CentralNic Group
Team Internet Plc

Team Internet Plc share price, company news, analysis and interviews

Team Internet plc (LON:TIG) – formerly CentralNic – is a global internet solutions group headquartered in London. Leveraging world-class technologies and industry leading teams, they have been transforming the way organisations, brands, publishers and consumers connect and thrive online.

CentralNic Registry

CentralNic’s registry division is a leading distributor of registries’ domain names, on an exclusive basis, through retailers globally. It is the only distributor with six of the top twenty new TLDs on its platform. The three most important contributing factors behind this achievement are the division’s leading technology platforms, its extensive range of support services and its integrated network of global retailers.

CentralNic Retail

The retail Division markets and sells domain names and associated products directly to the end-user.  The division distributes around 1,200 domain extensions, one of the widest range of domain extensions offered by retailers in the industry. In addition, the Retail Division supplies products associated with domain names such as website hosting and website security certificates.

CentralNic Reseller

Its reseller division manages and markets domain names and associated products through a large network of resellers. The division has approximately 20,000 resellers who sell domain names to end-user customers in over 250 countries globally. The division distributes around 1,200 domain extensions through its reseller network, one of the widest range of domain extensions offered in the industry. In addition, the Reseller division supplies products associated with domain names such as website hosting and website security certificates.

CentralNic Corporate

The corporate market is gaining in importance in the domain name industry, and CentralNic is addressing this market in several ways.

CentralNic Corporate provides products and services to:

  • de-risk the complex task of managing a portfolio of domain names, ensuring websites are always reachable and the brand owner has exactly the right mix of domain names it needs,
  • protect brand owners’ online presence, reputation and revenues from fraudsters, cybersquatters and counterfeiters,
  • help brand owners obtain, manage, protect and develop their internet presence under their own exclusive “DotBrand” TLDs.

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CentralNic Group

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Team Internet Group

Team Internet financial reporting schedule

Team Internet Group Plc (LON:TIG), a leading global internet company generating recurring revenue through creating successful connections – from businesses to domains, brands to consumers, and publishers to advertisers – has announced its upcoming financial reporting schedule.

We expect to publish our audited annual report and accounts for the financial year ending 31 December 2023 on Monday, 18 March 2024. Prior to this, on Monday, 29 January 2024, we will release a comprehensive Trading Update. This update will highlight a record performance in Q4 2023 and FY 2023, demonstrating that Team Internet Group continues to trade at least in line with current market expectations.

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Team Internet Group

Team Internet Group Court Hearing on Capital Reduction Outcome

Team Internet Group Plc (LON:TIG), the global internet company that generates recurring revenue from creating meaningful and successful connections: businesses to domains, brands to consumers, publishers to advertisers, has announced that the proposed cancellation of its share premium account, details of which were set out in the circular published by the Company on 7 September 2023 and which was approved by shareholders on 28 September 2023, was sanctioned earlier this week by the High Court of Justice of England and Wales.

The Court order confirming the Capital Reduction and a statement of capital approved by the Court in connection therewith will be sent to the Registrar of Companies shortly. The Capital Reduction will become effective upon the registration of the Court order and associated statement of capital by the Registrar of Companies.

Team Internet (LON:TIG) creates meaningful and successful connections from businesses to domains, brands to consumers, publishers to advertisers, enabling everyone to realise their digital ambitions. The Company is a leading global internet solutions company that operates in two highly attractive markets: high-growth digital advertising (Online Marketing segment) and domain name management solutions (Online Presence segment). The Company’s Online Marketing segment creates privacy-safe and AI-generated online consumer journeys that convert general interest online media users into confident high conviction consumers through advertorial and review websites. The Online Presence segment is a critical constituent of the global online presence and productivity tool ecosystem, where Team Internet serves as the primary distribution channel for a wide range of digital products. The Company’s high-quality earnings come from subscription recurring revenues in the Online Presence segment and revenue share on rolling utility-style contracts in the Online Marketing segment.

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Team Internet Group

Team Internet Group Continued delivery with 16% year-on-year increase in Revenue

Team Internet Group Plc (LON:TIG), the global internet company that generates recurring revenue from creating meaningful and successful connections: businesses to domains, brands to consumers, publishers to advertisers, is pleased to announce its unaudited financial results for the nine months ended 30 September 2023.

September 2023 YTD Financial Summary:

●       Gross revenue increased by 16% to USD 611.7m (nine months ended September 2022 (“September 2022 YTD”): USD 526.7m)

●       Organic revenue growth* for the trailing twelve months ended 30 September 2023 (“TTM 2023”) of approximately 19%

●       Net revenue (Gross profit) increased by 8% to USD 138.5m (September 2022 YTD: USD 128.3m)

●       Adjusted EBITDA** increased by 11% to USD 68.8m (September 2022 YTD: USD 62.0m)

●       Adjusted EPS increased by 28% to USD 17.56 cents (September 2022 YTD: USD 13.68 cents)

●       Net debt*** of USD 81.7m (31 December 2022: USD 56.6m) and Leverage**** of 1.1x pro forma EBITDA TTM 2023, following non-operating cash outflows in respect of the Group acquiring its own shares USD 30.2m (Share buyback: USD 24.9m, Employee Benefit Trust: USD 5.3m), dividend of USD 3.6m, reflecting the Group’s choice to return cash to shareholders, and non-recurring settlement of deferred consideration of USD 17.9m

●       Adjusted operating cash conversion of 95% (FY2022: 110%). We expect this to continue to normalise nearer to 100% over the remainder of the year

Q3 highlights:        

●      On 4 September 2023, the Group announced its rebranding from CentralNic Group to Team Internet Group and effective that same day, the Group’s shares commenced trading under the ticker “TIG”. At a general meeting held on 28 September 2023, a resolution was passed to change the Company’s name from CentralNic Group Plc to Team Internet Group Plc, a change which has now been confirmed by Companies House

●      The Group continued to trade at least in line with current market expectations during the period, driven by ongoing market share gains of its proprietary privacy-safe, AI-based customer journeys which address a multi-billion-dollar opportunity

●     In the Online Marketing segment, the number of visitor sessions increased by 36% to 5.6 billion for TTM 2023 from 4.1 billion for the trailing twelve-month period ended 30 September 2022 (“TTM 2022”). Revenue per thousand sessions (“RPM”) decreased by 7% from USD 104 to USD 97, continuing to outperform the market

●      The Online Presence segment again posted its highest ever organic revenue growth, 17% TTM 2023 compared to 4% for TTM 2022

●      Adjusted EBITDA as a percentage of Net revenue has increased to 50% for September 2023 YTD from 48% for September 2022 YTD, demonstrating that Team Internet’s growth continues to translate into operating leverage

●      Zeropark, Team Internet’s Commerce Media Tech business, announced three strategic partnerships: First, becoming a Tier 1 Demand Partner of Sovrn, a leading publisher technology platform. Second, a significant deal with booking.com, the global online travel agency. Third, Klarna, the Buy Now Pay Later platform has become a direct publisher on the Zeropark network

●      Voluum, Team Internet’s flagship ad tracker, announced the launch of a new integration with popular e-commerce platform Shopify, allowing customers to directly feed conversion data from their Shopify stores into Voluum, bolstering their ad, product, and page performance

●      On 31 August 2023, Adrenalads LLC was acquired for an initial consideration of USD 2.1m. The acquisition included deferred consideration of USD 0.2m payable in February 2025. This business has a rich history of collaboration with Zeropark

●      One of the Group’s largest Retail brands OnlyDomains entered into a partnership with business email provider Titan to offer new and existing customers premium business email with every domain name

Post period end highlights:

●     Launch of Team Internet AG’s Adsolutely product, seamlessly integrating tailored ad feeds into the digital space, discarding the intrusive nature of native ads. Adsolutely’s state-of-the-art technology resonates with the target audience’s interests through advanced keyword pairing,  offering users total control over contextual ads and related terms, while handling the intricacies of optimisation

●      The Group’s performance marketing business Codewise has been rebranded to “Commerce Media Tech”, reflecting our mission to help advertisers connect with their ideal customers

●      Simon McCalla joined Team Internet as the new CEO of our Online Presence division. Simon’s experience as a senior leader at blue chip companies both within and beyond the domain name industry make him a great fit to lead Online Presence into the future

●      Team Internet initiated an ESG alliance between leading partners along the domain name value chain at ICANN78 in Hamburg in October 2023

Outlook:

Team Internet delivered another strong performance during September 2023 YTD across both its Online Marketing and Online Presence segments, delivering organic revenue growth of 19% on a TTM 2023 pro forma basis. The Group has maintained its strong operating leverage, as demonstrated by Adjusted EBITDA as a percentage of Net revenue being 50% for September 2023 YTD (48% September 2022 YTD).

The material expansion of the Company’s share buyback programme announced on 3 July 2023, alongside the cash flow waterfall model as described on page 14 in the 2022 Annual Report, is primarily being funded by continued strong operating cash generation. To date, the Company has bought back 16.7m shares under its programme at a cumulative cost of GBP 20.7m. GBP 13.3m remains available for the remainder of the programme.

The Group looks ahead with confidence to Q4, which is typically its strongest quarter, and the Directors expect that the Group will continue to deliver results at least in line with current market expectations for the full year.*****

* Pro forma revenue, adjusted for; acquired revenue, constant currency foreign exchange impact and non-recurring revenues is USD 817m for TTM 2023 and at USD 687m for TTM 2022

**Earnings before interest, tax, depreciation, amortisation, impairment, non-cash charges and non-core operating expenses

*** Includes gross cash, bank debt and prepaid finance costs as of 30 September 2023 (cash of USD 83.7m and bank debt and prepaid finance costs of USD 166.7m); includes gross cash, bank debt, prepaid finance costs and hedging assets of USD 1.4m (31 December 2022 cash of 94.8m, bond debt, bank debt and prepaid finance costs of USD 151.2m and hedging liabilities of USD 0.2m)

**** Includes Net Debt as defined under*** (i) excluding prepaid finance costs, (ii) plus guarantee obligations, and (iii) plus the best estimate of any crystallised deferred consideration payable in cash, all divided by pro forma EBITDA, i.e. last twelve months’ EBITDA including acquired entities’ EBITDA on a pro forma basis, and adjusted for rental expense capitalized under IFRS 16 and non-core expenses

*****Latest analyst forecasts are within a range of USD 783m and USD 834m for FY23 revenue and USD 91m and USD 98m for FY23 Adjusted EBITDA

MANAGEMENT COMMENTARY ON PERFORMANCE

Introduction

Team Internet’s organic growth, combined with the acquisition strategy pursued through the end of 2022, substantially increased the scale and capabilities of the Group. The effect of this is demonstrated in our unaudited September 2023 YTD results which show increases in both Revenue and Adjusted EBITDA of 16% and 11% respectively, compared to September 2022 YTD.

Performance Overview

                The Group has performed strongly during the period with the key financial metrics listed below:

  Nine months ended30 September 2023 Nine monthsended30 September 2022    Change
  USD m USD m %
Revenue 611.7 526.7 16%
Net revenue/gross profit 138.5 128.3 8%
Adjusted EBITDA 68.8 62.0 11%
Operating profit 29.8 35.1 (15%)
Adjusted operating cash conversion (note 8) 95% 105% (9%)
Profit after tax 13.8 6.5 112%
EPS – Basic (cents) 5.10 2.48 106%
EPS – Adjusted earnings – Basic (cents) (note 7) 17.56 13.68 28%

Segmental analysis

Organic growth rates quoted below are calculated on a pro forma basis including all the Group’s constituents as of the last balance sheet dates and adjusted for non-recurring or non-cash revenues and on a constant currency basis.

Online Marketing segment

The Online Marketing segment continued to outperform the market, with revenues increasing by USD 62.1m, or 15%, from USD 412.6m to USD 474.7m. Organic revenue grew at a rate of 20% for TTM 2023, predominantly driven by Team Internet’s TONIC platform. Inorganic growth was a result of the full period impact of the VGL acquisition, which was acquired in March 2022, and Adrenalads in August 2023.

The number of visitor sessions increased by 36% from 4.1 billion for TTM 2022 to 5.6 billion for TTM 2023 and the RPM decreased by 7% from USD 104 to USD 97(1).

The Online Marketing segment creates privacy-safe and AI-generated online consumer journeys that convert general interest online media users into confident high conviction consumers through advertorial and review websites, generating utility-style referral and commission income through partnerships with Google, Amazon and a multitude of other partners. Our long-term vision aims to harness the Group’s expertise in two critical areas: first, to transform social media and other low-intent traffic into qualified leads for search ad campaigns; and second, to effectively turn search ad campaigns into successful e-commerce transactions. By integrating these capabilities, we aspire to establish a robust social commerce channel. This sector is expected to reach a value of USD 80 billion(2) by 2025 in the US alone.

Online Presence segment

Reported revenue in this segment increased by 20% from USD 114.1m in September 2022 YTD to USD 137.0m in September 2023 YTD. Organic growth for the Online Presence segment was 17% for TTM 2023, the highest growth rate since the segment’s establishment, driven by the structural shift in demand towards Top Level Domains where Team Internet has a competitive edge.

The number of processed domain registration years increased by 11% from 12.7m for TTM 2022 to 14.1m for TTM 2023 and the average revenue per domain year increased by 8% from USD 10.03 to USD 10.81. The share of Value-Added Service revenue TTM 2023 was 11.2%(3).

The Online Presence segment is a critical constituent of the global online presence and productivity tool ecosystem, where Team Internet serves as the primary distribution channel for a wide range of digital products.

Michael Riedl
Chief Executive Officer

(1) Based on analysis of c.85% of the search segment which can be adequately and reliably described by this KPI

(2) Source: “Social commerce: The future of how customers interact with brands”, McKinsey & Company, October 19, 2022

(3) Based on analysis of c.86% of this segment which can be adequately and reliably described by this KPI

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME UnauditedNine monthsended30 September2023 UnauditedNine monthsended30 September2022  AuditedYear ended31 December2022
Note USD m USD m USD m
 
Revenue 4 611.7 526.7 728.2
Cost of sales (473.2) (398.4) (550.5)
Net revenue/gross profit 138.5 128.3 177.7
Operating expenses (105.2) (89.4) (138.4)
Share-based payments expense (3.5) (3.8)   (5.7)
Operating profit   29.8   35.1   33.6
           
Adjusted EBITDA(a)   68.8   62.0   86.0
Depreciation of property, plant and equipment   (2.3)   (2.1)   (3.0)
Amortisation and impairment of intangible assets   (28.1)   (21.1)   (36.4)
Non-core operating expenses(b) 5 (5.0)   (6.0)   (8.2)
Foreign exchange (loss)/gain   (0.1)   6.1   0.9
Share-based payment expenses   (3.5)   (3.8)   (5.7)
Operating profit   29.8   35.1   33.6
           
Finance income less finance costs 6 (8.8) (9.4) (13.2)
Foreign exchange loss on borrowings (4.7) (5.6)
Net finance costs (8.8) (14.1) (18.8)
Profit before taxation   21.0   21.0   14.8
Income tax expense (7.2) (14.5) (16.9)
Profit/(loss) after taxation   13.8   6.5   (2.1)
           
Items that may be reclassified subsequently to profit and loss
Exchange difference on translation of foreign operations (4.2) (30.5) (13.7)
Movement arising on changes in fair value of hedging instruments 1.6 6.4 6.2
Total comprehensive income/(loss) for the period/year   11.2   (17.6)   (9.6)
Profit/(loss) is attributable to:Owners of Team Internet Group Plc  13.8    6.5    (2.1)
         
Total comprehensive income/(loss) is attributable to:Owners of Team Internet Group Plc  11.2    (17.6)    (9.6)
 
Earnings per share:  
Basic (cents) 5.10 2.48 (0.78)
Diluted (cents) 5.07 2.41 (0.78)
Adjusted earnings – Basic (cents) 17.56 13.68 20.01
Adjusted earnings – Diluted (cents) 17.45 13.29 19.81

All amounts relate to continuing activities
(a) Earnings before interest, tax, depreciation, amortisation and impairment, non-cash charges and non-core operating expenses.
(b) Non-core operating expenses include items related primarily to acquisition, integration and other related costs, which are not incurred as part of the underlying trading performance of the Group, and which are therefore adjusted for, in line with Group policy. 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION   UnauditedNine monthsended30 September2023   UnauditedNine monthsended30 September2022   AuditedYear ended31 December2022
  USD m   USD m   USD m
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 2.7 1.8 1.8
Right-of-use assets 4.7 5.6 5.5
Intangible assets 327.0 314.1 347.9
Deferred receivables 0.2 0.4 0.3
Deferred tax assets 9.7 7.9 9.5
Derivative financial instruments 1.4
345.7   329.8   365.0
CURRENT ASSETS
Inventory 0.5 0.8 0.6
Trade and other receivables 99.8 93.4 98.2
Cash and bank balances 83.7 83.8 94.8
184.0   178.0   193.6
TOTAL ASSETS   529.7   507.8   558.6
EQUITY AND LIABILITIES
EQUITY
Share capital 0.3 0.3 0.3
Share premium 98.3 98.3 98.3
Merger relief reserve 5.3 5.3 5.3
Share-based payments reserve 27.4 22.1 24.1
Cash flow hedging reserve 1.4 (0.2)
Foreign exchange translation reserve (15.0) (27.6) (10.8)
Retained earnings 30.0 59.1 50.0
TOTAL EQUITY   147.7   157.5   167.0
NON-CURRENT LIABILITIES
Other payables 5.7 11.5 13.9
Lease liabilities 3.1 1.9 3.8
Deferred tax liabilities 26.5 26.8 30.2
Borrowings 147.7 0.5 145.9
Derivative financial instruments 0.2
   183.0 40.7   194.0
CURRENT LIABILITIES
Trade and other payables and accruals 178.2 159.0 190.3
Lease liabilities 1.7 3.9 1.9
Borrowings 19.1 141.7 5.3
Derivative financial instruments 5.0 0.1
199.0   309.6   197.6
TOTAL LIABILITIES   382.0   350.3   391.6
TOTAL EQUITY AND LIABILITIES   529.7   507.8   558.6

  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY     Share capitalUSD m     Share premiumUSD m    Merger relief reserveUSD m   Share- based payments reserve USD m    Cash flow hedgingReserve USD m   Foreign exchange translation reserveUSD m     Retained earningsUSD m Equity attributable to ownersof the Parent CompanyUSD m
Balance as at 1 January 2022 0.3 39.8 5.3 19.5 (6.4) 2.9 52.6 114.0
Profit for the period 6.5 6.5
Translation of foreign operations (30.5) (30.5)
Other comprehensive income – changes in fair value of hedging instruments 6.4 6.4
Total comprehensive income for the period 6.4 (30.5) 6.5 (17.6)
Issue of share capital 59.6 59.6
Share issue costs (1.1) (1.1)
Share-based payments 3.8 3.8
Share-based payments – deferred tax asset (0.4) (0.4)
Share-based payments – exercised and lapsed (0.8) (0.8)
Balance as at 30 September 2022 0.3 98.3 5.3 22.1 (27.6) 59.1 157.5
Loss for the period (8.6) (8.6)
Translation of foreign operations 16.8 16.8
Other comprehensive income – changes in fair value of hedging instruments (0.2) (0.2)
Total comprehensive income for the period (0.2) 16.8 (8.6) 8.0
Repurchase of shares (0.5) (0.5)
Share-based payments 4.3 4.3
Share-based payments – deferred tax asset 0.5 0.5
Share-based payments – exercised and lapsed (2.8) (2.8)
Balance as at 31 December 2022 0.3 98.3 5.3 24.1 (0.2) (10.8) 50.0 167.0
Profit for the period 13.8 13.8
Translation of foreign operations (4.2) (4.2)
Other comprehensive income – changes in fair value of hedging instruments 1.6 1.6
Total comprehensive income for the period 1.6 (4.2) 13.8 11.2
Dividends paid on equity shares (3.6) (3.6)
Repurchase of shares (30.2) (30.2)
Share-based payments 7.3 7.3
Share-based payments – deferred tax asset 1.2 1.2
Share-based payments – exercised and lapsed (5.2) (5.2)
Balance as at 30 September 2023 0.3 98.3 5.3 27.4 1.4 (15.0) 30.0 147.7
                 

·      Share capital represents the nominal value of the Company’s cumulative issued share capital.

·      Share premium represents the cumulative excess of the fair value of consideration received for the issue of shares in excess of their nominal value less attributable share issue costs and other permitted reductions.

·      Merger relief reserve represents the cumulative excess of the fair value of consideration received for the issue of shares in excess of their nominal value less attributable shares issue costs and other permitted reductions.

·      Retained earnings represents the cumulative value of the profits not distributed to Shareholders but retained to finance the future capital requirements of the Group.

·      Share-based payments reserve represents the cumulative value of share-based payments recognised through equity and deferred tax assets arising thereon, net of exercised and lapsed options.

·      Cash flow hedging reserve represents the effective portion of changes in the fair value of derivatives.

·      Foreign exchange translation reserve represents the cumulative exchange differences arising on Group consolidation.

    CONSOLIDATED STATEMENT OF CASH FLOWS    UnauditedNine monthsended31 September2023   UnauditedNine months ended30 September 2022   AuditedYear ended31 December2022
  USD m   USD m   USD m
Cash flow from operating activities
Profit before taxation 21.0 21.0 14.8
 Adjustments for:            
Depreciation of property, plant and equipment 2.3 2.1 3.0
Amortisation and impairment of intangible assets 28.1 21.1 36.4
Finance cost (net) 8.8 14.0 18.8
Share-based payments 3.5 3.8 5.7
Increase in trade and other receivables (1.1) (5.3) (9.8)
Increase/(decrease) in trade and other payables (8.3) 1.7 16.9
Decrease in inventories 0.2 0.2
Cash flow generated from operations   54.5   58.4   86.0
Income tax paid (4.3) (4.4) (8.4)
Net cash flow generated from operating activities   50.2   54.0   77.6
Cash flow used in investing activities
Purchase of property, plant and equipment (1.7) (0.6) (1.3)
Purchase of intangible assets (6.7) (3.6) (5.2)
Payment of deferred consideration (17.9) (2.5) (2.7)
Proceeds from disposals of investments 0.1 0.1
Acquisition of subsidiaries and related assets, net of cash acquired (5.6) (66.9) (81.5)
Net cash flow used in investing activities (31.9)   (73.5)   (90.6)
 
Cash flow generated from/(used in) financing activities
Proceeds from borrowings 15.0 30.5 185.5
Settlement of forward foreign exchange contracts (21.0) (25.5)
Repayment of bond financing (128.6)
Repayment of revolving credit facility (18.8)
Bank finance arrangement fees (0.2) (3.4)
Accrued interest on bond tap 0.4 0.4
Bond arrangement fees (0.8) (0.8)
Proceeds from issuance of ordinary shares (net) 58.5 58.6
Repurchase of ordinary shares (30.2) (0.4)
Dividends paid on equity shares (3.6)
Payment of lease liability (1.1) (1.6) (2.2)
Bank loan capital repayments (0.2)
Interest paid (9.0) (7.0) (7.8)
Net cash flow generated from/(used in) financing activities (29.3)   59.0   57.0
Net increase/(decrease) in cash and cash equivalents   (11.0) 39.5 44.0
Cash and cash equivalents at beginning of the period/year 94.8 56.1 56.1
Exchange losses on cash and cash equivalents (0.1) (11.8) (5.3)
Cash and cash equivalents at end of the period/year 83.7   83.8   94.8

NOTES TO THE UNAUDITED FINANCIAL RESULTS

1.   General information

Team Internet Group Plc is the UK holding company of a group of companies which operate a global internet platform that derives recurring revenue from Online Marketing and Online Presence services. The Company is registered in England and Wales. Its registered office and principal place of business is 4th Floor, Saddlers House, 44 Gutter Lane, London EC2V 6BR.

2.   Basis of preparation

The financial results for the nine months ended 30 September 2023 are unaudited and have been prepared on the basis of the accounting policies set out in the Group’s 2022 statutory accounts and, for all periods presented, in line with the principal disclosure requirements of IAS 34: Interim Financial Reporting.

The unaudited financial results are condensed and do not represent statutory accounts within the meaning of section 435 of the Companies Act 2016. The statutory accounts for the year ended 31 December 2022, upon which the auditors issued an unqualified opinion, are available on the Group’s website and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

3.   Segment analysis

Team Internet is an independent global service provider building and managing platforms that sell Online Marketing and Online Presence services. Operating segments are organised around the products and services of the business and are prepared in a manner consistent with the internal reporting used by the chief operating decision maker to determine allocation of resources to segments and to assess segmental performance. The Directors do not rely on analyses of segment assets and liabilities, nor on segmental cash flows arising from the operating, investing and financing activities for each reportable segment, for their decision making and therefore have not included them.

The Online Marketing segment creates privacy-safe, AI-generated online customer journeys that convert general interest online media users into confident high conviction consumers through advertorial and review websites. The Online Presence segment is a critical constituent of the global online presence and productivity tool ecosystem, where Team Internet serves as the primary distribution channel for the wide range of digital products. 

Management reviews the activities of the Team Internet Group in the segments disclosed below up to a Net revenue/gross profit level only:

  UnauditedNine months ended30 September2023USD m   UnauditedNine months ended30 September2022USD m    AuditedYear ended31 December2022USD m
Online Marketing
Revenue 474.7 412.6            574.7
Cost of sales (380.4) (323.7) (449.6)
Net revenue/gross profit 94.3   88.9   125.1
         
Online Presence  
Revenue 137.0 114.1 153.5
Cost of sales (92.8) (74.7)         (100.9)
Net revenue/gross profit 44.2   39.4           52.6
 
Total revenue 611.7   526.7   728.2
Total cost of sales (473.2) (398.4) (550.5)
Net revenue/gross profit   138.5   128.3        177.7

 

NOTES TO THE UNAUDITED FINANCIAL RESULTS (continued)

 

4.   Revenue

The Group’s revenue is generated indirectly from consumers located in the following geographical areas:

UnauditedNine monthsended30 September2023USD m      % UnauditedNine monthsended30 September2022USD m      %  AuditedYear ended31 December 2022USD m      %
Americas 314.6 51% 279.2 53% 389.0 53%
APAC 53.8 9% 55.8 11%         73.5 10%
EMEA 210.9 35% 169.9 32%     234.5 33%
       UK 32.4 5% 21.8 4% 31.2 4%
611.7 100% 526.7 100%       728.2 100%

The Group’s revenue is invoiced directly to the following geographical areas:

UnauditedNine monthsended30 September2023USD m      % UnauditedNine monthsended30 September2022USD m      %  AuditedYear ended31 December 2022USD m      %
Online Marketing
Americas 14.4 3% 14.0 3% 19.5 3%
APAC 7.9 1% 5.4 1%         7.8 1%
EMEA 449.3 73% 391.5 74%      544.5 75%
       UK 3.1 1% 1.7 2.9
474.7 78% 412.6 78%       574.7 79%
Online Presence
Americas 51.4 8% 33.4 6%         51.7 7%
APAC 17.4 3% 16.2 3% 22.3 3%
EMEA 62.5 10% 61.6 12%         75.4 10%
UK 5.7 1% 2.9 1%      4.1 1%
137.0 22% 114.1 22% 153.5 21%
   
Total revenue 611.7 100% 526.7 100% 728.2 100%

5.   Non-core operating expenses

UnauditedNine monthsended30 September2023USD m UnauditedNine monthsended30 September2022USD m AuditedYear ended31 December2022USD m
Acquisition related costs 0.7 3.1 3.5
Integration and streamlining costs 2.6 2.8 4.0
Other costs(1) 1.7 0.1 0.7
5.0   6.0   8.2

(1) Other costs include items related primarily to business reviews and restructuring expenses.

NOTES TO THE UNAUDITED FINANCIAL RESULTS (continued)

6.   Net finance costs

UnauditedNine monthsended30 September2023USD m UnauditedNine monthsended30 September2022USD m AuditedYear ended31 December2022USD m
Finance income (0.3)
Impact of unwinding of discount on net present value of deferred consideration 1.1 0.4 1.0
Reappraisal of deferred consideration (2.8) (1.4) (1.3)
Arrangement fees on borrowings 1.0 2.9 3.0
Interest on bank borrowings and bond interest 9.9 7.4 10.2
Interest expense on leases 0.1 0.1 0.2
(Gain)/loss arising on derivatives classifiedas fair value hedges (0.2) 0.1
Foreign exchange loss on borrowings 4.7 5.6
Net finance costs 8.8   14.1   18.8

7.   Earnings per share

Earnings per share has been calculated by dividing the consolidated profit/(loss) after taxation attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share have been calculated on the same basis as above, except that the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares (arising from the Group’s share option scheme and warrants) into ordinary shares has been added to the denominator. In 2022, there is no change to the loss numerator of the dilutive calculation. Due to the loss made in the year, the impact of the potential shares to be issued on exercise of share options and warrants would be anti-dilutive and therefore diluted earnings per share is reported on the same basis on earnings per share.

 

UnauditedNine monthsended30 September2023USD m UnauditedNine months ended30 September 2022USD m AuditedYear ended31 December 2022USD m
Profit/(loss) after tax attributable to owners 13.8   6.5   (2.1)
Operating profit 29.8 35.1 33.6
Depreciation of property, plant and equipment 2.3 2.1 3.0
Amortisation and impairment of intangible assets 28.1 21.1 36.4
Non-core operating expenses 5.0 6.0 8.2
Foreign exchange loss/(gain) 0.1 (6.1) (0.9)
Share-based payment expenses 3.5 3.8 5.7
Adjusted EBITDA 68.8 62.0 86.0
Depreciation (2.3) (2.1) (3.0)
Net finance costs (excluding deferred consideration amounts, foreign exchange loss on borrowings and write off of arrangement fees on borrowing – note 7) (11.8) (9.5) (13.1)
Taxation (7.2) (14.5) (16.9)
Adjusted earnings 47.5   35.9   53.0
Weighted average number of shares:          
Basic 270,543,200   262,399,797   265,623,278
Effect of dilutive potential ordinary shares 1,600,095   7,708,732   2,584,385
Diluted average number of shares 272,143,295   270,108,529   268,207,663
Earnings per share:    
Basic (cents) 5.10   2.48   (0.78)
Diluted (cents) 5.07   2.41   (0.78)
Adjusted earnings – Basic (cents) 17.56   13.68   20.01
Adjusted earnings – Diluted (cents) 17.45   13.29   19.81

Basic and diluted earnings per share of 5.10 and 5.07 cents (2022: 2.48 and 2.41 cents) have been impacted by depreciation, amortisation, impairment, non-core operating expenses, foreign exchange gains and losses and share-based payment expenses.

NOTES TO THE UNAUDITED FINANCIAL RESULTS (continued)

8.   Financial instruments

The Team Internet Group is exposed to market risk, credit risk and liquidity risk arising from financial instruments. The Group’s overall financial risk management policy focusses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group does not trade in financial instruments.

Cash conversion for the nine-month periods ended 30 September 2023, 30 September 2022 and for the year ended 31 December 2022 was as follows:

UnauditedNine monthsended30 September 2023USD m   UnauditedNine months ended30 September 2022USD m    AuditedYear ended31 December 2022USD m
Cash conversion          
Cash flow from operations 54.5 58.4 86.0
Exceptional costs incurred and paid during the year 5.1 5.4 7.8
Settlement of one-off working capital items from the prior year 6.0 1.2 1.2
Adjusted cash flow from operations 65.6 65.0 95.0
Adjusted EBITDA 68.8 62.0 86.0
Conversion % 95% 105% 110%

Net debt as at 30 September 2023 and 31 December 2022 is shown in the table below.

    Bank debt  Cash Financialinstruments  Net debt
  USD m USD m USD m USD m
At 31 December 2022 (151.2) 94.8 (0.2) (56.6)
Drawdown (15.0) 15.0
Capital repayments 0.2 (0.2)
Prepaid finance costs 0.2 (0.2)
Amortisation of prepaid finance costs (1.0) (1.0)
Mark-to-market revaluation 1.6 1.6
Other cash movements (25.6) (25.6)
Foreign exchange differences (0.1) (0.1)
At 30 September 2023 (166.8) 83.7 1.4 (81.7)
         

Financial instruments included in net debt represent the mark-to-market valuation of interest rate swaps, which fix the variable interest component of USD 75.0m of the bank debt.

8.   Business combinations

Acquisition of Adrenalads LLC

On 31 August 2023, Team Internet acquired Adrenalads LLC, a Los Angeles based online marketing company that has a rich history of collaboration with Zeropark. Consideration included initial consideration USD 2.1m and deferred consideration of USD 0.2m payable in February 2025. The acquisition will be immediately earnings accretive. The acquisition aims to seamlessly integrate Adrenalads into the Zeropark ecosystem. This move is anticipated to strengthen Zeropark’s ties with ecommerce stakeholders, improve efficiency of internal media-buying processes, open new supply channels for Zeropark and establish a presence in strategic Pacific time zone.

In FY2022, Adrenalads generated unaudited revenue of USD 2.7m, unaudited Net revenue/gross profit of USD 1.1m and unaudited EBITDA of USD 0.7m.

The purchase price allocation exercise for the acquisition of Adrenalads has not yet been completed as at the date of signing this report, and it is therefore not possible to provide further details of the fair value estimates of the assets and liabilities at the acquisition date.

Deferred consideration payments

During the nine month period ended 30 September 2023 the following deferred consideration payments were made:

·      Deferred contingent consideration payments for the acquisition of VGL Publishing AG was settled in cash for EUR 13.7 (USD 14.9m), which includes EUR 12.4m (USD 13.6m) in respect of performance in 2022

·      The first deferred contingent consideration payment for the acquisition of M.A Aporia was cash settled for USD 2.3m in two instalments USD 0.8m paid on 13 July 2023 and USD 1.5m paid on 24 August 2023

·      On 27 July 2023, the final deferred contingent consideration payment for the acquisition of InterNexum GmbH was settled in cash for EUR 0.6m (USD 0.6m)

NOTES TO THE UNAUDITED FINANCIAL RESULTS (continued)

9.   Share buyback programme and Employee Benefit Trust

During the period the Company repurchased 15,878,125 shares under its share buyback programme at an average share price of £1.28 (FY2022: 220,000 shares at a share price of £1.54). These shares are held in treasury by the Company.

During the period the Group’s Employee Benefit Trust purchased 3,648,587 shares at an average share price of £1.16. At 30 September 2023 the Employee Benefit Trust held 9,199,521 shares (31 December 2022: 11,232,599 shares, 30 September 2022: 16,519,280 shares).

The total share repurchase in the period is USD 30.9m of which USD 30.2m was settled in cash in the period, with USD 0.7m settled in cash after the period end.

The number of shares held and outstanding share options is as follows:

Unaudited30 September 2023Number   Unaudited30 September 2022Number   Audited31 December 2022Number
Issued share capital 288,660,084 288,660,084 288,660,084
Shares held by the Employee Benefit Trust (9,199,521) (16,519,280) (11,232,599)
Shares held in Treasury (16,098,125) (220,000)
Share capital 263,362,438   272,140,804   277,207,485
Outstanding share options 11,525,831 18,372,001 12,985,926
Share capital plus outstanding share options 274,888,269 290,512,805 290,193,411

 

10. Events occurring after the period end

The following significant event occurred after the Group’s period end date of 30 September 2023 and before the signing of these Unaudited Financial Results on 13 November 2023:

·      On 19 October 2023, a deferred consideration payment in relation to the acquisition of M.A Aporia was made for USD 2.8m

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Team Internet Group

Team Internet Group confirms name change

Team Internet Group plc (LON:TIG), the global internet company that generates recurring revenues from creating meaningful and successful connections: businesses to domains, brands to consumers, publishers to advertisers, has confirmed that its name has changed from CentralNic Group plc to Team Internet Group plc and gives notice of the publication of its interim report for the nine months ended 30 September 2023.

Change of name to Team Internet Group plc

The Company announced the decision to change its name to Team Internet Group plc subject to shareholder approval on 4 September 2023. This change has now taken effect.

The Company’s TIDM, TIG.L, will remain unchanged as will its ISIN and LEI numbers.

The Company’s website address (including the information required by AIM Rule 26) is now www.teaminternet.com. 

Shareholders should note that their shareholdings will be unaffected by the change of name. Existing share certificates should be retained as they will remain valid for all purposes and no new share certificates will be issued.

We are Team Internet. The architects of a better-connected world.

Notice of Results

The Company will publish its unaudited interim report for the nine months ending 30 September 2023 on Monday, 13 November 2023.

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Team Internet Group

Team Internet receive overwhelming support of our recent rebranding

CentralNic Group plc (trading as Team Internet (LON:TIG)), the global internet company that derives recurring revenue from privacy-safe, AI based customer journeys that help online consumers make informed choices, has announced that at its General Meeting held yesterday, 28 September 2023, all resolutions were duly passed.

The full text of all the resolutions can be found in the Notice of General Meeting 2023, dated 7 September 2023, a copy of which is available on the Company’s website at Notice of GM 2023 .

The results of the voting were as follows:

% of votes in favour % of votes against Total votes Votes withheld
1.             Change of company name to ‘Team Internet Group Plc’* 99.98% 0.02% 182,497,663 11,282
2.             Cancellation of premium account* 99.99% 0.01% 182,497,663 50,019

 *Special resolution

The Company is in the process of legally effecting the name change and will provide an update once this process has been completed. Notes:

  1. Proxy appointments which gave discretion to the Chairman of the GM have been included in the “For” total for the appropriate resolution.
  2. Votes “For” and “Against” any resolution are expressed as a percentage of votes validly cast for that resolution.
  3. A “Vote withheld” is not a vote in law and is not counted in the calculation of the percentage of shares voted “For” or “Against”.
  4. The number of shares in issue on 28 September 2023 was 288,660,084 with 15,821,540 shares in treasury.

Michael Riedl, CEO, commented: “As Team Internet Group’s CEO, I wanted to express our gratitude for the overwhelming support of our recent rebranding and our strategy to prioritise shareholder returns, as expressed by the virtually unanimous endorsement of today’s General Meeting resolutions.”

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Interviews

CentralNic Group long term high accelerating growth yet still room for significant upside (Analyst VIDEO)

CentralNic Group Plc (LON:CNIC) is the topic of conversation when Bob Liao Director and Research Analyst at Zeus Capital joins DirectorsTalk Interviews.

Bob provides us with an overview of the trading update for Q2 2022, provides some context for the pro forma revenue growth and highlights its key drivers, shares his view on the revised guidance given the current macroeconomic environment and with the company clearly growing rapidly and has the potential to expand margins Bob shares his thoughts on the valuation multiples.

https://vimeo.com/731636820

CentralNic Group (LON: CNIC) is a global internet platform that derives recurring revenue from operating a marketplace model for online presence and online marketing services.

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CentralNic Group strong start with year-on-year organic growth now above 50% (VIDEO)

CentralNic Group plc (LON:CNIC) CEO Ben Crawford joins DirectorsTalk Interviews to discuss unaudited financial results for the three months ended 31st March 2022.

Ben takes us through the financial highlights, explains how with organic revenues at circa 53$ for the trailing twelve months what has driven the growth, reducing net debt and non core expense, operations and corporate activity and what we should expect from the group throughout the remainder of the year.

https://vimeo.com/713152465

CentralNic Group (LON: CNIC) is a global internet platform that derives recurring revenue from operating a marketplace model for online presence and online marketing services.

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CentralNic Group continue to beat expectations (Analyst Interview)

CentralNic Group Plc (LON:CNIC) is the topic of conversation when Bob Liao Director and Research Analyst at Zeus Capital joins DirectorsTalk Interviews.

Bob provides us with an overview of VGL, explains how the acquisition fits in with CentalNic’s business, talks us through the key parameters of the transaction and updates us on the company performance from its latest trading update.

https://vimeo.com/685377073

CentralNic Group is a global internet platform company that derives recurring revenues selling online presence and marketing services.

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CentralNic Group undervalued with multiple catalysts for share price momentum (Analyst Interview)

CentralNic Group (LON:CNIC) is the topic of conversation when Zeus Capital Analyst Bob Liao joins DirectorsTalk Interviews.

Bob explains whats the driving strong trading, gives us some details around the acquisitions, the revisions being made to forecasts off the back of the news and how CentralNic is positioned for investors.

https://vimeo.com/677595517

CentralNic Group is a global internet platform company that derives recurring revenues selling online presence and marketing services.

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Question & Answers

CentralNic Group

CentralNic Group continues to perform extremely strongly, CEO Michael Riedl explains why (LON:CNIC)

CentralNic Group Plc (LON:CNIC), the global internet software company that derives recurring revenue from marketplaces for Online Presence and Online Marketing services, recently announced the appointment of Michael Riedl, as Group CEO. We caught up with Michael to discuss his new role. 

Congratulations on your appointment as CEO of CentralNic. Obviously, you’ve been the CFO of the company for the past four years but could you give us a bit more background on yourself?

Yes, I’ve been with the Group for four years now, but I’ve been involved in the industry since 2007, first as an investor, and since 2011 as an executive. My first appointment was actually for an online marketing business, where I was CEO for four years and which we sold to Team Internet, currently our largest subsidiary in terms of revenue.

So with your background in selling a business to Team Internet was it you that introduced this key acquisition, and therefore the Online Marketing business, to CentralNic, which is now the biggest revenue contributor and growth engine of the company?

Ben and I always worked as a team, passing balls to each other. When the Team Internet business came up for sale, it was of course immensely helpful that I had built a basis of trust with the owners and management. This, together with my prior operational experience in this business, is why I was appointed as Chairman of the Board of Team Internet on acquisition in 2019.

The company continues to perform extremely strongly. The recent Q3 results showed 88% revenue growth and 100% growth in EBITDA and today you’ve stated the performance remains robust. Any more you can say on what is driving this and the outlook for the business?

One can see from our segmental reporting that our success is largely driven by the Online Marketing business. The growth is the result both of more consumers engaging with our websites, which increased from 1.8bn in the first 9 months of 2021 to 3.3bn in the first 9 months of this year, and us increasing the value per consumer engagement, from an average of USD 64.9 per thousand in the first 9 months 2021 to USD 104.1 per thousand engagements in the first 9 months this year. This is what actually drives the business.

Given your strong cash position and improved balance sheet you’ve announced you are launching a share buy-back programme, can you provide more detail on the rationale behind this?

The acquisitions we made in 2022 brought us a series of capabilities that are important to our strategic plan. While we still seek more opportunities, our success in the year just ended has taken away a bit of the urgency on acquisitions. This, combined with record free cashflow, allows us to proceed in earnest to return money to the shareholders that have always supported us when we needed it. It is not an abrupt pivot of our strategy, more a matter of rebalancing. You’ll see that we made a further small acquisition today for a total consideration of USD 5.2m which will bring us an additional $1.4m in EBITDA each year. This is in line with our vertical integration strategy, providing the Group’s Online Marketing segment with proprietary, exclusive special interest traffic to monetise.

And your successor in the role of CFO, Billy Green, what can you tell us about him?

I personally recruited Billy and we have worked closely for three years now. He has been instrumental in the acceleration of our reporting as well as our recent refinancing. He is very capable and well prepared for the role and I am still on hand to provide any support if requested.

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Upgrade

CentralNic Group 2022 revenue and EBITDA forecasts upgraded by Zeus Capital (LON:CNIC)

CentralNic Group plc (LON:CNIC) is the topic of conversation when Zeus Capital’s Technology Analyst Bob Liao caught up with DirectorsTalk for an exclusive interview.

Q1: CentralNic Group announced a strong trading update and two small but accretive acquisitions. Can you first off just tell us what’s driving that strong trading and perhaps give us some details around the acquisitions?

A1: The company announced that its strong growth in 2021 has continued into 2022 with revenue growth year to date, materially ahead of consensus expectations for the full year. They believe now that full year growth will be at least 14%, which is at the top end of consensus expectations so we should see numbers moving up on the back of their commentary.

The strong growth been largely driven by its online marketing division, the division has a really unique product that’s benefiting from Apple’s removal of support for third party cookies and their browsers. This is the issue that Facebook has been having but it’s been actually beneficial to CNIC so the online marketing division has got a product that can source good traffic for advertisers without the use of these third party cookies.

So, as a result, a lot of companies are moving away from advertising that depends on third party cookies and towards really privacy-focused product so that’s why it’s doing really, really well and continues to obviously in 2022.

The company made a couple of small acquisitions, not a large transaction, it’s only about €600,000 but again, it demonstrates one of the drivers’ of the company, which is that they continue to find attractive, highly accretive acquisitions that are able to provide a lot of synergies with the rest of their group.

So, both positive bits of news this morning.

Q2: So, on the back of that news, what revisions are you making to your forecasts?


A2
: It’s another positive surprise and this continues a trend that we’ve been seeing over the last several quarters of consistent upgrades. We saw in the first half of last year, good upgrades to revenues and then in the second half of last year, upgrades to both revenues and to profits.

Now, going into 2022, we’re continuing that trend so we’re upgrading our 2022 revenue by 14% and our EBITDA forecast by 4%. So, this is a stock that clearly has some strong earnings momentum and we’re expecting that to continue throughout the year.

Q3: Just looking at the tech sector as a whole, it seems to be under a bit of pressure at the moment. How do you see the company positioned for investors?

A3: It is a tech company undoubtedly, and a very, very innovative one but we think that despite the rotation that we’re seeing away from tech, the company, because of its characteristics, should be performing quite well.

The first point is that it’s not a high multiple stock that’s currently feeling most the pressure in the market right now, this is a stock that’s trading at only 10 times EBITDA, 14 times PE and even a free cash flow yield of 8%. So, the type of thing that even value investors would be looking for so I don’t think it should be caught in that downdraft.

The second point is in any uncertain environment that we might be seeing, they have proven that it has very, very high earnings reliability. Its online presence division provides internet infrastructure so clearly that’s going to be resilient during downturn and its proven to be the case. Its online marketing division is currently in a very strong secular growth trend, it was able to accelerate through the last downturn so lots of resilience provided fundamentally. It’s also got a very, very diverse customer base, it’s customer and customer bases consists largely of thousands and thousands of SEM’s so it’s not exposed to any one customer at all.

Finally, we touched on this briefly, the company is able to deliver a lot of value through acquisitions. It’s got a strong acquisition track record over the last couple of years, it’s a consolidator in the market and the market is mostly filled with smaller lifestyle businesses. As a result, it can source these attractive transactions that single digit multiples and realise significant synergies from them.

So, CentralNic Group, to us, appears undervalued and offers investors multiple catalysts for continued share price momentum.

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CentralNic Group

CentralNic Group “should be more growth and better value to come” says Edison Investment Research (LON:CNIC)

CentralNic Group plc (LON:CNIC) is the topic of conversation when Edison Investment Research’s Analyst Richard Williamson caught up with DirectorsTalk for an exclusive interview.

Q1: Can you tell us more about what CentralNic Group does?

A1: CNIC is a slightly unusual story in the UK market so there aren’t many companies directly comparable to it. What it does is it’s got two principal businesses, online presence and online marketing, and essentially what it is doing is providing the tools for businesses to go online.

So, in the online presence business, it sells domain names, subscriptions and other key elements to enable companies to go online and operate email and websites, as well as value added services such as reselling, hosting, website building and security certification.

On the online marketing side, the online marketing side is a relatively new business for the group, so they bought into this business about two years ago with the acquisition of Team Internet. What it does is it helps companies or investors monetize websites and what I mean by that is, essentially, companies and people who surf the internet go to certain websites and for that traffic, the company provides a way of monetizing that traffic to service investors of websites and owners of websites.

Q2: Now it seems like online presence has been growing strongly, but online marketing has been growing even more strongly. Do you think this growth can continue?

A2: Well, it has been a fascinating story. So, certainly over the course of FY20, looking at the organic growth figures, last year the company delivered organic growth of 9%, in Q1, I think it was up to 16%, in H1 it was 20%, and for the nine months, it was 29%.

So, it has been fascinating that essentially the company started an investment programme last year and investing circa $8/$9 million in the platform in essentially bringing the business together as well as strengthening the management team and staffing. That really does seem to have kicked into much higher growth in FY21 and set the company really on track for continued growth in the future.

So, I’m going to be slightly cautious here, but there certainly don’t appear to be any reasons why growth should slow down and the message that the company put out in the nine months results was very much that they expect this level of growth to continue for the remainder of the year. After that, it’s just a question of lack of visibility, but I don’t see any reason why there should be a massive step down in growth but let’s take it as it comes.

Certainly, the marketing side of the business is outgrowing the online presence side so that there is a disparity in growth there and as a result of that disparity in growth, I suppose online marketing is now, in revenue terms, the majority of the business, having only been acquired and added to the business at the back end of 2019.

So, there’s plenty of growth, strong growth across the business but particularly in online marketing and in a global advertising market that could well continue.

Q3: Over the years, the company had been very active on the M&A front, 2021 has been a little subdued in that respect. Do you think the buy and build model has changed at all?

A3: I think this is quite interesting, I suppose before 2021 investors were slightly nervous about the underlying health of the business and if they stopped doing M&A, what would that mean for the business? 2021 has lifted the veil and you can now see that the underlying organic growth is fantastic, and the business is continuing to perform strongly even without, again, there has been M&A but just a lower level of M&A.

So, even in 2021, the company has made three smallish acquisitions so following the large, multiple acquisitions made in 2019 and 2020 that’s a lower level of M&A, I don’t see any reason why M&A should not now continue. They operate in global markets and fragmented markets with the opportunity to acquire both in the domain names side of the business, as well as in the marketing side.

The company has net debt of about $79 million so in terms of leverage of about 15% and a net debt to EBITDA multiple of around 2/2.5/ 2.6 times so all told, I think that’s a very sustainable level of debt given the EBITDA, the cashflow that this business generates.

Early in ‘21, they secured shareholder approval for €150 million of bond issue and they’ve drawn €105 million of that so they’ve got €45 million still undrawn from that approval.

So, they are not over geared, they have debt headroom or headroom on the bond and of course, they have the potential for equity fundraising in the future. Potentially, particularly now the share price has ticked up so 6-12 months ago, the trading range was probably 80p to 100p and now they seem to have broken through a barrier and are up to about 140p to 150p, they may consider in the future that equity fundraising is something they will contemplate where previously everything has been debt funded.

Q4: CentralNic Group’s share price three months ago was just around £1 and now it’s trading over 145p. In your view Richard, should we consider these shares now expensive?

A4: The quick answer to that is no. The company trades on a PE multiple of about 16 times FY21 earnings and EV/EBITDA multiple of about 11/12 times. So, for the sort of levels of growth you’re getting here and our forecast for FY21 are 59% sales growth, and the company has generated a sort of revenue CAGR of about 78% over the last five years so this really is a high growth story.

The company is now at a point where it is gaining scale, still in the grand scheme of things, not large so market cap is about £300 million and £350 million pounds so there’s plenty of growth still to go.

I just feel that they have now achieved a level of credibility with investors, so I think there was a technical overhang 6-12 months ago that was subduing the share price, that has now been removed. The share price has moved to a new level, but with the growth set to continue, M&A set to continue and plenty of markets which they could consolidate and, dare I say it, a very attractive business model which is very sticky, high recurring revenues, fantastic cash conversion, they look well set for the future and to progress further from here.

So, I remain optimistic that there should be more growth and better value to come.

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CentralNic Group

CentralNic Group “tracking well ahead of our expectations” says Zeus Capital (LON:CNIC)

CentralNic Group plc (LON:CNIC) is the topic of conversation when Zeus Capital’s Technology Analyst Bob Liao caught up with DirectorsTalk for an exclusive interview.

CentralNic Group, a global internet platform company which derives recurring revenues selling online presence and marketing solutions, today issued a Q3 trading update and notice of results. Now, joining me today to discuss the company is Zeus Capital’s Bob Liao.

Q1: As mentioned, the company provided a trading update for the nine months of 2021, can you just tell us how the revenues and profits are tracking against the full-year expectations?

A1: They’re tracking well ahead, at least of our expectations. The company said they’d expect nine months revenue to be £280 million and that represents already 80% of our full-year forecast so they’re tracking ahead on the top line. With expected EBIDTA, they said EBITDA would be at least £32 million which is about 77% of our full-year forecasts.

So, it’s looking like the full-year, if things continue to go as planned, they’re going to be coming ahead significantly of our expectations especially if it’s a strong Q4 which it should be.

Q2: I understand the company’s organic growth for the nine month period was 29%, what’s driving that strong growth?

A2: There’s a couple of things driving up growth, one is their online marketing division which is their newest division and one that has been driving momentum over the last 18 months. They’ve been introducing a lot of new innovative products, they’ve been consolidating the market, using that scale to take market share and it’s a very strongly growing market, online marketing. So, that’s one major driver.

As well, the direct and indirect divisions, which has historically been the core of the business, is now accelerating growth and that’s because the company has made some significant investments in a lot of account management, sales and also in the product as well. That is resulting in the growth in that business, accelerating in the first-half was closer to the high single digits which is an improvement on the previous year. So, accelerating growth in that end of the business as well.

Overall, that’s a strong acceleration to 29% growth compares to 20% in the first half and only 9% in 2020 so momentum is only continuing for this one.

Q3: Just looking in Q4 and beyond, how do you view the outlook for CentralNic Group?

A3: I think the momentum has been strong for a while on the revenue front and what this trading update really says to us is that not only are we getting on the top line but it looks like the EBITDA has some earnings momentum behind it as well.

So, if you look at what the company said about trading for the full-year in terms of guidance and outlook, they’re talking about trading comfortably at or above the upper end of market expectations. That’s for both revenue and EBITDA so the outlook has been upgraded by the management team and again, I still think we see a bit of potential upside on top of that, based on the earnings outlook that we just talked about previously

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Analyst Notes & Comments

Team Internet Group

CentralNic Group revenue and adjusted EBITDA ahead of Edison forecasts

CentralNic Group plc (LON:CNIC) FY22 update confirmed accelerating momentum towards the end of the year, with revenue and adjusted EBITDA ahead of our forecasts, which we raised on 21 December. Its ability to effectively match advertisers with high-intent consumers, alongside global market demand for privacy-safe customer targeting solutions, continues to drive Online Marketing. Economies of scale and acquisitions have strengthened its operating leverage, leading to improved profitability. CentralNic’s attractive cash dynamics have supported a significant reduction in net debt, which we believe will continue to fall in FY23 in line with expected profit growth.

FY22: Ahead of consensus and our forecasts

CentralNic expects to report revenue of $728m, up 77% y-o-y and up 60% y-o-y organically. Revenue was also ahead of both our forecast and market consensus of $708m. Management expects adjusted EBITDA of more than $85m, equating to growth of at least 84% y-o-y and c 2% higher than our previous forecast. FY22 adjusted EBITDA to our net revenue estimate of $176m, which deducts costs directly passed onto its customers, was 48.5%, 9.5pp higher year-on-year as a result of stronger operating leverage from its scaling Online Marketing business and accretive acquisitions made in the year. Net debt decreased by $24m to $57m in the year, supported by expanding profit margins and an adjusted operating cash conversion (normalised operating profit/operating cash flow) in excess of 100%.

Forecasts revised

We have upgraded our FY22 revenue and profit forecasts based on the trading update. While we expect the same FY22 structural tailwinds to continue to drive demand in FY23, we believe revenue growth will be slower at 15% y-o-y as management moves its focus from high volumes of M&A to further strengthening its balance sheet and increasing returns to shareholders. We have left our FY23 profit and cash forecasts materially unchanged, reflecting potential operating cost pressures, particularly wage inflation and hiring needs.

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CentralNic analyst Zeus raise 2022 revenue forecast by 8% to $617m

CentralNic Group plc (LON:CNIC) LTM pro forma revenue growth accelerated again to 62% in Q2 2022, resulting in revenue of $335m and Adjusted EBITDA of $38m in H1. The company upgraded guidance, which appears very conservative. Even in the unlikely case of a sharp downturn leading to 16% sequential decline in Adjusted EBITDA in H2, the company would still meet revised guidance. We raise our 2022 revenue forecast by 8% to $617m and our Adjusted EBITDA by 4% to $70m and see the potential for strong earnings outperformance. Even based on our conservative forecasts, shares appear attractively valued at 6x 2022 EBITDA, 8x P/E and 12.5% FCFF yield. With increased estimates our valuation for CentralNic is lifted to 221p from 195p.

H1 trading update
¨ Long track record of accelerating growth: LTM pro forma revenue growth was an impressive 62% in Q2 and extends CentralNic’s long track record of accelerating growth from 53% in Q1, 37% in 2021 and 20% in 2020. There appears to be no signs of the potential weakness in CentralNic’s Online Marketing market that may be factored into the share price.

¨ Strong profits and cash generation: Adjusted EBITDA is expected to be $38m, resulting in margin of c.11.3% and in line with margins in 2021. Net debt including foreign exchange hedge liabilities is expected to be $65m, which is down by only $5.7m from $70.7m at the end of Q1. The relatively small decline in net debt is due to a sizable increase in hedging liabilities to $16.6m from $9.4m at the end of Q1. Excluding FX hedging liabilities, net debt would have fallen by $12.9m, which is c.66% of Q2 Adjusted EBITDA (c.$19.5m). The company estimated that adjusted operating cash conversion was over 100% in H1 2022.

¨ Guidance factors in extraordinary downturn: Given the strong H1 results, the company is now confident that full year 2022 results will be at least at the high end of the current market expectations ($603m revenue and $70m Adjusted EBITDA). This revised guidance factors in an extraordinary downturn in H2 2022, equivalent to sequential revenue decline of 20% and Adjusted EBITDA decline of 16%.

¨ Conservative forecast upgrade: We conservatively forecast $617m of revenue in 2022, 2% above the top end of current consensus, and Adjusted EBITDA of $70m, in line with the top end of current consensus. We estimate 37% pro forma growth in 2022, well below 62% pro forma growth already achieved in H1. (See charts overleaf for details.)

¨ Value for growth: Based on our conservative estimates, shares trade at only 6x 2022 EBITDA, 8x P/E and 12.5% FCFF yield. We raise of our DCF valuation from 195p to 221p, which is about 2x the current share price. Note that CentralNic Group shares were included in the AIM 100 and AIM UK 50 indices on 20 June 2022.

Summary financials

Price 113.5p
Market Cap £327.6m
Shares in issue 289m
12m Trading Range 86p – 154p
Free float 73%
Next Event Q2 results – 30 August

Financial forecasts

Yr end Dec ($’m) 2021A 2022E 2023E 2024E
Revenue 410.5 617.1 654.1 693.4
YoY growth (%) 71 50.3 6 6
Gross profit 118.5 170.8 180.5 190.9
Adj. EBITDA 46.3 70 75.7 79.7
YoY growth (%) 57.3 51.3 8.1 5.3
EBITDA margin (%) 11.3 11.3 11.6 11.5
EBITDA margin 39 41 41.9 41.8
(Net revenue) (%)
EPS (c) basic adj. 11.8 17.4 18.8 20.2
DPS (p) 0.8 1.8
Net cash (debt)+ -81.4 -51.2 -11.5 34.6
EV/EBITDA (x) 8.3 6 5.2 4.4
EV/EBIT (x) 9 6.4 5.5 4.6
P/E (x) 11.6 7.8 7.2 6.7
FCFF yield (%) 9.1 12.5 13.2 17.4
Source: Audited Accounts and Zeus estimates

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CentralNic Group

CentralNic analyst Zeus “see room for significant earnings upside”

CentralNic Group plc (LON:CNIC) published Adjusted EBITDA slightly ahead of previously flagged estimates. The Online Marketing division grew 83% organically, up from 65% growth in 2021. Divisional KPIs indicate both volume and pricing growth remain strong. As the company scales, quarterly margins have steadily risen to levels ahead of our full year estimates. At the same time, cash conversion and net cash were strong and we believe are tracking ahead of our forecasts. The company’s strong Q1 performance makes full year earnings expectations appear conservative. By simply annualising Q1 EBITDA and adjusting for the VGL acquisition, we estimate EBITDA could reach $80m, 19% above our forecast of $67m. Even based on our conservative forecasts CentralNic trades at only 7.5x 2022 EBITDA, 10x P/E and 10% FCFF yield.

¨ EBITDA slightly ahead and strong divisional performance: CentralNic published Q1 Adjusted EBITDA slightly ahead of the level flagged in its April trading update ($18.5m v c. $18m) and reported organic revenue growth of 53%. Organic growth was again led by outstanding growth of the Online Marketing division (83%), with the Online Presence division delivering substantial growth (7%). The Online Marketing division increased the number of visitor sessions by 54% and increased revenue per thousand sessions (RPM) by 104% yoy.

¨ Continued operating leverage could drive margin outperformance: EBITDA/ Net revenue margins have been consistently trending up every quarter from 36% in Q1 2021 to 46% in Q1 2022, demonstrating operating leverage benefits that we have conservatively not factored into our 2022 margin estimate (42%).

¨ Potential net debt outperformance: Cash conversion and ending net cash were both strong and appear on track to outperform our estimates, even if we assume only 50% net cash conversion of EBITDA over the remaining three quarters of the year.

¨ VGL and acquisition outlook: The VGL acquisition appears to be performing strongly. CentralNic is establishing an extended track record of value-enhancing acquisitions. The company indicated that it has a strong pipeline of acquisition targets. We are supportive of further earnings accretive acquisitions to further diversify market growth, products and customer base.

¨ Conservative outlook: Despite the company’s strong revenue growth, margin performance and cash conversion relative to forecasts, CentralNic Group indicated that trading is “comfortably in line”. We leave our forecasts, which are in the lower half of the range of consensus estimates, unchanged but we see room for significant earnings upside. If we simply annualise Q1 EBITDA and adjust for the VGL acquisition, we estimate EBITDA could reach $80m, 19% above our forecast of $67m.

¨ Valuation: Even based on our conservative forecasts CentralNic’s strong growth and margins appear undervalued. Shares trades at only 7.5x 2022 EBITDA, 10x P/E and 10% FCFF yield despite delivering 53% organic growth and steady margin expansion.

Summary financials

Price 131p
Market Cap £378m
Shares in issue 289m
12m Trading Range 80p – 154p
Free float 72%
Next Event H1 update – 18 July

Financial forecasts

Yr end Dec ($’m) 2021A 2022E 2023E 2024E
Revenue 410.5 573.4 607.3 643.4
YoY growth (%) 71 39.7 5.9 5.9
Gross profit 118.5 159.9 168.8 178.4
SG&A -72.2 -92.9 -96.5 -102.3
Adj. EBITDA 46.3 67 72.3 76.1
YoY growth (%) 57.3 44.9 7.9 5.2
Adj. EBITDA (%) 11.3 11.7 11.9 11.8
EPS (c) basic adj. 11.8 16.5 17.8 19.1
DPS (p) 0.8 1.8
Net cash (debt) -75 -46.3 -8.1 35.8
EV/EBITDA (x) 9.6 7.5 6.6 5.7
EV/EBIT (x) 10.4 8 7 6
P/E (x) 14.2 10.1 9.4 8.8
FCFF yield (%) 7.8 10.2 10.6 13.5
Div Yield (%) 0.6 1.4

Source: Audited Accounts and Zeus estimates

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CentralNic Group

CentralNic Group “tracking well ahead of our full year forecasts” says Zeus

CentralNic Group plc (LON:CNIC) released a very strong Q1 trading update, which drove the board to materially upgrade full year outlook even at this early stage of the year. The company further accelerated trailing twelve months organic revenue growth through Q1 to c. 51% (2021: 39%). Outperformance was again largely driven by the Online Marketing division, which continued to benefit from market share gains and market trends towards advertising solutions that can identify and refine consumer purchasing intent without third party cookies.

The company now expects full year results to be materially above consensus expectations. Given macroeconomic uncertainties ahead, we conservatively upgrade our revenue by 11% to $573.4m from $516.1m and Adjusted EBITDA forecast by 11% to $67.0m from $60.5m. However, we see further earnings upside in lieu of negative scenarios: If we simply annualise Q1 preliminary EBITDA and adjust for the VGL acquisition, we estimate EBITDA would reach $78m, equal to a 29% upgrade. However, even based on our conservative forecasts, CentralNic shares trade at only 7x 2022 EBITDA, 10x P/E and 11% FCFF yield.

Q1 update and forecast revisions

¨ Q1 trading: Revenue was c. $156m and Adjusted EBITDA was c. $18m. The company appears to be tracking well ahead of our full year forecasts. Simply annualising Q1 figures would result in revenue and Adjusted EBITDA of $624m and $72m, 21% and 19% above our original forecasts of $516m and $61m, respectively. Net debt fell to $65m from $75m at the end of 2021. Excluding c. $8m increase in net debt from the VGL acquisition and adding in $3m of increased bond hedge liability, the decrease in this adjusted net debt would be c. $15m, which was supported by over 100% adjusted operating cash conversion.

¨ Upgrade momentum: CentralNic Group is extending a string of earnings upgrades, supported by a strong investment case. They are a market leader in two high growth markets – digital advertising and domain name management. In addition, both divisions have attractive business models. They generate reliable revenues based on subscriptions and serve diversified customer bases. We believe the company’s strong growth, high revenue visibility, earnings momentum and high cash conversion are undervalued by its shares’ low multiples. Shares trade at only 7x 2022 EBITDA, 10x P/E and 11% FCFF yield. Our DCF valuation is 195p, 65% above the current share price.

Summary financials

Price 118p
Market Cap £341m
Shares in issue 289m
12m Trading Range 80p – 154p
Free float 72%
Next Event Q1 results – May

Financial forecasts

Yr end Dec ($’m) 2021A 2022E 2023E 2024E
Revenue 410.5 573.4 607.3 643.4
YoY growth (%) 71 39.7 5.9 5.9
Gross profit 118.5 159.9 168.8 178.4
SG&A -72.2 -92.9 -96.5 -102.3
Adj. EBITDA 46.3 67 72.3 76.1
YoY growth (%) 57.3 44.9 7.9 5.2
Adj. EBITDA (%) 11.3 11.7 11.9 11.8
EPS (c) basic adj. 11.8 16.5 17.8 19.1
DPS (p) 0.8 1.8
Net cash (debt) -75 -46.2 -8.2 35.4
EV/EBITDA (x) 9.2 7.1 6.3 5.4
EV/EBIT (x) 9.9 7.5 6.6 5.7
P/E (x) 13.4 9.6 8.8 8.3
FCFF yield (%) 8.2 10.8 11.2 14.4
Div Yield (%) 0.7 1.5

Source: Audited Accounts and Zeus estimates

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