CentralNic Group Plc (LON:CNIC), the global internet software company that derives recurring revenue from marketplaces for online presence and online marketing services, has announced its unaudited financial results for the nine months ended 30 September 2022. The Company has achieved record revenue and Adjusted EBITDA for the period, driven by sustained organic growth which has been further supplemented with five acquisitions, including one acquisition post the period end.
Financial summary:
● Revenue increased by 88% to USD 526.7m (September 2021 YTD: USD 280.6m)
● Organic revenue growth* for the trailing twelve months ending 30 September 2022 of c.66%
● Net revenue/gross profit increased by 53% to USD 128.3m (September 2021 YTD: USD 84.1m)
● Adjusted EBITDA** doubled to USD 62.0m (September 2021 YTD: USD 30.9m)
● Operating profit of USD 35.1m (September 2021 YTD: USD 6.5m)
● Non-core operating expenses reduced by 8% to USD 6.0m (September 2021 YTD: 6.5m)
● Adjusted operating cash conversion of 105% (September 2021 YTD: 118%)
● Net debt*** reduced by 22% to USD 63.4m as compared to USD 81.4m on 31 December 2021
Operational highlights:
● The Company’s organic growth further accelerated during the period, driven by the ongoing market share gains of its proprietary privacy-safe online marketing solutions which are facing a USD 100bn+ opportunity
● The number of visitor sessions increased by 83% from 1.8 billion in September 2021 YTD to 3.3 billion in September 2022 YTD and the revenue per thousand sessions (“RPM”) increased by 60% from USD 64.9 to USD 104.1
● EBITDA as a percentage of Net Revenue has increased from 37% in September 2021 YTD to 48% in September 2022 YTD, demonstrating that CentralNic’s operating leverage enables revenue growth to drive increasing profitability
Corporate highlights:
● Leverage**** reduced from 2.2x pro forma EBITDA as of 31 December 2021 to 1.2x due to improved profitability and continued deleverage
● Acquisition of VGL, a leading product review website publisher, in March 2022 for an enterprise value of EUR 60 million (c. USD 65 million)
● Oversubscribed GBP 42 million equity raise on 28 February 2022, EUR 21 million bond placing on 7 March 2022 and fully taken up Open Offer of GBP 3 million on 21 March 2022
● On 18 July 2022, the final deferred consideration payment for the acquisition of KeyDrive SA was settled totalling USD 1.1 million
● Acquisition of M.A Aporia on 13 September 2022 for an initial consideration of USD 11.2 million
● Appointment of Claire MacLellan as Non-Executive Director on 14 September 2022
Post quarter end highlights:
● Acquisition of Intellectual Property Management Company (“IPMC”) on 26 October 2022 for an enterprise value of USD 7.3 million
● In October 2022, the EUR 126 million of senior secured bonds were refinanced via a new Senior Facilities Agreement comprising a USD 150 million term loan and a USD 100 million revolving credit facility. These new debt facilities have an initial maturity date of 14 October 2026 with an option to extend by a further year. The borrowing cost will initially be 2.75% above SOFR, a notable reduction compared to the 7% above 3m EURIBOR for the senior secured bonds it replaces
● Between 9 and 21 November 2022, the Company entered into three separate interest rate swap transactions to fix the variable interest component on USD 75 million of the new USD 150 million term loan at a blended fixed rate of 3.92%
Outlook:
● CentralNic’s results for the nine months to September 2022 (“September 2022 YTD”) demonstrate the continued momentum within the business and significant potential of its strong marketplace model for Online Presence and Online Marketing services
● The Directors remain confident in the Company’s outlook, with the business trading comfortably inline with the recently upgraded market expectations. The Company will issue its full year trading update on 30 January 2023
Ben Crawford, CEO of CentralNic Group, commented: “CentralNic continued to build momentum in the third quarter, despite slower growth in the wider economy, with year-on-year organic revenue growth now reaching a record 66%, EBITDA more than doubling, and operating profit on a completely new level due to CentralNic’s operating leverage. This continued strong and consistent financial performance has allowed us to refinance at a notably improved interest rate, with a syndicate of quality banks which have the means to provide ongoing support for CentralNic’s growth strategy. With the sustainability of our growth proven in a recessionary environment, and endorsed by leading financial institutions, we look forward to the future with even greater confidence.“
* Pro forma revenue, adjusted for acquired revenue, constant currency FX impact and non-recurring revenues is estimated at USD 683 million for the trailing 12 months ending 30 September 2022 and at USD 411 million for the trailing 12 months ending 30 September 2021
** Parent, subsidiary and associate earnings before interest, tax, depreciation, amortisation, non-cash charges and non-core operating expenses
*** Includes gross cash, bond and bank debt, prepaid finance costs and the Mark-To-Market (MTM) valuations for the bond hedges (bond debt, bank debt and prepaid finance costs of USD 142.2m, hedging liabilities of USD 5.0m, and cash of USD 83.8m as of 30 September 2022 as compared to bond debt, bank debt and prepaid finance costs of USD 131.1m, hedging liabilities of USD 6.4m, and cash of USD 56.1m as of 31 December 2021)
**** Includes Net Debt as defined under *** plus (i) lease liabilities, (ii) guarantee obligations, and (iii) the best estimate of any Deferred Consideration payable in cash, all divided by pro forma EBITDA, i.e., last twelve months’ EBITDA including acquired entities’ EBITDA on a pro forma basis
To the best of our knowledge, these unaudited financial results have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group taken as a whole. In addition, to the best of our knowledge, these unaudited financial results include a fair review of the development and performance of the business and the position of the Group taken as a whole. The principal risks and uncertainties that the business faces remain materially consistent with the risks and uncertainties described in the Risks section of the Group’s 2021 annual report.
MANAGEMENT COMMENTARY ON PERFORMANCE
Introduction
CentralNic’s organic growth, combined with its accelerated acquisition strategy, substantially increased the scale and capabilities of the Company. The effect of this is demonstrated in our unaudited September 2022 YTD results which show a transformational increase in revenue and adjusted EBITDA, which have grown by 88% and 101% respectively compared to September 2021 YTD.
Performance Overview
The Company has performed strongly during the period with the key financial metrics listed below:
| Nine months ended30 September 2022 | Nine months ended30 September2021 | Change | |
| USD m | USD m | % | |
| Revenue | 526.7 | 280.6 | 88% |
| Net revenue/ gross profit | 128.3 | 84.1 | 53% |
| Adjusted EBITDA | 62.0 | 30.9 | 101% |
| Operating profit | 35.1 | 6.5 | 440% |
| Adjusted operating cash conversion ***** | 105% | 118% | n.m. |
| Profit / (loss) after tax | 6.5 | (5.3) | n.m. |
| EPS – Basic (cents) | 2.48 | (2.30) | n.m. |
| EPS – Adjusted earnings – Basic (cents) ****** | 13.68 | 7.12 | 92% |
Segmental analysis
Organic growth rates quoted below are calculated on a pro forma basis including all the Group’s constituents as of the last balance sheet dates and adjusted for non-recurring or non-cash revenues and on a constant currency basis.
Online Marketing segment
The Online Marketing segment has proven to be largely decorrelated from the softer performance reported by some of the major online marketing players, with the Company’s Online Marketing segment further accelerating its growth with revenues increasing by USD 245.6 million, or 147%, from USD 167.0 million to USD 412.6 million. Organic revenue doubled, predominantly driven by CentralNic’s TONIC media buying platform. Inorganic growth was obtained from the full year impact of the Wando and White & Case acquisitions, as well as the acquisition of VGL and, to a lesser degree, Fireball and Aporia.
The number of visitor sessions also increased by 83% from 1.8 billion in September 2021 YTD to 3.3 billion in September 2022 YTD and the revenue per thousand sessions (“RPM”) increased by 60% from USD 64.9 to USD 104.1.
CentralNic is a leader in online privacy, as none of our marketing platforms make use of third-party cookies and rather rely on contextual data. 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 continue to benefit CentralNic, as we provide an alternative for online marketers that is proven to be highly effective, whilst respecting the privacy of internet users. This puts us at the forefront of companies offering solutions for a more privacy conscious world, a key success factor in winning market share.
Online Presence segment
Organic growth for the Online Presence segment was 4.3% for the trailing twelve months ended 30 September 2022. Reported revenue in the segment increased only marginally though by less than 1%, from USD 113.6 million in September 2021 YTD to USD 114.1 million in September 2022 YTD, as a result of non-USD revenues translating into fewer USD following the devaluation of most global currencies against the dollar.
The average revenue per domain year decreased by 6% from USD 9.50 in September 2021 YTD to USD 8.90 in September 2022 YTD, while the number of processed domain registrations increased 7% from 9.1 million in September 2021 YTD to 9.7 million in September 2022 YTD. The share of Value-Added Service revenue for the period ended 30 September 2022 remained stable at 8%.
Outlook
CentralNic has enjoyed a very strong 2022, particularly in our Online Marketing segment. In September 2022 YTD, we reported 66% organic revenue growth on a pro forma basis for the trailing twelve months ended 30 September 2022.
Whilst the Directors continue to monitor the global macro-economic environment closely, they are confident that the Group will trade comfortably inline with the recently upgraded market expectations for the current financial year. Targeted investment in people and our market-leading products, in particular our suite of privacy-safe online marketing technologies, position us to succeed even in a challenging global environment.
The pipeline of future acquisition targets also remains strong, while our net leverage has substantially reduced and is now only 1.2x trailing 12-month EBITDA – compared to 2.2x as of 31 December 2021. CentralNic is therefore comfortably positioned, particularly given the Group’s high cash generation and the expected contribution from the recently completed acquisitions. With USD 100m of committed finance facilities, CentralNic now has additional capacity to continue its disciplined capital allocation to highly earnings accretive M&A opportunities.
These outstanding results further demonstrate that CentralNic can source and complete transformative acquisitions, but more importantly, that it can also integrate them successfully into marketplaces while continuing to deliver strong organic growth. Moreover, as the Company rapidly scales up, the underlying qualities of high recurring revenues and excellent cash conversion become increasingly meaningful, demonstrated by EBITDA as a percentage of Net Revenue increasing from 37% in September 2021 YTD to 48% in September 2022 YTD.
As a virtually pure-play recurring revenue business with high inherent cash conversion consistently above 100%, the Company continues to improve its key financial metrics as it grows, including its cash position, interest coverage and net debt to EBITDA ratio.
CentralNic continued to build momentum in the third quarter, despite slower growth in the wider economy, with year-on-year organic revenue growth now reaching a record 66%, EBITDA more than doubling, and operating profit on a completely new level due to CentralNic’s operating leverage. This continued strong and consistent financial performance has allowed us to refinance at a notably improved interest rate, with a syndicate of quality banks which have the means to provide ongoing support for CentralNic’s growth strategy. With the sustainability of our growth proven in a recessionary environment, and endorsed by leading financial institutions, we look forward to the future with even greater confidence.
Ben Crawford
Chief Executive Officer
