CentralNic Group Plc (LON:CNIC), the global internet company that derives recurring revenue from privacy-safe, AI based customer journeys that help online consumers make informed choices, has announced its unaudited financial results for the three months ended 31 March 2023.
Financial summary:
● Gross revenue increased by 24% to USD 194.9m (three months ended March 2022 (“Q1 2022”): USD 156.6m)
● Organic revenue growth* for the trailing twelve months ended 31 March 2023 (“TTM 2023”) of approximately 46%
● Net revenue/gross profit increased by 15% to USD 45.8m (Q1 2022: USD 39.9m)
● Adjusted EBITDA** increased by 15% to USD 21.3m (Q1 2022: USD 18.5m)
● Operating profit decreased by 23% to USD 7.7m (Q1 2022: USD 10.0m), the primary driver of which was an increase in non-cash charges such as Amortisation expense
● Adjusted EPS increased by 23% to USD 5.54 cents (FY 2022: USD 4.51 cents)
● Net debt*** reduced by USD 7.3m to USD 49.3m as compared to USD 56.6m on 31 December 2022 despite USD 4.0m in share buybacks
● Adjusted operating cash conversion of 94% (FY 2022: 110%), reflecting a temporary change in working capital mix. We expect this to reach 100% or more for the full year
Operational highlights:
● 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
● The number of visitor sessions increased by 70% to 5.0 billion for TTM 2023 from 3.0 billion for the trailing twelve-month period ended 31 March 2022 (“TTM 2022”) and the revenue per thousand sessions (“RPM”) increased by 12% from USD 91 to USD 102
● Adjusted EBITDA as a percentage of Net Revenue has increased to 47% in Q1 2023 from 46% in Q1 2022 continuing to demonstrate that CentralNic’s growth translates into operating leverage
● William Green, who became Group CFO on 12 December 2022, was appointed to the board of directors on 30 January 2023
Post quarter end highlights:
● Maiden final dividend of 1.0p payable on 16 June 2023 after approval at the AGM, reflecting a renewed capital allocation policy geared towards greater returns to shareholders
● Partnership agreement with Microsoft Bing, deepening and diversifying the demand pool in our important TONIC business
● First international expansion of our vergleich.org product review business with meilleurs.fr dedicated to France, the second largest market for our key e-commerce partner Amazon within the EU
● On 8 May 2023, the first deferred consideration payment for the acquisition of VGL was settled in cash for EUR 12.4m (USD 13.6m) as a result of the above expectation performance in 2022. This was fully funded by the incremental operating cash flow generated by VGL
● Appointment of Marie Holive as independent Non-Executive Director, Chair of the Audit Committee and a member of the Remuneration Committee
Outlook:
CentralNic has had a strong start to 2023 across both business segments, which is continuing into Q2. For TTM 2023, organic revenue has grown 46% on a pro forma basis. Moreover, as the Group rapidly scales up, the underlying qualities of high recurring revenues and excellent cash conversion become increasingly meaningful. Furthermore, the Group has strong operating leverage, as demonstrated by CentralNic’s Adjusted EBITDA as a percentage of Net Revenue being 47% for Q1 2023 (46% Q1 2022).
Whilst the Directors continue to monitor the global macro-economic environment closely, they are confident in the Group’s targeted investment in product innovation as well as vertical integration and international expansion has positioned it to succeed. Therefore, the Directors expect that the Group will trade at least in line with current market expectations for the full year.****
Furthermore, as part of its capital return programme the Group is announcing its second Share Buyback Programme (the “Buyback Programme”), in which it expects to purchase GBP 4m of its own shares. The Board considers the Buyback Programme to be in the best interests of all shareholders, given the cash generative nature of the business and continued strong performance. It reflects the Group’s more balanced approach to capital allocation.
There will be a webinar / conference call for equity analysts at 09.00 BST today, hosted by CEO Michael Riedl and CFO William Green. Anybody wishing to register should contact centralnic@secnewgate.co.uk, where further details will be provided.
Michael Riedl, CEO of CentralNic, commented: “I am pleased to announce that CentralNic has achieved highly resilient results in the first quarter of the year, demonstrating our industry leadership and reputation for excellence. We have secured key partnership with the world’s leading technology companies including Google, Amazon and recently Microsoft, a testament to the strength and quality of our offering. We are confident in our business model and our ability to continue delivering high-quality earnings and strong growth.”
*Pro forma revenue, adjusted for; acquired revenue, constant currency foreign exchange impact and non-recurring revenues is estimated at USD 771m for TTM 2023 and at USD 529m for TTM 2022
**Parent and subsidiary 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 31 March 2023 (cash of USD 102.9m and bank debt and prepaid finance costs of USD 151.4m); includes gross cash, bank debt, prepaid finance costs and hedging liabilities of USD 0.8m (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)
**** Latest analyst forecasts are within a range of USD 771.8m and USD 833.7m for FY23 revenue and USD 90.9m and USD 97.8m for FY23 EBITDA
MANAGEMENT COMMENTARY ON PERFORMANCE
Introduction
CentralNic’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 March 2023 YTD results which show increases in both Revenue and Adjusted EBITDA of 24% and 15% respectively compared to Q1 2022.
Performance Overview
The Group has performed strongly during the period with the key financial metrics listed below:
| Three months ended31 March 2023 | Three months ended31 March 2022 | Change | |
| USD m | USD m | % | |
| Revenue | 194.9 | 156.6 | 24% |
| Net revenue/ gross profit | 45.8 | 39.9 | 15% |
| Adjusted EBITDA | 21.3 | 18.5 | 15% |
| Operating profit | 7.7 | 10.0 | (23%) |
| Adjusted operating cash conversion (note 9) | 94% | 128% | n.m. |
| Profit after tax | 2.9 | 4.0 | (27%) |
| EPS – Basic (cents) | 1.06 | 1.53 | (31%) |
| EPS – Adjusted earnings – Basic (cents) (note 8) | 5.54 | 4.51 | 23% |
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 its growth with revenues increasing by USD 32.8 m, or 28%, from USD 116.9m to USD 149.7m. Organic revenue grew at a rate of 60%, predominantly driven by CentralNic’s TONIC platform. Inorganic growth was obtained from the full quarter impact of the VGL acquisition.
The number of visitor sessions increased by 70% from 3.0 billion for TTM 2022 to 5.0 billion for TTM 2023 and the RPM increased by 12% from USD 91 to USD 102(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.
Online Presence segment
Reported revenue in this segment increased by 14% from USD 39.7m in March 2022 YTD to USD 45.2m in March 2023 YTD. Organic growth for the Online Presence segment was 10% for TTM 2023.
The number of processed domain registration years increased by 2% from 12.1m for TTM 2022 to 12.4m for TTM 2023 and the average revenue per domain year increased by 4% from USD 9.48 to USD 9.85. The share of Value-Added Service revenue in Q1 2023 YTD was c.8%(2).
The Online Presence segment is a critical constituent of the global online presence and productivity tool ecosystem, where CentralNic serves as the primary distribution channel for a wide range of digital products.
Michael Riedl
Chief Executive Officer
(1) Based on analysis of c.86% of the segment which can be adequately and reliably described by this KPI
(2) Based on analysis of c.80% of this segment which can be adequately and reliably described by this KPI
