The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
and don’t forget afilias do “ own “ and run .info and .mobi in their own right from previous rounds .
franks shillings 25 ngtlds have around 250k regs , so something isn’t quite right when we see 2.3 M from 28 tlds . i don’t have the numbers to hand but if u analyze the donuts own pricing and regs per tld you get a picture of how things “ should be “ in this space ...
silver ,
hopefully my answer was enough but if i had to put a guesstimated sticker price on the afilias deal i would be thinking in the $400-600MM range .
my thoughts on this deal and how it relates to mmx.
the good :
shows consolidation still ongoing
the multiple i am sure will be around 12x NETT revenue ( as i have recently defined )
the not so good :
another would be acquirer of mmx is taken off the field , along with neustar who were bought by godaddy a few months ago : neustar and afilias were big independents.
as recently mentioned the leviathans left , Donuts , Godaddy and Versign with their multi billion dollar market caps are NOT going to touch MMX with a barge pole in anywhere near its present state . not a size thing , more a profile and transparency and quality of revenue thing imho . they simply can’t risk it with any questions surrounding the business for the $100-$150Mm price point / a wrong move could wipe 2-3 times that off their respective market caps , so not happening anytime soon or at all under mmx revamped and running free and clean for at least a year .
that leaves potential acquirers of radix and cnic imho : radix are more sellers of businesses than buyers .
that leaves CNIC , which in my opinion have their own set of issues to deal with in due course as they try to manage the businesses they have bought : is a deal to be done there for sure but , like ours with mmx would need a decent slug of cash and a cautious view of the long term value of any shares that would make up the deal .
may put a half decent sticker price on a deal i guess and the cnic shares may hold up long enough for everyone to clear out .
BTW : had we sold to CNIC instead of MMX in 2018 we would have seen an almost 50% share price increase ( and more cash ) in the period since , i definitely backed the wrong horse at the time ...
https://domainnamewire.com/2020/11/19/donuts-is-acquiring-afilias/
but a decent speciality TLD like .dds can be made to wipe its nose with even just say 3,000 regs..
3,000 X $100= $300,000
less icon fees of 25,000
backend fees of say 1,500
leaves a $270,000 + annual "contribution"
I have a feeling that .dds was initially applied for as a specialty old for dentists who suffix their credentials as DDs here in the US. perhaps they need ICann permission to expand it to a wider "general" TLD... IMHO .dds would have been better for ethereal than .luxe.... Digital Data Service or whatever
just by chance, I received an email to my inbox outlining some of Afilias nTLD wholesale prices effective jan 2021.
.info 19.99
.archi 68.49
.bet. 17.49
.bio 64.49
.black 55.99
.blue 17.49
.kim 17.49
.lgbt 42.49
.pet. 17.49
.pink 17.49
.poker 54.99
.pro 17.49
.promo 17.49
.red 17.49
.shiksha 17.49
.ski 44.99
I think I have made my point....
Scotty,
IMHO, yes...
bakky ,
agreed : Disher i understand is known to TF as they are both canadians and looks top drawer and i’m guessing it was his alertness that exposed the prior wrongdoing that caused the “ investigation “. that kind of forensic ability is what u would expect from a long served senior ex PWC senior partner and is very welcome
bakky ,
perhaps some may get nervous as the scabs get pulled off and the dums drop ...
Silver ,
honestly i think the II’s and even the non execs don’t and never had understood the domain industry and have largely gone along with the story and bill of goods sold to them by TH and MS. in truth so did the ICM vendors so no blame there . i always made clear my suggestions and there were soothing words and nods of agreement but then a more insidious more of the same with no sign of exposing the window dressing that had gone on before . is always hard to put ones own hands up when you have had your hands on the tiller during the period in question and have been the architect of the “ plan “. so needed TH and MS to go for this hopeful metamorphosis to occur . i am pretty sure that TF and BD will run all the numbers to see what is the best path forwards with a clean slate . i would recommend they announce the strategy , once developed , in a fairly transparent manner so that shareholders aren’t operating in a vacuum and everyone can strap themselves in for a bumpy ride . This is a 12 month plan , not a 5 year plan .
i just had to laugh out loud at myself , that’s the whole game plan laid out in public and free of charge :-)
like i have said , repeatedly , not rocket science and if can’t be written on the back of a fag packet , probably means is too complicated .
best to all !
silver ,
spot on : not my style of doing business and not TFs either from what i know of working with him for 10 years .
“ price support “ is “ incentives “ in whatever form they may take
bakky ,
yep that’s where the industry experience of a TF and someone like a Dan Schindler comes into play .
model it all out , make a decision , take a deep breath , execute and try not to scream as the scab gets ripped off ... let the cards go in the air based on best industry knowledge and estimates and let them fall where they may . truth will out within 12 months . honestly can’t see that the nett/ nett on the overall portfolio will end up with a better result than continuing more of the same subterfuge and blind hope .
at least what comes out at the end will have a normalized profile that can be sold at standard industry multiples .
we know $7.5 is already in the bag .
as i mentioned before even $14 million nett revenue ( only another $7 million from 28 tlds for goodness sake !) would generate imho a 10–12 multiple on nett revenue which is a market cap far north of what it is today .... so just to make it clear to achieve that hurdle of 7-8 mill net of cogs fir the remaining portfolio assuming let’s say an average of only $10 net per name is only 700-800k regs vs the current 2.3 million .
the company imho can do way better than that .
silver ,
totally agree and i think the company got themselves trapped on the hamster wheel and in a vain attempt to keep the headline DUMS number up in the 2 + million region , resorted to “ price support” for the “low price , low renewal “ names as you describe them to be able to make them appear to renew at industry standard / beating 75% renewal rates . smoke and mirrors and the major industry players simply not buying that story even though we may have over the last few years . that’s the unvarnished truth i think
bakky , i’m not actually sure but if you say for the non icm revenue it’s $10,000,000 divided by say 2,300,000 names that comes in at an average of $4.53 per or so and i’m convinced there is also “ price support “ in some of those names too .
if that was just $12 a name and dums halved to say 1.2 million thats $14 million revenue plus the $7.75 or so for icm putting the company over $20MM .
just sayin.
BB ,
you are correct and my numbers were just a dramatic example not a specific suggestion to enable you to see the modeling .
part of the point i was making that most people seem to miss , is the following :
the real value is built when the DUMS are real and used names . i.e. at the end of the name is a developed website ( which may take many hours to build ) or a strong defensive registration from a leading brand . once there is a website on the end of a domain the annual cost of keeping that name whether it’s $5 or $80 is probably is of little consequence to the registrant and renewal rates are in the 90 + % . this is the prime meat that a purchaser will pay a good multiple for .
super cheap names that are just used for redirects or pure speculation are of much less value to a purchaser as the provenance of those names and their continued renewal is far more speculative .
for the record i would like to see all the names at least $10–12 each and certain of them in the $50-100 range .
here’s a hypothetical worked example
let’s assume icann fess are 25 cents a name ( they are ) and that back end registry costs are 50 cents a name , so that’s a total cogs of 75 cents .
let’s say we have a TLD with say 300,000 regs currently priced at $3.00 a name with $1.00 a name in rebate / marketing support and 75 cents cogs .
that’s 900k headline revenue with 300k dums but actually only netts the company $1.25 a name so that’s a $375,000 a year nett contribution.
if you reprice do that same TLD to say $80 wholesale and As a result only the people who really “ wanted @ that registration kept theirs and dums dropped 90 % to 30k you would have $2.4 million in revenue and importantly the same cogs so 30,000x79.25 per tld that’s $2.377 MM nett contribution and only 30,000 registrations to manage rather than 300k.
so a reprice makes dums drop 90 % but profits for that Tld goes up more than 6 fold .
the renewal rates for that tld will then be high cos the only people registering them are people that actually want them , not a bunch of scammers or speculators .
the reputation of that TLD changes .
the value of that Tld on its own goes from perhaps $2-3 million to $20M .
makes that tld easy to understand , manage and sell to an acquirer .
again the above is just based on a hypothetical tld but wouldn’t be far wrong compared to some in the mmx portfolio and hopefully allows you to get my drift on all of this .
davand ,
that’s simply not the case .
the NEW management should easily be able to do an audit going back say 4 years on a TLD by TLD basis to analyze what each one makes or doesn’t make “ above the line “ , u would imagine 2 or 3 or perhaps a few more of the names will be classified as “write offs” with such few registrations to be unlikely to even meet the minimum icann COGs minimum fee of $25,000 per year and they should immediately be sold / auctioned off to see if some other player thinks they can make a silk purse out of them .
the rest need to go under the microscope with no view to prior performance and they should be modeled out using standard industry pricing elasticity to forecast registration levels at various price points to arrive at a revenue per tld number post icann fees and the neglible back end fees. any tlds with partner payments need to be examined and some hard conversations need to be had . my suspicion is that mmx didn’t play anywhere near hardball enough with the .london contract and possibly even the .law contract through fear of the market reaction to them exposing the hopeless nature of these prior regime contracts . i’m more of a “ rip the scab off and shine a light on “ type of chap rather than tippy toe around and try to brush under the carpet and keep secret .
ditto with any “ fake “ or loss making bulk registration deals that are just window dressing if the worst kind .
just admit them / blame on the previous crew / revamp prices and let the dums stabilize at a “ proper “ sustainable level .
isn’t going to be pretty but sustaining the window dressing is , imho , hog tying this company and worse , preclude a clean slate approach , which , again has previously deterred would be buyers and will do even more so in the future , with the field of bidders narrowing and with those remaining just simply not willing to take any “ risk” on something they can’t understand .
reprofile the wholesale prices to normalized prices , let the dums find their own proper level .
i can’t believe that you can’t end up with 25 “ performing “ TLDs that as a bundle would be worth $120 MM-180 MM .
won’t be done overnite but really is a very very straightforward job .
1) asses and analyze
2) agree and announce new pricing per tld with the appropriate 6 months notice required .
3) allow a full renewal season to elapse
in the meantime continue to reduce costs
within 12 months you have a refashioned business which may have lower / same / higher revenues and DUMS but at least it’s easy to understand with no complex , smoke and mirrors , convoluted explanation of how it makes money .
then it makes an easy bolt on for a larger player with no hidden banana skins for them .
so to answer your point
if i can see the company is willing to do these super simple , if tough , moves and i can see “ proper” pricing and structures by tld , then i , as an industry veteran , would likely take the “ gamble “ on buying