LUNCH MEETING NOTES with BEN CRAWFORD, THE CEO , 22/11/19

Centralnic (LON:CNIC)

I lunched with Ben Crawford, the CEO and Michael Riedl, the FD where they explained the week old $48m Team Internet deal, the background (very price relevant) and the impact on CNIC’s future yearly revenue, which almost doubles to $200m.

CENTRALNIC manages domain names which produce highly recurring annual revenue line as they resell domain names to the current owner / user and protecting brand names like Rolex (a client) from counterfeit type abuse. They also act as a name register. Almost utility like in predictability of revenue. CNIC manages 18m such domain names and in recent years been building up a global portfolio. CNIC gets an annual revenue per domain name of around $20 and owning a domain name is part of a person's identity. Corporate domain names extending out to protecting the brand itself. Renewal rates are 79% for individuals, 95%+ for corporates, where churn is less than 1%. Money is paid up front for the services. Economies of scale and service automation are key. CNIC is a top 5 registrar with a global sales function. Team Internet has leading domain name monetisation technology built around online advert. CNIC has wanted to own Team Internet for a while, missing out 2 years ago to the current owner. The current CNIC trading update points to numbers at the top end of analyst expectations.

CNIC is AIM listed with a market cap of $107m. YTD revenues of $77m, up 38% on FY2018 (to 30/6/19). Post this deal revenues will double, and the shares have positively responded. However, in the past every deal has been supported yet the share price languished. The Team Internet deal is to cost CNIC up to $48m, with the acquisition making pro forma revenues, for the whole group at $200m with adjusted EBITDA of $31m. The deal will conclude in the week of the 23/12 after the seller's EGM.

Broken down, the current CentralNic YTD revenues are $77m (to September) and the three past 2019 acquisitions (TPP, Hexonet, Ideegeo) together with the Team Internet make for pro forma FY revenue closer to $200m. This revenue is recurring. The Team acquisition takes CNIC into a new complementary online vertical, adding domain name monetisation from this ad tech and collates data on web site internet traffic. A significant accretion in earnings…

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