minds + machines group limited financial results fy2016 · .bradesco.gop. contested...

Minds + Machines Group Limited

Financial Results FY2016Presentation – 25 April 2017

http://mmx.co

DisclaimerThe following is a presentation (the “Presentation”) relating to Minds + Machines Limited (“MMX”). The Presentation is being communicated by MMX. It is confidential. Recipients may not provide, or otherwise make available, this Presentation to any person whatsoever and no part of it may be reproduced in any manner without the written permission of MMX. The information in the Presentation is subject to updating, revision and amendment. The Presentation does not constitute or form part of any offer or invitation to sell or any solicitation of any offer to purchase or subscribe for any shares in MMX. No reliance may be placed for any purpose whatsoever on the information contained in the Presentation or any assumptions made as to its completeness.

No representation or warranty expressed or implied is given by MMX or any of their officers, employees or agents as to the accuracy of the information or opinions contained in the Presentation and no liability is accepted for any such information or opinions (which should not be relied upon) or for any loss howsoever arising directly or indirectly from any use of the Presentation or its contents. The actual results, performance or achievements of MMX may be materially different from the future results, performance or achievements expressed or implied by any opinions, estimates and projections included in the Presentation. This Presentation is exempt from the general restriction on communications contained in section 21 of the Financial Services and Markets Act 2000 (“FSMA”) on the grounds that it is being provided only to persons of a kind described in Regulation 19 (being persons with professional experience in matters relating to investments), Regulation 48 (being a certified high net worth individual), Regulation 49 (being high net worth companies, trustees of high net worth trusts or unincorporated associations), Regulation 50 (being a sophisticated investor) or Regulation 50A (being a self-certified sophisticated investor) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Financial Promotion Order”) or to persons who are otherwise permitted by law to receive it.

Any recipient of this Presentation who does not fall within Regulations 19, 48, 49, 50 or 50A of the Financial Promotion Order or as described above; or to whom distribution is otherwise not lawful may not rely on it, and should return the Presentation to MMX immediately. Neither any company nor any person involved in the preparation of the Presentation owes a duty of care to any person or any recipient. Each person or company must undertake such investigations as they see fit before entering into any contract of any kind. If you are in any doubt as to what action to take, you are recommended to seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorized under the FSMA immediately. Presentation to MMX immediately. Neither any company nor any person involved in the preparation of the Presentation owes a duty of care to any person or any recipient. Each person or company must undertake such investigations as they see fit before entering into any contract of any kind. If you are in any doubt as to what action to take, you are recommended to seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorized under the FSMA immediately.

Minds + Machines Group Limited | Financial Results FY2016Slide 2

To be a leading pure-play registry of new generic top-level domains (“new gTLDs”) delivering a predictable annuity revenue stream

of scale

Our Mission

.vip

.casa.beer

.work .yoga.fashion

.boston

.cooking.law

At a glance

Minds + Machines Group Limited | Financial Results FY2016

Market Cap: GBP75.2m | Ticker Symbol: LSE: MMX

Domains under managementincluding committed orders, currently

c1.2 millionup from 821,000 as of 31.12.16 (31.12.15: 289,000)

FY 2016 gross billings

$15.8million – up 100%(FY 2015: $7.9million)

FY 2016 billings operating EBITDA profitbefore one-off restructuring costs,

$4.2 million(FY 2015 billings EBITDA loss of $6.6million –excluding one-off private auction proceeds)

Intangible assets

$45.6million(still based on book value)

Cash and cash equivalents

$15.3millionas at 31.12.2016

Slide 4

Key business highlights

• Nascent, large and fast growing market

• Diversified and differentiated world-class portfolio of top-level domain assets

• Successfully transitioned into a low cost-base, pure-play portfolio registry

• Strong global distribution partner network – Asia, Europe, US

• Clear vision of underlying customer base, markets and appropriate revenue model

• Experienced management team

• Proven monetization strategy now delivering profitable growth


Global Registrants per CountryFast growing market

Minds + Machines Group Limited | Financial Results FY2016

Net Registrations

Net Growth31 December 2015 31 December 2016

Verisign (.com, .net) 139.8m 142.2m 2.4m

Country codes 138.1m 142.7m 4.6m

New gTLDs 11.2m 27.6m 16.4m

Source: Verisign

China | 48.2%13,937,779 Domains

Whois Proxy (Unknown Registrant) | 22.2%

6,424,270 Domains

USA | 10.81%3,124,445 Domains

Other | 9.5%2,756,676 Domains

Germany 2.16%

Russian Federation 1.78%

United Kingdom 1.49%

Japan 1.27%

France 1.00%

India 0.76%

New Zealand 0.76%

Key drivers

Global growth of SME’s

Digital entrepreneurs

Domain investors

Slide 6

Differentiated and diversified portfolio


Uncontested TLDs

In partnership

On behalf of clients

.abogado .bayern .beer .boston .budapest .casa .cooking

.dds .fashion .fishing .fit .garden .horse .law

.luxe .miami .nrw .rodeo .surf .vip .vodka

.wedding .work .yoga .购物

.country .london

.bradesco .gop

Contested TLDs.cpa .gay .home .hotel .inc .llc

In partnership

.music

• Owner/operator of leading China facing new gTLD .vip- Upto 8 further TLDs going

through Chinese regulator, MIIT, approval process

• Largest portfolio of geographic gTLDs– 6 in Europe & US

• Quality vertical interest & generic TLDs

MMX REGISTRY

REGISTRARS

Low cost-base portfolio registry operator


• Business transformed into pure-play registry by new management team during 2016

• Now structured to operate across three key geographic regions – US, Europe, Asia

• OPEX capped at $6million (ie. goal: <33% of gross billings in a stable state environment)

• COGs capped at 20% of gross billings so as to deliver targeted gross margin >80%

• Global distribution partner network established

REGISTRY SERVICE PROVIDER

END USERS

Strong global distribution partner network& office location


North America 34

South America 1

UK 14

China 50

Rest of the world 7

Continental Europe 37

Japan 3

India/South East Asia 5

Munich (Germany) 1

London (UK) 2

Dublin (Ireland) 3

Xiamen (China) 2

Remote 5

Seattle 7

Office Locations

Headcount

(includes Exec team) 20

Registrar partners per region

Key

Experienced management team


Executive Directors

Non Executive Directors

Toby HallChief Executive Officer

Michael SalazarChief Operating Officer & Chief Financial Officer

Guy ElliottNon-Executive Chairman

Henry TurcanNon-Executive Director

Senior managers

Deep ShahFinancial Controller

Solomon AmoakoVP, Channel Management

Yuling HuangGeneral Manager, China

Caspar von VeltheimDirector of European Operations + Sales

Victor H. PittsDirector Premium Sales, Americas

Lou AndreozziCEO, Dot Law Inc.

Clear vision of underlying customer base, markets and revenue model

• Supporting registrars to target SME’s and vertical sectors

• Supporting registrars to target digital entrepreneurs

• Supporting registrars to target domain investors


Key end-markets Supportive revenue model

First year premium name billings

Standard name sales and ongoing renewals

1st Year 2nd Year 3rd Year 5th Year4th Year

289,000

821,000

1,200,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2015 2016 2017 - to date

Proven monetization strategy now delivering profitable growth


KPIs Domains under management

DU

Ms

7,922

15,800

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2015 2016



Annual gross billings $’000

Annu

al g

ross

bill

ings

$



Fixed OPEX

$’00

0

11,745

7,182

6,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2015 2016 2017 - expected

148%

45%

0%

20%

40%

60%

80%

100%

120%

140%

160%

2015 2016

OPE

X as

a %

of g

ross

bill

ings

84.04%83.92%

80.00%

81.00%

82.00%

83.00%

84.00%

85.00%

86.00%

2015 2016



Gross margin (on gross billings)

Gro

ss M

argi

n %

-6,574

4,209

-8,000

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

2015 2016



Billings operating EBITDA before restructuring costs

$’00

0

1.8m

3.8m

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

1,000

2,000

3,000

4,000

5,000

6,000

2015 2016 2017 - trend

Renewals - $ Annual renewals as a % of OPEX



Annual renewals - $ amount & % of OPEX

$’00

0%

of OPEX

Financial highlights


Billing operating EBITDA FY 2016

$000’sFY 2015 $’000’s

%Change

Billings(1) 15,800 7,922 100%

Partner payments (1,868) (1,487) 26%

Revenue less partner payments 13,932 6,435 117%

Cost of sales (2,541) (1,264) 101%

Gross margin 11,391 5,171 120%

Gross margin % 82% 80%

Cash expenditure

Operating expenses – ongoing (6,536) (11,745) (44%)

Operating expenses – forfeited (646) - -

Billing Operating EBITDA (before restructuring costs) (2) 4,209 (6,574) (164%)

(1) Billings refer to total sales generated during the year (not deferred for accounting purposes)

(2) Operating earnings before interest, tax, depreciation & amortization and other non-cash charges where earnings are calculated on the basis of billings as opposed to accounting revenue. It should be noted that for accounting purposes Operating EBITDA before restructuring was $3.6 million as highlighted in the Group’s 2016 Income Statement.

Summary income statement


2016 2015Revenue 15.00 6.32 Less: Partner payments (1.52) (0.84)Revenue Less Partner Payments 13.48 5.48 Cost of Sales (2.54) (1.26)Gross Profit 10.94 4.22 gTLD applications (0.15) 7.79 OPEX: Ongoing (6.53) (11.74)Forfeited (0.65) -

Operating EBITDA before Restructuring 3.61 0.27

Other (F/X, etc) (0.53) (4.64)Restructuring - Operating (1.17) -Restructuring - Contracts (3.75) -

EBITDA (1.84) (4.37)Other (Deprec, etc) (0.33) (0.30)Discontinued Ops (2.33) (4.68)

Net Profit / (Loss) for the year (4.50) (9.35)

Group Statement of Comprehensive Income

Accounting revenue more than doubled

Gross margin exceeds 81%

Net of one-time gTLD private auction revenue, 2015 had an Operating EBITDA loss of $7.67million on like for like basis

Reflects restructuring of challenging contract signed by previous management into structure that can now potentially deliver future economic interest

Without these costs, 2016 would have delivered a net profit of $3.4 million – they will not occur in 2017

COMMENTS

Summary balance sheet


Group Statement of Financial Position COMMENTS

Non-current Assets 2016 2015• Intangible 45.60 41.29 • FFE 0.09 0.19 • Goodwill 2.83 2.83 • JVs 0.39 0.83 • Other LT Assets 3.32 3.45

Total Non-current Assets 52.23 48.59

Current Assets• Cash 15.28 34.65 • Receivables 7.95 5.61

Total Current Assets 23.23 40.26 Total Assets 75.46 88.85

Liabilities• Trade Payables & Other (14.98) (8.97)• Lease obligations - -

Total Current Liabilities (14.98) (8.97)NET ASSETS 60.48 79.88

Equity• Share Capital 60.06 73.82 • FX 0.74 1.40 • RE 0.01 4.99 • Non-controlling Interests (0.33) (0.33)

TOTAL EQUITY 60.48 79.88

Assets in at book value. Change relates to .boston acquisition and value of restructured contract

Company maintains a strong cash position even after net $13.5 million share buyback, acquisition of .boston and restructuring

Primarily related to deferred revenue & accruals plus obligations from restructured contract

Share capital reduced 8% to 699,857,562 (31.12.16), Warrants, options, and RSU’s reduced 41% to 42,809,590 (31.12.16).

Summary cashflow


Group Cash Flow Statement COMMENTS

Includes Restructuring and Discontinued Operational costs of $2.5million

Reflects net share buyback

2016 2015

Cash from Operating EBITDA 3.61 0.27

One-off Discontinued Ops -1.31 -3.88

One-off Restructuring -1.17 -

Change in AR/AP/Other -1.76 0.82

Private auctions 0 -7.94

Cash from Operating Activities -0.63 -10.75

Cash from Investing Activities -3.76 8.7

Cash from Financing Activities -14.97 -9.98

•Net (decrease)/increase in cash -19.36 -12.03

•Cash at beginning of year 34.65 45.8

•FX -0.01 0.88

Cash at end of year 15.28 34.65

Summary

• Young business experiencing significant growth in a rapidly expanding, but still nascent, industry that has the potential to match .com/.net or the country codes within a 5-10 year time-frame

• Low operating cost pure-play registry with world class portfolio

• Registrations up over 40% year-to-date, following a near three-fold increase of registrations in 2016

• A loss making business transformed into one with ongoing profits by new management team

• Expanding global foot-print and distribution partner network established; and

• Significant scope for further billings and revenue improvement from premium and standard name inventory as Company looks to transition into a highly predictable annuity based business of scale


Appendix 1


Holder Amount Percent

Lombard Odier Asset Management 140,344,766 20.05%

London and Capital Asset Management Ltd 105,781,945 15.11%

Hargreave Hale Limited 64,014,389 9.16%

Oryx International Growth Fund Limited 52,550,000 6.94%

Hony Capital 50,107,692 7.17%

Guy Elliott * † 20,250,000 2.89%

Michael Salazar * 1,975,050 0.28%

Caspar von Veltheim ‡ 916,613 0.13%

Toby Hall * 500,000 0.07%

Major ShareholdersThe Company’s issued share capital consists of 699,857,562 Ordinary Shares of no par value. No Ordinary Shares are held in treasury. The total number of voting rights in the Company is 699,857,562. The percentage of Ordinary Shares not in public hands is 37.05% per cent.

The Company has been notified, in accordance with the Disclosure and Transparency Rules, of the following directors’ holdings and shareholdings amounting to 3% or more of the issued capital with voting rights:

* Director † Includes the interest of the Elliott Family Irrevocable Trust ‡ Director of a subsidiary

Thank you

http://mmx.co

minds + machines group limited financial results fy2016 · .bradesco.gop. contested...

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