Minds + Machines Group Limited – Final Results

Minds + Machines Group Limited (AIM: MMX), the top-level domain registry company, is pleased to announce Final Results for the year ended 31 December 2018.

Toby Hall, CEO of MMX, commented:

“2018 has been a transformative year, the ICM acquisition accelerating our ability to mature into a business where growing, highly predictable, recurring revenues now account for the majority of our income and underpin the business’s forward momentum in place of the one-off revenues that historically enabled the Group to fast-track its way to maiden operating profits over the prior 24 months. 

“In addition to driving growth from our significant library of TLDs in the year, we  also launched our first R&D Innovation project, .luxe, in November and are greatly encouraged by the progress it continues to make and the strategic relationships it is allowing us to develop.

As indicated in the Interims, the year has also been used to tackle certain historic contracts so that a clearer picture of the Company’s ongoing progress can be presented in future periods. Consequently, the strong underlying performance of the business and cash collections in 2018 have been tempered by the provisions and restructuring costs affecting the reported profitability. Notwithstanding that, we have a robust operating platform and methodology which will enable us to continue successfully monetizing our portfolio, the business now being well positioned for future growth.” 

2018 Financial Highlights:

• Group revenue up 5% to $15.1m (2017: $14.3m) net of the impact of reversing $586k of revenues recognized in prior periods
• Cash collections on normal operations (i.e. net of contested domain resolution revenue/other income) up 30% to $16.1m (2017: $12.3m)
• Renewal revenue up 97% to $9.4m (2017: $4.8m) representing 62% of Group revenue (2017: 34%)
• Core milestone achieved of renewal revenue surpassing Cost of Sales and Fixed Overheads for the first time – Cost of Sales and Fixed Overheads contained at $3.5m and $5.5m respectively (2017: $3.4m and $5.3m) in spite of the expansion of the business
• Regional split of revenues improved, the US sales team contribution increased to 57% of Group revenue (2017: 32%), China reduced to 29% (2017: 53%), with Europe remaining broadly flat at 14% (2017: 15%)
• Exposure to one-off income from brokered premium sales reduced to under 15%  (2017: 38%)
• Provisions of $13.4m made including a bad debt provision of $2.1m, onerous contract provision of $7.2m and impairment of the underlying asset of $4.1m, leading to an overall accounting loss of $12.6m

2018 Operational Highlights:

• Acquisition of ICM for $30.6m
• Domains under management grown 37% to over 1.81m (2017: 1.32m)
• .luxe launched to provide a common naming approach across multiple leading blockchains and the World Wide Web, Ethereum being the first partner

Post Period Highlights

• Q1 sales 246% ahead of same period last year with c. $500k of .law sales achieved in China
• .cpa and .gay contention sets resolved
• London & Capital loan facility retired in full ahead of schedule
• $510k of long-standing receivables collected
• Development partners for the integration of .luxe into the Bitcoin and EOS blockchains selected
• Bryan Disher, CPA, CA, appointed as independent non-executive director

Commenting on current trading and outlook he added:

“2019 has started exceptionally well, Q1 sales significantly ahead of the same period last year resulting from a combination of the first time contribution from ICM, healthy trading in China and steady growth in sales from the European and US teams. We likewise look forward to the benefits of certain underlying contract renegotiations beginning to feed through into the business in H2 and the subsequent period; the business is now well positioned for ongoing growth.”