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Dotdigital Group revenue jumped on 34.8% in 2018 while EBITDA Margin decreased on 4.8 pp from 31.7% to 26.9%

16 Oct 2018 • About Dotdigital Group ($DOTD) • By InTwits

Dotdigital Group reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
  • Dotdigital Group is a fast growth stock: FY2018 revenue growth was 34.8%, 5 year revenue CAGR was 28.7% at FY2018 ROIC 26.6%
  • Dotdigital Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.2%. At the same time it's in pair with industry average of 3.3%
  • CAPEX is quite volatile: £0m in FY2018, £0m in FY2017, £0m in FY2016, £0m in FY2015, £0m in FY2014
  • The company has highly profitable business model: ROIC is 26.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability


Dotdigital Group's Revenue surged on 34.8%. During the last 5 years Revenue growth bottomed in FY2017 at 18.7%. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 4.8 pp from 31.7% to 26.9% in FY2018.

Gross Margin decreased on 7.1 pp from 86.1% to 78.9% in FY2018. Gross Margin stuck to a declining trend at -2.6 pp per annum in FY2014-FY2018. SG&A as a % of Revenue decreased on 5.1 pp from 60.8% to 55.6% in FY2018. SG&A as a % of Revenue declined at -2.9 pp per annum in the last 5 years.

Net Income margin decreased on 2.5 pp from 22.4% to 19.9% in FY2018.

Investments (CAPEX, working capital and M&A)


The company's CAPEX/Revenue was 1.1% in FY2018. CAPEX/Revenue decreased on 2.0 pp from 3.1% in FY2015 to 1.1% in FY2018. It's average level of CAPEX/Revenue for the last three years was 1.4%. CAPEX as a % of Revenue declined at -0.72 pp per annum in the last 5 years.

Return on investment


The company operates at high and attractive ROIC (26.6%) and ROE (26.3%). ROIC decreased on 2.8 pp from 29.3% to 26.6% in FY2018. ROE decreased slightly on 1.0 pp from 27.3% to 26.3% in FY2018.

Leverage (Debt)


Debt level is -1.3x Net Debt / EBITDA and 0.0x Debt / EBITDA. Debt surged while cash dropped on 26.5%.

Dotdigital Group has no short term refinancing risk: cash is higher than short term debt (300,100.0%).

Valuation and dividends


The company's trades at EV/EBITDA 21.3x and P/E 30.5x.

Financial and operational results


FY ended 30 Nov -0001

Dotdigital Group ($DOTD) key annual financial indicators

mln. £201420152016201720182018/2017
P&L
Revenue16.21321.36626.92631.96643.09434.8%
Gross Profit14.68019.07423.53127.50734.02023.7%
SG&A11.05913.85817.36719.43123.97923.4%
EBITDA4.7386.8338.19710.13511.57614.2%
Net Income3.4194.6565.3687.1468.55819.8%
Balance Sheet
Cash9.30611.93217.31320.42815.005-26.5%
Short Term Debt0.0000.0000.0000.0000.005
Long Term Debt0.0000.0000.0000.0000.000
Cash flow
Capex0.6070.6670.5020.3750.47526.7%
Ratios
Revenue growth32.9%31.8%26.0%18.7%34.8%
EBITDA growth-1.3%44.2%20.0%23.6%14.2%

Gross Margin90.5%89.3%87.4%86.1%78.9%-7.1%
EBITDA Margin29.2%32.0%30.4%31.7%26.9%-4.8%
SG&A, % of revenue68.2%64.9%64.5%60.8%55.6%-5.1%
Net Income Margin21.1%21.8%19.9%22.4%19.9%-2.5%
CAPEX, % of revenue3.7%3.1%1.9%1.2%1.1%-0.1%

ROIC28.5%31.4%28.9%29.3%26.6%-2.8%
ROE27.6%28.6%25.5%27.3%26.3%-1.0%
Net Debt/EBITDA-2.0x-1.7x-2.1x-2.0x-1.3x0.7x

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 FY2014 FY2015 FY2016 FY2017 FY2018
Pinnacle Technology Group ($PINN)-17.1%108.6%
Wandisco ($WAND)40.0%-2.0%3.5%72.6%
Microgen ($MCGN)-0.0%7.2%34.5%45.7%
Lombard Risk Management ($LRM)21.6%5.4%10.3%44.8%
Zoo Digital Group ($ZOO)19.9%1.5%41.7%73.2%
 
Median (39 companies)0.8%4.7%10.9%10.9%3.0%
Dotdigital Group ($DOTD)31.8%26.0%18.7%34.8%


Top companies by Gross margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Lombard Risk Management ($LRM)99.2%98.6%99.3%99.6%
Netcall ($NET)91.0%90.9%91.2%91.7%90.2%
Wandisco ($WAND)80.7%93.2%88.1%90.0%
Eleco ($ELCO)87.8%88.9%86.7%87.9%
Proactis Holdings ($PHD)73.6%80.4%82.4%86.0%
 
Median (33 companies)57.5%55.0%56.6%55.1%35.3%
Dotdigital Group ($DOTD)90.5%89.3%87.4%86.1%78.9%


Top companies by EBITDA margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Rightster Group ($RSTR)-146.3%-64.1%-19.9%114.2%
Sopheon ($SPE)6.8%19.8%22.6%27.9%
Mail.Ru Group Ltd ($61HE)50.5%34.6%35.2%25.1%
Gresham Computing ($GHT)8.8%18.1%20.6%22.6%
Nasstar ($NASA)18.4%19.1%18.7%21.1%
 
Median (39 companies)10.3%12.3%10.2%10.7%6.8%
Dotdigital Group ($DOTD)29.2%32.0%30.4%31.7%26.9%


Top companies by CAPEX/Revenue, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Actual Experience ($ACT)2.6%6.0%39.9%48.7%
Csf Group ($CSFG)2.4%7.1%4.9%8.5%16.5%
Pennant International Group ($PEN)1.4%0.2%6.3%7.1%
Nasstar ($NASA)2.1%5.2%8.9%6.5%
Oxford Metrics ($OMG)2.8%2.4%1.8%5.8%
 
Median (39 companies)1.7%1.1%1.2%1.3%0.9%
Dotdigital Group ($DOTD)3.7%3.1%1.9%1.2%1.1%


Top companies by ROIC, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Rm ($RM.)130.8%289.2%254.7%73.8%
Triad Group ($TRD)24.5%61.5%74.4%61.1%41.0%
Sopheon ($SPE)-10.5%14.7%22.7%32.3%
International Bus Mach Corp ($IBM)31.6%29.7%21.5%19.5%19.8%
Microgen ($MCGN)9.0%12.1%15.4%18.4%
 
Median (41 companies)9.0%4.0%7.1%6.3%5.5%
Dotdigital Group ($DOTD)28.5%31.4%28.9%29.3%26.6%


Top companies by Net Debt / EBITDA

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Datatec ($DTC)0.3x0.4x1.1x10.2x
Progility ($PGY)1.8x12.8x6.8x3.9x
Zoo Digital Group ($ZOO)38.3x3.2x0.9x
Statpro Group ($SOG)-0.3x-0.2x3.0x
Idox ($IDOX)1.0x1.3x1.2x2.2x
 
Median (31 companies)-0.3x-0.5x-0.8x-0.5x-0.2x
Dotdigital Group ($DOTD)-2.0x-1.7x-2.1x-2.0x-1.3x