Final Results to 30 June 2013 Leader in providing outsourced online customer acquisition services
September 2013 Slide 2 Presenters and Agenda Presenters: Jeff Cox Chief Executive Officer Bruce Casely Chief Financial Officer Agenda: Introduction Highlights Financial Review Business Development Conclusion & Questions
Slide 3 Introduction Business overview Provider of highly profitable online customer acquisition solutions Delivered via premier proprietary technology platform and customer contact expertise Deep and broadening customer relationships Structural growth in online advertising market and growing trend toward outsourcing Profitable, cash generative, high growth Progressive dividend policy subject to availability of distributable reserves and funds required to finance future growth Good progress executing against the growth strategy
Slide 4 Contact centres 400+ agents in 4 locations pdfpad.com/flags/ PAKISTAN MEXICO Mexico City Outsourced English/Spanish Lahore Owned English/Spanish Karachi Owned English GRENADA St. Georges Outsourced English Slide 5 Market Structural growth drivers Global Advertising $ billions Global Search Advertising $ billions Double digit growth in underlying online advertising markets
Outsourcing trend more strongly favours expert providers like DGS
DGS occupies highest growth components
DGS winning larger allocations of client advertising budgets Source: Magna Global, Digital Media Forecasts, December 2012. CAGR 2012-2017 2012 2017 Digital Traditional 2012 2017 Search Display Social Mobile $98 $174 $45 $83 $480 $619 $98 $174 $41 $52 $16 $6 $6 $23 Mobile 23% CAGR Search 13% CAGR Social 29% CAGR Display 5% CAGR Digital 12% CAGR Traditional 3% CAGR Slide 6 Highlights Full year to 30 June 2013 Admission to AIM on 14 Feb raising $8m gross ($6m net of costs) Revenue up 28% to $25.5m in line with market expectation Profit performance ahead of market expectation adjusted EBITDA* up 32% to $4m Growth of call centre and support staff by 35% Launch of top three cable operators in Mexico Geographic expansion including UK and Germany Commercialisation of dgSMART platform Corporate structure changes * EBITDA adding back foreign exchange losses, extraordinary items and ESOP charge Slide 7 $6.2 $9.3 $20.0 $25.5 FY 2010 FY 2011 FY 2012 FY 2013 revenue ($m) $1.3 $1.5 $3.1 $4.0 FY 2010 FY 2011 FY 2012 FY 2013 ebitda* ($m) $0.95 $1.63 H1 $1.7 $0.18 $3.39 FY 2010 FY 2011 FY 2012 FY 2013 dividends ($m) H2 $1.69 Financial performance High growth high profit
+28%
+32%
+108% * EBITDA adding back foreign exchange losses, extraordinary items and ESOP charge YoY Growth FY13 v FY12 - - - - - - Slide 8 Financials Dividends and cash
In June paid $1.4m dividend Declaring a further $290k dividend to total $1.69m for H2 FY13 since going public to be paid in October This totals 6.27 cents per share* Cash balance of $4m at year end
*Based on 27,021,388 shares in issue, excluding ESOP shares which do not rank for dividend until post option exercise Slide 9 Summary Financials P&L and Balance Sheet $000 Audited Jun-12 Jun-13 Revenue 19,977 25,541 Cost of Revenue 12,914 15,758 Gross Profit 7,063 9,782 SG & A 4,037 6,560 EBITDA (Adjusted)* 3,049 4,025 Other expenses 164 501 Taxes** 1,064 5,091 Net Income/(loss) 1,798 (2,715) $000 Audited Jun-12 Jun-13 Cash and Equivalents 453 4,004 Accounts Receivable, Net 2,637 3,982 Deferred Tax Asset - 220 Prepayments Related party receivables - 211 1,095 - Total Current Assets 3,301 9,301 Plant Property and Equipment 41 544 Goodwill 206 206 Intangible Assets - 775 Total Non Current Assets 247 1,525 Total Assets 3,548 10,826
Trade Payables 1,778 2,482 Related-party Payable 200 - Factoring Advance 1,286 - Deferred Tax Liability 43 64 Other Liabilities 64 982 Income tax (Cyprus) 48 Total Liabilities 3,370 3,576
Shareholders Equity 177 7,250 *EBITDA adding back foreign exchange losses, extraordinary items and ESOP charge
**IP was sold pre IPO to TRG resulting in a $4.8m tax charge. This was offset by Net Operating Losses and a capital contribution by TRG for the same amount
Slide 10 Operational expansion Use of IPO proceeds Investment in working capital
Expansion of call centre operations $700k: New 330 seat state of the art call centre in Lahore, capacity to end Dec 14 based on current forecasts
$350k: Additional build out of further call centre and tech operational centre in Karachi
Paying down of facility Retired $2.4m of factored bank debt
Recruitment and business development Remainder of proceeds held to take advantage of market opportunities
Slide 11 Growth Platform, geography and sector Sector Addition
Alternative Energy
Home Automation
Geographic Expansion
DIRECTV Columbia
DISH Mexico
Core Platform
AT&T
CableOne
Windstream
Recent wins support strategic growth initiatives Slide 12 Growth Strategy Three pillars Core Platform Geographic Expansion Sector Addition Add Satellite And Wireless Add Business To Business Add Agency Business Optimise In House Spending Canada Latin America France, Germany and United Kingdom Other Europe Australia and New Zealand Middle East and Asia Alternative Energy Insurance Retail Banking Education Home Automation Healthcare Legal Scale Current Clients Geographic Expansion Utilities Slide 13 Growth Product and service development New business of bespoke software development services Licensing of dgSMART software and analytics platform
Bespoke software platform development for existing Fortune 500 customer base
Diversification and visibility of future revenue streams
Investment in resources to meet expansion and new lines of business Slide 14 Year Ahead Consistent focus Grow core business Accounts for most of growth in FY14
Launch Europe, expand Latin America Expect revenues in H1 2014
Seek opportunistic acquisitions in Emerging Markets Accelerate geographic or relevant sector growth
Invest in dgSMART to increase competitive advantage Add bench strength and capacity
Slide 15 Summary & Outlook Strong financial performance and growth
Continued execution on three pillar strategy
Expand new line of product development
Confident outlook
Slide 16 Appendices Slide 17 DGS Management team Bruce Casely Chief Financial Officer Jeff Cox Chief Executive Officer Founded DGS in 2008 VP Direct Channels, Charter San Diego State University, BA
Jeff has over 20 years of experience in direct marketing, including responsibilities for internet, contact center, direct mail, and door to door marketing. He has served as VP of Sales Channels for Charter Communications and in executive roles at Verizon Wireless and Airtouch Cellular. Joined DGS in 2012 Head of M&A, VION Food Group UK Robert Gordon University BA; Member of the Chartered Institute of Bankers in Scotland
Bruce has over 19 years of finance experience with particular focus on strategic planning and analysis, mergers and acquisitions, and corporate finance. He has worked for Bank of Scotland, Rothschild, Ernst & Young and Scottish & Newcastle plc Slide 18 Paid search Proprietary technology Proprietary databases on the performance characteristics of nearly 10 million search terms in over 6000 geographic locations developed over five years Proprietary algorithms that determine the optimal price to pay for advertising to ensure effective advertising placement
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Proprietary processes and tools for managing specific client requirements Slide 19 Websites Expertise in design and integration Own or manage over 26 properties Systems integration with clients enables real time service availability and provisioning Marketing integration with customers enables use of branding and trademarks Pricing integration with clients Optimised artwork and copy designed to drive customer conversion Slide 20 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 DGS is both gaining market share and growing absolute volume Slide 21 Summary Financials Cash Flow $ Audited Jun-12 Jun-13 Cash flows from operating activities Net (loss)/income 1,798,072 (2,714,623) Depreciation and amortisation 20,465 203,627 Income tax expense - 47,779 Stock Options Plan charge - 470,565 Foreign currency translation - (816) Adjustment to reconcile net income to net cash provided by operating activities: Changes in assets and liabilities: Accounts receivable (946,355) (1,345,113) Related-party receivables (123,507) 211,427 Prepayments and other assets 6,376 (1,095,448) Accounts payable 736,272 704,063 Related-party payables (79,675) (200,085) Other liabilities (5,951) 918,240 Deferred tax - net 472,080 (198,304) Net cash (used in)/provided by operating activities 1,877,777 (2,998,688) Cash flows from investing activities Purchases of intangible assets - (900,000) Purchases of computer and office equipment (31,936) (581,603) Net cash used in investing activities (31,936) (1,481,603) Cash flows from financing activities Repayment of loan from customer (1,250,000) - (Repayments of)/advances on factoring arrangement 1,286,585 (1,286,592) Gross proceeds from issue of new shares - 9,099,761 Extraordinary listing costs included within equity - (1,386,557) Other capital contribution - 4,696,079 Dividend paid (1,630,411) (3,091,566) Net cash provided by/(used in) financing activities (1,593,826) 8,031,125 Net increase in cash 252,015 3,550,834 Cash at the beginning of the period 200,762 452,777 Cash at the end of the period 452,777 4,003,611 Supplement disclosures of Cash Flow Information Cash paid during the period for interest 150,728 483,586 Cash paid during the period for income tax 1,064,163 - Slide 22 Share Information at 09/09/13 Share Price 223.5p Market AIM Ticker DGS.L Market Cap. 66.31m Ord. shares in issue 29.67m
Shareholder % TRG 43.83 Jeffrey Cox 19.51 DGS Share Option Plan 8.92 Investec Asset Management 7.95 Henderson Global Investors 3.07 Digital Globe Services, Ltd Crawford House 50 Cedar Avenue Hamilton HM 11, Bermuda www.dgsworld.com