CentralNic 2019 half year results

CentralNic Group Plc (AIM: CNIC) announced its half year results for the six months ended 30 June 2019. Both revenues and Adjusted EBITDA have tripled year-on-year, driven by a combination of growth through acquisition and underlying organic growth of c.6%. As indicated in the 2018 year end results, the Directors were considering amending the Group’s presentational currency to US Dollars and in H1 2019 concluded to revise the Group’s presentational currency for all periods ending after 1 January 2019, bringing it in line with its principal trading currency and industry peers.

Financial Summary:

• Revenue increased by 225% to $49.7m (H1 2018: $15.3m), which was virtually all subscription based
• Gross profit increased by 127% to $19.7m (H1 2018: $8.7m)
• Adjusted EBITDA* increased by 203% to $9.2m (H1 2018: $3.1m)
• Operating profit increased by 266% to $2.4m (H1 2018: operating loss of $1.4m)
• Cash balance increased 73% to $17.9m (H1 2018: $10.4m)
• Net debt** was reduced by 47% to $6.0m (H1 2018: $11.3m)

*Excludes impact of share-based payments expense for options, premium domain sales, foreign exchange, and non-core operating costs

** Includes gross cash, debt and prepaid costs; please see section “Post half year end highlights”

Operational Highlights:

• Numerous notable client wins, including:
  • Automattic, the parent company of WordPress and of the .blog TLD
  • The Alpnames portfolio of c. 680,000 domain names assigned by ICANN
  • The Kingdom of Bahrain, for registry services
  • A major contract from a global luxury car manufacturer
  • A significant registry project from a South East Asian government
• On track to make more than $1.0m of cost savings in the full year ending December 2019, from the integration of the KeyDrive acquisition, as demonstrated by strong H1 2019 performance
• Completion of first stage of earn-out for the KeyDrive acquisition, which exceeded financial targets
• Successful placing of the debut offering of a €50.0m oversubscribed senior secured bond, used to repay debt and to fund acquisitions

Post half year end highlights:

• TPP Wholesale acquisition completed 1 August 2019 for a gross consideration of c. $16.6m
• Hexonet acquisition completed 7 August 2019 after CentralNic paid an initial cash consideration of c.$7.8m for all Hexonet shares
• Ideegeo acquisition completed 7 August 2019 for a total consideration of c.$3.4m
• Settlement of the €50.0m senior secured bond issue on 3 July 2019 and repayment of the prior acquisition facility provided by Silicon Valley Bank on 30 July 2019
• The debt markets have demonstrated confidence in our recurring business model and acquisition strategy by over subscribing to our debut bond offering
• The cumulative annual adjusted EBITDA (including ongoing cost reductions of Hexonet) from the three newly acquired businesses, as per their latest completed financial years is $4.6m
• Net Debt restated for the bond issuance and the three new acquisitions would be approximately $35m, assuming the simultaneous completion of all the transactions on 30 June 2019

Outlook:

• Strong growth in the first half and three successful acquisitions, taking the Company to c. $130m revenues on a proforma annualised basis, demonstrate the successful execution of our buy and build strategy
• Performance of last year’s key acquisition, KeyDrive, demonstrates CentralNic’s ability to generate network effect and economies of scale beyond initial hard cost synergies, thereby improving gross margin and adjusted EBITDA margin
• This gives us confidence to continue with this consolidation strategy and we continue to assess a number of opportunities in what is a huge, fragmented and growing market
• Having achieved strong results in the first half of 2019, management is confident that the full year result should be around the top end of the current range of analyst forecasts

Ben Crawford, CEO of CentralNic, commented: “In the first half of 2019 CentralNic’s adjusted EBITDA exceeded our full year performance in 2018. These outstanding results not only demonstrate that CentralNic can source and complete transformative acquisitions, but that it can also integrate them successfully while continuing to deliver organic growth. Moreover, as we scale up rapidly, the underlying qualities of high recurring revenues and excellent cash conversion become increasingly meaningful.

“Our pipeline of future deals remains strong, while our net debt level remains comfortable particularly given the profitability of the existing CentralNic Group and the expected contribution from recent acquisitions. We are confident in continuing our trajectory towards joining the ranks of the global leaders in our industry.”