Company plans to reap a few of its free money flow.
CentralNic (AIM: CNIC) published its annual report (pdf) this week. The rollup of domain name and traffic monetization firms is entering a latest phase with a latest CEO, and three things stuck out to me within the annual report.
Late last yr, longtime CentralNic CEO Ben Crawford abruptly “retired” from the corporate. Plainly this was a part of a strategic shift at the corporate. Crawford oversaw immense growth, with much of it coming from acquisitions. The corporate is now shifting to creating the corporate more profitable and increasing money flows. Crawford was paid $575,000 in lieu of notice, and the corporate has quickly shifted the messaging around the longer term of the corporate.
Recent CEO Michael Riedl was previously the CFO and is leading the corporate through a decidedly bottom-line-based transition. The corporate will give attention to organic growth and returning capital to shareholders as a substitute of enormous acquisitions.
Riedl introduced a “waterfall model” for a way the corporate will allocate free money flow:
- Progressive dividends
- Capital projects to spice up organic growth
- Accretive bolt-on acquisitions
- Share buybacks
- Debt repayment
Seeing an organization that has grown through acquisition suddenly put progressive dividends at the highest of its list is a bit jarring.
An enormous a part of CentralNic’s business is traffic arbitrage, although the corporate won’t call it by that name.
Page six of the annual report explains the corporate’s arbitrage model that underpins a big a part of its growth within the Online Marketing segment. It describes how the corporate gets traffic from social media platforms and search engines like google and monetizes it by ultimately sending it to pay-per-click links or affiliate links.
The corporate increased the variety of visitor sessions from 2.6 billion in 2021 to 4.6 billion in 2022. It credits strong growth in social media traffic acquisition. It also increased its RPM (revenue per thousand impressions) from $76.40 to $105.00. This just isn’t necessarily indicative of upper pay-per-click revenue for the industry at large because CentralNic focuses its arbitrage efforts.
Google has made up a considerable amount of CentralNic’s revenue for a very long time, but it surely ballooned in 2022. While not using Google’s name, the corporate stated:
For the yr ended 31 December 2022, there was one customer that represented greater than 10% of the Group’s revenue, amounting to USD 492,783,000 (2021: USD 208,863,000) across two segments (Online Marketing USD 483,208,000 (2021: 198,994,000) and Online Presence USD 9,575,000 (2021: USD 9,8696,000 (sic))). The shopper is an aggregator who doesn’t procure the services for its own use but provides access to an estimated three to 4 million end customers who order and devour the services.
This represents roughly 68% of total revenue, up from about 50% in 2021. Nearly all of that’s from Online Marketing, which is actually Google’s pay-per-click links. The smaller portion from Online Presence is probably going related to Google’s domain name registrar.