CentralNic Group Plc (LON:CNIC), the global internet platform that derives recurring revenue from operating a marketplace model for online presence and online marketing services, has announced its unaudited financial results for the three months ended 31st March 2022. Both revenue and Adjusted EBITDA have increased year-on-year, driven by a combination of acquisitions and underlying organic growth.
Financial summary:
● Revenue increased by 86% to USD 156.6m (Q1 2021: USD 84.4m)
● Organic growth* for the trailing twelve months ending 31 March 2022 of c.53%
● Net revenue/ gross profit increased by 43% to USD 39.9m (Q1 2021: USD 27.9m)
● Adjusted EBITDA** increased by 83% to USD 18.5m (Q1 2021: USD 10.1m)
● Operating profit of USD 10.0m (Q1 2021: USD 1.4m)
● Non-core operating expenses reduced by 63% to USD 1.1m (Q1 2021: 2.9m)
● Adjusted operating cash conversion of 128% (Q1 2021: 163%) ahead of historic averages
● Net debt*** down by 18% to USD 61.3m (gross interest-bearing debt of USD 151.9m, cash of USD 90.6m) as compared to USD 75.0m on 31 December 2021 (gross interest-bearing debt of USD 131.1m, cash of USD 56.1m)
Operational highlights:
● Company’s organic growth further accelerated during the period, driven by investments in new management, staff and systems. EBITDA as a percentage of Net Revenue has increased from 36% in Q1 2021 to 46% in Q1 2022, demonstrating that CentralNic’s growth translates into operating leverage
● The Financial Times listed CentralNic among the top 250 fastest-growing companies and among the top 50 fastest-growing technology companies in Europe
Corporate highlights:
● Acquisition of VGL Verlagsgesellschaft mbH (VGL) in March 2022 for an enterprise value of EUR 60 million (approx. USD 65 million)
● Oversubscribed GBP 42 million equity raise on 28 February 2022, EUR 21 million bond placing on 7 March 2022 and fully taken up Open Offer of GBP 3 million on 21 March 2022
● Leverage**** as defined under the Bond Terms reduced from 2.22x as of 31 December 2021 to 1.56x due to improved profitability, continued deleverage and the largely equity financed acquisition of VGL
● Acquisition of Fireball GmbH and the .ruhr TLD in February 2022 for a total of c USD 0.7 million
Outlook:
● CentralNic’s results for Q1 2022 demonstrate the potential of its strong marketplace model for Online Presence and Online Marketing services
● The Directors are confident that the Company is comfortably trading in line with the recently upgraded forecasts[1]
● The Company will issue an H1 trading update on 18 July 2022
Ben Crawford, CEO of CentralNic, commented: “CentralNic has enjoyed a strong start to the year with year-on-year organic growth now reaching north of 50%, gaining market share in a growing market. At the same time, we have continued to add scale and capability through the completion of three strategic acquisitions in the period, including VGL, our largest acquisition to date, funded by an oversubscribed equity placing and tap bond issue. With notably reduced leverage and a healthy cash cushion, CentralNic remains well positioned for the future .“
* Pro forma revenue, adjusted for acquired revenue, constant currency FX impact and non-recurring revenues is estimated at USD 533 million for the trailing 12 months ending 31 March 2022 and at USD 349 million for the trailing 12 months ending 31 March 2021
** Parent, subsidiary and associate earnings before interest, tax, depreciation, amortisation, non-cash charges and non-core operating expenses
*** Includes gross cash, bond and bank debt and prepaid finance costs; it does not include the Mark-To-Market (MTM) valuations for the bond hedges of USD 9.4m as of 31 March 2022 (USD 6.4m as of 31 December 2021)
**** Includes Net Debt as defined under *** plus (i) the Mark-To-Market (MTM) valuations for the bond hedges, (ii) lease liabilities, (iii) guarantee obligations, and (iv) the best estimate of any 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
MANAGEMENT COMMENTARY ON PERFORMANCE
Introduction
CentralNic’s organic growth, combined with its 2021 and 2020 acquisitions, substantially increased the scale and capabilities of the Company. The effect of this is demonstrated in our unaudited Q1 2022 results which show a transformational increase in revenue and adjusted EBITDA, which have grown by 86% and 83% respectively compared to Q1 2021.
Performance Overview
The Company has performed strongly during the quarter with the key financial metrics listed below:
| 31 March2022 | 31 March2021 | Change | |
| USD m | USD m | % | |
| Revenue | 156.6 | 84.4 | 86% |
| Net revenue/ gross profit | 39.9 | 27.9 | 43% |
| Adjusted EBITDA | 18.5 | 10.1 | 83% |
| Operating profit | 10.0 | 1.4 | n.m. |
| Adjusted operating cash conversion | 128% | 163% | (21%) |
| Profit / (loss) after tax | 4.0 | (1.4) | n.m. |
| EPS – Basic (cents) | 1.53 | (0.67) | n.m. |
| EPS – Adjusted earnings – Basic (cents) | 4.51 | 3.17 | 42% |
Segmental analysis
The Company combined the previous Direct and Indirect segments into a single Online Presence segment for all reporting periods ending 30 September 2021 and later. The Online Marketing segment now includes the VGL and Fireball acquisitions.
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 grew more rapidly, with revenues increasing by USD 71.6 million, or 158%, from USD 45.3 million to USD 116.9 million. Organic revenue grew at a rate of 83%, predominantly driven by CentralNic’s TONIC media buying business, with the inorganic growth benefitting from the full quarter impact of the Wando and White & Case acquisitions, as well as the impact of acquiring VGL and, to a lesser degree, Fireball.
The number of visitor sessions also increased by 54% from 0.7 billion in Q1 2021 to 1.0 billion in Q1 2022 and the revenue per thousand sessions (“RPM”) increased by 105% from USD 48.0 to USD 98.2[2].
CentralNic is a leader in online privacy, as none of our marketing platforms make use of third-party cookies or collect personal data on our customers. We therefore expect that restrictions placed on those practices (e.g. the ban of third-party cookies in Google Chrome or App Tracking Transparency in Apple’s iOS 14.5) will benefit CentralNic, as we provide an alternative for online marketers that is proven to be highly effective, whilst respecting the privacy of internet users. This puts us at the forefront of companies offering solutions for a more privacy conscious world.
Online Presence segment
Revenue in the Online Presence segment increased by USD 0.6 million for the period ended 31 March 2021, or 2%, from USD 39.1 million to USD 39.7 million, with further growth being impacted by foreign currency revenues translating into less USD in the period.. Organic growth for this segment was 7% for the trailing twelve months ending 31 March 2022.
In the Online Presence segment, the Company steered away from increasing sales through discounted bulk sales, leading to the number of processed domain registration years decreasing modestly from 3.4 million in Q1 2021 to 3.1 million in Q1 2022 while at the same time, the average revenue per domain year increased by 11% from USD 8.60 to USD 9.50, ultimately improving the quality of revenue. The share of Value-Added Service revenue for the period ended 31 March 2022 remained stable at 8%[3].
Outlook
CentralNic enjoyed a very strong start to 2022 particularly our online marketing division. In Q1 2022 we reported 53% organic revenue growth on a pro forma basis for the trailing twelve months ending 31 March 2022[4]. Management was pleased with the achievement of strong results in Q1 2022, notably materially exceeding initial market expectations.
While the Directors are cognisant of the current global macro-economic environment, they are confident that the Group will comfortably trade in line with the recently upgraded market expectations for the year. By virtue of our confidence, targeted investment in human resources, restructuring and market-leading products, in particular our suite of privacy-safe online marketing technologies, we are well positioned to succeed in a challenging global environment.
The pipeline of future acquisition targets remains strong, while the net debt level remains comfortable particularly given the cash generation of the existing Group and the expected contribution from recent acquisitions. We are confident in continuing our trajectory towards joining the ranks of the global leaders in our industry.
These outstanding results demonstrate that CentralNic can source and complete transformative acquisitions, but more importantly that it can also integrate them successfully into marketplaces while continuing to deliver organic growth. Moreover, as the Company rapidly scales up, the underlying qualities of high recurring revenues and excellent cash conversion become increasingly meaningful.
A virtually pure play recurring revenue business with cash conversion of systematically over 100%, CentralNic continues to improve its key financial metrics as it grows including its cash position, interest coverage and net debt to EBITDA ratio. As our investment levels plateau moving forward, we expect future periods to benefit from increasing operational leverage.
Ben Crawford
Chief Executive Officer
