Minds + Machines reports final results for 2016

Minds + Machines Group Limited (AIM: MMX) announced Final Results for the year ended 31 December 2016.

Commenting on the results Toby Hall, CEO of MMX said:

“To understand the key market drivers of the new gTLD industry that saw net new registrations outstrip those in .com and the country codes combined in 2016, it is important to recognize the trends both from within the industry as well as external factors.

“It is therefore central to our strategy that we are positioned to support the three end markets that management sees are looking to benefit from those trends through our registrar partners – namely; new-start SME’s that are coming online for the first time, as well as established businesses already online; digital entrepreneurs that are looking to develop significant new markets and applications based around domain address conventions and domain investors who serve both as early pioneers, as well as marketeers, of new extensions.

“We believe much of the business development work and tests we have been conducting over the last 12 months are now providing the backdrop to the growth the portfolio is now enjoying and will, we believe, continue to enjoy.”

Commenting on current trading and outlook he added:

 “We continue to have significant scope for billings and revenue improvement as the Group’s premium and standard name inventory across its world-class portfolio of top-level domains is better monetized.”

“In short, the progress we made in 2016 to restructure the business into a pure-play registry and cost efficiently enter new markets has built strong foundations for the current year and beyond. We therefore remain confident of our ability to deliver meaningful value as we continue to grow our domains under management and resulting revenues and transition the Group into a highly predictable annuity based business of scale.”

Financial Highlights

·     FY 2016 billings up 100% to $15.8million (2015: $7.9million);

·     FY 2016 revenue less partner payments up 146% to $13.5million (2015: $5.5million);

·     FY 2016 gross profit up 159% to $10.9million (2015: $4.2million);

·     FY 2016 ongoing operating costs cut 44% to $6.5million (2015: $11.7million) with the current OPEX run-rate now below the $6.0million target;

·     FY 2016 operating EBITDA before one-off restructuring costs up to $3.6million delivering FY 2016 EBITDA profit before restructuring costs of $3.0million compared to a FY2015 loss of $4.4million;

·     FY 2016 Billings Operating EBITDA before restructuring costs up to $4.2million (FY 2015: loss of $6.6million);

·     Cash & cash equivalents post share buy-backs, tender offer, foreign currency charges, share payments and costs associated to discontinued operations and restructuring of $15.3million (2015: $34.7million);

·     Intangible assets of $45.6million based on their book value; and

·     Ongoing operations Earning per Share, on Operating EBITDA (before restructuring costs), of 0.49 cents.

Operating Highlights

·     Company successfully transitioned into a pure-play registry on-time and on-budget:

o  Registrar operations shut down and customers migrated to a registrar partner;

o  Registry technical back-end outsourced to industry leading registry service partner;

·     Cumbersome historic partner contract successfully renegotiated onto terms that can now potentially deliver future economic value;

·     Office opened in Xiamen, China and US offices centralised into single location in Seattle;

·     Company headcount reduced from 43 to 20 and staffing comprehensively restructured with only nine of the original team kept;

·     Board reduced from seven to four; and

·     Issued share capital reduced from 767,104,685 (2015) to 699,857,562 (2016), with warrants, options, and RSU’s reduced from 73,141,493 (2015) to 42,809,590 (2016).

Post Period Highlights

·     Business development teams strengthened;

·     40%+ registration growth year-to-date when confirmed sales taken into account:

o  US and European registrations up 37% to circa 350,000;

o  China registrations up 44% to over 817,000;

·     Launch of .boston scheduled for release in September 2017;

·     Submissions to MIIT, China’s regulatory body for the Internet, being progressed on up to a further eight of MMX’s wholly owned TLDs, which (if approved) will allow mmx to further target the China’s growing SME; and

·    New gTLD market growth up circa 6% year-to-date at over 29 million domain name registrations (source nTLDStats.com), this following on from last year where net new registrations in new gTLDs outstripped those in .com/.net by nearly seven-fold, and those in country codes by nearly four-fold.