viewMinds + Machines Group Limited

Minds + Machines' earnings to be marginally ahead of expectations

The US became MMX's leading sales region in 2018 with sales generated through the US team covering the North American and Japanese markets accounting for 51% of group sales, up from 33% in 2017. By contrast, China and Europe represented 36% and 13% respectively in 2018 compared to 50% and 17% in 2017

Top level domains
MMX enjoyed a strong fourth quarter

Top level domains (TLD) registry company Minds + Machines Group Limited (LON:MMX) expects full-year underlying earnings will be marginally ahead of market expectations.

The number of domains under management in 2018 rose by 37% to 1.81mln from 1.32mln the year before, with revenue tipped to rise above US$15.5mln from US$14.3mln the year before.

Last year was characterised by a focus on bearing down on costs and the group managed (subject to audit) to keep them below US$6mln, contributing towards the slightly better than expected earnings result.

Minds + Machines (MMX) noted that the earnings figure – what it calls operating EBITDA – is before the impairments taken at the half-year point.

READ: Minds + Machines clears the decks to more easily demonstrate future progress

MMX said the quality of revenue has continued to improve, with the renewals rolling in.

Unaudited renewal revenue nearly doubled to US$9.4mln in 2018 from US$$4.8mln, helped by a US$3.4mln second half contribution from the ICM portfolio; stripping out the acquired ICM properties, organic renewal growth within the MMX portfolio of top-level domains increased by nearly 20% for the year.

The quality of new billings (i.e. sales) has also continued to improve in the year with one-off brokered premium sales accounting for less than 15% of total sales (2017: 38%) and premium sales through the registrar channel remaining constant at around 12%.

Cash collections improve

Importantly, this improvement has led to cash collections for the year on normal operations (i.e. net of private auctions/other income) increasing by 30% to US$16.1mln from US$12.3mln in 2018, MMX stressed; ICM second-half collections represented US$3.3mln of the US$16.1mln.

Cash and cash equivalents as at 25 January stood at US$11.4mln, compared to cash of US$18.1mln at the end of 2017.

"A strong Q4 of sales through the registrar channel is allowing management to deliver on its strategy of transforming MMX into a stable, growing, cash generative business built around organic growth, innovation and accretive acquisitions,” said Toby Hall, the chief executive officer of MMX.

“Pleasingly, the significant momentum we created last year has continued into the early part of 2019 supported by the strategic acquisition of ICM which is delivering to plan," he added.

In a note to clients, analysts at ‘house’ broker finnCap said: “We nudge up our FY 2018 forecasts in response and will take a view on 2019 with the FY 2018 results published in March."

finnCap has a price target of 17p on Minds + Machines’ shares which in afternoon trading were trading at 5.90p, up 3.5% om Friday’s close.

 -- Adds analyst comment, share price --

Quick facts: Minds + Machines Group Limited

Price: 7.45 GBX

Market: AIM
Market Cap: £68.47 m

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