Dividend to look for more acquisitions — CentralNic shuns

Firm sees buyout opportunities in current economic environment.

CentralNic (London AIM: CNIC) has decided to delay its first-ever dividend to hunt for more buyout opportunities.

The firm disclosed the plan with the notice of its final results for 2019 issued today. It believes the current market (read: economic uncertainty due to the pandemic) might make for some interesting opportunities and wants to preserve its cash.

CentralNic by now noted its topline number for 2019: $109 million revenue. It broke this down in today’s note.

This breaks down into the firm’s three segments:

1. Reseller services. This includes registrars like Hexonet and Key-Systems, as well as the registry platform it operates on behalf of ccTLD and fresh top level domain owners. It generated $60.7 million revenue in 2019. It has 25.6 million domains under management (DUMs) and 29,000 clients. (Its revenue per domain is substantially smaller than other segments, in part since this includes the registry platform business for fresh top level domains.)
2. Modest business segment. This is CentralNic’s direct-to-consumer registrar business. It generated $37.8 million revenue in 2019. It has 2.2 million DUMs and 340,000 clients.
3. Corporate.  This covers corporate/intellectual property clients. It generated $10.8 million revenue with 1,000 clients and 154,000 domains. CentralNic has added Team Internet to this segment. It doesn’t really make sense here, but it doesn’t fit nicely into any of the segments. Team Internet is a domain monetization platform.

Overall, the firm posted an operating loss of $519k following share-based expenses and a total loss of $12.2 million. Its adjusted EBITDA was $17.9 million.

CentralNic believes that it ought to hold up well during the pandemic. It notes that “CentralNic Group has a loyal and sticky client base, with approximately 80% of CentralNic Group’s revenues derived from recurring annual fees that were agreed in years prior to 2019.”

It will be interesting to see how Team Internet,  which CentralNic is counting on for a big boost of high margin revenue in 2020, will fare. Ad markets are down, but this won’t necessarily hurt the business since it creates interesting traffic arbitrage opportunities. It depends a lot on what ad segments Team Internet’s clients target.