the Australian New Zealand market, whether it's through our own direct marketing efforts or our strategic partners, further into Far East Asia through our Singapore office, and we've now started to plateau as we've seen stronger demand coming from Japan and working with the likes of Shopify to push further from a go to market perspective as we look forward into that market with some feet on the ground. In terms of The U. S. Growth, we saw 3%.

19:56 As I talked about some of the headwinds we've seen, we've continued to solidify the foundations that we have within the North American region. We started to accelerate some of the investments that we've been doing from a marketing perspective as we've got the people. In terms of that growth coming through into the future years, as we're an annuity business,

20:16 for us, customer success teams and sales take about three to six months to ramp up in getting to that full target or hitting those full targets, and that starts to come through into the future years in terms of revenue growth in that region.

20:32 Whenever from an annuity revenue based perspective, you start to add the clients through the period, you see the full impact of the revenue growth in the following period, and that will continue to build. In terms of EMEA, very strong growth in the EMEA EMEA market, predominantly led by The UK. But as we start to develop more brand awareness in outside of The UK, we continue to see a strong demand for our platform in these regions.

21:06 I'll pass you over to Harav to go through the financial details. Yes. So good afternoon, everyone. So looking at the first half and in terms of the numbers and what we've seen. So group revenue grew 10% to 30,900,000 in the half. And then the monthly average revenue per customer increased 19% to now £1,422 per month per customer. Now in our business, we have a broad range of monthly spend that's contracted customer by customer. So that could be anywhere from sort of the lower end, our customers paying us around £250 a month. And then there are customers at the much sort of higher end paying, you know, tens of thousands of pounds a month. So 30,000, 40,000, £50,000 a month, the the very high end.

22:02 So the average revenue per customer isn't, you know, measurable as to how many customers we have. So in a subscription business, like, say, a Netflix or a Sky, you can take average revenue per customer or or ARPU and multiply that by number of customers, which gives you the overall revenue. In our case, because we have such a broad range of that, average revenue per customer, and what we're also talking about here is the contracted revenue, so it's not the total revenue of the business.

22:35 What we do see, therefore, is our customer numbers have actually increased over time, and those customers are spending more than the existing customer base that have come through, and our existing customers over time also spend more. So the ARPC is just more of an indicative trend of the new customer wins and the growth in the existing customer base that's coming through. It's not gonna drive, in into a one to one correlation with revenue. It absolutely helps because, of course, your customer base is spending more and your new customers are coming in, but there's not a there's not a kind of one to one correlation as you would have with a pure subscription model. Now Milan's talked about the three pillars of growth. So international revenue grew 4% in the in the period. The US was the the principal area of weaknesses as Milan's talked about.

23:29 But functionality revenue growing twenty two percent is very much key to the r and d spend that we do. It does show that as we're spending more on r and d and we spent 3,500,000 in the first half, that leads to not only the growth in the functionality revenue, but also that's where that average revenue per customer also goes up. So as customers take on and adopt some of that functionality that we're building, they will then be spending more with us as well. So the the from an r and d and a and a return on investment perspective, that's that's going very well.

24:03 In terms of the partnerships, as Milan's also talked about, the the revenue grew 9%. Again, that's indicative of the the investment that we put into our partnership team over the past twelve months. We have revamped our partnership model, to be more scalable. We've added new people or partner managers onto the teams. So that number, over time, we'd expect to to increase and and drive that top line further. From a profitability point of view, we've seen both adjusted EBITDA and adjusted operating profit both up 17 in the first half. Now I'll I'll talk a little bit more in detail about that on the next slide, because there are some, anomalies, I suppose, or or trends that have that have led to a higher margin than maybe we would have anticipated, at the start of the year.

24:52 The the chart on the right hand side of this slide just shows the revenue progression and how that revenue half on half continues to increase. And, of course, we had a pandemic related spike last year, which drove the first half of, fiscal twenty one probably to a higher level of growth than than we've seen historically. But the the normal trend has continued as we've moved into the second half of last year and into the first half of this year. So just looking at in more detail at the p and l. So I've talked about the overall revenue, the average revenue per customer, and then the, the strategic pillars. So I won't go too much more into the the the detail on revenue. But when it comes to our margins and costs so the gross profit, that, increased broadly, in line with the the growth in revenue, so 9%.

25:47 So our cost of sale has remained sim at sort of, similar growth levels to the revenue levels, and the margin, therefore, has remained relatively stable. And then what that's also done, therefore, is, in theory, the the operating profit margin and the EBIT EBITDA margins would have also been similar kinds of growth levels in a normalized year, but instead, obviously, they've they've grown 17% rather than the sort of 10%. And the reason for that is very simple. Glenn talked about people earlier, but it's taken longer than we would have anticipated

26:20 to fill a lot of the new hires that we wanted to make at the start of the year. And, also, in terms of some of the people that have left the business during the first half of the year, we've, again, it's taken a little bit longer to to to backfill, and therefore, there might be a a gap for a month or two as as we are backfilling those roles. And so what that's meant is that the in the first half, we we just didn't spend as much as we would have anticipated on on headcount. Now that has reversed, and and we now have all of the head count in place that was anticipated. The the backfills have have reduced, so the level of people leaving in the last couple of months has has been lower than it was in the the first half. So at this moment in time, the total number of employees we have has increased to over 350 from being, 340, at the at the end of the period we're talking about the first half. So with the investment that's gone in into those people and some of those are key hires, as Milan's mentioned, such as the VP of growth and the the head of customer success in The US, those costs, you see the full impact in the second half of this year. So our full year rev, margin operating margin will be closer to the normalized long term guidance that we give of 20 to 25%.

27:39 In fact, it will be closer to that 20% mark. So around the 21% level is what we're anticipating, so long as there's nothing else that changes in the next few months. So we'll see that, second half, impact when it comes to the actual margin within the half. But for the year, it's very much within that guidance. Two other just points on that to note. We also will be having a higher level of marketing spend in the first half sorry, in the second half versus the first half because we've now got that full team in place in The US. In the first half where there wasn't full team in place, it didn't make sense to ramp up the marketing budget. And so that that'll be very much second half weighted. Again, that's that's influencing the the the overall margin for the half and the year. So as we look forward, this is the the final point on this. As we look forward, the the margins operating margins will be around the 20 to 22% level for the next couple of years because you'll see the full year impact of all that hiring that we've done this year. But also from a marketing budget perspective, there won't be it won't be so lumpy, as it has been this year because of the the the those recruitment needs and the and the people churn that we've seen in the first half, particularly in The US. So next year becomes a much smoother year, in terms of from the start to what we expect to happen by by the end.

29:05 That's probably the the the key things to to highlight when it comes to the the p and l. I'll move over to the balance sheet. Bear with me. So the balance sheet, is very similar to, I suppose, what we've reported in the past in terms of the health of it. Strong cash position continues to grow. We've got no debt. It does give us opportunities to to invest as as we look forward. But, again, with the with the with the balance sheet, it's a it's a very strong balance sheet, gives us that bandwidth for strategic investments. And then the cash flows, which which, of course, help that is we've got strong cash flow with adjusted free cash flow of 8,600,000. Total cash balance at the end of the the period, so the end of December was 40,000,000.

29:52 That, has grown from 27,600,000, a year prior to that. So there's there's been a strong level of cash conversion and then cash collection as well as as continues to improve. So a healthy cash balance for the business, very much underpinning, the long term future of the business. There's there's no issues, therefore, when it comes to, you know, potentially having, you know, running out of cash or anything like that. We've we've got enough for for a long, long time. The health the balance sheet is very healthy. The business is in an extremely strong position financially from that perspective. So we're all set for for making sure that we can, invest as we go forward for for the future years.

30:38 With that, I know there are questions in in the chat, which we'll we'll address during the q and a, but I'll hand it back over to Milan. Thanks, Parag. So I guess from an outlook perspective, we've talked about, some of the headwinds that we've had and what we're actually doing about it in regards to The US. We've now got the management in place to really take that growth to that next level that we are looking for. We've got a strong team in that region where we are going through the onboarding process, and you'll start to see the benefits of the newer staff as they are fully trained and optimized. In terms of there is slightly slower growth in from the previous expectations, in the current year.

31:26 We are looking to not only see that unraveling of some of the pandemic messages, but optically, that covers up some of the increase that we're getting from marketing messages that are going out, which has expanded significantly and growth through the period has been significant. In terms of for us, the operating margins remain over 20. Continuing to look into the future, it will continue to see the levels of investment that we require in the business, the investment that we are making in our people from a learning and development, but also new talent that we're bringing into the business from a cultural perspective. We'll continue to expand now as we move to more of a flexi working scenario. In terms of other elements, return to more conventional in sales process that helps win some of the upper tier and mid sorry, upper tier mid market companies and large enterprise, but also it helps with the strengthening of our partnerships that we have across the different regions, which in turn means additional lead flow that comes in from a demand In terms of Parag mentioning our financial strengths, really gives us into flexibility to invest in both organic and in inorganic growth opportunities as we look forward. For us, we've continued to strengthen our foundations across all of our different regions, whether it's around the product, and whether it's around our people to really scale for that future growth as we look forward.

32:57 So in summary, in terms of the industry itself, that continues to grow between 1014%. You're seeing marketing, from a marketing budget perspective, digital marketing continue to increase as a percentage of overall marketing budgets. You're seeing more of the traditional marketing budgets being put into digital, which is a lot more cost effective, and you can measure the return on an investment. We have high visibility in our recurring revenues. Over 94% of our, sorry, 94% of our group revenues is recurring. Very much agile business structure, which makes quick decisions, and that allows us to empower our culture and our people to really push the business forward in the visions that we're achieving. A very focused growth strategy around geographic, around strategic partnerships, and product innovation.

33:48 From a fundamentals perspective, the long term vision and the value proposition remains unchanged. Alexandra, I'll hand back to you in terms of taking some of the questions. Thank you very much and thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right hand corner of screen. But just while the company take a few moments to review those questions 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 and thank you to all the investors for submitting their questions. I could ask you to read out the questions and give responses where it's appropriate for you to do so and I'll pick up from you at the end.

34:34 No problems at all. So first question from Henry. Quite a lot of cash on the balance sheet. What do you intend to use it for? So part of what I am doing, Henry, is really focused on getting my management team. So we are in the process of replacing our CFO. That's quite a long down the process in terms of getting a shortlist. Once I've got the new CFO and the chairman, we'll then take stock in terms of whether we invest that more for organic growth or whether we look at m and a from a strategic standpoint, whether it's around the synergy technology or more consolidation in strategic territories that we're looking at. Parag, there's a question from Andrew in terms of grateful, please, if you could talk about the basis on which you capitalize and amortize R and D. CapEx seems to run consistently ahead of amortization.

35:34 Yep. So we obviously do the capitalization in line with the the guidelines where we look to capitalize anything that is for future development. But the key here is that when we made the acquisition of Kamapi, there was a one off spike in that level of capitalization that that took place. Since then, the increase you'll see in r and d over the last three, four years has been constant at a constant level. The amortization is catching up to the point where probably in two years' time, assuming we we continue to increase r and d by a couple 100,000, say, three three to 400,000 a year, which is what we've been doing for the last few years. The amortization will actually catch up in about two years' time where they'll be equal and let each other off on the p and l.

36:21 Thank you, Parag. Another question I have, how do you plan to respond to the recent share price drop? Will you buy back shares? Effectively, we don't comment on the share price movements. But effectively, in terms of answering your question in regards to buy backing buyback of shares, We'll be talking to, our advisers. We myself and the board will also look at once the road show's over, look at where we are and what we do next, whether we do buy back shares, whether we invest the money organically, or whether we look at acquisitions as a way forward to complement our growth rates that we have from an organic standpoint.

37:09 Should I take the question from Will on the margin, just to clarify a little bit? The question is, you say the margin should be in the 20% to 22% range for the next couple of years. But if you annualize the second half, the implied guidance shows that margins for next year would be a lot lower. Are you saying that there's a lot of one off spend in the second half OpEx? So there's two elements to it. So there is an there is a second half weighting when it comes to some of that budget. So as I mentioned earlier, marketing spend is very much second half weighted. There there's a there's a lot more in the second half than there was in the first. There's two reasons for that. One is partly The US and the having not having the US team in place. The second part is that if you take The UK as an example, we still had lockdown in the pandemic.

37:58 Now events have opened up. Travel has opened up. There's a there's a there's a lot of marketing related activity. There's a lot of partnership team related activity, and then general business travel between offices. And and so therefore, marketing spend, travel travel, and subsistence spend, and a lot of those kinds of things are very much now back to normalized levels in the second half where they weren't in the first half. Now when we look forward, we set these budgets based on the full year, what we're expecting in terms of revenue, and therefore, a cost base with a little bit of flex in if the if needed. And so what the budgeting for next year is is based on the revenue we anticipate, we have a cost base that is able to be within that 20 to 22% range.

38:46 Now if we don't quite spend enough, that numb that percentage will be higher. If the revenue is higher, that percentage will probably be at the lower end of that 20 to 22% range. But, ultimately, we have a a plan on a three year basis of the cost that we expect to be within the business. So you can't just annualize the second half and take that as your run rate for next year. And then I think there's a there's a few more parts to that question, but I think the do you anticipate similar top line growth next year as this year? Well, the numbers in the market that you can see from the analysts and consensus show that at this moment in time, we expect growth to be slightly higher next year than it is this year when it comes to top line. So top line this year is roughly seven and a half percent is the sort of midpoint of the guidance.

39:38 Next year, that should be over 8% based on what we're seeing today. So growth should accelerate next year, and then that you can look at analyst notes for for years beyond that. But, essentially, next year should be an increase on the growth that we've seen this year. Trying to go through these questions to see which other once we haven't gone through in the out in the actual presentation. So Milan, maybe you want to take the one from JP around. I'll read the question out. So there's been a lot of consolidation in your market. As one of the last independent players, does this put DOTDIGITAL at a competitive disadvantage compared to larger slash PE backed firms who can deploy more resources?

40:31 Please comment on the general state of competition as perceived by ourselves. Yeah. In terms of consolidation, what we've seen from a historic standpoint is when they go through that consolidation, there's a change in strategy. There's disruption initially that happens when you go through any corporate activity. So for us, we are laser focused on working with our sales teams to really pinpoint the the the company or competitor and differentiate our product against them with a very focused approach of winning or displacing that provider. You also see cult cultural differences when any company is either consolidated through of through private equity or a trade buyer.

41:21 And at that point, we we pick up quite a lot of the talent from the business. In terms of does it disadvantage us from a competitive advantage perspective, there is a lot of private equity and VC backed money going into some of the competitors from the the landscape that I I provided. But we're very focused in the niches that we play in. We work with our strategic partners in the international regions. As I mentioned earlier, we are the largest in The UK, so most of the marketing teams have already heard of us. But from the international regions perspective, we focused on ecommerce. We've increased the addressable market or opportunity we can go after in the CRM space, we're increasing that market opportunity now with integrations or strategic partners in the sales and service clouds.

42:17 In terms of them spending a lot more of their marketing dollars, they're looking for general marketeer. We're very focused in our approach on how we win our customers for future growth. There's a question on customer concentration. So our top 100 customers make up about 31% of revenue. So it's about a third of revenue from the top 100. There's no customer from a contracted perspective that is over 1%. I think our largest customer is just under that. So it's a pretty pretty sort of long list when it comes to the the concentration of customers.

43:08 Question from Andrew. Please, could you be more explicit about the issues of management and staff in The US? How many people are involved? How has it affected customer service? Will it affect renewals? So there was a couple of moving parts here. What we saw was some private equity backed businesses or VC backed competitors that took a couple of our management teams, which effectively, while I couldn't get out to The US in terms of stabilizing some of our employees in that region, We did see some of our customer success and go to market employees leave the business for higher levels of salary.

43:55 In terms of where we are now, we've replaced the management team there with people from industry who really know that region, who can really drive that growth forward. We've also added in terms of our customer success teams. We've increased the amount we're gonna be recruiting. There was some level of higher attrition while we were going through a transitionary period. What we have seen is that cut customer attrition in that North American market now stabilized, and we're now seeing the positive impacts that we've put in terms of investment in our customer success staff in that region. And our head of customer success that will lead the charge in terms of our retention strategies and expansion strategies has just started with us last week.

44:48 So we're working with her and the rest of the team in terms of onboarding and training to really look at what we're we're seeing going forward. Most of the renewals, that were affected by the customer service levels dropping have either, churn during that last four month period, and we feel we're in a better place now with the deployment of our our customers with the right level of skills from our customer success teams to really move forward and the renewal rates increasing as we look forward into the future year. So there's one more question from Rosemarie here. Over how much of your revenues does the ARPC apply? So I think I mentioned earlier that it's we do it over our contracted recurring revenue, and that's around 82% of the total revenue. So that's the the element. The other piece, just to sort of final finish off the, you know, the breakdown of revenue. So we have 6% that is one off services.

45:48 Now those are when cost new customers come on board, and there's training and custom design templates that are created and working with our services teams on on getting that smooth up and running through the process. And then there's the SMS revenue and and even, I suppose, WhatsApp would will fit into that as that starts to grow, which is typically not contracted and is so pay as you go, but we're buying sorry. We're buying the actual supply from aggregators and then reselling that to our customer base. So the average revenue per customer, we're talking about purely just the contracted recurring revenue, which is just over 80% of the total. So I think that's pretty much all the the questions.

46:38 Yep. Thank you, Milan and Parag. I think you've addressed those questions you can from investors. And, of course, the company will review all questions submitted today and we'll publish those responses on the Investor Me Company platform just before redirecting investors to provide you with their feedback which I know is particularly important to the company. Milan, could I ask you for a few closing comments? Yeah, no problems at all. In terms of fundamentals of business, that continues to that hasn't changed. We continue to see strong profitable growth that is coming through. We see some of the newer changes that we've made, whether it's in North America, whether we've addressed some of the headwinds from a people perspective, that will continue to pay dividends. In terms of our opportunities, we continue to see strong opportunities within APAC, further into EMEA, and also into the North American market as we push forward. In terms of product innovation, we've done lots of new functionality deployment.

47:35 We've carried out our customer data platform. We're looking at the analysis. Our customers continue to drive a higher return on investment from the product and research and development that we're doing, and we can continue to see that coming through in the functionality recurring revenues that have been growing in the last six months, but also will be growing into the future. In terms of strategic partnerships, that continue to go from strength to strength, whether it's in our ecommerce, integrations that we have or whether it's in our CRM. We're now looking at newer partnerships within sales and service clouds. Some of the exciting, opportunities that we have are with the newer integrations with people like Zendesk as we look forward. And I think what we have today is a business that continues to deliver on cash generation, very profitable, strong growth.

48:26 And as we look forward, that will continue. Thank you very much. Milan Parag, thank you very much for updating investors today. Could I please ask investors not to close this session as you'll 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, and I'm sure it 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.