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Dotdigital Group reports 26.0% revenue growth in FY2016 and 1.5 pp EBITDA Margin decline from 32.0% to 30.4%

18 Oct 2016 • About Dotdigital Group ($DOTD) • By InTwits

Dotdigital Group reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Dotdigital Group is a fast growth stock: FY2016 revenue growth was 26.0%, 5 year revenue CAGR was 24.6% at FY2016 ROIC 28.9%
  • Dotdigital Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.9%. At the same time it's a lot of higher than industry average of 2.0%.
  • CAPEX is quite volatile: 0.50 in FY2016, 0.67 in FY2015, 0.61 in FY2014, 0.29 in FY2013, 0.31 in FY2012
  • The company has highly profitable business model: ROIC is at 28.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Dotdigital Group ($DOTD) key annual financial indicators

mln. £201220132014201520162016/2015
P&L
Revenue9.54712.19716.21321.36626.92626.0%
Gross Profit8.97111.31014.68019.07423.53123.4%
SG&A11.05913.85817.36725.3%
EBITDA2.9934.8004.7386.8338.19720.0%
Net Income2.4670.7423.4194.6565.36815.3%
Balance Sheet
Cash4.0206.0729.30611.93217.31345.1%
Short Term Debt0.0000.0000.0000.0000.000
Long Term Debt0.0000.0000.0000.0000.000
Cash flow
Capex0.3150.2920.6070.6670.502-24.7%
Ratios
Revenue growth6.6%27.8%32.9%31.8%26.0%
EBITDA growth14.8%60.4%-1.3%44.2%20.0%
Gross Margin94.0%92.7%90.5%89.3%87.4%-1.9%
EBITDA Margin31.4%39.4%29.2%32.0%30.4%-1.5%
Net Income Margin25.8%6.1%21.1%21.8%19.9%-1.9%
SG&A, % of revenue68.2%64.9%64.5%-0.4%
CAPEX, % of revenue3.3%2.4%3.7%3.1%1.9%-1.3%
ROIC26.4%38.0%28.5%31.4%28.9%-2.5%
ROE29.0%7.3%27.6%28.6%25.5%-3.1%
Net Debt/EBITDA-1.3x-1.3x-2.0x-1.7x-2.1x-0.4x

Revenue and profitability


The company's Revenue jumped on 26.0% in FY2016. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 1.5 pp from 32.0% to 30.4% in FY2016.

Gross Margin decreased slightly on 1.9 pp from 89.3% to 87.4% in FY2016. SG&A as a % of Revenue showed almost no change in FY2016.

Net Income marign decreased slightly on 1.9 pp from 21.8% to 19.9% in FY2016.

Capital expenditures (CAPEX) and working capital investments


In FY2016 the company had CAPEX/Revenue of 1.9%. The company showed small CAPEX/Revenue decline of 0.53 pp from 2.4% in FY2013 to 1.9% in FY2016. For the last three years the average CAPEX/Revenue was 2.9%.

Return on investment


The company operates at high and attractive ROIC (28.90%) and ROE (25.50%). ROIC decreased on 2.5 pp from 31.4% to 28.9% in FY2016. ROE decreased on 3.1 pp from 28.6% to 25.5% in FY2016.

Leverage (Debt)


The company has no debt. Cash jumped on 45.1% in FY2016.

Valuation


Dotdigital Group's trades at EV/EBITDA 17.1x and P/E 29.3x while industy averages are 15.6x and 19.1x. The company's EV/(EBITDA-CAPEX) is 18.2x with the industry average at 19.0x.

Appendix 1: Peers in Software & Computer Services


Below you can find Dotdigital Group benchmarking vs. other companies in Software & Computer Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Coms ($COMS)46.8%763.3%110.4%36.1%
Centralnic Group ($CNIC)15.9%4.0%98.9%71.3%
Proactis Holdings ($PHD)7.0%26.2%69.6%12.5%
Progility ($PGY)51.0%3.2%
Galasys ($GLS)14.3%20.9%311.1%33.0%
 
Median (44 companies)8.4%6.1%4.5%3.6%7.2%
Dotdigital Group ($DOTD)27.8%32.9%31.8%26.0%


Top companies by Gross margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Lombard Risk Management ($LRM)99.0%98.8%99.2%98.6%99.3%
Phoenix It Group ($PNX)97.0%97.2%97.6%97.9%
Wandisco ($WAND)91.8%80.3%80.7%93.2%
Netcall ($NET)88.2%89.7%91.0%90.9%91.2%
Idox ($IDOX)90.4%90.8%89.4%89.3%
 
Median (37 companies)62.7%62.0%58.0%60.2%48.0%
Dotdigital Group ($DOTD)94.0%92.7%90.5%89.3%87.4%


Top companies by EBITDA margin, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Mail.Ru Group Ltd ($61HE)43.1%47.4%50.5%34.6%
Idox ($IDOX)30.9%26.1%26.0%28.6%
Galasys ($GLS)44.0%83.6%32.6%28.5%
Oxford Metrics ($OMG)15.7%6.0%14.7%28.4%
Centralnic Group ($CNIC)38.7%31.1%24.8%28.3%
 
Median (44 companies)13.8%13.0%12.0%12.3%4.0%
Dotdigital Group ($DOTD)31.4%39.4%29.2%32.0%30.4%


Top companies by CAPEX/Revenue, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Rapidcloud Intl ($RCI)1.0%23.1%11.6%19.6%
Coms ($COMS)0.5%0.9%3.4%7.5%0.1%
Csf Group ($CSFG)1.5%4.0%2.4%7.1%4.9%
Nasstar ($NASA)17.9%2.1%5.2%
Unisys Corp ($USY)2.1%2.5%4.1%5.0%
 
Median (44 companies)1.5%1.5%1.9%1.1%0.9%
Dotdigital Group ($DOTD)3.3%2.4%3.7%3.1%1.9%


Top companies by ROIC, %

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Triad Group ($TRD)4.1%-3.8%24.5%61.5%74.4%
International Bus Mach Corp ($IBM)36.1%31.0%28.1%25.7%
Galasys ($GLS)58.7%60.9%40.8%22.2%
Instem ($INS)20.6%14.7%10.9%20.4%
Kalibrate Technologies ($KLBT)12.5%40.2%29.2%18.8%10.2%
 
Median (44 companies)12.5%11.5%9.4%4.3%7.1%
Dotdigital Group ($DOTD)26.4%38.0%28.5%31.4%28.9%


Top companies by Net Debt / EBITDA

Top 5 FY2012 FY2013 FY2014 FY2015 FY2016
Progility ($PGY)2.0x1.8x12.8x6.8x
Parity Group ($PTY)4.7x4.9x5.1x
Nasstar ($NASA)-5.3x0.0x1.9x
Phoenix It Group ($PNX)4.3x1.9x
International Bus Mach Corp ($IBM)0.9x1.2x1.4x1.7x
 
Median (34 companies)-0.4x-0.4x-0.3x-0.5x-0.8x
Dotdigital Group ($DOTD)-1.3x-1.3x-2.0x-1.7x-2.1x