dotdigital Group Plc ($DOTD)

Good afternoon, and welcome to the Dotdigital Group plc Half Results Investor Presentation. [Operator Instructions] And I would now like to hand you over to CEO, Milan Patel.

Good afternoon all, and thank you for attending today's H1 financial year '26 results presentation. Today, we'll be taking you through a number of items. So looking at the business overview and our strategic position going through a bit around the business model and the financial performance that we've had in the half year and going back to our organic growth pillars and acquisitive pillars, we can kind of talk about the organic growth that we've had across those 3 pillars. And then a recent acquisition that we did, which ties very nicely into the acquisitive pillars in the areas that we really want to add from a digital platform perspective. And then we'll spend a little bit of time looking ahead and what we what we are seeing and why we are confident in achieving in line results. So if we -- for investors that have joined us in the past, thank you so much for following the story, and we will quickly summarize some of the areas for the new people joining us, I'll take you through this the intro of the business for people that have been following the story for a number of years, this will just act as a summary of where we are today. We exist really to help brands reach our customers and thrive. The market continues to move our way. 86% of consumers will pay more for per size experiences, 72% of companies are now integrating AI into their marketing. And nearly half of all martech leaders say stack complexity is the #1 barrier to value. That complexity is the problem we've been solving for over 15 years. While others are scrambling to bolt AI onto legacy platforms, we built WinstonAI into the foundation natively. While others are stitching together point solutions, we offer a single unified solution, CXDP, with web personalization with influence and marketing and loyalty, all in one place with over 250 off-the-shelf ecosystem integrations. Today, around 9,000 brands trust us, we power over 100,000 campaigns every single day across 150 countries and with very high customer satisfaction rates and delivery of that return on investment. We're not new to this space. We've been operating for over 20 years within the space, and we've been really busy building more, which we will tell you about today. So moving on, and as we go through the presentation, I'll go through these 4 pillars of growth and why we believe our revenue stream or growth quality is certainly stronger now than ever before. If we go back to our organic growth pillars, we've continued to deliver against the geographies that we operate in. We've continued to expand our partnerships, continue to expand on product, both through organic development as well as new acquisitions that we've completed and M&A execution, well, we'll certainly talk about earlier, which is our recent addition to our platform suite. But I just wanted to take you guys back to where we started 3 years ago and where we are today. I think there's been a significant transformation over the last 3 years. We started with just shy of GBP 50 million ARR to today, well over GBP 81 million. Through that period, we've acquired 3 different businesses from an adjacent technology that expands the product suite. But also as one of our visions as Dotdigital was to diversify more revenues outside of the U.K. And today, 40% of our ARR comes from international. We also, in a fast-growing TAM and a larger TAM in the U.S., wanted to build more market share. And today, ARR is greater than 30%. The other area is around the partnerships. We believe partners really help drive that brand awareness within the ecosystem that we operate within. And over 60% of our customers are connected with one of our connectors. That allows our customers to really bring data and easily into the platform, but also the characteristics of those customers are slightly different. They come in with a higher average revenue per customer. As more data goes into the platform, they adopt more of the functionality. And thirdly, they are a lot more stickier. So over that 3-year period, over 60% of our customers are now connected. And if we go back to those organic growth pillars, we've delivered against the geographies. We've delivered against product and continue to spend 12% to 14% of R&D and really monetizing that and the partner network that we operate within. So what does the platform do? For the new joiners I tend to visualize our platform in 3 main areas. It starts with the data. It's all about understanding your customer, your prospect or recipient regardless of whether you're an e-commerce company or a commerce company. or a non commerce. When we describe commerce companies, they have a shopping basket attached to the end of the journey. We make it very easy for customers to bring data in, regardless of business systems, and that's all about capturing those behaviors. The middle layer to the platform is around the orchestration. And that's where you can start to create from drag-and-drop technology, one-off campaigns that you may want to do or really start to build on the customer journeys within the platform. Within that, you've also got AI that helps you construct your messages, helps you deliver the returns on investments customers are looking for. And then thirdly, we have all the different channels that you can communicate it. Going back to the 4 hours, it's the right message at the right time through the right channels to the right people. And what really brings it all together is the reporting analytics, which you can then continue to expand your ROI and build on the experiences based on what you know -- how does the different acquisitions fit in? Earlier, our most recent acquisition, really helps capture more 0 party first-party data. Fresh relevance, which we completed in September '24, really helps you home in on the channel or website, understanding from the customer data platform about the person that's visiting. It helps you de-anonymize that traffic and then really build content for that experience. And then social snowball. That was an acquisition we completed in June 25, and that's really about creating those advocates, whether they're purchased they purchased with you, and they are a micro-influencer, whether it's about referrals or really driving traffic either through product awareness or brand awareness at the start of that journey. So let's have a look at the market itself. It's a pretty large market and growing very rapidly. So as we've added to the platform suite, we've continued to expand into new addressable markets. We continue to see the tailwinds of platform consolidation, as I mentioned earlier, the adoption of AI both for marketing efficiencies as well as predictive capabilities to drive return on investment and that shift to build more 0 party first-party data. We've got a proven track record across the 3 regional hubs that we operate, whether it's in North America, whether it's in EMEA or JPAC. And whilst -- we're continuing to grow both organically and through acquisitions. We have low penetration in some of those international markets, which really gives us that opportunity to push further from a market share perspective and look to accelerate growth into the future. We look at where we are from a product standpoint, we've really built out that multiproduct strategy that had a vision to start 3 years ago. Let's talk about subject everyone is talking about today around AI, because it's worth being direct about what it means for us and our customers. AI agents are increasingly doing the work of marketeers, but they don't need to operate within a vacuum. They need data to act on infrastructure to run on and guardrails to really operate within. We've spent many years or over 10 years building exactly that foundation, a unified customer data layer across thousands of brands, own center infrastructure that we control and WinstonAI embedded natively not layered on top, but woven into how the platform actually works really built for the marketing executives to use. We've built the standard across security, privacy and environmental responsibility for the enterprise customers that we serve that's increasingly a procurement requirement and a risk management decision and we're one of a small number of platforms that have credibility and answers to those questions. And owned infrastructure is increasingly a strategic differentiator for us against the competitors when you really rely on third-party delivery networks you lose that visibility, control and ultimate trust. We own our delivery infrastructure. That means our customers can scale with the confidence and so can the AI workflows running on top of that. The era rewards orchestration platforms with data, compliant, infrastructure built in. That's us, and we believe we are in a strong position to benefit from these tailwinds. So I'll pass you over to Tom to talk about the business model and financial performance.

Thanks, Milan. It's good to be here talking to everyone today. I thought I'd start by talking about the financial model as a whole. And you will have seen this slide for those of you who've been at our investor presentations over the last year or so. But ultimately, we're driving high-margin, sticky recurring revenues with strong cash conversion, and that's what this slide is really showing. We take the top section, that's our total group revenues. Here, we've broken it down by a nonrecurring business, which is in the core business, that is the -- we'll talk about in a bit more detail in a moment. Our repeating business, again, that we'll talk about a little bit more in a moment, that is our lower-margin business and contracted recurring. That contracted recurring piece is now 84% of our total group revenues. We carried 90% group margin. That's what we're really interested in growing. That's where our acquisitions are focused and the other revenue streams are very much there to support the growth in that key business. If we then drop down to look at that forward-looking contracted ARR. So that contracted recurring but taking it and looking at what we will recognize in the next 12 months. We can see the level of growth we have there, we can see the organic growth with the acquired growth layered on and we can see strong contribution from both elements of that acquired growth and the organic growth. And that gives us confidence in the future and predictability in our business to be able to reinvest with confidence, knowing that we have certainties of step-up in revenues as we enter a new year before we even get that. That 3-year CAGR in forward-looking ARR is 14%, so very healthy. If we take this to the next level down on the cash generation side of things. Yes, we've made some acquisitions over recent years that very much flow into the core CXDP business, but we have very strong cash generation half-on-half, it does move around a little bit in terms of our free cash flow, and we'll have a look at that in a bit more detail. But those free cash flows have ultimately funded our 3 acquisitions over the last 3.5 years. So to move on a little bit and just look at that same commercial model just in a bit more detail and see how it drops down to gross profit. So sections on the left-hand side here, the core CXDP and related business lines is the salmon pink type color on, as I say, on the left-hand side, that is the high-margin business. That in terms of the dark colored piece, is the contracted recurring revenues from the fixed part of our contracts, so fixed value parts of our contract. There is also some variable elements to that, that I'll talk about in a bit more detail as well. That, in turn, makes our forward-looking ARR. The sliver in the end of the pink section, that's a nonrecurring element. So that's professional services, that's health checks, that's training, that sponsorships, all things that ultimately help our customers be successful in gaining value from our -- from the software they from us. That's the business that in its entirety that drives gross margins of 90%. That is area of our business that drives value for our shareholders. And that's the area that with this presentation is very much focused on. To say a few words about the section on the right-hand side. So this is our stand-alone API-only transactional messaging CPaaS business. This business does move around in terms of headline revenues, but it's far lower margin. It drives gross margins in the region for that whole business segment of around 15%. Yes, the vast majority of the value in our business, again, comes from that core CXDP business. So just a quick word as well on why that lower margin business remains of some level of importance to us, albeit diminishing is that the volumes that, that gives us with the telcos enables us better pricing when we are sending SMS type messaging in the core business where it drives a far higher margin because there's value add for our customers as it's a marketing-related message. So again, just to drop in and have a look at forward-looking ARR and how that's grown year-on-year or, in fact, half on half year. We talked about the 3-year CAGR of 14%. That does include the acquisitions. If we take that on a pure organic basis, that's a 9%. We'd love to get that to double digits and see a route there, but right now, it's at 9%. You can see the impacts of the 2 acquisitions in these periods. So this is obviously prior to the earlier acquisition that was made only last week. You can see fresh relevance dropping in there in H1 '24. And you can see social snowboard that actually has 2 elements to it because it has a volume-based element as well as a fixed base element dropping into the ARR at the end of last fiscal year. Looking at the bridge from H1 '25 to H1 '26 across that 12-month period. You can see the breakdown in growth with 4.5% coming from the core CXDP net growth, [indiscernible] 0.6 million coming from Social Snowball since the acquisition, which is somewhere between 8% and 9% of organic growth on a constant currency basis. Social snowball upon acquisition was GBP 4.1 million again, on a constant currency growth rate, that brings it to 14%. But then, of course, we do have the impact of FX being a global business, and that's had a negative impact of GBP 800 in across that year period, bringing us to the GBP 75.4 million that we can see there at the end of the period. Milan alluded to an ARR of GBP 81 million, of course, that's including the earlier acquisition that was announced last week that in the region of GBP 6 million worth of forward-looking ARR. So dropping this down to take a look at the income statement. You can see that the history there half-on-half are very, very consistent margins. This is showing adjusted EBITDA and adjusted PBT. You can also see that pandemic period of '21 and '22, where margins were jumping around a little bit. But if you average them out across the year, they were slightly higher as many software and tech businesses experienced the lower cost base with lower travel, et cetera, across that period. But that normalized rate of sort of 30% to 33% of adjusted EBITDA, and 20% to 22%, 23% of adjusted PBT has been delivered, not just across this period we're seeing here, but actually across at least a 15-year period of the company being listed. And there what I'd say are the headline metrics that we operate within, and we manage our capital deployment within those levels of margins. And they do move a little bit half on half. But across the board, look to ensure that we're maintaining those levels. Again, I won't necessarily read each bullet point on the left. You can see that recurring revenue growth and, of course, CXDP business as being 12% on a constant currency basis or 5% on an organic constant currency basis. Also worth just mentioning that we made the decision not to renew a contract that would have become loss-making at the end of last fiscal year at a value of about GBP 4 million annually. So of course, that's having an impact coming into FY '26. That's also having an impact on our gross margins. Gross margins have improved on that half-on-half from 78% to 80%. And as the balance of the business continues to shift to that core CXDP business and away from the lower-margin CPaaS business, we expect to see not step change in margins, but at any incremental change in that gross margin there. Milan's talked about the average revenue per customer increasing half-on-half, and that's certainly one of our -- but just want to drop down and talk about sort of admin expenses generally, you will see whilst we've maintained our sort of target level margins across the business. There has been a slight drop on the previous period, which isn't unusual. Just a word on why that has happened. We have consciously made or accelerated some go-to-market investments in the social snowball business to accelerate, to really drive growth in H2 and beyond. We've got such confidence in growth rates in that business that it made sense to do that. In actual fact, we are funding that longer term through some reorganization in the cost base with the EMEA go-to-market business but our first half of this year is just seeing some dual running costs there that in turn is just driving the margin down slightly, although not materially in that period. So, a word on the exciting stuff, taxation and EPS. And really just a word on the difference between the adjusted and statutory focus on PBT, the top left-hand chart there. And what we can see is what was we sustain those margins of at least 20% from an adjusted PBT level. Once you layer in the amortization on acquired intangibles, once you layer in the usual sort of exceptional items that come with acquisitions has been a acquisitive period for us over the last 3 years. That creates just a divergence between the statutory and the adjusted one that you can see coming through there. But yes, nothing to be concerned about there at all. The other piece that's worthwhile just touching on as we've been going through across this period that's reflected here is the increase in effective tax rate rising from mid-teens to actually a peak and it is absolutely the peak. The peak of 31% in this most recent period. Now fundamental reasons for that across that longer term, call the U.K. core tax rate increasing a significantly adverse changes to the U.K. R&D raging. We've equally for all to material degrees utilized all of our tax losses across the group, which are which are things that won't sort of come back. But there was -off item impacting that tax rate in the first half of the year, and that was the adverse impact to the deferred tax charge due to share awards that lapsed in the period, just as a result of the share price performance across that particular period. going forward and sort of expecting that effective tax rate to be 27% to 28%, so coming down from that peak. And we are in the throes of the U.K. patent box application and also applying for international equivalents that we'll look -- we'll certainly look to make that tax rate as efficient as possible. So touch on EPS as well. Whilst that does move around particularly half-on-half, the continued long term -- we have are seeing continued long-term improvements and that despite some of the tax pressures. And we are expecting to see some fairly significant actually improvements in the second half, again, as that adverse one-off tax impact of unwind through EPS as the diluted fully -- but the period for the full half of that diluted share count takes effect. Just a word on cash flow. So I don't want to spend too long on this. The key thing to draw out on the left-hand side here is that we are traditionally second half-weighted when it comes to free cash flow. You can see the differential there, typically 3 to 9, 3 to 10 in this first half? And then just a word on how I'm presenting free cash flow here. There is one additional adjustment that on putting through compared to that, that some of the analysts are putting through, really to just present it for things that truly won't reoccur. And that's the working -- the movements in working capital that are fundamentally based around the social snowball acquisition, and in particular, were amplified because of the timing. We acquired the business 4 days, 5 days before our year-end, and then settled some of the payments post year-end, but some of those payments went through -- had to go through the balance sheet as a result of the accounting rules there. So I'm just showing those separately, obviously, do with those as you wish, but I wanted to show them very clearly because they don't come out in the statutory cash flow statement. So just to take a step back and think about the key financials when we think about digital. We have a 15-year successful delivery of those baseline financial metrics, strong growth, typically around the 10% level. we're looking to drive that higher. Adjusted EBITDA margin exceeding 30%, and adjusted PBT margin exceeding 20% and free cash flow margins getting towards that 20% level. And certainly, with the opportunity to grow them should we wish to go down that route. But we're consistently balancing the margin versus growth. And typically, we're thinking about things as against the rule of 40. The higher value area of our business is what we're focused on, 3-year CAGR of 14% is accounting for 97% of our group gross profit that's where the focus should be. And what we are looking to do, we've always looked to do this. But as we've grown as a group, particularly post the Alia acquisition of last week, we're really focused on being a bit more agile with our capital allocation within those profitability metrics that we talked about to ensure that we are always we're always moving that spend around to ensure that we're focused on the higher growth segments, but the high would be that the international regions, be that recent acquisitions or be that taking advantage of some other sort of market opportunity. With that, I'll pass back to you, Milan.

Thanks, Tom. So I'll take you through some -- we like to keep things simple, and I'll take you through some of the organic growth pillars as well as acquisitions. So from an organic standpoint, we continue to expand within the -- we spend about 12% to 14%, as I mentioned earlier, on R&D and really to monetize that, we look at functionality recurred revenues, which has grown 20% in the period. Strengthening our partnerships really helps us drive that brand awareness within the different international markets, but also in the domestic market. If we look at the growth through acquisition, there were about 3 years ago, you would have heard me identify some verticals that we really wanted to plug from a product suite perspective, whether it be around web personalization and that was through the acquisition of Fresh relevance. That's about really using the customer data platform to optimize the experience of the person hitting your website and serving the right content. Secondly, it was around loyalty. And we decided to build the loyalty platform, which we'll be launching in early July. We also added influencers as a channel as the market uses lots of different channels in order to interact with a particular brand or campaigns, we felt as we look into the future, that's an area of channel adoption that will continue to increase. The other area was around the customer data platform, and we really build that organically within the business. So for us, we always assess whether we build it, whether we buy it or whether we partner. So in terms of the execution, and we touched on these different pillars. From a growth quality perspective, it's the different pillars and the successes that we've had in these different pillars that really create the growth within our organization. We've continued to see growth across all regions. Japan in the half year was a standout. That was, albeit from a smaller base that's continued to expand very nicely as we -- as we play within the local market. From a cross-sell perspective, if you heard the presentation at the year-end, it was really about taking that go-to-market of web personalization into the international arenas. We've continued to do that. We see that demand continuing to build within those regions. From a partner, which is an equally important pillar of growth, we've seen a 17% increase in revenues. Shopify has been the standout performer within that. which really gave us confidence as we did the acquisitions of both Social Snowball and also Alia, which predominantly today play within the Shopify space. We see that as the second largest prior to Alia second largest partner that we have from a strategic partnership perspective. And for us, strategic partnerships either represent 10% of our group revenues or have opportunity to represent 10% of our group revenues. In the period, we've seen 44% organic growth and 118% growth in Shopify. From a product delivery perspective, we've done lots around AI. We've been building on the capabilities. As I mentioned at the start of the presentation, it was really to drive more efficiencies within marketing departments, creating our own algorithms from a predictive capability to help our customers really drive that return on investment. We've already talked about the functionality recurring revenues. Loyalty product has been going well. It's currently in private preview and full launch will be in July. And the other channels that we talked about, some of the newer channels that we've built like WhatsApp, where you can have those 2 make conversations, store that into the customer data platform and really get that recipient within the customer journey has been performing really well. Tom touched on it. I touched on it. We recently last week actually, completed the acquisition of Alia. What it effectively allows you to do is really build on the profiles that you have within the data platform but more importantly, the subscribers within your marketing -- within the marketing campaign. Alia has demonstrated phenomenal growth in the 2 years, 2.5 years, it's been operating. If I look at December '25, they generated over $8 million of ARR in the previous 12 months, $1 million of ARR. So you can see that rapid pace, the product market fit that they've created and over 2,700 customers within the Shopify space. Social snowball was an integration we did at the start of July, and that's been performing really well. We've integrated the areas that we wanted to. We've continued to work on the go-to-market from a stand-alone basis, but also creating that cross-sell, upsell opportunity. We've seen that ARR increase by 30% in the period. So let's talk about Alia. It's a very exciting acquisition for us. This helps us really look at the opportunity but help us complete that life cycle our customer would have with their end customers. I won't go through the whole deal overview. We've already talked about it in the RNS, but you can see that on screen. For me, it was really to strengthen that CXDP vision building that multi-products and allowing our customers to capture more data on whether it's traffic to site or the end enriching that data within the platform. It was also around making sure that we can accelerate our product road map from creating the suite across the whole customer experience and also deepening that shop ecosystem presence. You can see that coming out in the Shopify growth through the acquisition of Social snowball. We really created that brand awareness within that ecosystem, which has really helped with that organic growth we've seen in the last 6 months. This will continue to enrich the brand awareness within that Shopify space. Also with Alia, creating pop-ups as a way or using AI to have the right content served to whether it's unique visitors or repeating visitors and using all these different data points to make sure they're capturing the audience at the right point. We've seen the lead capture market or audience growth market moved from about $2.87 billion and continue to expand quite significantly. So how does this all fit together? This is what our suite looks like today, becoming more multi-product being able to have a tool set that our customers can use at different touch points. For me, I guess, product strategy means a lot to us, but let's reflect on how that works with our customers' life cycle. So if you -- if you're an e-commerce company, you generally are looking for customer acquisition. And within customer acquisition, you're driving traffic to your site. That could be through paid ads. That could be through traditional marketing efforts, like trade shows, like white paper creation, et cetera, content creation. It could be social and social, and Social snowball fits very nicely to drive traffic to sites with anonymous visitors as well as repeating through either expanding your product awareness or your brand awareness. Alia fits very nicely as you start to get the traffic really deanonymizing that, either by giving you information and using clever gamification tactics, could be discounting rules, it could be behavioral rules to capture more of that data. So now you're starting to identify that traffic through the use of Alia, expanding your list sizes and opted in marketing campaigns . The next part of that is all about nurturing those identified customers. And within Dotdigital marketing, you can start to put them down different journeys. It could be a nurture program. It could be a retention program. It could be a repeat purchase. It could be a replenishment. And those are some of the examples our customers use from a customer can side of things. Next is all about conversion. So we've got fresh relevance that helps you convert. We've got Dotdigital as a marketing platform that is looking things like product recommendation. It could be abandoned basket for some of those customers. That once it's completed, that then turns into us having to build a loyalty program, so -- or an advocacy program to really keep those customers coming back. And that's where our loyalty platform as well as social snowball to really create those micro influencers to build on amplifying your products experience or your brand experience to get more customers coming through. And if I complete that flywheel, it's all around the reporting and analytics to really advance that customer experience as more people enter that flywheel. What brings everything together is around the data, making sure you're understanding who you're speaking to. And WinstonAI, having that -- all these different data points across the platform, really optimizes your AI algorithms to drive that return on investment. For us, we're really working with our customers to expand that usage create further innovation from a product development perspective, grow that customer base and continue scaling and leveraging our acquisitions that we've done. What does that mean? That really turns into 3 main areas, whether it be around the growth engine, we have high visibility in recurring revenues over 90%. Over 80% of that is contracted and continuing to see that ARR grow. Strong cash generation, not just in the last period, but just throughout the time we've been a public company, really delivering on those fundamentals and continuing retention of our customers increasing as they adopt more of the platform. From a product strategy, that portfolio or suite of products is continuing to expand and get stronger. Recent acquisitions we've done really accelerate us pushing further into that space, increasing that total addressable market. We continue to focus around AI, and there's some really cool stuff coming up as we look into the future. From a market drivers perspective, the expansion of TAM, we've continued to see an emphasis on creating personalized experiences around AI adoption and an emphasis on that 0 party first-party data. With all that, that really gives us the confidence in H2 and into the future. Thank you very much for listening to the story. And that brings us to the end of the presentation part of today. We are now happy to take questions.

That's great, Milan, Tom. Thank you very much indeed for your presentation. [Operator Instructions] Milan, Tom, we have received a number of questions in today's meeting, and I want to start off the Q&A session with the first one here. What is Dotdigital's key competitive advantage? How defensive is it against any perceived AI threat? And what is its key barrier to entry? Is the latter its e-mail sender reputation and over the last decade as an e-mail, service provider, a core part of the platform generating the highest ROI for the customer and in addition, also perhaps at 0 and first-party data capability, personalization and AI-driven predictive analytics, a bit a lot there, but if you could just cover those.

Yes. No problems at all. Thank you for that question. I think there's a number of other questions, but by grouping these different questions, there's 3 key points. What is the competitive advantage against the competitors out there, what's the defensibility against AI and the key barite entry. We've answered a number of areas, but just a recap from a competitive advantage perspective. We probably have the most amount of breadth and depth in our tool set now that can solve our customers' use cases. Obviously, when you're going up against a particular customer, there are numerous differentiation points that you have. in order to win that customer. But generically, we can work across the whole customer base. We have our own message sending infrastructure. In terms of expertise, we've been playing in the space over 20 years. and we have a proposition that not only is it about the technology, but it's also about people that really make it happen for our customers, understanding what they're looking to achieve and given them the tool set and the expertise to make sure that they deliver on the return on investments. We've got one of the deepest integration infrastructure out there. So we connect in to over 250 off-the-shelf integrations which is maintained by us, built by us from an ecosystem perspective and bringing that data in easily. So some of those are the kind of core advantages. But naturally, in a different pitch process, there are going to be areas where you can pay yourself against a particular competitor. In terms of defensibility against AI, there's a number of different things that we talked about in this presentation. However, if I kind of summarize some of the key points, what are our moats and how do we become defensible. It's our proprietary first- data that we've collected over a number of years and over 9,000 different brands. AI is only as good as the context that you give it with a context layer. We're going to do e-commerce and Martech integrations, whilst you may be able to do a little bit of it [indiscernible] coding, we work across all of our business systems. We work across bringing in all that behavior in sites -- domain-specific AI embedded into workflow. We're not -- when we build AI, we're not just an application layer. We're deeply worked in into that whole customer experience tool set across these different touch points that our customers would have, that actionable behavioral and predictive insights. AI is only as useful when it can really drive real actions. And we've been very good at doing that. But with native AI, you actually get the output of that. There are high switching costs. When you have across the different departments of our customers or across many different points solutions that they may have, working with one another, you may be able to build a small proportion of that. You're not going to be able to build all of it. People are not looking to rip all of that out when it's working. For ushaving that full funnel CXDP customer experience vision, AI, I guess, point solutions or tools can't really match that full customer journey. We are working in a regulated world. Obviously, some of you would have heard about GDPR in a more regulated world, customers are looking for, I guess, previously focused and secure AI architectures, which Dotdigital tool is and has ISO accreditations against, especially with those larger midsized businesses and enterprise. So I think I've answered a number of different questions that people have been asking around the competitive advantage, defensibility against AI and key sorry, key barriers to entry. That's the last part send a reputation absolutely. We've built 20 years' worth of high reputation on our IP. As I mentioned earlier, we control our own messaging infrastructure. We don't use a third-party. So that reputation does act as a barrier to entry. Also having the full suite of tools, somebody can't just build all these different tools very quickly to come into market. If you look at most of the market entry with then the space we play in, there's always been acquisitions into the space at both organic builds of platforms.

That's great. Moving on to the next one here. What is go-to-market investment in social snowball, which contributed to the fall in margins? And what's the expected payback on that?

Thank you. Good question. So firstly, just to put this all into context. So we have said for a number of years, and we'll continue to redeploy our capital to areas that are growing faster or they're faster up ROI for us. And subtends one of those. So in the 3 to 4 months post acquisition, we wanted to ensure that, that growth was still down, which it was, which gave us confidence to just accelerate investments. And we're talking here on acquisition, approximately 3 heads. It's now more than double that. And the return on that investment will come through in the second half of this fiscal year. Now I talked about redeployment of cost capital. What we're actually doing is our the EMEA market is growing slower. Therefore, we are redeploying some capital from EMEA it to or to ones. But in the first half period, there's a bit of overlapping costs there that will flush through in the second half, and we'll see a return on those margins.

Perfect. Next question is, why is your CPaaS business only 15% gross margins when Twilio is 55%?

Yes. Good question in there as well. CPaaS for us is an area of focus. We have -- when we did the acquisition back in 2017 of Comapi, which did play in the CPaaS space, it was for us to integrate that technology within the Dotdigital platform. If we look at Twilio, they've got high volumes of customers across whether they're being small business, all the way up to large enterprise customers. That generally with lower volume, we have a higher margin with larger senders, you have a lower margin, and that mix allows them to get to 55% gross margin. For us, we have small volume -- sorry, a small number of customers with large volume where the margin in the large volume centers is obviously lower. They also have slightly better with the volumes that Twilio do better margins from the telco providers than we would compare to the amount of message sending that we are doing.

Can you clarify the run rate revenue and ARR at the time of acquisition for Social snowball and Alia?

Yes. Sure. No problem. So given that their full subscription businesses, the run rate revenues almost -- they do equate to ARR. So it's almost one and the same thing. But social snowball at the time of acquisition, was just ahead of GBP 4 million worth of ARR. Alia was -- as we disclosed, just above $8 million as at 31st December, so a couple of months before acquisition. It's fair to assume [indiscernible] touched since then which equates to about GBP 6 million.

How distracting and problematic is the current share price it's not very distracting?

It's not very distracting. So there's quite a lot of market sentiment that is weighing on the share price. I think what we focus as a management team and I guess, employees within the business. Whilst, yes, it's not great, having a low share price, we are just fully focused in growing the business, keep delivering the fundamentals and that sustainable growth model that we've been building across those 3 organic growth pillars. I think looking at share price on a day-to-day basis with areas that we can't control.We do it periodically, but we don't look at that on a day-to-day basis anymore.

Next question here is on retention. What is gross and net retention and what modules have low retention?

Yes. So the gross in net retention, I'll refer to net retention first, it's in excess of 100%, and we called out in the half year report that gross retention has improved by a couple of percentage points. on the first half last year. Net retention has improved by one percentage point. There's a question part of that was also with regards to -- are there any particular higher-churn areas. Not really. No. It's all fairly consistent across the group and across the contract types, albeit there are some the one. There's certainly no outliers that are in permanent decline.

Another question on Alia. What is your realistic expectations for Alia or in terms of growth? And clearly, you're not expecting 8x growth this year?

No, we're not anticipating growth again. I'd be wonderful if it happens, but we're not expecting that. In terms of what the market has, the market has about 25% growth for both Social Snowball and Alia, actually. But if you look at the dynamics of the earnouts that are based upon what the founders the need that they can achieve that they are in the region of both of those recent acquisitions, doubling in size each year for a 2-year period. Be wonderful they got there, but for obvious reasons, we're not guiding the market to that.

Thank you, Tom. Next question here is, can you please compare your offering functionality with Klaviyo, what stops you from growing as quickly as Klaviyo?

Yes. So if I kind of go back to the way I visualize the platform, whether it's around the data, whether it's around the orchestration layer or channels. We've focused our platform functionality or build and the depth of the platform on mid-market, larger enterprise, the ability to have more flexibility in whether it be structures they set up with multi-brand, multi-territory, so that's an area of differentiation to Klaviyo. Klaviyo is a very good platform for smaller businesses. But when we graduate to a platform like ours, not only do you get more flexibility in data, the ability to create more customer journeys in an automated fashion but also we have a lot more channels than Klaviyo do and send to. In terms of what stops us growing as quickly as -- can I guess the growth is a factor of how much you spend on sales and marketing. We have kept that balanced disciplined approach of profitability and having 20% plus profit or PBT margins, 30% plus EBITDA margins, whereas obviously Klaviyo has been loss-making for a number of years and starting to get to profitability. It's about creating that brand awareness across the globe that would allow us to get to the growth rates of player.

Moving on topics here, is that Dotdigital going to add merchandising to its all-in-one offering?

Yes. definitely. And I guess when -- if we cast our minds 3 years ago, there were a number of areas that we identified. Loyalty around web personalization around 0 party first party data and that was a key area that we identified as we claimed in web personalization and the next kind of evolution to that or maturity of that market would be sad for merchandising. We haven't looked at acquisitions in that space. The only issues we've had is as a point solution in search and merchandise they have a higher level of attrition in that space, we've not been able to get the valuations to work in terms of what founders are looking for and what we value that time of technology on. So as the loyalty platform goes into full public release, that is probably an area that we may look to build ourselves and less from an acquisition standpoint, something comes up, which we feel would be a great addition to the Dotdigital platform.

Another question here from an investor is, what do you think the trade-off is between adjusted operating margin and growth? If you drop margins by 5%, how much faster could you grow?

It's a bit of a difficult question to answer. But what I do know is if you look at let's say, a Braze or a Klaviyo and their market consensus is as they've returned more to profit or the profit expectations as they look forward, the growth rates have come down. So actually investing more in sales and marketing creates a broader top line I think with the acquisitions we have with Alia and Social snowball that are growing a lot faster as well as some of our international regions. Even if we maintained growth at the, let's say, 7% to 10% organically in the core business, accelerating a bit more around redeployment of capital. We could, in the medium to long term, get the business to a 13% to 15% growth rate whilst maintaining the same margins. I know that's not fully answering your question in terms of if we dropped it by 5%, how much more growth could we get from the core business I think looking at it in a different way, we've got business lines that are growing a lot faster. We can deploy a bit more of the capital that earns a higher return on investment for us, which will help accelerate our future organic growth rate.

Next one here is, please review the sales organization, quota-carrying headcount and average net ARR productivity.

Co, we'll review that. Yes. And I'll just add on that one, actually. We permanently are reviewing that. And that's why the example I gave her that we're redeploying some capital towards social snowballs from other areas of the business. So we do permanently do that, and it's what the company has done for a number of years in terms of redeploying capital to some of the faster-growing markets and well outside of the U.K. So yes, I'd say this is something we do on an ongoing basis as well

We review that. I think the -- there is a good investment coming up that will help with the efficiencies of the sales -- so we are late to put a CRO, Chief Revenue Officer into the core business as management bandwidth with the breadth of where the business is today on the maturity of they will be looking at that on a constant basis. At the moment, whilst the general managers of each of the regions reporting to myself as well as the newer acquisitions, I only have a certain amount of time motion perspective. So we are bringing a CRO that will help optimize and make more efficient on current sales, sales and methodology, process and efficiencies.

And perhaps one last question as we approach the hour. Since you have become more acquisitive, your return metrics like ROE, ROA, ROCE have all declined. So are you just buying growth at the expense of returns? When can shareholders expect a return on this capital investment? Or is the quality of the business going down?

That's a very good question. I think, yes, we have done acquisitions, a number of acquisitions over the last 3 years. we needed to build out the suite, part of our vision 3 years ago, and it continues was about making this a more multi-suite product One, it defends against AI per second gives our customers as their behaviors have changed for over the recent years, which is around the consolidation of platform. If we look into the future over the next 12 to 18 months, we'll focus on integrating those acquisitions and continue building organically. We have near completed what we describe as our suites across the whole customer experience. So we'll be back focused on that organic growth while we build more of the cash over the next 12 to 24 months, which should obviously improve those metrics.

Fantastic. Milan, Tom, thank you for addressing those questions from investors today. And we long before we direct investors to provide you with a feedback, which is very important to you in the company. Can I please just ask you for a few closing comments?

Yes, no problems at all. Thanks again, everyone, for joining today. I think for us, H1 has demonstrated strong progress against not only a geographic pillar of growth whether it be the extra functionality, the AI builds that we've done continuously enhancing our product also from a strategic partnerships, we're seeing some very strong growth in strategic ones as we look into the future and delivery over the last 6 months. ARR growth has continued to expand quite significantly and over that 6-month period, we continue to increase our retention of our customers and rising and increasing that spend of our customers as the depth of the platform and our customers use more of that platform from an adoption perspective . Our multiproduct CXDP strategy has continued to deliver both on a functionality recon revenue, which has been up 20% in that 6-month period. We've seen channels like WhatsApp, which we recently launched. We're launching our loyalty platform, and we've completed 2 acquisitions that we're very excited about as we look into the future acceleration of our organic growth rate with strong cash generation that we create in our business and that growing international footprint, more diversification of revenues outside of the U.K. in high growth addressable market and the recurring revenue nature of our business, we have full transparency into the future. Tom and I appreciate your time today, and we look forward to updating you on our continued progress.

That's great. Thank you once again for updating investors today.