MMX domains

Minds + Machines reports $15.8 million in billings (100% growth)

Minds + Machines Group Limited (AIM:MMX) reported topline billings growth of 100% for the year ended 31st December 2016.

Total billings of $15.8 million were achieved for FY 2016 compared to $7.9 million for FY 2015, with the strong performance of H1 2016 continuing into H2 where billings were up 30% at $7.7 million compared to the same period last year.

Net of partner payments, billings for the year increased over 115% to $13.9 million as a result of the improved contribution from the Group’s wholly-owned TLDs in 2016.

Importantly, renewal billings increased year-on-year by 116% to $3.8 million (2015: $1.75million) with standard name renewals accounting for 57% of the renewal billings in 2016. In 2017, the Directors anticipate the renewal billings continuing to grow with the contribution from standard names increasing in both quantum and percentage terms.

MMX just announced that it is eliminating premium domain name renewals starting from January 2017.

2016 has also seen MMX significantly reduce the costs for the Group’s ongoing operations with operating expenditures cut by over 40% to approximately $6.8 million in 2016 (2015: $12.2 million). Encouragingly, the figure for 2016 includes approximately $1.0 million of non re-occurring costs so the Group’s ongoing operating expenditures for 2017 are already below the $6.0 million run-rate previously set for the year. The Directors are also pleased to report that cost of goods (“COG”) in 2016 were contained to $2.5 million (2015: $1.3 million) in spite of a near threefold increase of domains under management to 821,136 at 31 December 2016 from 288,831 twelve months earlier.

In 2017 management will focus on further reducing the cost income ratio, with the goal of achieving a key cross-over point in the next 18 months where the renewal billing run-rate will be greater than that of the Group’s operating expenditures. This will effectively mean that new sales, net of COGs, can immediately drop to the bottom-line.

It should be noted that billings from new registration sales grew to just under $12 million in 2016 from $3.7 million in 2015. Management believes there is significant continued scope for further substantial topline growth given over 80% of the Group’s premium inventory remains unsold and there is effectively an unlimited stock of standard name inventory across MMX’s portfolio.

As a result of the topline growth, operating EBITDA, before restructuring costs, as defined in the Interims, is expected to be over $3.5 million for the full year ended 31 December 2016, compared to a $12.1 million loss in 2015 (2015: gross profit of $101,000 less $12.2 million of operating expenses).

Ongoing profitable growth

The management team is also pleased to report that the one-time restructuring of the Company has been completed on time and on budget. Similarly, burdensome contract obligations entered into by previous management have now been addressed. Whilst reported figures will be impacted by one-off costs associated with these items, the business has now been restructured to deliver ongoing profitable growth.

Toby Hall, CEO of MMX, commented:

“We now have an organisational structure in place that will allow the Group to continue growing profitably. This is particularly exciting given the phenomenal growth we are seeing in what is still effectively a nascent industry –  a nascent industry that saw a net growth of over 16 million registrations during 2016 – broadly in line with that of .com and all the country codes combined. As we look forward into 2017, our focus will be to continue monetising our portfolio both in terms of new registrations and renewals across our three main regions of focus – Asia, particularly China, Europe and the US, with a natural emphasis towards those markets showing greatest growth.”

Geographic split

In 2016, MMX successfully penetrated the China market through the highly successful launch of .vip in May which was followed by the domain receiving government MIIT approval in December. As a result, the split of gross TLD billings across three regions of focus in 2016 was approximately: China 59%, US 24%, Europe 17%. During the year, year-on-year billings for the Group’s US facing TLDs grew by approximately 22%, greatly helped by billings growth in .law and certain vertical strings such as .fit and .wedding as well as the generics .work and .casa. It is worth noting that a year-on-year drop in top-line registration numbers in a domain, as reported by sites such as ntldstats.org, does not necessarily signify a decline in billings. For example, in 2016 .work generated $392,000 off 81,000 registrations compared to $206,000 off 102,000 registrations in 2015 reflecting the use of a promotional initiative to drive registrations that year. In 2017, MMX’s focus will be to continue developing gross billings, as well as domains under management, from each of the regions through its growing network of registrar and distribution partners.

Premium sales

In May 2016, MMX’s management team piloted a new premium pricing policy during the launch of .vip which it believes has contributed greatly to the domain’s initial success. As of January 6, 2017, a similar premium pricing policy has been introduced across all of MMX’s wholly owned domains, a six month notice period having to be given to the channel to effect this change. This marks the first step in a broader business development drive which is being supported by the hiring of new staff to support this initiative. MMX’s management team will be closely monitoring the progress of this activity.

New gTLD launches and geographic expansion

In 2016 the Company deliberately focused on launching one top-level domain well rather than following the approach of the previous year where multiple TLDs were introduced many of which with little business development support. During 2017, the MMX management team will follow the same approach as 2016 looking to launch no more than two domains onto the market in the year, one of which will be .boston.

The Company will also continue to explore the opportunities to introduce TLDs from one geographic region into another.

Michael Salazar, COO of MMX, commented:

“After a transformational twelve months in terms of building revenues and cutting costs, we are now beginning to see the real benefits of being a portfolio player as we start to leverage the experiences and insights gained across the portfolio.”

The Company expects to publish its audited results for the year ended 31 December 2016 in April.

Sold.Domains

About Konstantinos Zournas

I studied Computer Engineering and Computer Science in London, UK and I am now living in Athens, Greece. I went online in 1995, started coding in 1996 and began buying domain names and creating websites in 2000. I started the OnlineDomain.com blog in 2012.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.