MMX announces half year results (including a $5.1m settlement)

Minds + Machines Group Limited (AIM: MMX), one of the world’s leading owners and operators of Internet Top-Level Domains (“TLDs”), announced the Group’s unaudited interim results for the six month period ended 30 June 2019 (the “period”).

MMX has recently switched its company results reporting from GBP to USD.

The H1 results show a substantive improvement in revenue mix and cash generation from normal operations as a result of the focus on automated sales through the registrar channel and expanded renewal base that has benefitted from the ICM acquisition completed in June 2018.

Financial Highlights

• Registrations up 19% to 1.82m
• Revenues up 39% to $8.9m (H1 2018: $6.4m) benefitting from the full six month ICM contribution  and 9% channel growth from the original MMX portfolio
• Underlying revenue mix significantly improved:
  – renewal revenues 68% of total H1 revenues (H1 2018: 53%) covering 97% of all costs (partner payments, cost of sales, and operating expenditures)
  – non-channel brokered revenue reduced to 10% (H1 2018: 25%)
• Operating EBITDA, net of auction revenue, improved fourfold (306%) to $2.7m (H1 2018 $0.7m)  delivering H1 unaudited EBITDA of $2.6m compared to a H1 2018 EBITDA loss of $14.6m
• Net earnings of $1.7m compared to a H1 2018 loss of $14.7m
• EPS of 0.19c (H1 2018 2.07c loss)
• Cash inflows from normal operations (net of auction revenue) of $8.6m (H1 2018: $6.3m) with cash generation from normal operations up to $2.2m compared to $0.5m H1 2018
• Cash of $8.9m at 30 June 2018 post payment of $3m loan facility and $1.8m payment to exit onerous contract

Operational highlights

• ICM integration completed, combined operations streamlined and the previous two-year decline across the four ICM properties corrected
• Significant improvement in automated new sales through the channel, primarily driven by data-based activities
• Innovation projects advanced, their primary focus being on generating second horizon revenue  opportunities from the existing portfolio:
  – expansion of .luxe R&D project so that a .luxe address can serve as a standard address format across all blockchains as well as the World Wide Web;
  – development of and ICANN approval for the new AdultBlock and AdultBlock+ service for the   ICM portfolio that will allow trademark holders to protect both their own exact match terms   and the many thousands of variant look-alike terms that can be generated through variant     scripts to dupe consumers; and
  – development of a data driven expiring names service to better monetize non-renewed names.
• Geographic mix improved – US now accounting for 63% of billings, China 27%, Europe 9% and ROW 1%.

Post Period End and Current Trading

• Continued growth in normal DNS based registrations, up 6% since period end to 1.92m
• Ongoing channel growth, billings currently trending 15% ahead of Q3 2018 with brokered sales in line with the same period last year
• Innovation initiatives progressing well:
  – 0.5 million identifiers reserved by the first two pilot wallet partners for onchain  use within the .luxe project
  – Over 0.6 million addresses blocked through the first 106 AdultBlock+ sales in September
• .law shortly to be endorsed as an approved web address for lawyers in China
• the legacy onerous contract addressed with an in-principle agreement reached:
  – $5.1m settlement to be paid in H2 from existing cash resources on completion of the legal process
• £1.0m share buyback programme started as part of the Company’s broader strategy to deliver shareholder value

Toby Hall, CEO of MMX commented:

“We remain extremely encouraged by the progress year-to-date across the Group as we continue to deliver on our strategy of producing highly predictable, balanced revenue streams through organic growth, innovation and selective acquisition which is now resulting in healthy cash generation for the Group. It is in turn enabling us to settle the legacy onerous contract that has been a substantial cash drain on the business over the last five years from existing cash resources in the business.

“The £1.0m buyback, initiated on 26 July 2019, will continue whilst, during the second half of the year, we explore with our shareholders a more meaningful return of funds either through the introduction of a progressive dividend, a larger tender offer, or a combination of the two. Current trading remains positive and whilst the full year outcome will be dictated by the timing and recognition of revenue from new initiatives, notably AdultBlock, we are encouraged by the cash generation of the business and trading remains in line with market expectations.

“Against the backdrop of continuing momentum, Management would like to thank the Group’s staff, commercial partners, shareholders and Board for their support over the last three years which has successfully allowed MMX to transition into a highly cash generative company enabling it to be increasingly valued on fundamentals, not sentiment.”

A meeting for analysts will be held today at 10.30 at the offices of finnCap, 60 New Broad Street, London EC2M 1JJ.  In addition the Company will be holding a Q&A session open to retail and other shareholders at 6 p.m. on 3rd October, at WeWork, 1 Poultry, London EC2R 8EJ.  Investors wishing to attend should contact Belvedere Communications on: +44 (0) 20 3687 2754.