Afilias To Raise $100 Million By Entering The London Stock Exchange

Afilias announced its intention to apply for admission of its issued and to be issued Ordinary Shares to trading on AIM, a market operated by the London Stock Exchange (“Admission”) and to conduct a placing of its Ordinary Shares with institutional and professional investors (the “Placing”). The Placing will comprise an offer of new and existing Ordinary Shares.

The Group is one of the world’s leading providers of advanced internet services that enable Top Level Domains (“TLDs”) to operate. Afilias provides services, both as Registry Operator for TLDs and as Registry Service Provider to third parties that act as Registry Operators for TLDs.

Afilias is the Registry Operator for the .INFO, .MOBI and .PRO generic TLDs (“gTLDs”) and 8 further gTLDs as part of the Internet Corporation for Assigned Names and Numbers (“ICANN”) 2012 programme of new gTLDs (“nTLDs”) pursuant to agreements with ICANN. As a Registry Operator, Afilias maintains the master directories of all Domain Names in these TLDs.

Afilias also acts as Registry Service Provider for a number of generic and country code TLDs (“ccTLDs”). For example, Afilias has an agreement with the .ORG Registry Operator, Public Interest Registry (“PIR”), to provide Registry services in support of PIR’s management of the .ORG TLD. Afilias has similar agreements with a number of other Registry Operators including SITA, the .AERO Registry Operator, and DotAsia, the .ASIA Registry Operator. In addition, Afilias provides services as Registry Service Provider for several ccTLDs such as .IN and .ME (the country codes for India and Montenegro, respectively).

In total, Afilias supports Registries for more than 20 million Domain Names, comprising approximately 6.6 million Domain Names as a Registry Operator and 13.5 million Domain Names as a Registry Service Provider. Afilias is today the world number two market participant behind Verisign for Domain Names under management1 and the number one Registry Service Provider for gTLDs launched pursuant to the 2001 to 2004 rounds2.

As part of ICANN’s 2012 round of nTLDs, Afilias was associated with a total of 305 initial applications for nTLDs either directly as Registry Operator or indirectly as Registry Service Provider to other applicants. As at 3 October 2014, 8 nTLDs have been launched with Afilias as Registry Operator (including .ORGANIC, .BLACK and .移动(.MOBI)), 11 have been launched with Afilias as Registry Service Provider (including .VEGAS, संगठन (.HINDIORG) and 机构 (.CHINESEORG)). 51 applications have been withdrawn in Afilias’ capacity as both Registry Operator and Registry Service Provider.

Key strengths

· A global leader in Domain Names under management

o A market-leading position with the second-largest number of Domain Names under management globally.

o The largest global Registry Service Provider by number of Domain Names under management.

· Focus on a structural growth market

o Focus on the operation and management of TLDs – a significant market with approximately 280 million Domain Names registered globally across all TLDs.3

o The total number of registered Domain Names has grown at a CAGR of approximately 16% from 2003 to 2014.4

· Major participant in the 2012 new gTLD programme

o Opportunity to capitalise on ICANN’s 2012 nTLD programme, in which Afilias has been an active and major participant.

o Afilias was associated with 254 active applications5, either as Registry Operator or as Registry Service Provider, as at 3 October 2014.

o Afilias is targeting up to 25 nTLDs as Registry Operator and up to 200 nTLDs as Registry Service Provider following completion of the current nTLD ICANN application programme.

· Highly experienced team of Executive Officers

o Afilias is managed by Executive Officers with extensive industry experience who have an average tenure with the Group in excess of 10 years.

· Track record of operational and customer excellence

o Focus on excellent operational performance – and customer service – with over a decade of experience in meeting or exceeding its service level agreement obligations under its agreements with ICANN.

· Well invested technology systems and infrastructure

o In recent years, the Group has invested to develop and enhance its technology and infrastructure platform.

o The Group’s systems are expected to handle the anticipated uplift in volumes resulting from the nTLD process.

3Source: Zooknic (as at 30 June 2014)

4Source: Zooknic (as at 30 June 2014)

5This includes applications that have already launched or been delegated and pending applications (both contested and uncontested)

· High visibility of recurring revenues

o High visibility of earnings as Afilias has long-term contracts with ICANN as a Registry Operator (with provisions for presumptive renewal) and multi-year contracts with third-party Registry Operators as a Registry Service Provider.

o The Group also benefits from the repeat nature of the service and the Directors believe that the knowledge of renewal rates gives high visibility over future revenues.

· Strong financial track record with high margins and cashflow generation

o Track record of revenue growth, increasing from US$61.7 million in 2011 to US$77.6 million in 2013, representing a CAGR of approximately 12%. Over this period, Adjusted EBITDA increased from US$19.4 million to US$38.6 million representing a CAGR of approximately 41.2%.

o High margins with an Adjusted EBITDA margin of 31.4% in 2011 increasing to 49.8% in 2013.

o Strong cash flow generation with high levels of cash conversion. Cash flow from operations as a percentage of Adjusted EBITDA was 137% in 2011, 96% in 2012 and 119% in 2013.

· Track record of significant acquisitions

o Successful track record of identifying, executing and integrating acquisitions, such as mTLD Top Level Domain Limited (acquired in 2010) and Registry Services Corporation (acquired in 2011), the Registry Operators for the .MOBI and .PRO gTLDs, respectively.

· Well developed sales and marketing channels

o Well-developed sales and marketing channels, via approximately 600 Registrars worldwide (that collectively account for over 95% of the global Domain Name sales channel) including global leaders and important niche players.

Rationale for the Placing

The Placing will enable the Group to:

· Pursue its growth strategy;

· Increase Afilias’ corporate profile with existing and new customers;

· Assist in incentivising and retaining key management and employees;

· Create a liquid market in the Ordinary Shares for Shareholders; and

· Provide the Selling Shareholders with a partial realisation of their investment in the Company.

Use of proceeds

Proceeds from the Placing will be used by Afilias to:

· Acquire contested nTLDs in the upcoming auctions;

· Fund attractive acquisition opportunities including existing TLD assets and operating businesses in the Registry Operator and Registry Service Provider areas; and

· Develop the Group’s existing Registrar business to become an integrated operation.

Details of the Placing

The Placing will comprise an offer of Ordinary Shares to institutional and professional investors in the UK and elsewhere under Regulation S under the US Securities Act of 1933, as amended (the “Securities Act”), and in the United States only to “qualified institutional buyers” as defined in Rule 144A under the Securities Act pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

The Placing will comprise an offer of new and existing Ordinary Shares. New Ordinary Shares to be issued by the Company are expected to raise gross proceeds of approximately US$100 million. The net proceeds from the Placing receivable by the Company will be used to pursue its growth strategy, as described above.

The Placing will also provide the Directors and certain other Shareholders (the “Selling Shareholders”) with an opportunity for a partial realisation of their investment in the Company. The Selling Shareholders will agree to customary lock-up arrangements in respect of their remaining holdings of Ordinary Shares for specified periods of time following Admission.

Immediately following completion of the Placing, it is expected that the Company will have a free float of approximately 30% of the issued share capital of the Company. It is currently expected that Admission will take place in November 2014.

In relation to the Placing and Admission, Numis Securities Limited (“Numis”) is acting as nominated adviser and broker, financial adviser and bookrunner to the Company.

Full details of the Placing will be included in the Admission Document, to be published in due course.

Commenting on today’s announcement, Hal Lubsen, Chief Executive Officer of Afilias said:

“Since 2001, we have established ourselves as one of the world’s leading players in the Domain Name industry. The increasing use of the Internet is here to stay, and underpins the growth in our market.

“Our business model, both as a proven Registry Operator and Registry Service Provider, clearly differentiates us and is supported by our track record of consistent, profitable growth. In recent years we have invested substantially in infrastructure and technology to enable us to take on a much greater number of Domain Names.

“Today’s announcement is an important step in the next phase of our growth, as we look to be a key player in the new programme of TLDs, and make selective acquisitions to increase the breadth and depth of our services and reach.”

Jonathan Robinson, Executive Chairman of Afilias, said:

“I have seen at first hand the strength and resilience of Afilias’s business model, growth prospects and management team having been a Director of the Company since 2001.

“The Placing will bring significant benefits – by providing further capital to fund our organic and acquisitive growth plans, and raising our corporate profile with existing and new customers.”