I am pleased to report on a year of significant strategic and operational progress as well as strong financial performance.
The Company has been built to capitalise on the structural shift in how businesses communicate and interact with their customers. As businesses increasingly use digital channels and mobile centred engagement to improve customer experience and reduce costs, the Group’s portfolio of software and services are designed to meet this need.
We have continued to grow profitably, invested in our core platforms and IP, developed new partnerships and expanded our geographic footprint into the North American market with the acquisition of Impact Mobile in July 2018 as well as additional senior management hires in the region. We believe we are the market leader in the UK, South Africa and Canada, we are well positioned to further benefit from evolving, global consumer communication trends.
For many years, the Company has had a vision of a world in which consumers will have the choice of many digital touchpoints with which to communicate, and the insight that large consumer businesses will need software to manage these touchpoints and integrate them into their IT systems and business processes in order to provide consistent and seamless customer experiences. We started preparing for this omnichannel world many years ago and, in the last year, we have seen very clear evidence that our vision is being realised.
Over the last year, we have seen Apple, Google and Facebook (through WhatsApp) significantly accelerate their efforts to create channels for enterprise communications with the launches of Apple Business Chat, Google RCS Business Messaging and WhatsApp Business. We have built good working relationships with these global technology businesses and are one of a few providers approved to offer these new channels. We are very much at the forefront of working with them to attract leading consumer businesses to use these new, more interactive communication channels.
The new channels and technology capabilities have created the concept of “messaging as a platform” whereby significant e-commerce, customer service and other business to consumer interactions will take place over these channels. According to Informa, this market is predicted to be worth $74billion by 2021.
Delivering a great customer experience whilst reducing costs has become a top priority for consumer facing businesses, and the automation of communications across messaging channels, managed in real-time has become a strategic imperative. Industry analyst, Forrester, states that 72% of decision makers at large enterprises have improving customer experience as a top priority. However, many large consumer facing businesses with multiple divisions and departments (typically customer operations, contact centres, marketing and IT) are restricted by legacy systems and data spread across different communications products and partners. Our 2019 CIO Research Report recently revealed that these were the two most significant challenges facing CIOs with over 50% stating that they prevented them from delivering a frictionless customer experience across all customer communications channels. Therefore, there is a compelling need for businesses to invest in software platforms that connect existing business systems and data across all digital touchpoints to allow for seamless customer communications.
We categorise these software platforms as “Enterprise CPaaS” and they are part of the broader CPaaS market that globally is forecast to grow from $2 billion in 2017 to $10.9 billion in 2022 according to IDC. Gartner supports the view that companies will continue to invest in CPaaS, stating that end user spending is growing at a compound annual growth rate of nearly 50% between 2016 and 2021.
Our strategy remains to be at the heart of the digital customer interactions for our clients, providing them with the software, services and infrastructure that enables them to deliver great customer experiences whilst benefitting from the cost advantages of digitisation and automation. Since foundation, we have been a “mobile first” business, handling two-way interactions with customers across mobile devices at scale with deep integrations into business systems and processes to fulfil and provision services. This heritage in real time, interactive, end to end customer journeys provides a key competitive differentiation.
Products, technology and infrastructure
The Group has maintained its investment in product development and innovation to support the strategy of being at the heart of customer interactions.
Our core platform, IMIconnect, is differentiated from other CPaaS providers through focusing on the needs of many types of users within large enterprises rather than the developer focussed CPaaS providers that have some similar features. IMIconnect allows technical as well as non-technical users to rapidly build and manage customer journeys using a visual flow builder and pre-configured integrations. The platform is built with large consumer facing enterprises in mind, providing end to end service management, in life support and flexible integration methods for both legacy and modern business systems. IMIconnect has enabled businesses to launch or change their customer journeys up to ten times faster than traditional development methods. In a recent survey we conducted, 83% of CIOs of large consumer facing businesses said that their current development approach hindered their ability to change or create new customer journeys in a fast and agile manner.
Over the last year, we have added new channels to IMIconnect, made it easier to use with a refreshed user interface, and added NLP (“natural language processing”) and AI capabilities to help understand and automate interactions.
Investments in our marketing automation product, IMIcampaign, have enabled marketing teams to easily create their target audience groups for base marketing campaigns, improved the usability of our email composer tool and enhanced our campaign analytics with a new set of dashboards. We also added the ability to better engage customers with personalised video MMS messages.
Further developments to IMIchat included adding proactive messaging on live chat, Apple Business Chat as a new channel and an advanced reporting capability to help contact centres optimise their workforce.
With automation now also a strategic imperative, we have continued to develop capabilities in using AI and machine learning to automate customer interactions. The IMIbot.ai product was enhanced through the implementation of a ‘Manager Bot’ architecture which enables customer interactions to be orchestrated across multiple bots for different use cases and also provides the ability to add new bots progressively as new use cases emerge. We expanded the Intelligence Library, added knowledge bases for different sectors including retail and travel, and made significant usability improvements particularly for allowing non-developers to manage in-life bot operations. We have also embedded some of these capabilities into IMIconnect.
Our operator specific messaging platform, NMX, has been enhanced to include tools to help mobile operators find new revenue streams through different treatment for different types of message.
Further development of IMIdigital includes enhancements to service creation module to support data/voice packs and over-the-top (“OTT”) bundles. The product has been upgraded from a service delivery platform to an end-to-end digital product catalogue management platform for mobile operators. In addition, several subscriber engagement & gratification features have been added to help mobile operators to increase and sustain the digital service adoption of their subscribers.
Our Textlocal application which serves SMB customers was significantly enhanced in terms of throughput and scalability. Last year over 17,000 UK businesses used the product to deliver over 700 million SMS messages to reach and retain their customers.
In addition to investing and developing the existing platform and applications, we continued to explore opportunities that new technologies can have for businesses in improving their customer communications. In particular, we recently introduced a new application, IMIassist, which enables businesses to transform customer interactions with real-time video assistance powered by WebRTC technology. IMIassist allows contact centre agents, healthcare professionals, technicians and other personnel to offer services such as remote troubleshooting, virtual health clinics, field force support and remote claims processing to customers. The solution was recently voted as runner-up in the ‘Personalising Customer Interactions’ category at the UK Innovation Awards 2019 and we are currently exploring commercial opportunities for this product with a number of large enterprises and public-sector organisations.
In terms of our infrastructure and services, this year we have moved to the containerisation of our platform to allow granular control of individual systems and the ability to manage scaling with a reduction in costs. It also allows us to be cloud provider agnostic. Along with this, we have centralised our 24x7 monitoring and incident management using ServiceNow, allowing us to have a global view of the platforms and the service level agreements (“SLAs”) offered to our customers.
On average, more than 20,000 incidents each month reach our central monitoring system which are filtered, analysed and ticketed while managing a 99.0% SLA on incident resolution. Uptime SLAs have been 100.0% for the cloud platforms and 99.8% globally.
IMIconnect is our enterprise CPaaS offering which helps businesses to rapidly create and launch omnichannel customer journeys up to ten times faster, deliver context aware messaging experiences, and orchestrate customer communication flows with back-end systems. This year, IMIconnect was recognised by Gartner in the Market Guide for CPaaS as being one of the leading players in this evolving sector.
A significant number of new clients have launched IMIconnect over the last year across multiple sectors including banking, utilities, mobile operators, logistics and retailers. Popular use cases across these sectors include appointment bookings, customer service feedback, parcel notifications, fraud alerts and meter reading submissions.
IMIchat is a cloud application that consolidates digital, mobile and social customer service channels into a single agent desktop. A unified channel console enables agents to manage real-time, two-way conversations over channels like Facebook Messenger, SMS, Twitter DM, email, and web-chat, therefore equipping agents with omnichannel visibility. IMIchat enhances operational efficiency and reduces costs for businesses through messaged-based customer service and improved resolution rates for contact centre agents.
There has been a significant increase in year on year volumes for IMIchat with the number of chats created increasing by 48%. We have also made a number of product updates in order to enhance the products functionality over the last year, including supporting new communication channels such as Apple Business Chat and WhatsApp Business and improving the reporting capabilities for customer service teams.
IMIbot.ai is a modular AI platform for the end-to-end delivery of automated conversational experiences to customers at scale. The platform enables businesses to use chatbots to enable multi-channel self-service for customers to resolve frequently asked queries such as ‘locate my closest store’, ‘where is my order’ and meter reading submissions. IMIbot.ai is already integrated with our own agent console (IMIchat) as well as several contact centre providers to allow seamless connection to a human agent for more complex queries.
IMIbot.ai has enabled our clients to increase their contact centre resolution rates. A major global home retailer has reduced the number of queries handled by human agents by 50% and a leading UK renewable energy provider has deflected up to 65% of their inbound chats through automation.
IMIcampaign is a cloud campaign management software application designed for multichannel marketing communications. It allows businesses to automate, personalise and contextualise their customer communications at scale using a mobile first approach. IMIcampaign has also been recognised by Gartner in the Magic Quadrant for Mobile Marketing Platforms.
During the past year, IMIcampaign customers have deployed over 5,000 campaigns, delivering over 1.5 billion marketing communications across email, SMS, MMS, Push notifications, Voice and unstructured supplementary service data (“USSD”).
Patient Portal powered by Envoy Messenger
Patient Portal powered by Envoy Messenger is specifically designed for the healthcare sector and delivers patient communications over digital channels to improve patient satisfaction, operational efficiency and reduce missed appointments. At present, 104 NHS hospital trusts and 313 hospitals are live with digital innovations powered by Envoy Messenger. In just one month, 90,000 appointment slots are released for other patients, saving the NHS time and money simply through digital patient communications.
Textlocal is a cloud based, self-serve platform that allows businesses to have instant, affordable access to SMS messaging and mobile marketing tools. The online platform is designed for small independent businesses right through to the corporate sector, allowing users to easily sign up and start deploying mobile messaging campaigns, with the additional option for managed campaigns.
Alerts, reminders and promotions within simple text messages drove increased sales and engagement, with response rates typically exceeding 70%.
NMX is a fully redundant messaging platform that enables operators to monetise their Application to Person (“A2P”) messaging business and improve revenue assurance as a virtual extension of the operator’s SMS infrastructure. To enable mobile operators to add value directly in the message stream, NMX provides a framework to pull in additional services, data sources, decisioning and restriction into any customer service, enabling the mobile operator to expedite time to market for new offerings & react quickly to fraud.
Organisation and systems
The Group has grown significantly since IPO in 2014 with a much broader geographic reach and a significant number of new colleagues, many as a result of acquisitions. Integrating the acquisitions and creating a common culture has created additional management challenges and complexity within the Group. Over the last year, we accelerated integration efforts and, following the settlement of earn out arrangements, we will, over the coming year, have a simpler management structure focussed around regional, commercial go to market business units with centralised teams working on IP development.
Over the last year, the Group has invested in common systems to manage the global business including Salesforce for CRM, ServiceNow for incident and change management, NetSuite for finance operations and Workplace by Facebook for internal communications. We have also appointed central teams to manage security, data privacy and compliance and will be consolidating HR and performance management systems over the coming year.
The Group has grown organically for 15 of the last 16 years and organically grown monthly recurring and repeating revenues for 16 years. This has been achieved whilst maintaining capital disciplines and profitability.
We believe the structural changes in the market and our portfolio of products can support continued growth for many years and our approach to achieving this is built on four growth drivers.
1. To grow our share of interactions and customer journeys with existing accounts
The Group has been a trusted vendor to an outstanding list of market leading, blue-chip organisations and consumer brands in our core markets for many years. We expect to help them embrace the possibilities of new technologies and broaden the range of interactions we manage. Our product portfolio works across multiple different business areas including customer operations, customer service and marketing and we are therefore in a great position to cross sell and upsell once we have worked with one area of a business.
During the year to 31 March 2019, the number of clients that provide more than £500k p.a. revenue increased to 40 (33 in FY18) and clients with revenues between £100k p.a. and £500k p.a. increased to 83 (43 in FY18). We also successfully renewed all significant contracts which came up for renewal, including with 4 of our top 10 customers.
2. To accelerate market penetration through partnerships
We have continued to invest in developing new strategic partnerships in order to target new enterprise clients and sectors. This past year, we have launched IMIconnect on the Salesforce App Exchange, thereby providing support for the world’s leading CRM platform and its users throughout the world. This will enable existing Salesforce customers to rapidly launch and orchestrate two-way, trigger-based customer communications across communications channels.
We have also strengthened our existing relationship with BT, adding IMIconnect to BT’s enterprise communications portfolio as a messaging alerts and notification solution branded ‘BT Notify’. Additionally, we have signed a partnership agreement with Scandinavian mobile operator, Telia, as well as winning a new retail client through another established partnership.
3. To be at the forefront of introducing new innovative customer engagement technologies
As previously mentioned, this year, we have partnered with some of the world’s largest consumer technology vendors to add platform support for new communications channels including Apple Business Chat, WhatsApp Business Solution and Google RCS Business Messaging.
The Group launched Apple Business Chat with UK energy provider npower who use the richer, more interactive channel to improve the customer experience for customers looking to switch to a smart meter. Earlier this year, we also became a verified WhatsApp Business solution provider to help businesses use this newly available channel to engage with their customers. We launched our first solution with one of India’s largest FMCG companies, Britannia, to engage with their 1.5 million retailers over WhatsApp. The launch of these new channels has generated a significant pipeline of opportunities with both new and existing clients which we expect to capitalise on in the coming year.
We have also supported the Google RCS initiative by working together with companies such as Shell, Hermes and Pizza Hut to showcase RCS at the GSMA World Congress in Barcelona this year. We have also recently delivered the first live RCS campaign in the UK at scale for Vodafone. This campaign received higher engagement rates than using traditional communication channels such as SMS, MMS or email and demonstrates the potential of RCS to deliver richer messaging experiences for customers.
As aforementioned, we also recently introduced a new application, IMIassist, which enables businesses to transform customer interactions with real-time video assistance powered by WebRTC technology. Use cases for this technology include: remote troubleshooting, virtual clinics, claims processing, field force support and customer service.
Our patient portal and reminders, powered by Envoy Messenger, manage 27 million outpatient appointments per year across 104 NHS Trusts (covering 313 hospitals). We are currently exploring a number of opportunities to leverage new technologies, including WebRTC, in the coming year to provide services such as virtual clinics to NHS patients.
4. To leverage acquisitions for market distribution
We have successfully completed seven acquisitions since IPO in 2014 and they have all continued to perform in line with our expectations.
The recent acquisitions of Impact Mobile and ExpressPigeon have strengthened our position in North America and we are excited by the immediate opportunity that the US market presents. During the year we announced an early settlement agreement with the sellers of Healthcare Communications and, on 1 July 2019, we agreed the early settlement of Infracast (see note 31). Both have performed at the top end of management expectations since acquisition and the agreements were reached in order to accelerate integration activities and further capitalise on current market opportunities.
Our acquisition criteria remains the same in that we look to acquire businesses that:
i. provide similar communication software and services as the Group;
ii. have strong embedded clients therefore providing an opportunity to upsell the Group’s broader portfolio of capabilities; and
iii. complement our existing product portfolio with new channel capabilities or migrate clients over a period of time on to the Group’s core platforms.
The Group has continued to make good progress, retaining all significant contract renewals and winning new customers and contracts across all regions in which it operates. We have delivered strong growth in gross profit of 23% (7% organic) and adjusted EBITDA growth of 35% which includes a significant headwind created by external factors that affected a single customer, MTN. Excluding the declines from this single customer, gross profit growth is 32% of which 14% is organic1on a constant currency basis. We have delivered high levels of cash generation and enhanced operating leverage whilst making strategic progress with several key partners in Europe and the US.
Although the technology trends impacting the business are global, the market opportunities and business models reflect local environments. As a result, the commercial activities of the business are managed and best reviewed on a regional basis.
Europe & Americas – 71% of Group gross profit
The region has continued to perform well, with year on year gross profit growth of 43% (16% organic). This has been generated through a mix of growth from existing contracts, new contract wins and successful deployments through the Group’s growing partnership network.
The new contract wins across the mobile operator, financial services, retail, logistics, gaming and gambling sectors, include cross-selling to customers of Textlocal and IMImobile Intelligent Networks (formerly Infracast). These largely recurring revenue contract wins include the Company’s core enterprise CPaaS offering, IMIconnect and are expected to support growth in the first half of FY20 and beyond.
The Group has a very strong presence in the UK market and provides solutions to all three major UK mobile operators, three of the top five banking groups, four of the six leading utilities, two of the largest logistics providers and a host of leading gaming, retail and leisure businesses. We have also developed partnerships with BT in the UK, Telia in Scandinavia and O2 in Germany for further distribution of the Group’s products.
In North America, we have renewed existing contracts with mobile operators, AT&T and Telus, as well as with the U.S. Department of Education. After acquiring two new businesses in the region, Impact Mobile and ExpressPigeon, and appointing our North American CEO, we remain excited by the potential in the North American market. We expect to capitalise on several growth and partnership opportunities in the region during the coming period.
Middle East & Africa – 15% of Group gross profit
The region has experienced a year on year gross profit decline of 19%. This reflects a good performance of the Enterprise business in South Africa (organic1, constant currency3gross profit growth of 20%) and a 28% decline in the mobile operator business across Africa on a constant currency basis3. The decline is largely due to the services supplied to MTN, particularly in the Nigerian market, where volumes are now nominal. The growth in the Enterprise business reflects new contracts in the financial services and leisure sectors in South Africa.
Asia-Pacific – 14% of Group gross profit
The region has delivered strong organic1gross profit growth of 14% on a constant currency basis3. This growth has been supported by successful deployments for the Telenor Group and new contract wins with mobile operators and various enterprise clients in the region. We are also pleased to have launched our first WhatsApp Business solution with a FMCG customer in the region to engage with 1.5 million retailers across India.
Textlocal India continues to experience good growth with, on average, over 1,000 new customers acquired every month, giving a year on year growth rate of over 60%.
The Group is at a very exciting stage with technology developments creating momentum in the customer communications sector for more automation and use of digital channels. We are ideally placed to capitalise on this momentum and we believe there is no clear category leader in this market and that, due to our leading position in the advanced UK market, we have an opportunity to play a leading role globally.
The 2020 financial year has started well with trading in line with expectations. We continue to have good earnings visibility due to our established client relationships, healthy pipeline of new deployments and high proportion of recurring customer revenues. We are confident in delivering continued organic growth across all regions of the business.