CentralNic Group Plc (LON:CNIC), the global internet company which helps online consumers make informed choices, has announced its unaudited financial results for the six months ended 30 June 2023.
● Gross revenue increased by 18% to USD 396.4m (six months ended June 2022 (“H1 2022”): USD 334.6m)
● Organic revenue growth* for the trailing twelve months ended 30 June 2023 (“TTM 2023”) of approximately 31%
● Net revenue/gross profit increased by 11% to USD 91.2m (H1 2022: USD 82.1m)
● Adjusted EBITDA** increased by 16% to USD 44.6m (H1 2022: USD 38.6m) and good progression from Q1 2023 to Q2 2023 reflecting a quarter over quarter increase of USD 2.0m
● Operating profit decreased by 19% to USD 17.5m (H1 2022: USD 21.7m), mainly due to an increase in non-cash charges such as amortisation and foreign exchange
● Adjusted EPS increased by 34% to USD 11.37 cents (H1 2022: USD 8.46 cents)
● Inaugural final dividend of 1.0p per share paid on 16 June 2023 totalling USD 3.6m, reflecting a renewed capital allocation policy geared towards greater returns to shareholders
● Net debt*** increased by USD 11.6m to USD 68.2m (31 December 2022: USD 56.6m), following non-operating cash outflows in respect of the Company acquiring its own shares (USD 13.9m), the Company’s dividend (USD 3.6m), and USD 15.2m in respect of the non-recurring settlement of deferred contingent consideration
● Leverage **** increased to 1.0x from 0.9x pro forma EBITDA as of 31 December 2022. The increase in the net leverage ratio is entirely driven by the Company’s choice in returning cash to shareholders through its share buyback programme and dividend
● Adjusted operating cash conversion of 94% (FY 2022: 110%). We expect this to normalise nearer to 100% over the remainder of the year
H1 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 49% to 5.3 billion for TTM 2023 from 3.5 billion for the trailing twelve-month period ended 30 June 2022 (“TTM 2022”), reflecting continual integration with new networks combined with entering new verticals and geographies. Revenue per thousand sessions (“RPM”) remained stable at USD 100, outperforming the market
● Organic revenue growth for the Online Presence segment was 15% for TTM 2023 compared to 5% for TTM 2022 at H1 2022
● Adjusted EBITDA as a percentage of Net Revenue has increased to 49% in H1 2023 from 47% in H1 2022, demonstrating that CentralNic’s growth continues to translate into operating leverage
● Appointment of Marie Holive as independent Non-Executive Director, Chair of the Audit & Risk Committee and a member of the Remuneration & Nominations Committee. The scope of the Audit Committee has been expanded to encompass Risk, resulting in its new name as the “Audit & Risk Committee”
● Partnership agreement with Microsoft Bing, deepening and diversifying the demand pool in our important TONIC business
● Awarded exclusive supplier status for the UK Crown Commercial Service in the Online Presence registry division
● First international expansion of our vergleich.org (VGL) 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
Post period end highlights:
● Zeropark, CentralNic’s commerce media business, has 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, CentralNic’s flagship ad tracker, has 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
CentralNic delivered another strong performance during the H1 2023 period across both its Online Marketing and Online Presence segments, gaining market share. For TTM 2023, organic revenue growth was 31% 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 49% for H1 2023 (47% H1 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, vertical integration and international expansion. These strategic moves have positioned the Group to succeed. Therefore, the Directors expect that the Group will trade at least in line with current market expectations for the full year.*****
The material expansion of the Company’s second 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 being funded by continued strong operating cash generation. To date, the Company has bought back 5.7m shares under that programme at a cumulative cost of GBP 6.7m, in addition to purchases of shares by the Company’s Employee Benefit Trust. In excess of GBP 27m remains available for the remainder of the programme.
Michael Riedl, CEO of CentralNic, commented: “CentralNic has continued to deliver yet another strong quarterly performance, enhancing our market share in each of the segments in which we operate. Our sustained performance is a testament to our strong ingrained culture of operational excellence, a factor that keeps us at the fulcrum of the industry ecosystems.
Through our ongoing initiatives to boost operating leverage, we are fortifying an already highly dependable and sustainable business model. Our unrelenting commitment to these efforts continues to build upon our prime objectives of creating a market leader in its space and maximising shareholder value.
Our AI strategy goes beyond simple technological application; it’s about reshaping CentralNic into a dominant force in this data-driven era. Our strategy is built on three pillars: (a) enhancing AI capacity, (b) accelerating AI impact, and (c) scaling our AI advantage. The Group has been at the forefront of the industry in integrating AI into the heart of our operations and has successfully pioneered and launched multiple AI projects.”
*Pro forma revenue, adjusted for; acquired revenue, constant currency foreign exchange impact and non-recurring revenues is estimated at USD 794m for TTM 2023 and at USD 606m 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 30 June 2023 (cash of USD 82.6m and bank debt and prepaid finance costs of USD 151.5m); includes gross cash, bank debt, prepaid finance costs and hedging assets of USD 0.7m (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
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 June 2023 YTD results which show increases in both Revenue and Adjusted EBITDA of 18% and 16% respectively compared to H1 2022.
The Group has performed strongly during the period with the key financial metrics listed below:
|Six months ended30 June 2023||Six monthsended30 June 2022||Change|
|USD m||USD m||%|
|Net revenue / gross profit||91.2||82.1||11%|
|Adjusted operating cash conversion (note 8)||94%||110%||(15%)|
|Profit after tax||9.4||6.9||36%|
|EPS – Basic (cents)||3.40||2.61||30%|
|EPS – Adjusted earnings – Basic (cents) (note 7)||11.37||8.46||34%|
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 46.6m, or 18%, from USD 257.8m to USD 304.4m. Organic revenue grew at a rate of 36% for LTM 2023, predominantly driven by CentralNic’s TONIC platform. Inorganic growth was a result of the full period impact of the VGL acquisition, which was acquired in March 2022
The number of visitor sessions increased by 49% from 3.5 billion for TTM 2022 to 5.3 billion for TTM 2023 and the RPM remained stable at USD 100(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. The long-term vision is to combine the Group’s abilities to (a) convert social media and other low intent traffic to qualify for search ad campaigns and (b) convert search ad campaigns into ecommerce transactions, in a thriving social commerce channel, a market that is estimated to be worth USD 80bn(2) by 2025 in the US.
Online Presence segment
Reported revenue in this segment increased by 20% from USD 76.8m in June 2022 YTD to USD 92.0m in June 2023 YTD. Organic growth for the Online Presence segment was 15% for TTM 2023, the highest growth rate since the segment’s establishment, driven by the structural shift in demand towards Top Level Domains where CentralNic has a competitive edge.
The number of processed domain registration years increased by 7% from 12.0m for TTM 2022 to 12.9m for TTM 2023 and the average revenue per domain year increased by 6% from USD 9.83 to USD 10.46. The share of Value-Added Service revenue TTM 2023 was 7%(3).
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.
The Group today also announces it is streamlining its reporting cycle. CentralNic has historically provided nine updates to the market in the course of the year. This will be reduced to seven, where trading updates for Q1 and Q3 will be incorporated into those interim reports, which are to be published within forty-five days of the end of the period. The Board believes this reporting cycle continues to support active investor engagement throughout the calendar year.
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.80% of this segment which can be adequately and reliably described by this KPI