CentralNic Group plc (LON:CNIC) Chief Executive Officer Ben Crawford caught up with DirectorsTalk for an exclusive interview to discuss their final results and their Q1 2020 update.
Q1: Final results and a Q1 update just out. Looking first at the Final Results, the financial highlights look impressive with revenue up 95% up to $109.2 million and Adjusted EBITDA up 96% to $17.9 million, can you tell us more about the financial performance over the year and are you happy with it?
A1: Well, as you might imagine, we are fairly happy with it, it’s actually the fifth out of six years where we’ve doubled in size and obviously it becomes more of a challenge each time you do it but happily, we’ve achieved it again.
It’s a blend of our underlying organic growth and some acquisitions we made in 2018, in August and September, and then we did do three acquisitions in August as well that contributed as well a little to this. What you can see clearly is our EBITDA margins are holding well and I’d also add that that cash conversion is also holding well as well as being able to scale the business very dramatically.
So, as far as we’re concerned, everything is moving in the right direction, obviously we’re not sitting on our laurels, if you look at the market, you’ll see we’re expected to double in size again in 2020.
Q2: Moving to Q1 2020 update, CentralNic Group traded in line with market expectations, what type of growth has the company experienced over the quarter?
A2: It’s roughly 100% growth so in the first quarter, we did $66 million in revenues and if you compared that to the $109 million, we did in the full year last year, you can see that we’re already more than halfway to hitting that number again. Similarly, our EBITDA number was a little over $8 million and considering we did $18 million full year last year, you can see that we are absolutely on that trajectory of continuing to double in growth.
I’d also say that the business, everything we’ve seen, is showing us that despite all of the problems there are in the economy at the moment with COVID-19, demand for our services is continuing to be strong. That’s not only for domain names, which makes up about half of our current business, but also the added-on services that now makes us about half of our revenues so we’re seeing great demand across the board for all of our products.
So, whilst the numbers in the market were said back in December, before the coronavirus really hit the rest of the world, outside of China, we’re one of the lucky ones that are able to say we’re still trading in line.
Q3: When we last spoke, there had been no negative impact from COVID-19, I take it this is still the case?
A3: That’s right. We monitor this very closely and I’m happy to say that not only was not the case in Q1 but each week subsequent to then, we continue to trade in line with our budget in order to meet the expectations of the market.
Q4: As you’ve just said, about 50% of 2020 revenues are coming from domain-related internet services, why is this important for the company?
A4: Well, the company last year was almost a pure domain vendor so we sold subscriptions to domain names as almost our sole business but when you look at other companies that have achieved million-dollar market capitalisation in our business, they always need to add additional services to give them that real growth and scale.
So, last year, through a number of acquisitions, we’ve actually done the same so now we make about 50% of our revenues from non-domain subscription products so for example, domain monetisation, it’s a service for people who are domain investors to enable them to make money from domain names while they’re in their inventory before they sell them. We also started selling Microsoft Office 365 software to small businesses and bundling that together with domain names and also hosting using Amazon’s AWS service as well.
So, those are the types of services that are all associated with domains but are very important to us as they are really the gateway to us doubling in size again this year, the same way we did last year.
Q5: Just talking about acquisitions, can you tell us how the Team Internet integration is going?
A5: Excellent, the company has really performing exactly how we’d hoped. Despite all the barriers to integration that come from everyone having to work from home, the collaborations between the teams is excellent and the company is performing absolutely to the level we’d expected.
Q6: Finally, when we last spoke, we talked about Centralnic Group’s management restructure during the period with new hires and appointments, how are they all settling in now or is it a little bit too early?
A6: Not really, no. We hired very experienced people to head up new business units for us and they’ve jumped right in. I think because we operate a very global business, they never had an expectation of sitting in the office with all of their team anyway because the teams are spread in different countries around the world so it doesn’t really affect our management that much.
I would say that it was an absolute blessing that we did hire a Chief People Officer for the first time, Tracey Hickling. Obviously having everybody working from home has introduced some new Human Resources challenges so to have a top notch professional to be leading us in managing all the people-related issues that come up, is incredibly helpful to us. So, she’s leading from the front I’m happy to say.