Team Internet Group Plc (LON: TIG, OTCQX: TIGXF), the global internet company that generates recurring revenue from creating meaningful and successful connections: businesses to domains, brands to consumers, publishers to advertisers, has announced its unaudited financial results for the three months ended 31 March 2024.
Financial Summary:
● Organic revenue growth* of approximately 8%, for the trailing twelve months ended 31 March 2024 (“TTM 2024”)
● Gross revenue increased by 1% to USD 195.9m (versus three months ended March 2023 (“Q1 2023”): USD 194.9m)
● Net revenue (Gross profit) increased by 4% to USD 47.6m (Q1 2023: USD 45.8m), with gross margin increasing from 23.5% to 24.3%, a relative 3% uplift
● Adjusted EBITDA** increased by 4% to USD 22.2m (Q1 2023: USD 21.3m), with EBITDA margin increasing from 10.9% to 11.3%, a relative 4% uplift
● Operating profit increased by 44% to USD 11.1m (Q1 2023: USD 7.7m)
● Profit before tax increased by 65% to USD 7.1m (Q1 2023: USD 4.3m)
● Profit after tax increased by 62% to USD 4.7m (Q1 2023: USD 2.9m)
● Adjusted EPS increased by 20% to USD 5.35 cents (Q1 2023: USD 4.46 cents)
● Net debt*** of USD 80.6m (31 December 2023: USD 74.1m) and Leverage**** of 0.95x pro forma TTM 2024 EBITDA, remaining under 1.0x, following non-operating cash outflows in respect of the Group acquiring USD 11.5m of its own shares
● Adjusted operating cash conversion of 80% (Q1 2023: 94%), impacted by cash receipts from a significant business partner being collected in April instead of March, due to Easter public holidays coinciding with quarter-end. We expect cash conversion to normalise nearer to 100% over the remainder of the year
Q1 highlights:
● In the Online Marketing segment, the number of visitor sessions increased by 19% to 6.0 billion for TTM 2024 from 5.0 billion for the trailing twelve-month period ended 31 March 2023 (“TTM 2023”). Revenue per thousand sessions (“RPM”) decreased by 10% from USD 102 to USD 91
● The Online Presence segment recorded organic revenue growth of 14% TTM 2024 compared to 10% for TTM 2023
● Adjusted EBITDA as a percentage of Net revenue has increased to 46.6% for Q1 2024 from 46.5% for Q1 2023, demonstrating that Team Internet’s continued growth can be achieved whilst maintaining compelling operating leverage
Post period end highlights:
● FY2023 final dividend of 2.0p payable on 28 May 2024 (FY2022: 1.0p), an increase of 100% as the Group continues to pursue the progressive dividend policy launched in 2022
● On 10 April 2024, the Group announced that its ordinary shares began trading on the OTCQX® Best Market (“OTCQX”) under the symbol “TIGXF”. OTCQX is the premier tier of OTC Markets where more than 12,000 US and global securities trade. Trading on OTCQX will significantly enhance Team Internet’s visibility and accessibility in the world’s largest capital market
● On 26 April 2024, the Group acquired Shinez I.O. Ltd and its subsidiaries (together “Shinez”) for an initial cash consideration of USD 38.9m and USD 4.3m retained to cover for customary warranties and indemnification.
Outlook:
Team Internet has once again delivered a strong quarter, with both adjusted and statutory earnings growth. The Group prioritises earnings growth over top-line growth, whilst maintaining a robust 8% organic revenue growth on a pro forma basis for TTM 2024. Adjusted EBITDA Conversion remained healthy at 46.6% (Q1 2023: 46.5%) of Net revenue, demonstrating continued strong profit margins.
The Directors remain confident in the Group’s strategic investments in product innovation, vertical integration, and international expansion. These initiatives have positioned the Group for success. Given these strong foundations, the Directors are confident that the Group will meet market expectations for the full year.*****
Michael Riedl, CEO of Team Internet, commented: “I am pleased to report that the emphasis on holistically managing for earnings and cash flow continues to yield substantial benefits. This holds true even as we tailor the growth of our Online Marketing sector to align with our enhanced focus on sustainability and customer experience. We are laying the strong operational foundations which will best position the Group to go from strength to strength, as we execute on our strategy and deliver attractive returns for our shareholders.
The commencement of trading on OTCQX is another milestone in making the Team Internet success story available to a broader audience and we are excited about further milestones on this journey to come.
Finally, with Shinez joining Team Internet, we now have a robust platform addressing the ‘Awareness’ stage of the advertising funnel, complementing our existing offerings, TONIC and VGL, which focus on ‘Consideration’ and ‘Conversion’, respectively. We now undoubtedly hold the most comprehensive product offering among our peers.
We remain laser-focused on our OM2 vision – Omni Media, Omni Monetisation – and leadership in the carefully targeted markets in which we operate, making us even more resilient as we scale up.”
* Pro forma revenue, adjusted for; acquired revenue, constant currency foreign exchange impact and non-recurring revenues is USD 840m for TTM 2024 and at USD 778m for TTM 2023
** Earnings before interest, tax, depreciation, amortisation, impairment, non-cash charges and non-core operating expenses
*** Includes gross cash, bank debt and prepaid finance costs as of 31 March 2024 (cash of USD 75.5m and bank debt and prepaid finance costs of USD 156.8m); includes gross cash, bank debt, prepaid finance costs and hedging assets of USD 0.7m (31 December 2023 cash of 92.7m, bank debt and prepaid finance costs of USD 166.6m and hedging liabilities of USD 0.2m)
**** Includes Net Debt as defined under*** (i) excluding prepaid finance costs, (ii) plus guarantee obligations, and (iii) plus the best estimate of any crystallised 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, and adjusted for rental expense capitalized under IFRS 16 and non-core expenses
***** Latest analyst forecasts, prior to the contribution of Shinez to the enlarged Group forecast, are within a range of USD 857m and USD 910m for FY24 gross revenue and USD 98m and USD 108m for FY24 Adjusted EBITDA
MANAGEMENT COMMENTARY ON PERFORMANCE
Introduction
Team Internet continued to deliver growth throughout the income statement, including 44% growth in operating profit and 62% growth in profit after tax, as the Group continues to execute on the delivery of profitability, cash generation and shareholder value.
Performance Overview
The Group’s key financial metrics are listed below:
| Three months ended31 March 2024 | Three monthsended31 March2023 | Change | |
| USD m | USD m | % | |
| Revenue | 195.9 | 194.9 | 1% |
| Net revenue/gross profit | 47.6 | 45.8 | 4% |
| Adjusted EBITDA | 22.2 | 21.3 | 4% |
| Operating profit | 11.1 | 7.7 | 44% |
| Adjusted operating cash conversion (note 8) | 80% | 94% | n.m. |
| Profit after tax | 4.7 | 2.9 | 62% |
| EPS – Basic (cents) | 1.85 | 1.05 | 76% |
| EPS – Adjusted earnings – Basic (cents) (note 7) | 5.35 | 4.46 | 20% |
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
Online Marketing segment Gross revenue reduced by USD 3.8m, or 2.5%, from USD 149.7m to USD 145.9m, with Net revenue stable at USD 30.5m. Organic Gross revenue grew at a rate of 7% for TTM 2024, propelled by Team Internet’s TONIC platforms, and driven by 19% growth in the number of consumer journeys, to 6.0 billion for TTM 2024 from 5.0 billion for TTM 2023, while click prices continue to be under pressure on both the demand (revenue) and supply (cost of sales) side, with RPM decreasing by 10% from USD 102 to USD 91(1).
The Online Marketing segment creates privacy-safe and AI-generated online consumer journeys that convert general interest online media users into confident high conviction consumers through advertorial and review websites, generating utility-style referral and commission income through partnerships with Google, Amazon and a multitude of other partners. Our vision harnesses the Group’s expertise in two critical areas: first, to transform social media and other low-intent traffic into qualified leads for search ad campaigns; and second, to effectively turn search ad campaigns into successful e-commerce transactions. By integrating these capabilities, we aspire to establish a robust social commerce channel. This sector is expected to reach a value of USD 80 billion(2) by 2025 in the US alone.
Online Presence segment
Reported Gross revenue in this segment increased by 10.6% from USD 45.2m Q1 2023 to USD 50.0m in Q1 2024. Net revenue increased by 12.5% from USD 15.2m to USD 17.1m, with much improved operating margins. Organic Gross revenue growth for the Online Presence segment was 14% for TTM 2024, continuing the year-on-year double digit growth which the segment demonstrated throughout 2023, driven by the structural shift in demand towards Top Level Domains where Team Internet has a competitive edge.
The number of processed domain registration years increased by 1% from 13.5m for TTM 2023 to 13.6m for TTM 2024 and the average revenue per domain year increased by 16% from USD 10.1 to USD 11.7.
The Online Presence segment is a critical constituent of the global online presence and productivity tool ecosystem, where Team Internet serves as the primary distribution channel for a wide range of digital products.
Michael Riedl
Chief Executive Officer
(1) Based on analysis of c.84% of the Online Marketing segment which can be adequately and reliably described by this KPI
(2) Source: “Social commerce: The future of how customers interact with brands”, McKinsey & Company, October 19, 2022
(3) Based on analysis of c.86% of this segment which can be adequately and reliably described by this KPI
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | UnauditedThree monthsended31 March 2024 | UnauditedThree monthsended31 March2023 | AuditedYear ended31 December2023 | |||
| Note | USD m | USD m | USD m | |||
| Revenue | 4 | 195.9 | 194.9 | 836.9 | ||
| Cost of sales | (148.3) | (149.1) | (645.8) | |||
| Net revenue/gross profit | 47.6 | 45.8 | 191.1 | |||
| Operating expenses | (35.8) | (37.2) | (144.3) | |||
| Share-based payments expense | (0.7) | (0.9) | (4.5) | |||
| Operating profit | 11.1 | 7.7 | 42.3 | |||
| Adjusted EBITDA(a) | 22.2 | 21.3 | 96.4 | |||
| Depreciation of property, plant and equipment | (0.7) | (0.8) | (3.3) | |||
| Amortisation and impairment of intangible assets | (10.0) | (9.0) | (38.8) | |||
| Non-core operating expenses(b) | 5 | (1.0) | (1.4) | (6.1) | ||
| Foreign exchange gain/(loss) | 1.3 | (1.5) | (1.4) | |||
| Share-based payment expenses | (0.7) | (0.9) | (4.5) | |||
| Operating profit | 11.1 | 7.7 | 42.3 | |||
| Finance income | 0.3 | – | 0.6 | |||
| Finance costs | (4.3) | (3.4) | (13.6) | |||
| Net finance costs | 6 | (4.0) | (3.4) | (13.0) | ||
| Profit before taxation | 7.1 | 4.3 | 29.3 | |||
| Income tax expense | (2.4) | (1.4) | (5.0) | |||
| Profit after taxation | 4.7 | 2.9 | 24.3 | |||
| Items that may be reclassified subsequently to profit and loss | ||||||
| Exchange difference on translation of foreign operations | (5.0) | 2.1 | 4.7 | |||
| Movement arising on changes in fair value of hedging instruments | 0.9 | (0.6) | – | |||
| Total comprehensive income for the period/year | 0.6 | 4.4 | 29.0 | |||
| Earnings per share: | ||||||
| Basic (cents) | 1.85 | 1.05 | 8.94 | |||
| Diluted (cents) | 1.79 | 1.02 | 8.63 | |||
| Adjusted earnings – Basic (cents) | 5.35 | 4.46 | 23.22 | |||
| Adjusted earnings – Diluted (cents) | 5.18 | 4.36 | 22.41 |
| All amounts relate to continuing activities |
| (a) Parent and subsidiary earnings before interest, tax, depreciation, amortisation and impairment, non-cash charges and non-core operating expenses. |
| (b) Non-core operating expenses include items related primarily to acquisition, integration and other related costs, which are not incurred as part of the underlying trading performance of the Group, and which are therefore adjusted for, in line with Group policy. |
