Digital Globe Services, Ltd. HY Results

Transcription

1 Digital Globe Services, Ltd. HY Results March, 2014

2 Agenda Business Overview 3 Operational Highlights 11 Financial Review 12 Business Development 16 Outlook 19 Jeff Cox - Founder & CEO Jeff Cox has over twenty years of wireless and cable sales and operations experience and has held executive positions in sales channel development and execution, on and off-line marketing programs and call center sales and operations for some of the world's most recognised brands. Jeff has held executive management positions at Charter Communications and senior management positions at mobile phone operator AirTouch (acquired by Verizon). Sandra Rodger - CFO Sandra has more than twenty years experience in financial services. Sandra trained with and worked for Deloitte for 10 years before joining PwC in their Newcastle office, where she worked with a variety of quoted clients and was involved in a number of IPOs to the AiM and Main Markets of the London Stock Exchange. In 2008 she moved to Scotland and became the Head of Assurance Private Business for Central Scotland. In 2012, Sandra joined Grant Thornton UK LLP as an Assurance partner and was Practice Leader of their Edinburgh office.

3 Strong top and bottom line growth DGS Revenue $m DGS Gross Profit $m DGS adjusted EBITDA 1 $m 59% Growth on % Growth on % Growth on %* 65% % 45%* % 59% 74% %* 41% 59% 44% 35% 41% % 35% * of N+1 Singer forecasts H1 H2 1 EBITDA is earnings before interest, taxes, depreciation and amortisation. Adjusted EBITDA additionally excludes foreign exchange gains and losses, extraordinary items, non-cash Employee Stock Option Plan charges, warrants, legal costs associated with Edu acquisition and one off severance costs - 3 -

4 DGS attracts, compels and converts high value customers DGS maximises paid search traffic and increases Customers that click on DGS search ads are routed client brand awareness through employing to either an inbound agent or a website optimised proprietary algorithms and an extensive for their viewing device and containing database of telecom search performance history to select search terms and manage search engine bid pricing 24/7 Campaign Monitoring Platform Marketing, Pricing, and Systems Integration tailored messaging designed to drive high customer conversion Algorithmic Bid Optimisation Decision Driven Reporting Customer Acquisition Strategy Intuitive Customer Experience Brand Specialists Demographic overlay analysis enables DGS to proactively modify messaging and offer structure to increase propensity to buy; Robust campaign reporting provides opportunities to tailor marketing initiatives Customer Segmentation and Propensity Modeling Internal QA And Sales Verification Interested customers are routed to skilled inbound telephone agents managed by DGS who use a consultative sales approach to handle a wide variety of calls ranging from product inquiry to sales and billing support - 4 -

5 Business model Online Customer Acquisition Provider of highly profitable online customer acquisition solutions DGS purchases paid search advertising converts interest at managed websites converts interest at contact centres DGS receives per-sale commissions from its clients - 5 -

6 DGS partners with the biggest brands in a diverse range of industries to defend and grow their market share Select DGS Clients Business Overview Canada United States UK Latin America Profitable, cash generative, high growth Revenue CAGR of 30% over last 4 years Long term and embedded customer relationships, with over 40 direct and indirect client relationships globally Over 600 staff in Europe, North America and Asia Structural growth in online advertising market and growing trend toward outsourcing Dividend paying Continuing progress in executing against the growth strategy - 6 -

7 Paid Search proprietary technology Proprietary databases on the performance characteristics of nearly 12 million search terms in over 6500 geographic locations developed over six years Proprietary algorithms that determine the optimal price to pay for advertising to ensure effective advertising placement + Proprietary processes and tools for managing specific client requirements and other digital media - 7 -

8 DGS s model optimizes bidding parameters, evolving over time Solutions to the problem at hand, or chromosomes, are randomly generated The chromosomes are independently applied to historical data SOLUTION 1 SOLUTION 2 SOLUTION 3 SOLUTION 4 HISTORICAL DATA The chromosomes with the best fitness scores are combined to form new chromosomes, and the process is repeated Each chromosome is given a fitness score determined by how well they solve the problem based on historical data GENERATION 2 GENERATION 1 CHROMOSOME FITNESS SCORE - 8 -

9 Competitive position performance leader Industry has focused on revenue growth by bidding to win in paid search auctions; DGS is not the largest provider when measured in revenue terms DGS has focused on profitability and customer quality by developing data and algorithms; clients view DGS as the performance and quality leader DGS has built unique performance data and algorithms through interactive market experience over time; financial investment alone is insufficient to compete Business model provides resilience against margin compression - 9 -

10 Market trends in advertising dollars spent position DGS well for future growth Global Advertising 1 Key Takeaways $480M +5.2% $619M Double digit growth in underlying online advertising markets Outsourcing trend more strongly favors expert providers like DGS DGS occupies highest growth components; Mobile, Social and Search Breakthrough in social media DGS winning larger allocations of client advertising budgets $98M +12.2% $174M Traditional Advertising Digital Advertising 1 Source: Magna Global, Digital Media Forecasts, December CAGR

11 Operational highlights Revenue expansion from core US cable communications clients, contract extension with Comcast post period end Double and triple-digit growth from key revenue clients Diversification of revenue base with faster revenue growth outside top 5 clients Expansion into European market with first UK client and new London office Continued investment in business: new sales team hires in core business and Edu, new purpose built call centre in Lahore, and new head office and call centre in Karachi, Pakistan Appointment of highly experienced EVP of New Verticals and CTO Acquisition and successful integration of DGS Edu, accelerating entrance into new industry vertical

12 Financial highlights Revenue $m - up 59% Gross profit $m - up 57% Adj. EBITDA* $m - up 67% % 36% % % Adjusted earnings per share of $0.03 (30 June 2013: ($0.09)) Cash at 31 December 2013 of $2.8m after funding $1.5m for DGS Edu and payment of the final dividend amount of $0.3m, both in November 2013 * EBITDA is earnings before interest, taxes, depreciation and amortisation. Adjusted EBITDA additionally excludes foreign exchange gains and losses, extraordinary items, non-cash Employee Stock Option Plan charges, warrants, legal costs associated with Edu acquisition and one off severance costs

13 Financials P&L $m 6 months ended 31 December months ended 31 December 2012 Year ended 30 June 2013 Revenue Total cost of revenue Gross profit Total selling, general and administrative expenses Operating Profit Total other expenses Profit before income taxes and extraordinary items Extraordinary items Income Tax (Credit)/Expense (0.02) Net Profit/(Loss) 0.78 (4.08) (2.71) $m Six months ended 31 December 2013 Six months ended 31 December 2012 Year ended 30 June 2013 EBITDA Foreign exchange gains or losses Extraordinary items Non-cash Employee Stock Option Plan charges Warrant Legal costs associated with EDU acquisition One-off severance costs Adjusted EBITDA Key Takeaways Diversification of revenue over the period, with top 5 clients accounting for 80% (2012: 91%) Revenue from remaining clients outside top 5 increased 110% Strong performance from new vertical (Edu) continuing post period end Stable gross margin Increase in SG&A due to investment in infrastructure and key personnel to support growth strategy

14 Financials Balance Sheet $m 31 Dec Dec June 2013 Assets Current Assets Cash and cash equivalents Accounts receivable Prepayments and other assets Deferred tax asset Non-Current Assets Goodwill Intangible Assets Computer and office equipment, net of accumulated depreciation Key Takeaways Cash position provides the means for organic and acquisitive growth Edu acquisition: reflecting increase in intangible assets and goodwill Total Assets Liabilities and Stockholders Equity Current Liabilities Factoring advance Accounts payable Other liabilities Income tax payable Contingent consideration payable Non-Current Liabilities Deferred tax liabilities Total Liabilities Stockholders Equity Common stock Preferred stock Additional paid-in capital Warrant Accumulated other comprehensive loss (0.00) - (0.00) Share based payment reserve Retained deficit (1.91) (0.49) (2.70) Total Stockholders Equity Total Liabilities and Stockholders Equity

15 Financials Movement in cash Movement in cash - FY13 to HY1 14 $m Notes Operating cash flow before changes in working capital of $1.9M (FY13: ($2.4M)) (0.8) Gain on exercise of shares of $0.1M (FY13: nil) Cash consideration acquisition of DGS Edu LLC of $1.5M 4.0 FY13 Cash from operating activities Gain on shares Change in working capital (1.5) Edu acquisition (0.6) Planned capex (0.3) Dividend paid 2.8 HY1 14 Planned spend on capex of $0.6M relating largely to new purpose built call centre in Lahore Dividend of $0.3M paid in November 2013 on the back of strong results Closing cash at bank position of $2.8M (FY13: $4.0M)

16 Growth Strategy SECTOR ADDITION Legal Healthcare Retail Banking Utilities Education Insurance Home Automation GEOGRAPHIC EXPANSION Middle East and Asia Australia and New Zealand Other Europe Germany, United Kingdom Latin America Alternative Energy Canada CORE Scale Current Clients Optimise In House Spending Add Business To Business Add Satellite And Wireless Add Agency Business PLATFORM

17 Successful acquisition of Edu - education lead generation company Updates Attractive vertical based on core business Appropriate size with loyal client base Transition completed Excellent management team in place Shortened on boarding times for new clients Realising cost savings based on core structure Leveraging key analytics to support Edu model

18 Product and service development Appointment of Chad Rycenga Infrastructure, strategy and support Focusing tech team on revenue generation Optimising search term algorithms Increasing tech development and management Bolstering analytics team Continuing enhancement of dgsmart platform New business of bespoke software development services Bespoke software platform development Diversification and visibility of future revenue streams Commercial focus on tech deployment + product offering

19 Summary and Outlook Solid progress in H1 Strong early trading in traditionally stronger H2 Continued execution on three pillar strategy Growing core business Expanding into relevant sectors Entering new geographies Ongoing assessment of opportunistic acquisitions Healthy pipeline of new business opportunities Confident outlook for

20 Appendices

21 Share information Share Price p Market AIM Ticker DGS.L Market Cap m Ord. shares in issue 27.5m Shareholder % TRG Jeffrey Cox DGS Share Option Plan 8.20 Investec Asset Management 7.88 Henderson Global Investors 3.39 Digital Globe Services, Ltd Crawford House 50 Cedar Avenue Hamilton HM 11, Bermuda