Minds+Machines Makes $1.18 Million From .Law Early Access Program & $100K From Premium Domains

Minds + Machines Group Limited, provided an update of its operations for Q3 2015.

During the EAP period of 12-19 October, orders exceeding $1.18 million were received, with some significant premium sales held back until after EAP. As of 1600 UTC on 23 October 2015 over 3,135 .law and .abogado applications had been made.

During Q3, the Group continued to build its sales teams and to increase its alliances with leading registrars and premium name brokers, achieving more than $100,000 of sales in collaboration with third-party intermediaries.

Antony Van Couvering, Minds + Machines CEO, commented:

“In Q3 we saw our acceleration into a sales and marketing-led business pay off with the launches, just post-quarter, of .miami, .law, and .abogado. In .law, we have successfully penetrated a high-value, vertical market directly, with multiple sales of premium names, and a highly successful Early Access Program which generated $1.18 million of orders in the first week. In Miami, we pioneered a pre-launch, on-the-ground sales effort, effectively engaging the city government, and extending our marketing spend through co-marketing with the registrar channel, which has resulted in the most successful geo city launch to date on a per-capita basis.

“We now have a year of solid market data, including renewal data – both internally and from the overall gTLD market.  With that, and the knowledge gained from our recent successful launches, we can now plan and model cost-effective sales and marketing strategies for the TLDs in our portfolio, both existing and future. Efficient sales and marketing, along with a continued emphasis on cutting out unnecessary costs, is the key to achieving growth and profitability, and this will be management’s emphasis going forward. In Q3 we eliminated $940,000 of annualised costs and identified another $700,000 which will be implemented in the near future.

“Also in Q3, the Board instituted a share buy-back programme of up to £15 million ($23 million) over 12 months, which we are now actively pursuing.

“With the solid growth in standard names, and increasing sales of premium names, we have every reason to be confident about our H2 performance as we drive towards our goal of crossing over into operational profitability in 2016.”

October launches and renewals – guidance

During Q3, new sales and marketing launch strategies were tested and implemented for the launches of .miami and .law, both of which yielded significant results.

For the 12 October .law and .abogado launches, Minds + Machines undertook an extensive pre-launch campaign to educate the legal community on the .law value proposition. High-profile organisations such as the Florida Bar, ALM Media, DLA Piper and Orrick openly supported the introduction of .law and .abogado. For the .law and .abogado registries, the Company also put into place a seven-day Early Access Program (“EAP”) for the first time in the Company’s history, which provided the Company with additional revenue. During the EAP period of 12-19 October, orders exceeding $1.18 million were received, with some significant premium sales held back until after EAP. As of 1600 UTC on 23 October 2015 over 3,135 .law and .abogado applications had been made. It should be noted, though, that as .law and .abogado are for use by qualified lawyers only, applications will not show as registrations until after the verification process has been completed  and applications converted into registrations.  Public registration data therefore lags behind actual sales.

Registrations in .miami, launched 2 October, are on track to pass 11,500 within the calendar month of launch, making it the top-selling city gTLD in the period and the most successful geo launch on a per-capita basis. Significantly, 78% of registrations are within the state of Florida, which augurs well for adoption and renewal rates moving forward.

In relation to the first year renewal rates for .london that entered General Availability (“GA”) on 9 September 2014, an update will be provided in November to allow the 45 day grace period that follows renewals to complete for the GA week registrations. Indications continue to suggest renewals will be ahead of industry renewal rates, which have averaged between 50% and 75%.

Sales & marketing update

Standard names

During Q3, Minds + Machines also successfully launched its first portfolio-wide registrar-channel promotion of the Group’s non-geo TLDs. All major registrars are currently participating in the promotion, which initially runs through to 31 December 2015. The campaign has contributed to the increase of domains under management in the period – up to 3.52% of all gTLDs registered at 30 September, with revenue per standard name up $3.43 to $13.53 at the end of the quarter. For the nine months to 30 September, standard name sales represented 73% of total revenues and 97% of total registrations.

Premium names

During Q3, the Group continued to build its sales teams and to increase its alliances with leading registrars and premium name brokers, achieving more than $100,000 of sales in collaboration with third-party intermediaries.  Public awareness of the Minds + Machines premium inventory has also been supported by the registration of approximately 29,000 names across fourteen of the Company’s TLDs by its wholly-owned Emerald Names subsidiary. The purpose of the Emerald Names initiative is to create awareness for the inventory via secondary market brokers, to provide pricing flexibility, and to make the names directly visible to consumers when they enter it into a web browser.  The Company expects an increasing share of premium name sales to close via Emerald Names. For the nine months to 30 September, premium names sales represented 27% of total revenues and 3% of total registrations. The average premium price for the nine months to 30 September was $179; management expects this figure to increase in the final quarter as a result of the .law and .abogado launches.

Throughout the roll-out of the .law and .miami launch campaigns, the Company received significant interest in premium names. Minds + Machines will therefore continue to develop this market segment for each of its top-level domains through a combination of direct sales and working through brokers and consultancies that specialise in the industries that correspond to the gTLDs in the Company’s portfolio.

Portfolio

The Company is focused on its sales and marketing plan to include TLD-specific strategies. Once completed, management will be able to prioritise its marketing budget to drive sales in its high-return TLDs, to identify effective sector-specific partners (as in .law) or employees, and to extend the budget through co-marketing with registrars (as in .miami).  Management believes the development of a model will both drive sales management, and clarity to the market.  This will be the focus of the executive team and the Board until complete.

Cost restructuring

As highlighted in the unaudited interim results, the executive team has already implemented changes that will result in over $2.24 million in annualised cost savings, the majority of which, with annualised cost savings of $1.3 million, were implemented in June 2015 by reducing personnel. A further $940,000 in annualised cost savings were implemented in Q3 2015 through additional headcount reductions and through the reorganisation of the Company’s IT infrastructure. The additional cost savings of $700,000 announced in the interim results, and which will increase total annualised cost savings to $2.94 million, are expected to be implemented heading into 2016.

Executive management and the Board will continue to evaluate and streamline processes & systems in ensure an efficient and effective operating structure. The Company will continue to keep shareholders updated of this activity as it progresses.

Returning Capital to Shareholders and Cash Position as at 30 September 2015

On 22 September, the Company announced a share buy-back programme of up to £15 million ($23 million) over the following twelve months. To date, just over £570,000 has been spent repurchasing 6,284,828 ordinary shares, which will all be cancelled. The Company will continue to buy shares on the open market as and when it sees value in so doing.

Cash in the bank at 30 September 2015 stood at $46.4 million.

Contested domains

The Group continues to have an interest in seven contested generic top-level domain applications and continues to move towards resolving these in a manner that delivers maximum value to the Company.

KPIs

The Board is pleased to update the status of the Company’s stated KPI’s by which it evaluates the progress of the business as at 30 September 2015.

·     Domains under Management (“DUMs”): As at 30 September, total domains under management (DUMs) represented 3.52% of total gTLD domain names registered, up from 3.43% at the end of Q2, and tracking within the target KPI range of 3-5%. These figures do not include names registered at Emerald Names, where the Company holds registered names for later resale.

·     Average Revenue per Standard Name: as at 30 September, the average revenue per standard name was up $3.43 to $13.53, bringing it closer to our target KPI of $15 to $22 per standard name as a result of renewals in .london and revenue from the Sunrise periods in .law and .miami.

·     Average Revenue per Premium Name: as at 30 September, the average revenue per premium name was $179, down from $187, still below our target KPI of $200 to $225 as a number of substantial sales had to wait to be booked until the public launches of .law, .abogado, and .miami, just after the end of the quarter. The Board therefore expects this KPI to rise in the final quarter of the year.

·     Standard Name Sales Growth: standard name sales growth continues to track ahead of the 1.5-2 times annual growth target, standing at 2.89x at 30 September (compared to 30 June at 2.22x), driven by the roll-out of the Company’s portfolio-wide promotion through the registrar channel of its non-geo gTLDs.

·     Premium Name Sales Growth, however, has dipped to 1.73x but remains broadly in line with the 1.75-2.5x annual growth target (end of Q2 1.83x). This relates primarily to the fact that the sales teams were still being built out in the period and were focused on the launches of .miami, .law, and .abogado, where premium name sales will be reported in Q4.

Michael Salazar, Minds + Machines’ CFO, added:

“We are strongly encouraged by the traction being generated through the first sales and marketing initiatives being implemented as we transition into the second phase of the business’s development. We likewise remain committed to fully extinguishing legacy cost issues from the first phase of our development. We look forward to the continued strengthening of our activities in the final quarter of the year.”