Minds + Machines Group Limited (LSE:MMX), provided the following unaudited trading update ahead of publication of the Group’s accounts for the 12 months ended 31 December 2015, which will be announced during the week commencing 18 April 2016.
During Q4 2015, the Company saw significant unaudited billings* growth in both standard and premium domain names as a result of the Company’s ongoing transition into a sales-led business, the launches of .law, .abogado and .miami, and the first-year renewals of .london previously reported. For the final quarter, standard name billings were up 184% at $2.66m (Q3 2015: $0.94m) while premium domain name billings were up 215% at $1.52m (Q3 2015: $0.48m). At the year-end, total billings for the year rose 57% to $7.92m (FY2014: $5.03m) – with standard name billings accounting for $4.86m, premium name billings $2.94m and other billings $0.12m. Additional gross receipts for the year from one-off private gTLD auctions amounted to $9.15m (FY2014: $37.5m).
At the year end, total domains under management within the Company’s registry increased 28% to 278,523 (Q3 2015: 216,820) and 158% on the year (FY2014: 108,000) – representing 2.5% of the new gTLD market which grew from 3,710,349 registered domains at 1 January 2015 to 11,191,542 at the year end, fuelled by significant growth in China in the second half of the year.
Antony Van Couvering, Minds + Machines CEO, commented,
“We have seen exceptional growth in the new gTLD market in 2015 and we are pleased that our emphasis on sales and commercial partnerships has allowed us to significantly grow our domains under management while delivering on a range of key revenue metrics as we drive towards crossing over into operational profitability in 2016. Looking forward, we anticipate setting up a range of sales and marketing initiatives that will allow us to significantly increase domains under management, while protecting our long-term revenue streams in each of our top-level domains. In particular, our forthcoming entry into the Chinese market, which has been one of the key drivers of growth for the industry, has the potential to produce a step-change in our market penetration.”
Registry KPI update
Given the rapidly evolving gTLD market, and following feedback from shareholders, the Group will transition to reporting set registry KPI’s only at the time of the interim and year-end accounts, starting in financial year 2016. As part of the registry KPI transition, management is pleased to report that as of 31 December 2015, the Group achieved:
· average revenue per standard name of $15.54 for the year (up from $12.41 at 30 September 2015) – in line with the stated 2015 KPI target of $15-$22;
· an average revenue per premium name of $241.73 (up from $125.85 at 30 September 2015) – significantly ahead of the KPI range for the year of $200-$225 per premium name;
· standard names sales growth for the year of 2.74x – significantly ahead of the 1.5-2x 2015 annual growth target; and
· premium name sales growth for the year of 1.84x – in-line with the 1.75-2.5x premium name annual growth target.
Meanwhile, total domains under management reached 278,523, representing 2.5% of the new gTLD market – below management’s KPI target of 3-5% as a result of the market’s significant growth in China in H2. Early indications of renewals suggest they will be broadly inline with the industry norms.
During Q4, the executive team continued to improve the Company’s business model with the goal of ensuring the most efficient and effective operating structure for the business and its stakeholders moving forward. To deliver further efficiencies to those already announced, the executive team continues to engage with third-party partners to drive greater cost efficiencies and scalability. The Company will continue to keep shareholders updated on this activity as it progresses.
As previously reported, during Q4 the executive team successfully:
· launched three new gTLDs – .law, .abogado and .miami;
· advanced negotiations which resulted in the acquisition of .boston in January 2016;
· developed its market entry strategy for China with a Q1 launch expected;
· developed new marketing strategies and sales tactics across its existing portfolio for standard and premium names, bearing initial fruits in Q4 with larger benefits expected in 2016;
· developed a schedule for launching up to 5 new top-level domains in 2016, the timings of which will be announced on a rolling basis through-out the year; and
· post-period, has seen .work pass 100,000 registrations.
Further, 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.
Returning Capital to Shareholders and Cash Position as at 31 December 2015
On 22 September 2015, the Company announced a share buy-back programme of up to £15 million (c. $23 million) over the following twelve months (the “Programme”). To date, just over £6.28 million has been spent repurchasing 72,890,368 ordinary shares for cancellation. The Company will continue to repurchase ordinary shares on market as and when it sees value in so doing. The Company additionally clarifies its intention that the maximum number of ordinary shares that may be purchased through the Programme is 125,395,422 ordinary shares, being 15 per cent. of the ordinary shares in issue on 22 September 2015. Taking into account the ordinary shares purchased to date, the Company may purchase up to a further 52,505,054 ordinary shares under the Programme in the period to 21 September 2016.
Cash in the bank at 31 December 2015 stood at $34.7 million.
Michael Salazar, COO, commented:
“The combination of improving the efficiency of our operations and emphasizing sales and marketing means that as a board we can look confidently forward into 2016. We have an exceptional portfolio and we look forward to strengthening it as relevant opportunities present themselves.”
* Total billings provides insight into the sales of MMX’s domain names since payment is typically collected at the time of invoice with revenue then being ratably recognized over the term of a domain. As such billing figures for the year should not be viewed as unaudited revenue figures for the year. Unaudited billings for FY2014 were $5.03m compared to audited revenue for FY2014 of $1.92m.