Q1: CentralNic Group, the leading provider of domain name services, has reported its H1 2020 results with 18% proforma growth. Bob, can you tell us what drove such strong revenue growth?
A1: The strong growth was driven by market share gains, largely, in the monetisation division. The company has introduced new software that has taken advantage of modern browser technologies and a lot of the new security standards that have come around. They’ve introduced them in a better way than their competitors and as a result of that, they’ve been able to extract a lot more value of the traffic that they get and it results in their yields growing significantly.
So, in the first half, yields grew 33% and what has happened is that has driven the revenue growth to 38% which has been the big driver of the 18% proforma growth that you talked about.
Q2: How is that strong topline growth translated into EBITDA growth and cash generation?
A2: We saw an equally strong performance at the EBITDA level, EBITDA increased by 16% on a proforma basis compared with the 18% in the topline and the company achieved this strong growth even whilst investing in a lot of sales and product management and new leadership. We haven’t even started seeing the benefits of that but they’ve made those investments in H1.
In terms of cash generation, the company has been able to convert 138% of EBITDA to cash in the second quarter and that’s a return to very strong cash generation compared to some of the one-off outflows in Q1. The company expects cash conversion to remain at about 100% so all there very solid.
Q3: How have these strong results impacted your outlook on CentralNic Group?
A3: We’re definitely more optimistic, we’re raising our revenue forecast by 7% for the 2020 year, that assumes about 6% proforma growth in H2 which is down from the 18% growth that we just talked about with H1. That’s because the monetisation division and the new products we talked about were already introduced in the second half of 2019 and so the year-on-year comparison are naturally going to be much more difficult. We’re still looking at solid growth and, if anything, my view is that we’re looking at conservative assumption in the second half and if we do see some continued momentum in the business, like we’ve seen in the first half, we could see some further upgrades.
In terms of EBITDA, we’re leaving those estimates unchanged and relatively conservative there as well, we’ve raised our expense forecast to account for some for that increased investment that they’re going to continue into the second half. We’re not factoring in any of the benefits from that so we think we’ve got some potential upside to the numbers we’ve put out there and the prospects for the company, if anything, are looking brighter than ever.