Minds + Machines Group Limited (AIM:MMX), the top-level domain registry company, announces that it has entered into a settlement agreement (the “Settlement Agreement”) with the vendors of ICM Registry, LLC (“ICM”), including Mr Stuart Lawley, the former majority shareholder of ICM (together the “Settlement Parties”) pursuant to recent alleged warranty claims, under the acquisition agreement entered into between the Company and ICM on 3 May 2018 (the “Acquisition Agreement”).
Under the terms of the Settlement Agreement the Company has agreed to pay the Settlement Parties in aggregate US$1.0 million in full and final settlement of all claims brought by the Settlement Parties (the “Settlement”) relating to the acquisition of ICM by the Company under the Acquisition Agreement.
Whilst the Directors believe that the alleged claims of the Settlement Parties are without merit, they believe the swift Settlement is in the best interests of the Company and allows it to focus on restoring shareholder value without the distraction of potentially expensive and time consuming litigation.
The Settlement Agreement will allow for a more positive relationship between the parties, including in particular Mr. Lawley, for the benefit of all MMX shareholders.
The Board of Directors is pleased to announce that Tony Farrow, who re-joined MMX at the end of October as Interim CEO has been appointed CEO of the Company. Mr. Farrow will also join the Board of Directors following completion of regulatory due diligence.
Commenting on FY 2020 trading, Tony Farrow said:
“It is great to be back working with the MMX team. Our FY 2021 plan will focus on AdultBlock sales, extensive release of inventory to the market, quality registrations with the view of future renewal revenue and standardized promotions for our channel partners. It is a straightforward business where focus must remain on the quality of our domain registrations and promotions with our channel partners. We lost some of the momentum after the initial launch of AdultBlock in FY 2019. However, FY 2021 was always the target year for the full rollout of this new product, and I am encouraged by the dialogue with our channel partners to really move AdultBlock in FY 2021. I look forward to sharing more insight and information when we release our FY 2020 results in the Spring.”
MMX revenues in FY 2020 were largely in line with those for FY 2019. Renewal revenue remained consistent in FY 2020 at 68%. FY 2020 new standard registration revenue increased to 24% with reduced dependency on premium domains.
Billings declined 3% year on year, reflecting increases in most TLDs but a significant drop in AdultBlock billings in FY 2020 following its initial launch in FY 2019. In FY 2020 98% of billings were delivered through the registrar channel, eliminating the Company’s historical reliance on one-off brokered sales.
Domains Under Management (“DUMs”) declined 19% in FY 2020 compared to FY 2019, with no loss in contribution, reflecting an intentional shift by the Company to more profitable transactions. Continuing our sales efforts toward our higher margin TLDs will be a principle focus in FY 2021.
In addition to the departure of the Company’s former CEO and CFO, in FY 2020 MMX also reduced its workforce by 20%. Severance costs associated with this right sizing means that the reductions did not result in cost savings in FY 2020, but the reduced staffing will reduce costs in FY 2021. No separation costs were paid to the former CEO and CFO.
The new executive team is also reviewing the contribution received from each of its TLDs and the growth prospects for each from new sales initiatives to ensure the carrying values associated with each TLD is appropriate going forward.
Cashflow from operations was $6.4m in 2020 (2019: $0.5M, including onerous contract payments of $6.6M). Cash at year end stood at $8.9m (2019: $6.6m) after share and option buy-backs in the year of $3.1M. Through the share buy-back programme and the cancellation or buy-out of employee share options and restricted share awards, in FY 2020 the Company reduced the number of common shares outstanding by 3% and its fully diluted shares outstanding by more than 8.5%. The Company remains debt free.