Earnings call transcript: Team Internet Q2 2024 sees strategic shifts and AI focus

Team Internet Group PLC (market cap: $212.39M) recent earnings call for the second quarter of 2024 highlighted significant strategic shifts and a focus on artificial intelligence, despite a decline in revenue. The company reported gross revenue of $803 million, marking a 4% decrease from the previous year. Strong cash conversion and a decrease in net debt were notable positives. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations, presenting potential opportunities for investors. The company maintains a "GREAT" Financial Health Score of 3.27, suggesting robust operational fundamentals.

Key Takeaways

• Team Internet reported a 4% decline in gross revenue to $803 million.
• The company is transitioning to AI-driven platforms and expanding internationally.
• Cash conversion was robust at 108% in the second half of 2024.
• Team Internet maintained a stable financial position with reduced net debt.

Company Performance

Team Internet Group PLC experienced a modest decline in revenue, reflecting broader industry challenges. Despite this, the company managed to maintain a solid financial footing by reducing its net debt to $96.4 million by year-end and achieving a cash conversion rate of 108% in the latter half of 2024. The company’s strategic reorganization into three segments—Domains, Identity & Software, and Search—aims to streamline operations and enhance focus on core areas.

Financial Highlights

• Gross Revenue: $803 million, a 4% decline from 2023.
• Operating Profit: $44 million, excluding $36 million in non-recurring impairment charges.
• Adjusted EBITDA: Over $90 million.
• Net Debt: Reduced to $96.4 million.
• Cash Conversion: 108% in the second half of 2024.

Outlook & Guidance

Looking forward, Team Internet projects a consensus adjusted EBITDA of approximately $60 million for 2025. The company plans to achieve balanced contributions from its domains, comparison, and search segments. Strategic initiatives include expanding the comparison business internationally and continuing AI-driven optimization strategies to bolster growth.

Executive Commentary

CEO Michael emphasized the transformative potential of AI, stating, "AI returns are not measured in single or double digit percentages, but rather in triple digit percentage." CFO Billy Green highlighted the company’s improved stability, asserting, "The group is in a much more stable condition than it has been in any previous time."

Risks and Challenges

• Market Shifts: The decline in traditional search engine usage among Generation Z poses a challenge.
• Competitive Pressure: Maintaining leadership in domain registration amidst increasing competition.
• AI Integration: Effectively integrating AI technologies across segments remains critical.
• Economic Conditions: Macroeconomic pressures could impact future growth.
• Regulatory Environment: Potential regulatory changes in key markets could affect operations.

Team Internet’s strategic focus on AI and international expansion positions it for potential future growth, despite current revenue challenges. With last twelve months EBITDA of $70.2M and revenue growth of 3.33%, the company demonstrates resilience in challenging market conditions. The company’s ability to adapt to market shifts and leverage technological advancements will be crucial in navigating the evolving digital landscape. Discover more detailed insights and expert analysis with InvestingPro, including exclusive ProTips, comprehensive financial metrics, and in-depth research reports covering 1,400+ top stocks.

Full transcript - Trean Insurance Group Inc (TIG) Q4 2024:

Jake, Moderator, Team Internet Group PLC: Welcome to the Team Internet Group PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the q and a tab that’s just situated on the right hand corner of your screen. Please just simply type in your questions and press send.

The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we’ll publish those responses where it’s appropriate to do so on the InvestoMe company platform. Before we begin, as usual, we would just like to submit the following poll. And if you’d give that your kind attention, I’m sure the company would be most grateful. And I would now like to hand you over to the executive management team from Team Internet Group PLC.

Michael, good afternoon, sir.

Michael, CEO, Team Internet Group PLC: Thank you, Jake, and welcome everybody this Monday afternoon to the Team Internet twenty twenty four year end results presentation. I’m here with our CFO, Billy Green, and we will run you through the following agenda. First, a brief state of the nation address in view of the recent reset of our forecasts, then Billy will present the 2024 financial highlights to you, and I will then finish up the presentation with a journey through our strategy and outlook. And conscious of time, let’s jump straight in. So you will have three questions.

What has just happened? Why does it matter? And where will the journey take us? So Google has, announced that starting March 19, so that’s already effective as of now, it will commence opting out all advertisers from their program Google AdSense for domains. Advertisers can still opt back in into the program.

However, these opt in ratios are never as high as an automated opt in, so we must expect that this will start, the decline of this product. And why does it why does it matter? Because AdSense four Remains has been the backbone of the revenue generation of our search division. Google has already, about one and a half years ago, introduced a new successor product that goes by the name of related search on content, which we’ve already implemented, which we’re already scaling. The, the the reason why we have, however, reduced our profit forecast for the current year is that the new product after only one and a half years of optimization is not yet at the level of perfection of AdSense for domains, which has been optimized for a straight fifteen years.

This is why we must anticipate that during this transition phase, our margins in this business, which have been in the mid teens, will now for a brief period of time be rather mid single digit and what’s then again grow over the next couple of quarters and years to the old levels as we run through our normal process of optimizing the landing pages, picking smarter keywords, coming up with better language on the pages that trigger the consumer behavior that is needed for a successful conversion. And then together with the fact that Google Google’s new RSO product also allows receiving traffic from traffic sources that before were non admissible on AdSense for domains, like, for example, traffic from other search engines or from email marketing campaigns, this business should then rise back to the same level where it was or maybe even more given the larger total addressable market. Before we go into into more detail on on the journey of the transition from AdSense for Remains to Red Circle Content, let let us first put the search division into the context of the larger group. So in our in our first trading update in the beginning of the year, we announced that we were, as of now, report in three reporting segments, domains, identity, and software as the first, comparison as the second, and search as the third.

But it doesn’t stop here. As a matter of fact, we’ve also reorganized internally so that not also our internal operating divisions match, this match our reporting segments. While we will, spend the the first part of the presentation mostly with with search, let’s also forget about our domain business, which is a trusted partner of the leading online presence and cybersecurity companies all across the world to buy domain names and associated digital products all across the planet, where we did more than $200,000,000 of revenue in the year just ended. Let’s also not forget about the comparison division, which is helping consumers making confident data driven decisions in their purchasing, where we’ve seen more than 40% organic growth and EBITDA going up by three quarters. And, and then last but not least, the search division, which has been the biggest driver of revenue and profits in the past.

Now in the for the interim, we expect it to be, in terms of EBITDA contribution in line with you to other, with you to other divisions, but we will then see how they will all again grow in parallel to a much bigger scale than where they are now, but that we will discuss in further detail in the strategy and outlook section. So just as a reminder, to to demonstrate these, these two abstract terms, AdSense for domains and related search on content. So, you will have already seen the slides in prior presentations. So AdSense four remains a high performing legacy product that is now being deprioritized by Google with the five steps, capture the attention, qualify the intent, refine the need of the user, match the intent and need of the user to, to to an ad, and then ultimately completing the journey with the with the cash flowing in reverse. The advertiser who receives the user pays Google the typical click price.

Google remits the majority of the click price to us, and we then out of this, out out of these proceeds would then need to finance our traffic acquisition cost. Now with related search on content, the journey doesn’t look terribly different. Again, we need to spark interest on a social media website, then they deliver the context around the topic, trigger the intent by show by showing a series of ads, and then in the last step, drive the conversion of the user into becoming a customer of that advertiser. You might now ask yourself, okay, that looks more or less the same. So why is this why is this, a challenge in the short term, but also an opportunity in the long run?

And here’s again a slide that we already presented after our q three results last year and which has so which has always been there, but apparently, the urgency of the transition of, AdSense four remains to rate social on content has obviously increased. Again, let’s revisit what is the what is the purpose of the business. Search engines are losing generation zed and younger as users. We basically engage with with these audiences, bring them back to the open web on on websites that are built for conversion of of the attention into actual purchases. The opportunity is now to materially enhance the brand and user experience.

Brands prefer to have their ads being shown in a contextually aligned content environment rather than on on a website that doesn’t include anything than a choice of ads. And also and also the users, appreciate the additional content and context around the ads that they are seeing. This also opens a huge opportunity not only in engaging better with users and their brands, but also on the supply side. Now some properties that before did allow to send users off their website to our no content, ads only experience, will now open up to also send traffic onto our websites that have been built with RSOC, so increasing the total addressable market of the industry. What is the challenge now?

The challenge is the user engagement. Users love to come to our websites. However, now that there is interesting content around the ads, more often than before, they would intend to start scrolling and omitting the click that we need to monetize the experience. This will be a process of including additional ads below the Google Ad units to basically monetize those users who don’t choose to click but just scroll through the content. And for the rest, simply our machine learning based approach to constantly improve the content, the layout of the website, and and the workflow to get the, to get the the click through ratios as close to the levels that we’ve experienced on AdSense for Remains as before.

And, then together with the higher click prices that we are experiencing today because the advertisers are more happy with the new with the new, canvas on which we paint the ads, will then translate into an at least as fascinating and powerful ecosystem as AdSense four domains has been for the last eighteen years. What’s what’s now our license to win? First of all, we start out as the leader in AdSense for domains. So we already have a lot of we have a lot of data. We also have unique experience with with content and videos.

So, we know very well from other business that we own how to write content that, that that captures the attention of of a user and keeps them on the website for for many minutes rather than just, a bare few seconds. We also, from other investments that we’ve done in the past, have a lot of experience with working with advertisers other than Google and blending them seamlessly into a content experience. And then, with our comparison division, we already have many years of experience in in doing highly automated, automated testing on content rich websites, which is also a skill that not all of our competitors possess. And this is why notwithstanding the bump in or the trough in profitability that we must expect for the current year 2025, we are very confident that this business or next year will turn around into double digit growth mode and ultimately end up at the same or even higher scale than, the business that we had first built around the old workflow from Google AdSense for domains. Before we before we go into a more detail around the other divisions and the strategy of the business, I will briefly hand over to Billy to present the financials for the year 2024 to you.

Billy Green, CFO, Team Internet Group PLC: Thank you, Michael. As Michael indicated, just giving you a brief overview summary of the financials that we released this morning. Those of you who saw the previous trading update we released last month would have seen that gross revenue remains above $800,000,000. 8 hundred and 3 million dollars being 4% lower than twenty twenty three’s ’8 hundred and ’30 ’7 million dollars is is, is is is a performance that that you’ve probably already seen, but it’s important to note and to draw your attention to the makeup within that gross revenue number. So that 4% decline is the net of a 11% decline in search due to the challenges faced there, but, that’s combined with growth in both the domains segment growing by 7% year on year and in the comparison segment growing 43% year on year.

So there are three businesses growing at very different speeds within that net 4%. Moving along to the net revenue box, the net revenue decline year on year was lower than, more moderate than, the gross revenue decline. And that indicates, as you would probably expect, that the opposite of what we experienced during the the boom years of search growing rapidly over 2020, ’20 ’20 ’1, ’20 ’20 ’2 into 2023, we gradually, over that time, experienced a ferocious and impressive, rate of growth in terms of search revenues and indeed net revenues, but the gross margin percentage was gradually declining because our search products tend to be amongst the lower margin products in our business. So vice versa, in a year in which search does not perform as well in comparative terms as comparison and domains, you’re gonna see, the gross margin percentage gradually improve as search becomes a slightly smaller proportional part of the business. Moving along to adjusted EBITDA, those of you who’ve heard previous presentations that we’ve made over the last six, nine months will know that we had noted that mainly due to inflationary factors, the the the rate at which our operating expenses were growing was, in some cases, higher than the rate at which net revenue was growing.

And, obviously, that’s a situation that one would not expect to see in perpetuity. So since the middle of last year, we’ve been gradually taking cost out of the business and, in a moderate fashion. And that’s led to operating expenses being lower in the second half of the year than the first half. So although although, we saw, adjusted EBITDA decline being higher year on year than the net revenue decline, given how we’ve rebased the cost base over the last six, nine months, we should see improved operating leverage in future as indeed we successfully improved the operating leverage of the group during 2022 and into 2023. The operating profit number on the right hand side of the screen, whilst that shows 8,200,000.0 on a pure IFRS GAAP basis, if you were to add back the impact of, $3,036,000,000 dollars of nonrecurring, impairment charges, you’d you’d find operating profit in excess of 40 in excess of 44,000,000, in in in 2024.

So actually, the the 44,000,000 that’s recorded in 2024, excluding the nonrecurring impairment charges, is broadly in line with the 45,700,000.0 recorded in 2023. Moving to the to to to the bottom few boxes, adjusting earn adjusted earnings per share, that would that would have shown us lower in 2024 if it were not for the the, lower share count gradually improving, tidying up the the the share balance of the business. As we gradually over time continue to buy back shares in in a moderate fashion, we’ll gradually see the share count continuing to decline, and therefore, we should see, a return to higher levels of earnings per share. Net debt, I’ll come on to in more detail on a on a on a, a subsequent slide when we get to the balance sheet. I think it’s important that we not only talk about the increase in net debt year on year, but the movements in net debt within the year.

So I’ll come back to that. Adjusted operating cash flow was 7% higher year on year, nearly reached a hundred million dollars. So $99,100,000 is a more pleasing performance in respect of that. And, naturally, the price earnings ratio you will see on the bottom hand side of the screen, is something that’s already been been commentated on, and will continue to be. So moving on to the little more detail on the income statement, there’s only a couple of highlights that I’ll pull out here that we haven’t already touched on in the previous slide.

You’ll see around the middle of that page, for those of you who track and follow and model, the the expenses between adjusted EBITDA or rather the the reconciliation, the balances between adjusted EBITDA and GAAP IFRS operating profit, you’ll see not only the non recurring impairment charge there of $36,000,000 that I referred to earlier, absent which operating profit would have been north of $44,000,000 But you’ll also see non core operating expenses of 7,100,000.0, and that looks a lot higher year on year on a GAAP basis than 2023. So it’s worth pointing out that 2023 benefited materially more than twenty twenty four of noncash credits related to reassessments of deferred contingent consideration, I. E. Earn outs, in respect to acquisitions that we’ve made. So as with any group, when we acquire companies, we we we produce our best estimate of the purchase price.

We we perform a purchase price allocation. We set up the correct assets and liabilities at the at at the, supportable value on the balance sheet, and that includes a provision for deferred contingent consideration. Naturally, over time, as those businesses perform either higher or lower than expectations, that then leads to a need to adjust through the p and l the level of deferred contingent consideration on the balance sheet. So there was a more significant credit in 2023 of $7,000,000 that reduced the non core operating expenses to 2.7, whereas there was a much smaller, credit net credit in 2024. So if you were to add back those those those noncash and indeed nonrecurring credits, the actual cash noncore operating expenses were $200,000 lower in in 2024 than they were in 2023.

Most of the non core operating expenses consisted of acquisition and integration activity, so those those expenses will naturally be lower in 2025 than they were in 2024 or 2023. And the acquisition expenses primarily relate not only to the the Shines acquisition, but also to other m and a activity that we considered in 2024. There were opportunities, that were that were in our pipeline on our radar for businesses that we were interested in looking at, but but ultimately, we decided not to make any any offers for those other businesses. And therefore, you’ve got a combination within noncore operating expenses of spend not only on the deals that are executed, but also naturally some spend on deals that we end up for various reasons not carrying out. Moving on to the balance sheet, I said I would talk about net debt in a little more detail.

We delevered as a group, fairly consistently quarter on quarter throughout 2022 2023, as a lot of you who followed the company for a few years will remember. So we then reached a level of net debt of 74,100,000.0 at at the end of twenty twenty three, significantly less than one than one times, net debt to adjusted EBITDA, I. E. Leverage. In by the middle of twenty twenty four, so by May 2024, that had increased to a 9,900,000 as the reported net debt as of thirtieth June twenty twenty four.

Since then, we’ve delevered quarter over quarter to reach net debt of 96,400,000.0 by the end of twenty twenty four, so a 13 and a half million decrease in net debt by the end of last year. And indeed, we continue that continue that delevering into this year. So in any month in which Team Internet carries on its normal course of business and generates operating cash as we do without fail every month, In any in any month, in any quarter when we’re not spending that money on either m and a activity or any other nonrecurring spend, we are using that that cash flow we’ve generated to fund the share buyback program that continues, and then the remainder goes to delevering. So absent returns to shareholders via share buybacks or dividends, the remainder goes to delevering. And that’s why we’re able month on month and over time to to moderately reduce that that net debt as indeed we were successful in doing in the second half of last year.

The final the final thing I’ll say in respect of the financials, is relates to relates to the cash flow and the cash conversion of the company. Those of you who follow Team Internet for the last couple of years may recall that having achieved a greater than 100% conversion of operating profits to operating cash in 2022. We slightly underachieved in 2023. We converted operating cash to operate sorry, operating profit to operating cash at a ratio of 96% in 2023. And that was that was lower than the target we set ourselves.

So that indicated to me that there was more work that the team and the business more generally could could could achieve in 2024 and indeed in 2024 after a challenging start to the year when when, cash conversion was lower than 100 percent for most of the first half of last year. We recovered well in the second half of last year to eventually record a 108% conversion of operating profit to operating cash. And that’s really the result of two factors. One is a general, additional improved discipline in working capital management on across the business. But also, as we find over time that search becomes a lower proportion of Team Internet Group, and search is the the one of our businesses that happens to have the least efficient working capital cycle, as it gradually becomes a lower proportion, then there’s a there’s an overall improvement in the working capital mix of the group, and that leads to higher cash conversion.

So we look forward to continuing to take advantage of that, over the course of this year as search becomes a lower proportion of the business compared to the more work capital efficient domains and comparison businesses. With that, I will pass back over to Michael for the overview of the strategy and outlook.

Michael, CEO, Team Internet Group PLC: Thank you, Billy. And so with more than $90,000,000 of EBITDA in the last year, the question is now, of course, how do we get back there after 2025? And the solution is that we have now three similar sized divisions in terms of EBITDA contribution. So with all of them around $20,000,000 and all of them will grow going forward from here. So let’s start with domains, the, basically, the stem cell of Team Internet Group.

So here, we make the global domain access simple, compliant, and scalable. This is why some of the or I should say most of the most admired companies in online presence, cybersecurity and brand protection have chosen us as the partner to buy domain names and associated products all across the world, where we cater directly and indirectly through our channel partners to more than 4,000,000 different individuals, relying on our services to run their websites. The opportunity is to build the operating system for digital identity. So domain names are still forty years or forty two years to be precise after the invention, still the centerpiece of online navigation and digital identity. This is where, your website is hosted.

This is from where you are sending your emails. Your email again is what you’re locked in with in most different services and even, your your trademark might be part of the domain name or the domain name might even be, your trademark like in the case of a Booking.com. So us managing the the centerpiece of online identity, of course, makes it quite apparent that that we should expand into into other adjacent services like, for example, trademark, docketing services. Why only why only register a domain name that includes the trademark? Why not creating the trademark in the first, place?

Why not securing the the presence of our customers in terms of social media handles, in terms of blockchain credentials, and even all kinds of certificates that there are in existence to prove your identity on the Internet. So that is that is one part of the equation. The other part is that we’ve just integrated a business called Volum, which we initially reported as as part of our online marketing segment. However, it is ultimately, a software as a service solution with the same revenue qualities as the main business subscription revenues spread over thousands of customers. But more importantly, it’s, it also holds second to none of, capabilities in terms of data analysis and, and and process automation, also things that are important in the digital identity value chain.

So we are bringing these two businesses together for even higher performance. The challenge is, in this business is, just like with domain names where you have 300 different country codes, top level domains for each and every country or even independent territories like the British Indian Ocean territories. The same applies for trademarks, for example. The same applies, to Blockchain technology where there’s also thousands of Blockchains out there. Some of the products are paid for.

Some of the products are for free. So how do you build a business from it? And here, our license to win is a, the trusted partnerships with some of the greatest distribution partners that you could hope for, reaching from, Amazon through, a GoDaddy or an Alibaba in in in China, a CloudFlare or a Squarespace. So, there’s there’s all kinds of customers out there who who use our service to basically procure domain names all across the world. And this is this is the strength on which we are building, having the access, to enough end customers through our channel partners to make, to make investment into integrating new products into our into our workflow pay off.

The the the rest is just what is our core skill. So for more than twenty years, we’ve been doing the hard work, the the hard plumbing job on the Internet connecting thousands of hosting providers to hundreds of so called registry providers and even more other providers of services like, SSL certificates and others. And basically, the the confluence of these factors makes that, that we can continue growing this business at above market rates and at the same time increasing the total addressable market to keep the runway for further growth very, very long. Then moving on to comparison. So our comparison division delivers on an evergreen purpose, which is cutting through the noise and helping consumers with data driven and trustworthy websites to make smart decisions, so that they would spend their scarce budgets on the right product.

Also at the same time cutting out waste and making our planet a little bit cleaner. The big opportunity here is that AI unlocks potential to continue the the growth rates that we’ve seen in the past for a very, very long time. So AI enables us to do three things. First, go abroad much faster than than than before because it’s obvious that now with generative AI, of course, supervised by humans, it is much easier and much less cost intensive to create a new language version of your website. The second is go long tail.

So today, we are picking in hundreds of thousands of products. But in the future, we will think about millions of products going into the niche, extracting more niche demand and and and margins for, for very specific products, for very specific customer needs. And then last but not least, at least in our at least in our German home markets where our brands like vergleisch.org have developed into a true consumer brands, we will also explore, opportunity of direct sales as you rather than just earning commission by referring a customer to somebody else. Why not take the order in the first place and, and then manage the shipping process to the customer? Of course, all these three steps are difficult when going abroad.

There will always be an incumbent who already firmly, covers that market. However, the the KPIs that our platform delivers in terms of conversion rate, in terms of basket size, in terms of the commission rates that we can command from our partners. We are very comfortable that in every market, we can at least buy a big dent into into the market share of the incumbents. In terms of going long tail, obviously, this requires more effort, but generative AI has created the basis. Quantum computing is giving us will give us limitless computing power in a not too distant future.

And here, we believe this problem can or this challenge can definitely be tackled. And when then talking about, going direct to consumer, yes, going to consumers, of course, makes that you need customer support, you need to supervise the fulfillment, you need to meet certain compliance, certain compliance thresholds. But also here, AI is part of the solution. Today with chatbots or even with human like phone conversations, customer support costs now come down dramatically compared to where it was before the advent of generative AI only two and a half years ago. And this is why we firmly believe that we can play these three opportunities through our new SEA first platform that we’ve built for scalable AI driven growth.

Let’s let’s have a look at 02/2025. So the consensus for 2025 is approximately $60,000,000 of adjusted EBITDA, which includes some 20,000,000 plus contribution from Search, admittedly down from $57,000,000 in the year 2024 and about $40,000,000 plus, from the domain’s identity software business on the one hand and the comparison segment on the other hand. The, the growth that’s projected in here or in here from domains and comparison is just a continuation of the success story that you’ve already seen in the last year. This now also makes that today with, today, the composition of the earnings of the group are much more balanced than at any point in time in the past. So today, all domains comparison and search this year are expected to deliver around at one third of the group contribution.

And, going going going forward, we will we will see that also the growth of these divisions runs a bit more in parallel than it has done in the past. So that’s hopefully next time when we reach again the same $90,000,000 EBITDA level that we had last year, it will rather three times $30,000,000 and that’s then just a milestone to grow from there. To deliver the story. We’ve, we’ve we’ve demonstrated that we could accelerate the growth of the domain division and make it more efficient at the same time, leading to 46% EBITDA growth in the year just ended. We have demonstrated that we could take comparison out of the post COVID blues that the entire affiliate industry has experienced in 2023 into a hyper growth mode that is now not driven like the growth that many companies experienced in 2021 by a pandemic, but purely by great technology and strong execution.

And in terms of search, let’s not forget our Google business was delivering $75,000,000 of revenue and about $10,000,000 of EBITDA at a time when we took control of it at the February. It has been taking us four years to scale from the year to half a billion dollars of revenue. And while we retire the existing success engine at Sense for the main over time, we have zero doubt in our SOC’s capability, to let us build the same success that we had before or potentially even greater given that we now have better brand experience, better user experience and can also implement additional monetization forms into the same websites, which were before exclusively reserved to Google. This takes us to the end of our presentation. We say thank you and are now looking forward to your questions.

Jake, Moderator, Team Internet Group PLC: Perfect. Michael, Billy, if I may just jump back in there. Thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that’s situated on the right hand corner of your screen. But just while the team take a few moments just to review those questions that were submitted already, I’d just like to remind you that a recording of this presentation as as well as the copy of the slides and the published q and a can all be accessed via your investor dashboard.

Guys, as you can see there, we have received a number of questions throughout your presentation this afternoon, and thank you to all of those on the call for taking the time to submit their questions. But, Michael, Billy, at this point, if I may hand back to you guys just to read out those questions and give your responses where it’s appropriate to do so. And if I pick up from you at the end, that’d be great. Thank

Billy Green, CFO, Team Internet Group PLC: you. Yes. Certainly. That that makes perfect sense. Thanks, Jake.

And, if I may, I will answer the first two questions because they’re interestingly, they’re they’re they’re two sides of the same coin, really. So the first question is, what is the rationale for buying back shares rather than reducing the significant debts? And we absolutely are doing both, not to the exclusion of each other. So, we we continue to buy back shares under our share buyback program, which was which was launched in in autumn of last year. But it doesn’t it doesn’t anywhere near use up all of the operating cash that we’re generating.

Every every month that goes by, we generate more and more operating cash. And therefore, in the second half of last year and into this year, we’re able to comfortably fund the buyback program from that spare operating cash and also reduce debt. So that will continue. And I think it’s really important that as a group, we’re imbalanced on both returning cash to shareholders and on de leveling. And then the second question is kind of the other the other side of the of the coin as I as I indicated, reminding us that a 10% maximum buyback that we we typically, request at the annual general meeting each year and is and and is and is granted to us.

10 maximum of buyback, effectively is 20% of the of of the free float of the business given how much of the the share capital of the business is is is is owned by some key shareholders. Does the board see buybacks as an important strategy at the current share price? So, yes, we are continuing the share buyback program. We we haven’t we haven’t, considered making any change to the buyback program. It’s we we’ve we’ve given our our broker, discretion to manage the buyback on our behalf.

There remains, I believe, as of today, there’s somewhere between a 1.5, 1 point 6 billion of shares left to go until that program reaches its its limits. So that does continue. Share buyback activity continues. We we then have the the optionality where we can either, prioritize further share buybacks or delevering, and that naturally, whilst we’ve maintained a very consistent, capital allocation policy over the last several years, we need to be able to react to and and sometimes adapt, and evolve that strategy from time to time. And the balance of returning cash to shares versus versus delevering will continue to evolve this year.

But those first two questions, they are effectively you know, one is one is indicating, what did you deliver? The second is is indicating what did you buy back my shares? So it is a question of balance. It has to be. We’re never going to have a complete consensus as to how much of the capital should be allocated to those two potential uses.

And over time, we’ve been successful in navigating what we believe is a very reasonable balance and will continue to do so.

Michael, CEO, Team Internet Group PLC: Thank you. The next question is on the ROI on our AI driven initiatives. And there is a huge number of AI driven initiatives, both in terms of how we run the business and and here, as as you know from from prior presentations, AI in the in particular in the form of machine learning has always been in the fabric of our day to day operations and, will will always be. We we now we now see that we can, in some in some parts of the business, develop accelerated growth. The best example here is probably, the comparison business, where without artificial intelligence, the, the growth of the last year would have been much more difficult to achieve, or in terms of streamlining operations, which is one of the main profit drivers in the domains business where we have material reduced the cost run rate from the February to the end of two thousand twenty four, which will now also help us delivering even better results, for this division in the year 02/2025.

In in terms in in terms of how how do we how do we measure, how do we measure the success, just like for any kind of investment that you put into the business? What is the additional cost that we engage? What is the what is the additional either revenue or cost savings in other in other parts of the business, that can be attributed to that, to that investment or expense and then always make sure that we make more money from it than what we spend. However, I should say that with AI, the returns are not measured in single or double digit percentages, but rather in triple digit percentage. Just so it’s a very powerful technology that helps us achieving great things.

Billy Green, CFO, Team Internet Group PLC: Yeah. The next question is on an interesting topic. It’s effectively around, we we announced today, I think, the, the crystallization of a long awaited pivot in terms of AdSense for domains to related search on content, and to what extent was that pivot anticipated. I think it’s fair to say that the the eventual decline of AdSense for domains and growth in related search on content is something that we have anticipated and spoken about, regularly over the last six six, nine months since it became very clear to us that AdSense for Domains, although although it remains a very high high productive product, was was was not going to be the product that would be the number one in Google’s arsenal with its with its shareholders. So I think the the the pivots happening over time was something that we knew about and had spoken about.

The timing, the acceleration was was was not apparent to us, and it wasn’t apparent to us or any of our competitors. The acceleration and the timing of the pivot has has caught the entire industry by surprise, and that is really what we’re reacting to. And it’s it’s fortunate for us that we were already at the very advanced stages of developing, launching, our own related search on content product, which generates revenue and is profitable today already. So it’s it’s it’s it’s it really just re re reinforces the importance of ensuring that in related search on content, we we we monetize that as effectively as possible. The next question is related more to the the domains business, the DIS segment.

The question is the ISEBITDA margin 50% margin is very positive, achieved partially through cost reduction. Absolutely, operating operating expense reduction. Can you maintain the circa 50% margin whilst continuing to grow this segment organically? And the answer to that is yes. We’ve already been successful, particularly over the last year and into this year in being successful in taking cost out of the out of the business in moderate portions while still growing revenue.

So it’s not as if we’re, divesting material parts of that business or closing down material platforms. It’s more about platform integration. So when you when you integrate multiple platforms onto one tech stack for one of a a better term, that you can you can very quickly, reduce the operating cost without impacting revenue. And indeed, the whole ethos, the whole mantra within within the group and within that particular part of the business has been, this is not about cost reduction. This is about EBITDA growth.

So we are only taking cost out where we are sure that it will only have minimal impact on revenue, so we can continue to to take cost out and maintain that margin while still growing that segment organically. The next question relates to, neatly having talked about search and domains neatly falls onto comparison, the the the third part of the business. What countries and markets is the comparison business launched in, and what are the upcoming launch for this business. I think Mike alluded earlier to the some of the markets that we’re gonna be launching in in the future, in in in some English speaking markets. We we launched the comparison business in Italy in October of last year, Spain in November.

We relaunched our French language business on the on on the new platform in January. So they are already market, so we already operate in, exist in. We gradually build the brand and market share. And whilst it’s a it’s it’s it’s at least a a one year gestation of each business before it really reached the point where it’s profitable from an EBITDA perspective. We should find later this year that those Italian, Spanish, French businesses are already pivoting towards being profitable on an EBITDA basis as we launch in other markets.

So, we’re expecting the international businesses will break even for the remainder of this year, and they’ll start to to make a more significant contribution to profits from next year and into the into the future.

Michael, CEO, Team Internet Group PLC: Right. I would I would like to add here that we’ve also already prepared a platform to process non Latin language, which will then facilitate expansion into Asia. And we’ve also already redesigned the database to also absorb products which are not sellable on Amazon to basically be able to to integrate a much broader array of ecommerce companies either in the existing markets or in other markets where Amazon is not the market leader, just like, for example, Japan, most of Latin America or, South Korea.

Billy Green, CFO, Team Internet Group PLC: Okay. The next question is about the, should investors expect dividends in the future? And the answer is is is yes. We have to be very careful naturally as a as a public company that we that we, that we don’t make any guarantees about the exact level of dividends that are gonna be paid in future periods. But the declaration of our first interim dividend in in, last autumn, which was paid last October, then followed by us not not declaring a final dividend for this year, mainly mainly because in the in the context of a very recent reduction in EBITDA, I think it’s I think it’s important in terms of the the balance of the group that we delever slightly before we get back to returning funds to shareholders in more material portions, via dividends.

So we can expect future dividends. It is still a part of the company’s strategy. It’s just there’s a temporary need to rebalance the return of cash to shareholders with with delevering. So investors should expect dividends in the future. There’s a question about there’s a question about, have we considered to spin off the domains business?

Is it feasible? And in terms of the constituent parts of the group, it is feasible to just to spin off any one of our platforms. We have we have three quite distinct segments in which we’re very happy to report not just the revenues, but obviously the profitability of those individual parts of the business so that the market can see, where the value directly lies. So in terms of spinning off a part of that business, it is it is absolutely feasible to do so. No no carve out is ever straightforward as it as it, might appear to be on paper, but it is feasible to do so.

It is worth noting though that, the timing and the value of any business that we were likely to divest would have to be right. We’ve been asked many times over the years and and indeed we’ve disclosed that we’ve had approaches for the Domains business. We have never considered that any interest in that Domains business has been in the in the best interest of the shareholders, which is why we have not, to date, seriously entertained, the the separation of the domains business from the marketing businesses. But it is something that, we we we we cannot be closed minded to, and we need to consider each piece of interest in any component part of the group from the lens of whether it gives the shareholders the best value by maintaining the group together or by or by separating out parts of the group. So it is something that we cannot be closed minded to.

Where are we now? Do we expect the decline in Google AdSense for domains related business to have any negative cross sale impact in other segments of our business? Not materially so, but the the change in the change in in product, from Google, from from AdSense for Domains to related search on content does have some, some some knock on impacts elsewhere. It mainly impacts our search business, and that’s fully reflected in the forecasts. There there are anytime the ecosystem changes, we may well see we may well see knock on impacts to other other marketing parts of our business.

So the the material impact is to the search segment that’s already fully reflected. Any any knock on impacts elsewhere on the business, should be very moderate, but it is it it is part of the ecosystem in which we exist. We’re very happy to continue to operate both within the the domains and the marketing online marketing sectors. There are obviously, very sophisticated business partners that we’re we’re proud to partner with in each of those. And therefore, any change in that ecosystem, without wanting to speculate too much about where Google is going in the next year or two.

They will they you know, it it could it could have other knock on impacts.

Michael, CEO, Team Internet Group PLC: Yeah. Maybe maybe to add to this, thank thank you, Billy. The the obvious part is, of course, so called domain parking, which is a major source of income for domain investors. But just like, we will transition our media buying activities to related search on content, the same will happen for domain parking. And quite interesting, quite interestingly, we also own a product ZeroPark, which comes from our acquisition of that company called CodeWise in the at the February, which, which, offers an alternative monetization method where basically the visitor to the website is being auctioned in a live auction within a few milliseconds and then being redirected to the highest bidding advertiser, which is something that in the past, struggled competing with with Google’s AdSense for Remains in most verticals, and now it will be a much more compelling offering.

So we we we believe that we also have some other businesses which will be which will perceive this as a tailwind and propel them into into a more favorable future.

Billy Green, CFO, Team Internet Group PLC: That actually, Michael, helps answer, the the next question that’s come up, which is where does the lost business from AdSense for Domains actually go in the short term? As in who benefits from the change? Is it Google or other parties as well? And the and the straight answer is it is other parties as well. So we are one of the we, through our feed and through the the ownership of ZeroPark as Michael just alluded to, We are one of the beneficiaries of some of the some of the decline in AdSense for domains.

There are so there are other knock on impacts elsewhere in the marketing ecosystem that we need to take advantage of, and we’re we’re well positioned to do so because we have a a a a stable of marketing platforms. If we were if we had all our eggs in one basket and we had one or maybe two marketing platforms, then the the the the risk you have with that concentration would be that we wouldn’t be able to take advantage of the passage of traffic and indeed the the flow of advertiser dollars elsewhere. But we do have a broad range of of platforms and of products. And I think that’s that’s really the point I’d I’d like to draw through from we’ve referred to the diversification between products in our numbers. The group is in a is in a is in a much more stable condition than it has been in any in any previous time.

Certainly, during my time with the company since 2019, we were somewhat reliant on search and on AdSense for domains through the through the impressive growth years of 2021, ’20 ’20 ’2, and to 2023. And we now have a much broader, a broader range of platforms all pulling a very similar, financial power. And that is that that diversification of products, diversification of revenue, I hope will be well received by the market because it is something that was perceived as an issue over the last several years. And now we have a very we have a very, very broad diversified range, which could only benefit us as a management team and the shareholders.

Michael, CEO, Team Internet Group PLC: And and I wanted to make one one one comment. It’s not only that business is is moving is is moving elsewhere. As we described on the first page, part of the challenge is that simply the workflow on related search on content hasn’t gone through the same number of billions of iterations in order in order to to optimize it. This is why this is why now our our margins, which on AfD were rather mid teens, will will now rather be mid single digit for an interim period of time. However, this is not this is not a final a final state.

So we’ll just go through the exact same process as with AdSense for Remains and just over millions and later billions of of page views optimize optimize the workflow, ultimately getting back to the same level of profitability. And then hopefully in a few years, going to present to you a division that is just as profitable as it still was last year.

Billy Green, CFO, Team Internet Group PLC: Okay. I I believe we’ve reached time. So, Michael, any any final words before we before we end the call?

Michael, CEO, Team Internet Group PLC: Yes. So so so certainly. So team Internet is still the sum of three divisions, each of which has a very strong market share in its respective market, each of which has an evergreen purpose and, and each of which having all the talent that it needs to to grow it further, from the point where it is now. And, also all three businesses share the the same quality that they are highly cash generative. So, and that they can and then that it can scale very quickly, so we don’t need to manage complex supply chains.

We don’t need to build big factories, planning for the future. As soon as the cancellation of the stars is right in search, the revenues more or less automatically come back to the levels where they were. And the other two divisions, domains, and comparison at this point in time. Leave no questions open, just long term growth, high cash conversion and a lot of AI making the business better from year to year.

Jake, Moderator, Team Internet Group PLC: Perfect. Michael, Bill, if I may just jump back in there, thank you very much indeed for updating investors this afternoon. Could I please ask investors not to close this session as you’ll now be automatically redirected for the opportunity to provide your feedback in order the management team can really better understand your views and expectations. This will only take a few moments to complete, but I’m sure it’d be greatly valued by the company. On behalf of management team of Team Internet Group PLC, we would like to thank you for attending today’s presentation.

That now concludes today’s session, so good afternoon.

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