CentralNic Group Plc (LON:CNIC), the global internet platform company that derives revenue from the worldwide sales of internet domain names and related web services, has announced its unaudited financial results for the three months ended 31 March 2021. Both revenue and adjusted EBITDA have increased quarter-on-quarter, driven by a combination of acquisitions and underlying organic growth.
Financial summary:
● Revenue increased by 48% to USD 84.4m (Q1 2020: USD 56.9m)
● Organic revenue growth Q1 2021 compared to Q1 2020 is 16%
● Net revenue/ gross profit increased by 58% to USD 27.9m (Q1 2020: USD 17.7m)
● Adjusted EBITDA* increased by 23% to USD 10.1m (Q1 2020: USD 8.2m)
● Operating profit of USD 1.4m (Q1 2020: USD 2.9m)
● Adjusted operating cash conversion of 163% (Q1 2020: 46%), primarily due to optimisation of working capital
● Net debt** down to USD 79.0m (gross interest-bearing debt of USD 122.1m, cash of USD 43.1m) as compared to USD 85.0m on 31 December 2020 (gross interest-bearing debt of USD 113.6m, cash of USD 28.6m)
Operational highlights:
● Significant investment in new management, staff and systems accelerated organic growth to record levels and positions the Group well for continued growth
● All segments have achieved organic growth compared to the prior year period
● Investment in new products resulting in improved sales of value-added services in Direct and Indirect segments
● Financial and operational performance demonstrate the resilience of all businesses in the face of potential business interruption related to the COVID-19 pandemic
Financial highlights:
● Completion of acquisition of SafeBrands, an Enterprise Domain Management and Online Brand Protection provider, strengthening our Enterprise division within the Direct Segment, for USD 3.7m plus a deferred consideration of USD 0.7m
● Successful, oversubscribed placement of EUR 15m (approximately USD 18.2m) of senior secured callable bonds at 104.5% of par value, implying a yield to maturity of 5.0%
● Completion of the acquisition of online marketing business Wando Internet Solutions for USD 6.5m plus an additional performance-based earnout of up to USD 6.5m
Post period-end highlights:
● Final EUR 0.8m of deferred consideration for the Team Internet acquisition settled in April 2021
● EUR 0.6m of deferred contingent consideration for the SafeBrands acquisition settled in May 2021
Outlook:
● The accelerated organic growth is testament to the success of the investment in new management, staff and systems
● The Company’s market consolidation strategy continues, with opportunities being continually assessed in what is a large, globally fragmented and growing market
● Management expects the full year results to be in line with market expectations
Ben Crawford, CEO of CentralNic Group, commented: “In Q1 2021, CentralNic generated more revenue and EBITDA than in the whole of FY 2018. In our Direct and Indirect segments, which provide the essential tools for business large and small to go online, growth in domain name sales has notably accelerated. More importantly, our efforts to deliver value-added services through our direct and indirect channels are paying off, with the sales of associated services outpacing domain names sales.
Subsequent to the recent acquisitions of Zeropark, Voluum and Wando, which have substantially expanded the service offering past monetising traffic on dormant domain names to a full suite of online marketing and monetisation solutions, including data analytics, management resolved to rename the segment more fittingly as “Online Marketing”. CentralNic is a leader in online privacy, as none of our marketing platforms make use of third-party cookies or collect personal data on our customers. We therefore expect that restrictions placed on those practices, e.g. the ban of third-party cookies in Google Chrome or App Tracking Transparency in Apple’s iOS 14.5, will benefit CentralNic, as we provide an alternative to online marketers that is proven to be highly effective whilst respecting the privacy of internet users, putting us at the forefront of companies offering solutions for a more privacy conscious world.”
* Subsidiary and associate earnings before interest, tax, depreciation, amortisation, non-cash charges and non-core operating expenses
** Includes gross cash, debt and prepaid finance costs
These unaudited financial results have been prepared for the purpose of fulfilling the information undertaking requirements included in the bond terms for the Senior Secured Callable Bond Issue.
MANAGEMENT COMMENTARY ON PERFORMANCE
Introduction
CentralNic’s organic growth, combined with its 2021 and 2020 acquisitions, substantially increased the scale and capabilities of the Company. The effect of this is demonstrated in our unaudited Q1 2021 results which show a transformational increase in revenue and adjusted EBITDA, both of which have grown by 48% and 23% respectively compared to Q1 2020.
Performance Overview
The Company has performed strongly during the quarter with the key financial metrics listed below:
| 31 March2021 | 31 March2020 | Change | |
| USD m | USD m | % | |
| Revenue | 84.4 | 56.9 | 48% |
| Net revenue/ gross profit | 27.9 | 17.7 | 58% |
| Adjusted EBITDA | 10.1 | 8.2 | 23% |
| Operating profit | 1.4 | 2.9 | (52)% |
| Adjusted operating cash conversion 1 | 163% | 46% | 117% |
| Loss after tax | (1.4) | (1.3) | (8)% |
| EPS – Basic (cents) | (0.67) | (0.73) | 8% |
| EPS – Adjusted earnings – Basic (cents) 2 | 3.17 | 1.97 | 61% |
1 Please refer to note 8
2 Please refer to note 7
Segmental analysis
In our Direct and Indirect segments, which provide the essential tools for business large and small to go online, growth in domain name sales has accelerated notably. More importantly, our efforts to deliver value-added services through our direct and indirect channels are paying off, with the sales of associated services outpacing domain names sales. Organic growth rates quoted below are calculated on a pro forma basis including all the Group’s constituents as of the last balance sheet excluding non-cash revenues and on a constant currency basis (which may have a significant impact given fluctuations in foreign exchange rates).
Indirect segment
Significant scale was achieved in the Indirect segment, with revenues increasing by USD 4.9m, or 24%, from USD 20.5m to USD 25.4m. The growth has been carried by the Group’s key Wholesale brands. Organic growth of the segment was 13%.
Direct segment
Revenue in the Direct segment increased by USD 3.1m, or 29%, from USD 10.6m to USD 13.7m. On an organic basis, revenue grew by 13%. Management is particularly pleased with this development as both the Retail business and the Corporate business have returned to growth, also supported by new project work wins for major Telcos. In particular the North American corporate domain business performed very strongly.
Online Marketing segment
Subsequent to the recent acquisitions of Zeropark, Voluum and Wando, which have substantially expanded the service offering beyond monetising traffic on dormant domain names to a full suite of demand side and supply side solutions, including data analytics, management resolved to rename the segment more fittingly as “Online Marketing”. The Online Marketing segment was the fastest growing one, with revenues increasing by USD 19.5m, or 76%, from USD 25.8m to USD 45.3m. Revenue continued to grow organically at a high rate of 19%, largely driven by Team Internet’s PubTONIC, with the remainder being contributed by the acquisitions of Zeropark, Voluum and Wando.
CentralNic is a leader in online privacy, as none of our marketing platforms make use of third-party cookies or collect personal data on our customers. We therefore expect that restrictions placed on those practices (e.g. the ban of third-party cookies in Google Chrome or App Tracking Transparency in Apple’s iOS 14.5) will benefit CentralNic, as we provide an alternative to online marketers that is proven to be highly effective whilst respecting the privacy of internet users, putting us at the forefront of companies offering solutions for a more privacy conscious world.
Outlook
In Q1 2021 CentralNic reported 16% organic revenue growth on a pro forma basis. Management is pleased with the achievement of strong results in Q1 2021, in line with market expectations.
These robust results demonstrate that CentralNic can continuously source and complete transformative acquisitions and integrate them successfully while continuing to deliver organic growth. Moreover, as the business scales rapidly, the underlying qualities of high recurring revenues and excellent cash conversion become increasingly meaningful.
The pipeline of future acquisition targets remains strong, while the net debt level remains comfortable particularly given the profitability of the existing CentralNic Group and the expected contribution from recent acquisitions. We are confident in continuing our trajectory towards joining the ranks of the global leaders in our industry.
Ben Crawford
Chief Executive Officer
