CentralNic Group Q&A “really poised for the next phases of growth” (LON:CNIC)

CentralNic

CentralNic Group plc (LON:CNIC) Chief Executive Officer Ben Crawford caught up with DirectorsTalk for an exclusive interview to discuss a strong set of results, what’s driven the growth, the monetisation segment, new hires in the company and the progress of the Codewise integration.

Q1: A strong set of results with 118% revenue growth and 68% EBITDA growth for CentralNic Group. Am I right in thinking that this revenue for the first nine months of 2020 succeeded the cumulative reported revenue for financial years 2018 and ‘19 combined?

A1: We couldn’t be happier about the growth.

Now, obviously, we had made four acquisitions during that time and so that’s a combination of the organic growth and the inorganic. In order to make things really clear, we did the exercise of a proforma where we pulled together all of the companies that we bought the second half of last year and we looked at all of their performance throughout the whole of 2019 so we could compare like for like.

What we’ve found is that our revenues actually increased organically 17% from $145 million in the first nine months of 2019 to $170 million of revenues in the first nine months of this year. It’s a great performance, particularly, obviously, when we consider all of the economic hardships that have occurred throughout the year.

We’re obviously very lucky that we’re an internet business, we always viewed ourselves as a piece of critical infrastructure and therefore we had very good business continuity plans in place. We could get everyone working from home before it was actually required, making sure that our offices were one of the cause of spread for COVID and keeping our teams very much intact, all supply chains all online.

What we found is that I think because of people working from home, businesses having to serve their customers over the internet, people losing their jobs and needing to come up with a new business idea they could do from home, there’s actually been pretty substantial growth in our company and demand for our services.

Q2: Now as you say, proforma sales growth look very strong at 17%, are there any particular areas of the business that have been driving that?

A2: There are actually, the company that we bought at the end of last year, Team Internet, released a new product which combines a monetisation and cyber security, particularly SSL certificates, together into one product. That’s proven to be very successful, particularly among certain group of customers we have which is domain name investors that buy very large volumes of domain names and so happily that product has driven north of 30% growth in that particular area, which is fantastic for us. It is one of our lower margin products and so what you’ll see is whilst our revenue has been great, the gross margin hasn’t grown at quite the same rate. That’s really because of a change in blend, I’d say our margins have been rock solid across every business however, the blend has changed which has driven down our gross margin as a whole.

Obviously, it’s a happy day when the revenues are going so strongly in such a difficult context.

Q3: Just looking at the rapid growth within the monetisation segment, how has it been achieved? Have you rolled out any additional products or technology out?

A3: Well, that SSL certificate, SSL monetization, is that particular product that has driven that and because of all of that success, we obviously have gone on to buy a second monetisation business as well.

You’ll see that we raised the money in Q3 but we actually spent it in Q4 so these results don’t include the results from our latest acquisition yet but we’ll be seeing them at the end of the year. Obviously, we’ve really kicked some goals with our first monetisation acquisition, the second one puts us in a unique position.

We have two different technologies, two different supply chains, making us the first company to be able to optimise between the two to offer our customers choice and obviously if there’s ever any troubles with one supply chain and so on, we have the other one is a hedge.

So, that makes us extremely resilient as well as a dominant in that market.

Q4: During the period, you’ve brought a number of new senior managers on board to drive organic growth, where are these majors deployed within the business?

A4: All over really, we did two things so one is we created two new divisional head posts and one was the internal promotion, the other one was an external hire. We brought in a Head of HR, we put in a Head of Product to really lead our new products so all of these people are driving revenues.

Also, underneath them, we’ve put a number of other people, be that project managers, developers and so on, in order to make sure that they have the teams they need to drive organic revenues.

At the core of the business, we put in some new software, new systems and new hires like a new Head of HR in order to ensure that we’ve got the basis to support both the organic growth and the inorganic growth that will come from new acquisitions in the future.

So, we’ve really looked at this year as a year of investment, being able to take advantage of this rapidly increasing revenues that we had more cash that we could deploy while still being able to hit our EBITDA targets. We we’ve taken advantage of that, we’ve done that and so we’re really poised for the next phases of growth.

Q5: Now, you mentioned your pipeline of future deals remains strong, is there any more detail that you can provide on that for us?

A5: If there was, we would’ve announced it. Can’t blame you for asking, who knows, hopefully we’ll talk again soon.

Q6: Obviously, CentralNic Group’s latest acquisition of Codewise only completed very recently but is there anything that you can say on how things are progressing with integration?

A6: I’d say excellently, the fact that we actually completed the deal to the minute, of the time we said we would, is a sign of the professionalism of the Codewise team and the very smooth way that we’re working together.

The team are all based in Krakow in Poland and, obviously all working from home, the same as us everywhere, and so that obviously would normally provide some pretty significant challenges because normally I’d be in their offices meeting with them, talking to them, answering their questions. So, now we’re doing it all over all over the interne but I have to say things couldn’t be going more smoothly and we’re very happy with them.

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CentralNic Group Plc

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