Member Info for Silverblade

Sounds like adultblock to me. Whoever negotiated this deal should no longer be with the business - it’s one commercial farce too far. And if it was adultblock / what about all the commission that went with the sales? And registry payments? Incompetence - and the change in senior management team recently is likely connected - but should not stop there, the buck stops with MS for me. SB

Best of luck BKD - I’m sure it was a difficult decision to move on from mmx - but sometimes we are all guilty of becoming too emotionally attached to an investment (I know I do) and sometimes the correct decision is to put our focus elsewhere where that attachment puts us in a better place! Good timing on your exit - although I appreciate that might not have been the return you were looking for here - but that’s a pretty common theme here....SB

Agreed SS / can you imagine the conversation the IIs who upped their stakes earlier this year must be having. This may be the tipping point for change - management and corporate. SB

Surely not 3 days after an investor event. We appointed a chief revenue officer last year - who now appears to have left. What was his role in this - responsible or did he uncover? Could be adultblock revenue? Any way you look at it MS Has shown a history of poor accounting and poor commercial decisions. This appears shambolic. SB

if your looking at the web site they are - but the web site has not been updated following yesterdays presentation which included the new senior management team I noted - esp Yuling's new position and John Matson which does appear to be Solomon's ob. Not saying they are all gone - but there are definitively changes afoot. SB

Not quite sure what’s going on with our senior management team. Start of year we had Vaughn Liley (Chief Revenue Officer); Deep Shah (Financial Controller); Christa Taylor (Chief Marketing Officer); Sheri Falcon (Policy and Counsel); Yuling Huang (General Manager, China); Ben Anderson (COO); Solomon Amoako (VP, Channel Management); Roman Prendergast (CTO); Casper Veltheim (European Sales).

Our latest senior management team – Ben, Deep, Casper and Sheri as is. Yuling now Global Channel Director. John Matson, Americas Channel Director (possible ‘contractor’ given he runs a tech consultancy?). No mention of Vaughn, Christa, Solomon or Roman – they are either no longer part of the senior management team, or no longer part of the team full stop? SB

It does look like the current tender offer is having a somewhat negative impact on our share price – failing to satisfy those investors who believed (and were told in January this year) that a dividend was forthcoming. Somehow we appear to be witnessing another failure to create shareholder value. The upside to this is that more shares can be purchased with the £3m if the share price remains sub 6p and there is a 15-20% premium for the tender offer – or quite frankly why bother. That said – if the tender offer is 7p a share – its hardly the greatest bit of business for investors here is it. Out of interest - the last tender offer was in 2016. At the time of the formal announcement, the share price was 11p. The tender offer was for 100m shares at 13p (20% premium to share price) and was classed as a £13m return to investors. Over the next couple of days the share price rose pretty close to the tender price of 13p (so perhaps some general uplift associated with the move) - but within 6 months was at 8.5p – which prompted the strategic review which in turn spurred the price up to a peak just under 14p in August 2017. It’s been a horrendous three years since…..! SB

Correction to my post yesterday on the adultblock pipeline. Turns out there are 80,000 Sunrise B domains – 15K were initially reserved by ICM at the time and related to celebrities, cities, religion, culture and therefore could not be purchased for use. The remaining 65K number now referred to as the sales opportunity are domains held by trademark holders who are protecting their brands from being registered as adult sites. Adultblock appears to be a strong product, with a healthy pipeline. Only time will tell if our pricing model and market appetite for the protections on offer lead to a high uptake. SB

I think they got the original number wrong - there were 80k registrations in total covering 15k sunrise A - actual xxx domains - and 65k sunrise b - defensive xxx blocks. A healthy sales number appears a key requirement to shift the needle here - and even 50% in the next 12 months would be stellar - with a decent portion of 10 year blocks adding significantly to our annual revenue. It seems strange to now be focused on a product never in the original plan as a catalyst for recovery - and let’s hope our IIs bought in recently on this potential change in fortune having been party to some forecasts. SB

If we assume our H2 revenue takes a hit on broker sales as per H1, but follows the same overall reduction ie 5%, H2 should be $9.5m before additional adultblock. What is unclear is whether any of last years adultblock sakes were multi year ie up to 10 year deals in which case there will be some benefit from the 2000 sold last year. Let’s assume the selected registrars have been chosen as those best placed to make some sales this year - with about 16k in play this year and next with their registrations. Toby and Michael always make it sound like all is going great - but the key metric of shareholder value is always missing. SB

The H2 weighting has always been made to sound more than it actually is. This perhaps refers more to renewals than actual bottom line revenue. Last year H2 performance was 10% higher than H1 (H1 $8.9m v H2 $10M = $18.9m total) . In 2018 (H1 $6.1m v H2 $6m after stripping out $3.2m ICM = $15.3m total) it was pretty much like for like. There was a big swing in 2016 (H1 $5.3m v H2 $9m = $14.3m), but nothing in 2016 (H1 $7.3m v H2 $7.7m = $15m). So no real pattern I can see to support the H2 claim. SB

As you say bakky - not a huge amount to get excited about – but some positives. Excluding directors, in 2018 we had 23 employees, in 2019 we had 21, now in 2020 we have 18. In 2020 we have 3 registry service providers - next year we will have one. In 2019 our total costs $12.6m. This year, c.$12m. 2021 c. $11m. Not huge leaps but going in the right direction. And yet – despite costs savings, tender offers, buybacks, proposed FCF distributions, cash generation, cash reserves, core business doing ok, potential high margin AB product – our valuation is dreadful. 3 years ago the business was valued at c. £100m. 4 years before that c. £130m. Today c. £50m, and once again we dip below 6p. Brutal performance for virtually all shareholders. SB

Correct. Will send some questions in the morning. See you at 3pm. SB

Just to reiterate and reinforce our knowledge of our IIs motivation – Harwood Capital hold 70m shares via their Oryx International fund – which seeks “a retail investor who is seeking long term (at least 5 years) real growth in capital value from investing in medium and small sized companies”. Oryx made their first big investment in 2015 (50m in two tranches at 8p), adding another 16m in May this year at 6p – averaging somewhere about 7.25p. Pretty clear they have zero interest in a dividend – all about increasing capital. SB

Looking at the purchase action of II's this year I would say loading up is exactly what they have been doing - almost 70m shares this year so far between them. SB

You are more likely to be correct than not on the dividend point SS. Certainly the u-turn on paying a dividend speaks volumes about current company strategy. Given the cash on our balance sheet is not being used in any meaningful way, and the share price is at a virtual 10 year low, using excess cash to reduce shares in circulation makes sense from a medium-term investment perspective. What frustrates me is what shares have been bought and cancelled to date (23m plus 5m+ in treasury) were less than last year’s executive team options (c.29m); and we appear to have awarded another 25m this year, with an expectation that c.40m (based on a 7.5p offer price) may be purchased in the upcoming tender offer. So we are using company reserves to stand still in overall share count given the dilutive nature of the options (currently 65m – with a very low average price trigger which I would be very surprised is not achievable over the next 12/18 months). The level of recent management options are significantly in excess of prior years – and appear to include a rolling uplift dealing with previous years expired options. The team are now heavily incentivized to secure a deal – and will likely make many $$ms in the process. I will be very interested to see if any of our II’s (and Guy Elliott) intend to participate in the offer; or whether they are using this as an exercise to increase their overall % holdings and subsequent take of any future sale. SB

It’s certainly looking that way Hucks. IIs control the business and are not interested in short term returns. It’s the sale pay day they are after. That said, the reference to distributing 50% of the FCF next year onwards requires further clarification (could this be a dividend) - I suspect this is a concession TH has secured on behalf of PIs - but I could be wrong. And YHAL don’t think for a second our major IIs are not looking for a clear strategy to a profitable exit - they have invested tens of millions of pounds into the business and small % of their portfolios or not that needs to be reported on and justified given the recent increase in holdings. IMO. SB

Hello MMX_IR (Investor Relations?).

Probably best just to say CEO H1 2020 video is available on BRR Media web site? and YouTube? SB

Unless I missed something – I don’t believe we have seen an official release on this year share option awards. But according to the accounts there has been one – a $300k share based payment expense has been included in H1 2020. On investigation – we entered the year with 48m options outstanding with various performance criteria. During H1 2020 9m options expired as they failed to meet their conditions (base price of 7p) – the numbers don’t quite tally as there were actually 10m shares awarded to TH and MS in 2018. However – by the time of the H1 2020 results we now have 65m share options outstanding. So in H1 2020 – 25m share options were awarded (13,853,200 options and 10,915,400 Restricted Stock Units ("RSU's) to the Executive team and key employees according to the accounts). Bear in mind the company spent $1.2m cancelling 16m shares at 6p in H1 2020 whilst issuing 25m options at a similar price. Even at 6p the options are worth more ($1.5m) than our entire PBT for the first half of the year. That's some bonus. I say similar – because there is no record of the award, no details on the vesting conditions and for me leaves a bad taste in the mouth. As a minimum – if these awards were for TH and MS and others – TH and MS should have declared their increased interest – I would suggest each now have in the region of 30m options available in future years tied to various conditions relating to share price and cash generation. Doesn't make trusting the guys any easier does it - although as I say I may have missed something.......SB

Bakky/Hucks - Had a wee look at adultblock and adultblock+ to refresh myself. The previous sunrise B programme was designed for businesses, celebs etc who wanted to block their name from being used in a xxx domain – looks like cost was about $200 for the full 10 year block – with 65k registrations held by the registry itself so don’t resolve on the web - a nice $13m pay day for SJL that year. Mmx’s new adult service can be for 1,3,5 or 10 years – with adultblock covering a single string in all four adult domains; with adultblock+ extended to include all variations on the string known as homographs (“non-Latin-script domains that look almost identical to the original”). The prices were discounted last year – but regular pricing is adultblock c.$350 per year and adultblock+ c.$800 per year – although there may some more incentives introduced for the Q4 sales campaign - with 16k target domains with the two selected registrar partners. These are retail so our wholesale price would be lower. So if we could generate $400/500 average for each sale; that’s $400/500K per 1,000 blocks. This could be a game changer if we get anywhere near 50% take up – and even 10,000 sales converted into renewals would be significant – to put it in context our total new sales in H1 2020 was $2.7m. 10,000 @ $500 = $5m. 20,000 = $10m. etc! Something positive to look forward to. SB