CentralNic extends XYZ deal until 2032

CentralNic and XYZ.com have extended their registry services pact for the next fifteen years, according to CentralNic.
Announcing its first-half 2017 financial results today, CentralNic said the back-end contract has been extended until 2032.
It’s an unusually long duration for a registry services contract, which are usually much more likely to run about five years.
It even lasts 10 years beyond the expiration of XYZ.com’s own ICANN contracts (though renewal of these is a near-certainty).
The deal covers all .xyz domains, as well as all of the other TLDs in XYZ.com’s portfolio. That currently includes the likes of .rent, .storage and .college.
CentralNic said it “will receive a fixed fee based on the volume of .xyz registrations and subscriptions managed” under the new deal.
In a statement to the markets, CEO Ben Crawford said the relationship “has been updated to normalise the Company’s revenues and profits going forward.”
I believe the previous contract contained a per-domain component, which exposed CentralNic’s revenue to .xyz’s erratic pricing-influenced growth trajectory.
.xyz’s zone file has shrunk by a whopping four million domains since this time last year, causing it to lose the crown of highest-volume new gTLD, due to it offering free or almost free domains that expired without renewing after a year.
However, CentralNic disclosed that the proportion of its own wholesale transaction volumes that were renewals (rather than adds and transfers, I assume) was 18% in the first half, up from 2% in the same 2016 period.
For the six months ended June 30, the company had overall revenue of £10.6 million ($13.9 million), up 18.5% year over year.
Its net loss after tax was £619,000 ($810,000), down from £1.3 million. At the EBITDA level, profit was £1.4 million ($1.8 million) compared to $900,000 in H1 2016.
While I still stubbornly think of CentralNic as primarily a registry play, in fact the company now gets about three quarters of its revenue today from its retail registrar division, which contributed just shy of £8 million to the total in H1.
Instra, the Australian registrar it acquired at the end of 2015, contributed £5.83 million.
The wholesale division, registry back-end services — contributed £1.82 million to revenue and £450,000 to EBITDA in the half.
That’s despite CentralNic being the back-end for six of the top 20 new gTLDs by volume — .website, .space, .tech, .site, .online, and .xyz
If we tally up the number of domains in only those six TLDs, we get to about 4.2 million, per their zone files.
The company’s third reporting unit, Enterprise, contributed £800,000 ($1 million) in the half, of which £360,000 ($471,000) came from premium domain sales.

Endurance losing founder-CEO next week

Endurance International, the parent company of registrar brands including Public Domain Registry, BuyDomains, Domain.com and BigRock, will see its founding CEO resign next week.
The company said this week that Hari Ravichandran will be replaced by Jeff Fox, most recently chair of customer relationship management software vendor Convergys, on August 22.
Endurance, which makes about 12% of its revenue from domain registrations, had disclosed Ravichandran’s plan to move on back in April, when it was characterized as an effort to move the company to the next stage of growth.
But it comes in the context, as the company has acknowledged, of an ongoing Securities and Exchange Commission investigation into its 2015 acquisition of Constant Contact.
The SEC probe has been going on since at least December 2015.
Endurance is also facing flattening top-line growth — revenue of $292.3 million, up 1% on last year, in the second quarter — and deepening losses.
Fox was CEO of Convergys from 2010 to 2012. He is also principal of The Circumference Group, his own investment/advisory firm.

Tucows revenue rockets after Enom buy

Tucows saw its revenue from domain names more than double in the second quarter, following the acquisition of rival Enom.
The company this week reported domain services revenue for the three months ending June 30 of $62.8 million, compared to $28.4 million a year ago.
That was part of overall growth of 78%, with revenue rising from $47.2 million in 2016 to $84.2 million this year.
Net income for the quarter was up 29% at $5.2 million.
Enom, which Tucows bought from Rightside for $76.7 million earlier this year, now accounts for a little under half of Tucows’ wholesale domains business, the larger portion going through its OpenSRS channel.
Sales from Tucows’ premium portfolio rose to $968,000 from $885,000 a year ago.
Its retail business, Hover, did $7.6 million of revenue, up from $3.6 million.

GoDaddy domains business grows 15% in Q2

GoDaddy saw its revenue from domain name sales increase by almost 15% in the second quarter, the company announced this week.
Its domains revenue was $263.3 million, up 14.6% on the same quarter last year.
That was part of an overall growth trend at the company, which saw revenue for the quarter up 22.3% at $557.8 million.
Revenue growth would have been a point higher but for currency fluctuations. GoDaddy now does about a third of its business outside its native US, helped a deal by its acquisition of Host Europe Group, which closed at the start of the quarter.
Net income for the period was $18.1 million, reversing a loss of $11.1 million a year ago.
Domains account for about 47% of overall revenue at the company.
GoDaddy said it had 17 million customers at the end of the quarter, June 30, adding about a million organically compared to a year earlier and 1.6 million from the HEG acquisition.
At the end of the quarter, the company had $591.2 million in cash and equivalents and debt of $3 billion.

Verisign confirms first price increase under new .net contract

Verisign is to increase the wholesale price of an annual .net domain registration by 10%, the company confirmed yesterday.
It’s the first in an expected series of six annual 10% price hikes permitted under its recently renewed registry agreement with ICANN.
The annual price of a .net registration, renewal, or transfer will go up from $8.20 to $9.02, effective February 1, 2018
If all six options are exercised, the price of a .net would be $15.27 by the time the current contract expires, including the $0.75 ICANN fee. It would be $14.52 without the ICANN fee.
The increase was confirmed by CEO Jim Bidzos as Verisign reported its second-quarter earnings yesterday.
For the quarter, Verisign saw net income go up to $123 million from $113 million a year ago, on revenue that was up 0.7% at $289 million.
It now has cash of $1.8 billion, up $11 million on a year ago.
It ended the quarter with 144.3 million .com and .net names in its registry, up 0.8% on last year and 0.68 million sequentially.

MMX stung for $7.7 million by crappy .london contract?

Did MMX take a $7.7 million accounting hit to renegotiate a crappy .london gTLD contract? It looks a bit like that to me.
Found in the company’s full-year 2016 financial results yesterday is the disclosure that it had to pay off an undisclosed gTLD partner after originally making “overly ambitious” predictions about its likely popularity.
The deal apparently had MMX — then under previous management as Minds + Machines — making guaranteed payments to its partner on the assumption that it would sell a lot more domains than it eventually did.
.london currently has about 56,000 names in its zone file, down from a post-launch peak of about 65,000.
According to its statement to the markets, MMX recorded a 2016 one-time contract restructuring expense of $3.8 million and has added a $3.9 million intangible asset to its balance sheet in relation to the contract.
That’s a total of $7.7 million, but CEO Toby Hall told DI that the cash payment was nowhere near that amount. He said:

in reality we have paid no where near that amount and much of this is the accounting treatment of a new contract that we believe has the potential to deliver future economic value to the business and will be covered from future revenues.

The gTLD in question is not named in the statement, and Hall also declined to name it in response to a DI inquiry, but MMX says of the contract:

In very early 2012, at the time when ICANN was still accepting new generic Top Level Domain applications, the then Executive Team entered into an overly ambitious agreement that it believed would provide value to the overall profile of the Group. The agreement had very significant financial commitments over the life of the contract and did not include any clauses that could allow the Group to renegotiate those commitments should the specific top-level domain not perform to the agreed financial projections. The growth of this top-level domain has not come close to meeting those expectations and the agreement has proven – and would have continued proving – to be a significant drag on the Group’s ability to generate positive cashflow from the given TLD.
In late Q4 of 2016 the current Executive team was able to successfully conclude renegotiations of certain components of the agreement by either restructuring or buying out certain financial commitments thus making it more economically viable going forward. As a result of the renegotiation effort, the Group has revised its modeling and believes that it can derive future economic benefit from the renegotiated contract. Accordingly, based on Management’s review, a portion of the buy out ($3.8million) has been expensed as a one-off restructuring cost while the remaining portion ($3.9million) will be capitalized as an intangible asset with future economic benefit.

All the evidence points to .london being the gTLD in question.
First, MMX says that the deal was entered into in “very early 2012”, which ties up with the timing of the request for proposals by the Mayor’s marketing office, London & Partners.
Second, MMX doesn’t have any other partner-based gTLDs that would plausibly have such ambitious commitments.
Third, MMX has previously stated that it was renegotiating some “burdensome” contracts. Last year, without relating it to a renegotiation, it said in a trading update that it was “encouraging to see an increasingly commercial and flexible approach from London & Partners, our Dot London partners”.
Fourth, word on the street back in 2012 was that L&P (which remember is affiliated with the London Mayor, an elected political office) had gone with tax-haven-based MMX rather than UK-based non-profit Nominet because MMX (then Minds + Machines) had offered the best financial incentives.
The scrapping of the old deal is perhaps another indicator of the hubris that accompanied the opening of the new gTLD program five years ago.
While L&P is the “owner” of .london, for want of a better word, in practice I gather that MMX runs it pretty much as if the gTLD was part of its regular portfolio.
The news of the contract changes were made in MMX’s audited 2016 results, which showed its billings doubling to $15.8 million during the year.
Revenue was $15 million, up from $6.3 million in 2015. Less partner payments, revenue was $13.5 million versus $5.5 million a year earlier.
The statement has half a dozen or more bottom lines, depending on what costs you exclude, but the one MMX wants us to look at is “Billings Operating EBITDA before one off restructuring costs”, which was $4.2 million compared to a loss of $6.6 million in 2015.
That, in other words, means that an unprofitable company has become a profitable one.
A lot of that has to do with the revenue from hundreds of thousands of .vip domain sales in China and a swingeing restructuring that led to headcount being slashed from 43 people to 20 people.
The company also sold off its registrar business to Uniregistry and started outsourcing its back-end functions to Nominet.
For 2017, the company has already disclosed two huge sales that will boost domains under management considerably, but at the risk of concentrating a larger part of MMX’s business outlook in just a few hands.
UPDATE: This article was updated a few hours after publication to clarify what MMX has said in relation to .london in previous trading statements.

CentralNic says revenue more than doubled in 2016

CentralNic’s revenue was up 110% in 2016, according to the company.
The registry today released its unaudited results for last year, showing EBITDA up 65% at £5.5 million ($6.7 million) on revenue of £22.1 million ($26.9 million)
The company, which has expanded into registrar services via acquisition in the last few years, said its recurring revenue — mainly domain registrations — now account for about 80% of revenue.
CentralNic has about a third of the new gTLD back-end market, primarily because it’s the provider for .xyz’s millions of cheapo registrations.
In its statement, it said it hopes to focus on growing more in China, where clients including .xyz were recently licensed.
It also intends to make more acquisitions, where the deals “meet clear strategic criteria including being earnings accretive in the short term with a strong recurring revenues base”.

Tucows says eNom may be shrinking as Melbourne IT drives 2016 growth

Tucows yesterday reported an 11% increase in revenue for 2016, driven partly by an acquisition, but warned that its more recent acquisition, eNom, may be shrinking.
The company reported revenue for 2016 of $189.8 million, up from $171 million in 2015. Net income was up 41% at $16 million.
For the fourth quarter, revenue was up 9% year-on-year at $48.8 million. Net income was down 9% at $2.8 million.
In a conference call, executives linked some of the growth to the April 2016 acquisition of Melbourne IT’s reseller business, which added 1.6 million domains to Tucows’ DUM.
While Tucows also operates its Ting mobile phone service, the majority of its revenue still comes from domains and related services.
In the fourth quarter, revenue was $30 million for this segment. Of that, $23.1 million came from domains sold via its wholesale network and $3.8 million came from Hover, its retail channel.
CEO Elliot Noss noted that the acquisition of the eNom wholesale registrar business from Rightside last month made Tucows easily the second-largest registrar after GoDaddy, but made eNom sound like a neglected business.
“The eNom business is a flat, potentially even slightly negative-growth business in terms of gross margin dollars,” he told analysts.
eNom’s channel skews more towards European and North American web hosting companies, which are a growth challenge, he said. He added:

We acquired a mature retail business and associated customers which for the past few years has been more about maintaining and servicing eNom’s existing customers as opposed to growth. It has not been actively promoted and as a result has a flat to declining trajectory. It’s something we don’t intend to change in the short-term, but as we look under the hood and get a better sense of the platform as we will with all of the operations, the long-term plan might be different.

The acquisition was “overwhelmingly about generating scale and realizing cost efficiencies”, Noss said.
Tucows paid $83.5 million for eNom, which has about $155 million in annual revenue and is expected to generate about $20 million in EBITDA per year after efficiencies are realized.

GoDaddy revenue tops $1.8 billion in 2016

GoDaddy today said that its revenue for 2016 topped $1.8 billion.
In a preliminary disclosure to the markets ahead of its formal February 15 earnings announcement, the registrar said that annual revenue for 2016 is expected to come in at $1.84 billion.
That compares to $1.6 billion in 2015.
Its fourth-quarter revenue is expected to be $486 million, up from $425 million in the fourth quarter of 2015.
GoDaddy said that at the end of the year it had $573 million in cash and equivalents and just over a $1 billion in long-term debt.

MMX billings double even as some volumes slide

MMX has reported a 100% increase in billings for 2016, despite its number of domains under management dropping in some TLDs.
The company, until recently known as Minds + Machines, said billing were $15.8 million in the year to December 31, compared to $7.9 million for in 2015.
Billings is an up-front measure of sales growth that does not take into account the way domain revenue is recognized over the life of the registration.
The company said, in a trading update to the London markets today, that billings and domains under management do not necessarily correlate. The former can be up even if the latter is down:

For example, in 2016 .work generated $392,000 off 81,000 registrations compared to $206,000 off 102,000 registrations in 2015 reflecting the use of a promotional initiative to drive registrations that year.

MMX also disclosed that China now accounts for more than half of its billings: 59%, compared to 24% for the US and 17% for Europe.
That’s largely based on its launch of .vip, which launched last May and has half a million names mainly because of the resonance of the string in China.
The company said it intends to imitate its focus on .vip in 2016 by only launching two TLDs — .boston and one other — in 2017.
MMX’s formal, audited 2016 financial results will be published in April.