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Minds and Machines swings to profit, agrees purchase of '.xxx' and '.porn'
Internet domains operator Minds and Machines announced the $41m acquisition of Florida-based rival ICM, which owns web-domains such as .xxx, .porn, .adult and .sex, after swinging to a maiden profit in the past financial year.
M&M has conditionally agreed to acquire the entire membership interests of ICM Registry, a US company which is the owner of four high value, niche top-level domains, for a cash payment of $10m and around £22.5m ($31m) of news shares. The cash will be funded from the company's existing cash reserves, while 225m new ordinary shares will be issued to the vendors.
ICM reported net sales of $7.27m and a net income of $3.5m for 2017, when it took approximately 100,000 registrations. Approximately 78% of revenue received throughout the year was renewal based and approximately 14% was generated from premium sales.
Toby Hall, MMX's chief executive, said the acquisition is expected to be earnings enhancing in the current year and has been made to deliver "scale, strong recurring revenues and positive working capital" for 2018 and future years.
"Further, it will strengthen the quality of our revenues, both accelerating MMX's already fast-growing renewal base and improving the geographic make-up of our sales, given ICM's revenues are primarily derived from the US and Europe. We see this transaction as a major step forward in our ambition to introduce a progressive dividend policy over the next 18 months."
For its own part, M&M recorded retained profits of $3.8m for the calendar year from a $4.5m loss last time, having reduced fixed overheads by 19% to $5.3m.
Gross billings were flat at $15.6m despite total revenues declining 4.6% to $14.3m. Revenue from renewals doubled to $4.8m.
Hall said, "2017 has been about proving out the business model: firmly locking-in the operational gains of 2016 to ensure a profitable base, and developing a long-term growth strategy."
After carrying out a strategic review to "explore how strategic options might accelerate shareholder value" from organic growth, disposals, innovation and taking part in industry consolidation, the decision to acquire ICM would "cement MMX's position as a leading registry group in the new gTLD sector as we develop into a long-term annuity-based business".
As of 1120 BST, the company's shares had dropped 9.90% to 9.10p.