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MMX to pay $5.1 million to get out of terrible .london deal

Minds + Machines will pay its partner on .london roughly $5.1 million in order to put the catastrophic deal to bed for good.

That’s a reduction from the $7.9 million liability it had previously estimated.

The company said last week that it will pay an unspecified partner the $5.1 million “as full and final settlement for any further liability or contractual spend” after renegotiating the contract.

In April, MMX said that the deal had cost it $13.7 million since the outset.

While MMX has never publicly fingered the contract in question, which has been a pair of concrete boots for years, its deal with .london’s London & Partners is the only one that fits the bill.

The registry secured L&P, the marketing arm of the London Mayor’s office, as a client during the mayoral reign of Boris Johnson, the man set to be anointed the UK’s next prime minister this week.

It agreed to make millions of dollars in guaranteed payments over the duration of the contract, because it expected to sell a shedload of .london domains.

That never happened. The gTLD peaked at 86,000 names in March 2018 and was down to 54,000 a year later, evidently a fraction of what MMX had planned for.

The renegotiated deal — I believe at least the second time the deal has been amended — is “in principle” for now, with formal approval expected soon.

In its trading statement last week, MMX also said that the first half of the year ended with a 19% increase in regs, ending June at about 1.82 million.

It said it has “stabilised” declining billings in its acquired ICM Registry portfolio of porn-themed TLDs at $2.8 million, and that it has a “clear pathway” to growth from the four zones.

It’s hoping “further new initiatives” — likely a reference to a new trademark-blocking service — will help out in the current half.

MMX also said that it’s spending $1 million of its cash reserves on a stock buyback.

Time for some more ICANN salary porn

Kevin Murphy, June 3, 2019, Domain Policy

ICANN has filed its tax return for its fiscal 2018, so it’s once again that time of the year in which the community gets to salivate over how much its top staffers get paid.

The latest form 990, covering the 12 months to June 30, 2018, shows that the top 21 ICANN employees were compensated to the tune of $10.3 million, an average of $492,718 each.

That’s up about 4% from $9.9 million in the previous year, an average across the top 21 staffers of $474,396 apiece.

These numbers include base salary, bonuses, and benefits such as pension contributions.

Employee compensation overall increased from $60 million to $73.1 million.

The biggest earner was of course CEO Göran Marby, who is now earning more than his immediate predecessor Fadi Chehadé but a bit less than last-but-one boss Rod Beckstrom.

Marby’s total compensation was $936,585, having received a bonus of almost $200,000 during the year. His base salary was $673,133.

The number of staffers receiving six-figure salaries increased from 159 in fiscal 2017 to 183 — about 44% of its estimated end-of-year headcount.

Towards the end of the reported year, as ICANN faced a budget crunch, many members of the ICANN community had called on the organization to rein in its spending on staff.

ICANN says it targets compensation in the 50th to 75th percentile range for the relevant industry.

The top five outside contractors in the year were:

  • Jones Day, ICANN’s go-to law firm. It received $5.4 million, down from $8.7 million in 2017.
  • Zensar Technologies, the IT consultancy that develops and supports ICANN software. It received $3.7 million.
  • IIS, the Swedish ccTLD registry, which does pre-delegation testing for new gTLDs. It received $1.3 million.
  • Iron Mountain, the data escrow provider. It received $1.1 million.
  • Infovity, which provides Oracle software support. It received $1 million.

The return shows that ICANN made a loss of $23.9 million in the year, on revenue that was down from $302.6 million to $136.7 million.

The primary reason for this massive decrease in revenue was the $135 million Verisign paid for the rights to run .web, at an ICANN last-resort auction, in ICANN’s fiscal 2017.

The tax form for 2018 can be found here (pdf) and 2017’s can be found here (pdf).

Revenue dips as Brexit whacks .eu in 2018

Kevin Murphy, April 16, 2019, Domain Registries

.eu saw its registrations sink substantially in 2018, largely due to Brexit, which affected its revenue and profit.

Registry EURid said yesterday that it was managing 3,684,750 .eu domains at the end of the year, down by 130,305 over the year.

It’s .eu’s lowest end-of-year domain count since 2012.

The UK, which voted to leave the EU in 2016 but has yet to follow through, sank from the fourth-largest .eu country to the sixth, now behind less populous countries Poland and Italy.

EURid and the UK government have warned UK-based registrants that they stand to lose their domains after Brexit is actually executed (if it ever is)

As Brits abandoned their .eu names by the tens of thousands, EURid also suspended over 36,000 domains for abuse, which affected its annual total.

The decline hit EURid’s revenue, which was down to €12.7 million, from €13.3 million in 2017. Profit was down from €1.7 million, from €2 million.

The data was published in the registry’s annual report (pdf), published yesterday.

.london disaster leads to mixed 2018 for MMX

New gTLD registry MMX, aka Minds + Machines, suffered a huge net loss in 2018, largely due to its disastrous .london contract, even while its operating fundamentals improved.

For the year, MMX reported a net loss of $12.6 million, compared to a 2017 profits of $3.8 million, on revenue up 5% to $15.1 million.

The loss was almost entirely attributable to charges related to an “onerous contract” with one of its partners.

MMX has never disclosed the identity of this partner, but the only outfit that fits the profile is London & Partners, the agency with which MMX partnered to launch .london several years ago.

The registry, expecting big things from the geo-TLD, promised to pay L&P millions over the term of the contract, which expires in 2021.

But it’s been a bit of a damp squib compared to former management’s expectations, peaking at about 86,000 regs last year and shrinking ever since.

MMX says the estimated gap between the minimum revenue guarantee payable to L&P and the expected revenue is expected to bring in before 2021, is $7.2 million.

It’s recorded this as a charge on its income statement accordingly, along with another $4.2 million impairment charge related to the same contract.

The company recorded a $7.7 million accounting charge related to this contract in 2016, too.

The company says that to date it has lost about $13.7 million on the deal.

These charges, along with a few other smaller one-off expenses, were enough to push the company into the black for 2018.

But other key performance indicators showed more promise, helped along by the acquisition last year of porn-themed registry operator ICM Register, best-known for .xxx.

Notably, renewal revenue almost doubled, up 97% to $9.4 million.

Domains under management was up 37% to 1.81 million.

Operating EBITDA was $3.6 million, up 12.5%.

Looking ahead, MMX said billings for the first quarter are expected to be up 246%, due to the first impact of the ICM acquisition.

It also said it closed $500,000 of sales in .law in China in March. That would work out to over 5,000 domains, based on the retail price of about $100 a year, but those domains have yet to show up in the .law zone file, which only grew by about 200 domains last month.

MMX said it is planning to launch “a high-value defensive registration product” for corporate registrars by the third quarter.

If I had to guess, I’d say that is probably a clone of Donuts’ Domain Protected Marks List service, which offers trademark owners deep discounts when they defensively block strings across the whole Donuts gTLD portfolio.

It’s a model copied by other registries, including recently Uniregistry.

NameSilo nets $1.5 million profit

Kevin Murphy, March 28, 2019, Domain Registrars

Fast-growing registrar NameSilo yesterday reported its financial results for 2018.

The Canadian company reported revenue of CDN 17.2 million ($13.3 million) for the year, up from CDN 10.4 million ($8.1 million) in 2017.

Net income was CDN 1.92 million ($1.48 million), compared to CDN 565,000 ($435,000).

Bookings were CDN 28.78 million ($21.45 million), up from CDN 14.04 million ($10.81 million) in 2017.

These are the results of NameSilo LLC, the operating registrar subsidiary of the listed entity, NameSilo Technologies Corp, which is listed on the Canadian pink sheets. The former reversed into the latter in August.

NameSilo says it has added 850,000 new domains under management since then, and now has about 2.7 million names.

According to the most-recent registry transaction reports, NameSilo was the second-fastest growing gTLD registrar in November and the 16th-largest by DUM. It ranks higher if you group registrar accreditations into families.

Radix sees revenue up 30%

Kevin Murphy, March 12, 2019, Domain Registries

New gTLD registry Radix said today that its revenue increased by 30% in 2018, largely due to an end-of-year boost.

The company, which runs nine gTLDs including .online and .site, said that gross revenue was $16.95 million last year.

It added that net profit was up 45.6%, but the privately held company does not actually disclose the dollar value of its bottom line.

Radix said that the fourth quarter of the year, which presumably saw the benefits of Operation September Thrust, was its strongest quarter.

The company said that 27% of its revenue came from standard-price new registrations and 60% from renewals.

Its premiums brought in $1.9 million, 56% of which were premium renewals.

CentralNic expects flat profit as revenue almost doubles

Kevin Murphy, February 4, 2019, Domain Registries

London-listed domain firm CentralNic today gave investors a sneak preview of its 2018 financial performance.

The company expects its profits at the adjusted EBITDA level to be up only slightly — from £6.6 million ($8.62 million) to £6.7 million ($8.75) — compared to 2017.

But revenue is expected to soar from £24.3 million ($31.7 million) to £42.5 million ($55.5 million), largely due to the impact of its merger with KeyDrive, which completed in August.

KeyDrive was the holding company for brands including the registrars Key-Systems, Moniker and BrandShelter, and the registry providers OpenRegistry and KSRegistry.

The Luxembourgish firm reversed into AIM-listed CentralNic in a deal, described as “transformative” for CentralNic, valued at up to $55 million.

Most of the company’s revenue now comes from the registrar part of the business, though the registry division is the more profitable.

CentralNic said today that “subscription products” are now roughly 90% of total revenue.

The company expects to save £1 million ($1.3 million) this year by migrating its old registrars over to the KeyDrive platform and migrating its new registries onto the CentralNic platform.

It has also appointed KeyDrive’s former CFO as CentralNic CFO, replacing Don Baladasan. Michael Riedl has also joined the board of directors, while Baladasan remains on the board as group managing director.

Full, audited financial results will be announced in May.

MMX sees better profits than expected

Kevin Murphy, January 29, 2019, Domain Registries

Portfolio registry MMX saw 2018 financial results slightly ahead of expectations, the company told investors yesterday.

It now expects revenue to be over $15.5 million for the year, compared to $14.3 million in 2017. Operating EBITDA, its preferred profitability indicator, will be “marginally ahead of market expectations”.

It expects revenue from renewals — which MMX has been trumpeting as a key indicator of stability — to be $9.4 million, compared to $4.8 million in the prior year.

That’s mainly due to the $3.4 million contribution of recently acquired porn TLD specialist ICM Registry. Without ICM, renewal revenue was still up 20% though.

The company’s exposure to the Chinese market has also been reduced. It now contributes 36% of sales, compared to 50% in 2017.

Volatile one-off premium domain sales are also on the decrease in terms of revenue share — 15% in 2018 compared to 38% in 2017.

Its full audited results will be published later in the quarter.

MMX waving goodbye to .london? Boss puts focus on renewal profits, China

Kevin Murphy, September 26, 2018, Domain Registries

MMX’s revenue from domain renewals could cover all of its expenses within the next 24 months, if everything goes to plan, according to CEO Toby Hall.

Hall was speaking to DI this evening after the company reported its first-half financial results, which saw revenue up 22% to $6.4 million and a net loss of $14.7 million, which compared to a loss of $526,000 a year earlier.

MMX’s huge loss for the period was largely — to the tune of $11.8 million — attributable to the restructuring of an “onerous” contract with one of its gTLD partners.

Hall refuses point blank to name that partner, but for reasons I discussed last year, I believe it is .london sponsor London & Partners, which is affiliated with the office of the Mayor of London.

When L&P selected MMX to be its registry partner for .london back in 2012, I understand a key reason was MMX’s promise to pay L&P a fixed annual fee and commit to a certain amount of marketing spend.

But two years ago, after it became clear that .london sales were coming in waaaay below previous management’s expectations, MMX renegotiated the deal.

Under the new deal, instead of committing to spend $10.8 million on marketing the TLD itself, MMX agreed to give half that amount to L&P for L&P to do its own marketing.

It appears that L&P has already spunked much of that cash ineffectively, or, as MMX put it:

a significant portion of that marketing budget has been spent by the partner with minimal impact on revenues in the current year and no expectation of any material uplift in future periods

MMX seems to have basically written off the .london deal as a bad call, and now that MMX is no longer in the registry back-end or registrar businesses, it seems unlikely that the .london partnership will be extended when it expires in three years.

Again, Hall would not confirm this bad contract was for .london — I’m making an informed guess — but the alternatives are limited. The only other TLDs MMX runs in partnership currently are .review and .country, and not even 2012 MMX management would have bet the farm on those turkeys.

Another $2.1 million of the company’s H1 net loss is for “bad debt provisions” relating the possibility that certain US-based registrar partners may not pay their dues, but this provision is apparently related to a new accounting standard rather than known deadbeats threatening to withhold payments.

If you throw aside all of this accountancy and look at the “operating EBITDA” line, profit was up 176% to $661,000 compared to H1 2017.

While the loss may have cast a cloud over the first half, Hall is upbeat about MMX’s prospects, and it’s all about the renewals.

“Renewal revenue will be more than all the costs of business within 24 months,” he said. To get there, it needs to cross the $12 million mark.

He told DI tonight that “an increasing percentage of our business is based on renewals… just on renewal revenue alone we’ll be over $10 million this year”.

Renewal revenue was $4.7 million in 2017 and $2.4 million in 2016, he said. In the first half, it was was up 40% to $3.4 million.

MMX’s acquisition of porn domain specialist ICM Registry, which has renewal fees of over $60 per year, will certainly help the company towards its 2018 goal in the second half. ICM only contributed two weeks of revenue — $250,000 — in H1.

Remarkably, and somewhat counter-intuitively, the company is also seeing renewal strength in China.

Its .vip gTLD, which sells almost exclusively in China, saw extremely respectable renewals of 76% in the first half, which runs against the conventional wisdom that China is a volatile market

Hall said that .vip renewals run in the $5 to $10 range, so apparently TLD volume is not being propped up by cheap wholesale renewal fees. The TLD accounts for about 30% of MMX’s renewal revenue, Hall said.

About 60% of .vip’s domains under management are with Chinese registrar Alibaba. The biggest non-Chinese registrar is GoDaddy, with about 3% of the namespace.

More exposure to China, and specifically Alibaba, is expected to come soon due to MMX’s repurposing of the 2012-logic gTLD .luxe, which is being integrated into the Ethereum blockchain.

MMX said last week that some six million (mostly Chinese) users of the imToken Ethereum wallet will in November get the ability to register .luxe domains via imToken and easily integrate them with their Ethereum assets.

The announcement was made at the Alibaba Cloud Computing Conference in China last week, so you can probably guess imToken’s registrar of choice.

MMX rejected three takeover bids before buying .xxx

MMX talked to three other domain name companies about potentially selling itself before deciding instead to go on the offensive, picking up ICM Registry for about $41 million.

The company came out of a year-long strategic review on Friday with the shock news that it had agreed to buy the .xxx, .adult, .porn and .sex registry, for $10 million cash and about $31 million in stock.

CEO Toby Hall told DI today that informal talks about MMX being sold or merged via reverse takeover had gone on with numerous companies over the last 11 months, but that they only proceeded to formal negotiations in three cases.

Hall said he’d been chatting to ICM president and majority owner Stuart Lawley about a possible combination for over two years.

ICM itself talked to four potential buyers before going with MMX’s offer, according to ICM.

Lawley, who’s quitting the company, will become MMX’s largest shareholder following the deal, with about 15% of the company’s shares. Five other senior managers, as well as ICM investor and back-end provider Afilias, will also get stock.

Combined, ICM-related entities will own roughly a quarter of MMX after the deal closes, Hall said.

ICM, with its high-price domains and pre-2012 early-mover advantage, is the much more profitable company.

It had sales of $7.3 million and net income of $3.5 million in 2017, on approximately 100,000 registrations.

Compared to MMX, that’s about the same amount of profit on about half the revenue. It just reported 2017 profit of $3.8 million on revenue of $14.3 million.

There’s doesn’t seem to be much need or desire to start swinging the cost-cutting axe at ICM, in other words. Jobs appear safe.

“This isn’t a business in any way that is in need of restructuring,” Hall said.

He added that he has no plans to ditch Afilias as back-end registry provider for the four gTLDs. MMX’s default back-end for the years since it ditched its self-hosted infrastructure has been Nominet.

The deal reduces MMX’s exposure to the volatile Chinese market, where its .vip TLD has proved popular, accounting for over half of the registry’s domains under management.

It also gives MMX ownership of ICM’s potentially lucrative portfolio of reserved premium names.

There are over 9,700 of these, with a combined buy-now price of just shy of $135 million.

I asked Hall whether he had any plans to get these names sold. He laughed, said “the answer is yes”, and declined to elaborate.

ICM currently has a sales staff of three people, he said.

“It’s a small team, but their track record is exceptional,” he said.

The company’s record, I believe, is sex.xxx, which sold for $3 million. It has many six-figure sales on record. Premiums renew at standard reg fee, around $60.

With the ICM deal, MMX has recast itself after a year of uncertainty as an acquirer rather than an acquisition target.

While many observers — including yours truly — had assumed a sale or merger were on the cards, MMX has gone the other route instead.

It’s secured a $3 million line of credit from its current largest shareholder, London and Capital Asset Management Ltd, “to support future innovation and acquisition orientated activity”.

That’s not a hell of a lot of money to run around snapping up rival gTLDs, but Hall said that it showed that investors are supportive of MMX’s new strategy.

So does this mean MMX is going to start devouring failing gTLDs for peanuts? Not necessarily, but Hall wouldn’t rule anything out.

“Our long-term strategy is ultimately based around being an annuity-based business,” he said. He’s looking at companies with a “strong recurring revenue model”.

About 78% of ICM’s revenue last year came from domain renewals. The remainder was premium sales. For MMX, renewal revenue doubled to $4.8 million in 2017, but that’s still only a third of its overall revenue (though MMX is of course a less-mature business).

So while Hall refused to rule out looking at buying up “struggling” gTLDs, I get the impression he’s not particularly interested in taking risks on unproven strings.

“You can never say never to any opportunity,” he said. “If we come across and asset and for whatever reason we believe we can monetize it, it could become an acquisition target.”

The acquisition is dependent on ICANN approving the handover of registry contracts, something that doesn’t usually present a problem in this kind of M&A.

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