CentralNic Group Q&A: Codewise acquisition “a really fantastic deal” (LON:CNIC)

CentralNic Web Services

CentralNic Group plc (LON:CNIC) Chief Executive Officer Ben Crawford caught up with DirectorsTalk for an exclusive interview to discuss the Codewise acquisition, potential synergies and KeyDrive meeting expectations.

Q1: Ben, the acquisition of Codewise, it was completed very quickly, can you talk us through how this was achieved?

A1: There’s a lot of planning that went into the completion of the deal because CentralNic Group were buying the assets of Codewise rather than the shares and so we had to transfer all the customer agreements, all the employee agreements, all the assets and so on into a new entity called CentralNic Poland.

Happily, I’d say the Codewise team were very professional, as is our team, the cooperation was great between them and so we had a very, very detailed plan and we just executed on that plan and no one went home each day until they’d done what they were supposed to get done that day.

And as you say, we were able to complete it at the hour we had predicted, multiple months in advance so really, really, promising start to bringing those teams together and we’re already working very well.

Q2: Presumably, you’re becoming quite adept at the acquisition process now, do you have a process that you follow?

A2: We have processes where, luckily, because we do business globally already with so many business partners around the world, we have business relationship and warm introductions to many, many companies in terms of sourcing deals. Also, because of our track record of successfully financing and completing a lot of deals, happily, vendors also come to us.

We’re very proactive, we see the companies that we think are the best in the business and obviously, we start a conversation as early as we can with them because sometimes it can take quite a while.

We’ve realised that to be really very good at doing some of the tougher deals, companies may be had some issues with their technology or they’re in a difficult jurisdiction, has meant that it gives us a real advantage because we’ve got such a strong team of engineers and so much experience doing deals in exotic countries.

We’ve acquired businesses in Romania and Slovakia and The Bahamas and New Zealand etc., we’re very well equipped to get those deals over the line and that often means that we’re able to pay a lower multiple for a really high quality company.

Obviously, beyond that, we have a great integration processing team that now, time and again, have worked out how to very efficiently bring the new company into the mothership, introduce them to all of our ways of working and also basically make the most of stabilising growing them and, and integrating.

Q3: Can you just give us a refresher on what Codewise brings to the business and its financials and what potential synergies there are really?

A3: So, Codewise is a monitorisation company and so that means that for domain name investors that get a lot of traffic to their domain names, it’s a way that they can swap that traffic for money. Similarly, if you’re an online marketer and you have the budget and what you’re trying to do is get traffic to come to your website, you swap that money for the traffic. So, it’s actually an exchange between those.

It’s got, literally, thousands of advertisers, thousands of publishers on the two sides of the exchange and then in addition to that, Codewise has a business code Voluum Tracker which is a market-leading in software for online marketers to collate all of their data and use AI tools to optimise their spend, to get the best ROI.

So, great additions to our monetisation business, our first step into online marketing, which is obviously an important tool for anyone that has a domain name that wants to build a website and they want to drive traffic to that site.

In terms of financials, in the year to June 30th, the company did about 6$0 million in revenue and generated about $7.5 million in adjusted EBITDA and we paid under five times trailing earnings for that.

So, a really fantastic deal for us and also such a team of talented people, deep engineering, data scientists, great marketers, very professional management so it’s going to be a great asset to have business.

In terms of synergies, our due diligence team were able to identify £1 million worth of recurring, what they called like ‘low-hanging fruit synergies’, things like by combining our buying power together we should be able to get better rates in our cloud hosting suppliers, that kind of thing. So, not necessarily requiring any changes to head count and so on, more to do with saving money on external spending and obviously cross-selling opportunities.

Codewise has a different technology from our other monitorisation company, Team Internet, and a different group of partners so by combining the two together, we’re the only company in the world that has both types of technologies, both sets of partners, it means we can optimise between the two.

We can give our customers a choice of both technologies and potentially, it makes us very resilient and robust because if there’s ever any problem with one of the companies, obviously we can move all the customers to the other one and there is no other company in our industry that has that kind of resiliency.

Q4: Now, I note as well that KeyDrive continues to outperform, has this exceeded CentralNic Group’s initial expectations?

A4: Well, we had very high expectations so I’d say it’s met our expectations would be the word.

It’s another great business, again, we’re deep into integrating that with some of our other companies and so on and mixing the teams up and everything’s moving great.

As you’ve seen, we made a deferred payment of late in the last week and that obviously it’s an earn-out payment so that relates to the company performing very well.

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CentralNic Group Plc

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