Blood on the boardroom floor after MMX admits revenue screwup

MMX’s top two execs are out, after the new gTLD registry admitted that the company misstated its revenue in 2019 and the first half of 2020.

CEO Toby Hall and CFO Michael Salazar both quit from the board and their executive roles with immediate effect, after a board probe concluded that its 2019 revenue was overstated to the tune of $1.7 million. Its 2019 net income was also overstated by $1.9 million.

In the first half of 2020, it understated revenue by about $80,000 and net income by about $200,000.

The screwups relate to not only the mystery $1.1 million contract MMX warned about earlier this month, but also two more contracts last year worth a total of $790,000.

The company received the cash from these unnamed partners and reported it as revenue immediately, when it should have recognized it only when the partners made sales to end users, MMX said.

Its revenue for 2019 should have been correctly reported as $17.2 million, and its net income should have been $2.8 million.

For the first half of 2020, revenue should have been $8.4 million and net income should have been $1.4 million.

The company said that Tony Farrow, an ICM Registry import who until recently worked as MMX’s COO, will return to the company as interim CEO.

Bryan Disher, an independent MMX director, will be interim CFO. Guy Elliott, currently non-executive chair, will become executive chair.

Lockdown bump was worth $600,000 to ICANN, but end of Club Med saves 10x as much

The coronavirus pandemic lockdowns and the resulting bump in domain name sales caused ICANN’s revenue to come out $600,000 ahead of expectations, up 4%, the org disclosed last week.

But ICANN saved almost 10 times as much by shifting two of its fiscal year 2020 public meetings to an online-only format, due to travel and gathering restrictions.

The organization’s FY20 revenue was $141 million, up by $5 million on FY19, against a rounded projection of $140 million. ICANN’s financial years end June 30.

ICANN said it is “uncertain if these market trends will continue”.

Back in April, the organization lowered its revenue forecast for FY21 by 8%, or $11 million.

Expenses were down $11.1 million at $126 million, 8% lower that expectations and $4 million lower than the 2019 number.

That was mostly due to a $6.2 million saving from having two public meetings online-only.

ICANN typically spends $2 million per meeting funding over 500 travelers, both ICANN staff and community members, but that was down to almost nothing for the first two meetings of this year.

Pre-pandemic, ICANN expected these meetings, slated for Cancun and Kuala Lumpur, to cost $4.2 million and $3.4 million respectively, but the switch to Zoom brought them in at $1.4 million and $0.4 million.

ICANN would have occurred some pre-meeting travel expenses for the Cancun gathering, which was cancelled at the last minute, as well as cancellation fees on flights and hotels.

The org has previously stated that the switch away from face-to-face meetings could save as much as $8 million this calendar year.

The rest of the savings ICANN chalked down to lower-than-expected personnel costs, with hiring slowing during the pandemic.

Incidentally, if you’re wondering about the headline above, it’s a reference to a notorious 2009 WSJ article, and outrage about ICANN’s then $12 million travel budget.

Eleven years later, the FY20 travel budget was $15.7 million.

CentralNic parking boosts revenue even as its registrars suffer

CentralNic reported what it called “outstanding” first-half financial results yesterday, with growth from its new parking business more than offsetting a decline in its registrar business.

The company reported H1 revenue of $111.1 million, up 124% year over year. Adjusted EBITDA was up 64% to $15.1 million.

But these remarkable numbers were driven primarily by acquisitions — CentralNic made four in the second half of last year. Its estimated organic growth was more modest.

On an apples-to-apples basis, revenue was up 18% and adjusted EBITDA was up 16%.

The company has reorganized how it reports its various segments into “direct”, “indirect” and “monetization”. Two of those segments grew while one shrank.

The direct segment, which basically means CentralNic’s collection of retail registrars, saw revenue down 11% at $21.6 million, but a lot of that was due to rejiggering the reporting segments. Apples-to-apples, revenue was down 1% at $20.9 million.

Indirect, which bundles together its wholesale registrars, registry and registry back-end services, saw revenue up 62% at $41.2 million. Apples-to-apples, the growth was 9%.

But the standout performer was the new monetization segment — domain parking, which became a big deal after CentralNic acquired German outfit Team Internet last year — which saw revenue up 38% at $48.5 million.

The one worryingly dark spot in this segment is the fact that one customer is responsible for over 92% of revenue.

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

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

.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

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%

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

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.