Reglikedomain industry desk

Tucows expects $20 million EBITDA/year from “opportunistic” eNom buyout

Tucows expects fast contribution from eNom, which has booked losses at Rightside.

Domain name and communications firm Tucows (NASDAQ:TCX) didn’t plan to acquire two domain name businesses over the past year, but the opportunities were too good to pass up.

First, the firm scooped up Melbourne IT’s reseller channel for just over $8 million AUD. Then, last Friday, Tucows purchased eNom from Rightside (NASDAQ:NAME) for $83.5 million.

On a conference call Friday, Tucows CEO Elliot Noss explained that these two opportunities fell into its lap:

I want to be clear, still, that these two transactions ought to not be seen as any change in our view of M&A or our overall capital allocation strategy. These were simply individual, opportunistic transactions that presented themselves at attractive valuations and which represented excellent uses of capital. While there may be additional opportunities in the coming years, eNom was a singular opportunity.

If you look at the numbers, these deals certainly seem like good uses of cash. Tucows expects $2 million per year in gross contribution from the Melbourne IT deal and ultimately thinks the eNom deal will contribute $20 million cash to EBITDA. It expects regarding $15 million in 2017 ahead of all of the excess costs are worked out of the business.

In a note filed with the SEC today, Rightside noted that its eNom business had an EBITDA loss of $7.0 million for the first nine months of 2016. Update: I misread the table in Rightside’s SEC filing. The eNom business was actually profitable.

Noss expects significant costs savings by bringing its OpenSRS domain reseller platform and eNom under one roof. The cost savings will come from having one set of overhead for finance, human resources and office space.

Of course, Tucows also took out its number one competitor with the transaction. It will no longer have to duke it out with eNom when it comes to convincing resellers to use its system. Its main competition will be Endurance International Group’s ResellerClub. GoDaddy also has a reseller platform, but it has traditionally been marketed as a turnkey system that’s not as easy to integrate into existing hosting platforms.

Also on the wire

Other reporting from the domain desk.

SDomain RegistrarsSteady, Brandable Domain Sales Growing — Tucows’ RevenuesGiveaway hits 500,000 free domains — Namecheap .meDomain RegistrarsGiveaway hits 500,000 free domains — Namecheap .meQDomain RegistrarsQuestion Minds + Machines’ Priority Reservation System — Domain registrarsAs Fresh Domain Registrations Fall, Domain Registrars Get DesperateDomain RegistrarsAs Fresh Domain Registrations Fall, Domain Registrars Get DesperateIs becoming a domain name registrar & what it means for the business — Why GoogleDomain RegistrarsIs becoming a domain name registrar & what it means for the business — Why GoogleNDomain RegistrarsNetwork Solutions phone surveyTop 20 chart: Europe market shareDomain RegistrarsTop 20 chart: Europe market shareICANN slashes fresh TLD forecast, but is it enough?Domain RegistrarsICANN slashes fresh TLD forecast, but is it enough?Profit fall at Team Internet Group — Revenue andDomain RegistrarsProfit fall at Team Internet Group — Revenue and