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Team Internet Group PLC (TIG) released its Q2 2025 earnings report, revealing a mixed financial performance that led to a 3.4% decline in its stock price. The company reported a decrease in gross revenue for the first half of 2025, although adjusted EBITDA remained positive at $71.3 million. According to InvestingPro analysis, the stock appears undervalued despite falling 53.7% over the past year. The stock reacted negatively in the market, trading at $59.60, down from a previous close of $61.70. InvestingPro has identified several positive factors, including management’s aggressive share buybacks and expectations for net income growth this year.
Key Takeaways
- Team Internet’s gross revenue decreased in the first half of 2025.
- The company reduced its net debt from approximately $110 million to $93.3 million.
- Restructuring efforts are underway, with a $4.7 million expense aimed at reducing future operating costs.
Company Performance
Team Internet faced a challenging period in Q2 2025, with gross revenue declining 4.1% from the previous year. The company’s gross margin stands at 23.4%, which InvestingPro data indicates is below industry averages. The company maintained a positive adjusted EBITDA and reduced its net debt significantly, with an attractive EV/EBITDA multiple of 4.3x suggesting potential value opportunity. Despite these efforts, the company posted an operating loss of $7 million, influenced by a $6 million foreign exchange loss and $7.2 million in non-core operating expenses.
Financial Highlights
- Revenue from Domains: $104 million, with a gross profit of $38 million.
- Revenue from Comparison: $28 million, with a gross profit of $9 million.
- Revenue from Search: $132 million, with a gross profit of $26 million.
- Adjusted operating cash flow: $26.9 million.
- Operating loss: $7 million, impacted by foreign exchange and non-core expenses.
Outlook & Guidance
Looking forward, Team Internet anticipates higher profitability in the second half of 2025, driven by seasonal benefits in its comparison and search segments. Analysts share this optimism, with InvestingPro data showing a strong buy consensus and forecasts for positive earnings of $0.12 per share this year. The company is focusing on international expansion, targeting markets in Italy, France, Spain, the UK, and the US. This expansion is expected to contribute significantly to future growth. Cost optimization remains a priority, and the company expresses confidence in the recovery of its search business. For deeper insights into Team Internet’s growth potential and comprehensive analysis, investors can access the detailed Pro Research Report, available exclusively on InvestingPro.
Executive Commentary
Michael, the CEO of Team Internet, expressed optimism about the company’s future, stating, "We are confident that we will end at the end. We will come out as a stronger, more balanced business." He acknowledged the need to regain market trust, emphasizing strategic initiatives to enhance performance and market position.
Risks and Challenges
- Foreign exchange volatility continues to impact financial results.
- The restructuring process may lead to short-term operational disruptions.
- Expansion into international markets carries inherent risks, including regulatory challenges and increased competition.
- Dependence on Google’s workflow changes in the search market poses a strategic risk.
- Maintaining traffic acquisition capabilities is crucial for sustaining revenue growth.
Q&A
During the earnings call, analysts raised concerns about the company’s share price and its strategies for cost-saving. Questions also focused on the impact of losing a RedX customer, which management described as minimal. Executives provided clarity on the restructuring efforts and the expected benefits of international market expansion.
Full transcript - Team Internet Group PLC (TIG) Q2 2025:
Jake, Moderator/Presenter, Team Internet Group plc: Afternoon, ladies and gentlemen, and 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 our responses where it’s appropriate to do so on the Investor Meet company platform. Before we begin, we would just like to submit the following poll. If you give that your kind attention, I’m sure the company would be most grateful. And I’d 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 for the introduction, and welcome everybody on this call today for the Team Internet Group interim results for the six months ended on the June 30. I’m here today with our CFO, Billy Green. And in the next few minutes, we are going to go with you through the following agenda. First, I will run you through our business strategy, and then Billy will take over and lead to the financials and and also ultimately present the outlook of the company to you. So for those for those who are new to the our business, we operate in three segments.
The first being domains, identity, and software, the second comparison, and the third being search. In domains, we are the Internet’s distribution backbone for domain names, cybersecurity products, and brand protection products, And the world leading online presence platform, cybersecurity providers, and also global brands rely on us to create their brand online, grow it, and scale it securely. In this business in this business, in the first half of the year, we’ve done around a $104,000,000 of of revenue from which we generated $38,000,000 of gross profit. The most remarkable figure on this, on this, division, however, is certainly the EBITDA that we’ve grown by around 30% from $8,300,000 to $10,700,000 in the first half of this year, which is basically the confluence of continued growth and us doing a lot of work in terms of streamlining our cost structure. We’ll come, we’ll we’ll speak more about that on the next slide.
In comparison in comparison, our role is to basically cut through the noise and bias on the Internet. If you if you search for something like what’s the best vacuum cleaner, everybody will shout, I’m the best. And here, we provide independent data driven guides that earn the trust of consumers and convert them into actual customers. The monetization here works through referring high conviction customers to leading ecommerce partners, including Amazon as our premium partner. And this is in terms of the online advertising world pretty much as good as it’s as it gets.
The the world has been moving to to models where advertisers only pay when, they see actual outcomes, and therefore, our comparison business pretty much plays in the end game of of ad tech. And with with this concept in the first half of the year, it has generated $28,000,000 of gross revenue from which it’s created $9,000,000 of gross profit. And, out of that gross profit, it converted 60% into into final earnings. Then in search in search, what are we doing here? Search engines struggle engaging with Gen Z and even younger generations.
However, these social media platforms, they are strong at capturing the attention, but they struggle in converting the audiences into actual customers. And we bridge that gap with a of lean and high yielding experiences where we engage with users on social media and show them the rich offering, of the open web, thereby turning scrolls into revenues. And, on the fourth on the March 4, we have, we have pointed out by Arnes that Google, who’s our main partner here, is com is is materially overhauling its workflow with which this business is being conducted, which for this year leads to to to challenges around the revenue and and and profit generation. However, despite these challenges, we’ve still generated $132,000,000 of revenue, so that’s 22 per month. Out of that, we generate, out of that, we generated almost 20% into gross profit at $26,000,000 and and still generated eight and a half million dollars of EBITDA.
And on the last slide in this business and strategy section, we’re going to present to you our plans how to turn this around to, in order to basically seamlessly align with the the profits that we’ve shown in the past. Deep diving on domains. Here, our focus is profitable and value added growth. So we are looking into quality over over quantity. We are looking into margin resilience.
So we want we are we’re only engaging with customers with whom we can work on fair terms and conditions. We are focusing on value capture to work with those customers where our product and service have the highest value added for them and who then in return would pay us good money, for all services. And we are also looking into growth adjacencies outside the domain, sector. All of these, all of these factors basically underpin our strategic role in the domain industry and domain names, even though they now exist since who would have guessed forty two years to domains what were invented in 1983. Domain names are still the anchor of digital identity.
This is where you serve your website from. This is where you send your email from. Your email is then again your login into all kinds of digital services. So a business that has been a business model that has been forged forty years ago, but it is today more relevant than it ever was as everyone is trying to move the economy global. And these are not these are not only claims that we are making.
Actually, we have we have quantitative evidence of the progress here. So as as you see on the left hand side, the number of domain years that we’ve processed has come down a bit by 4%. Again, given that we are that that we are basically foregoing opportunities to make ultra low margin revenues just to drive up but without any without any profits. And you’ll see success in that in that that actually we could increase the average revenue per domain year that we processed by 8%. So net of the two factors, this very clearly pays off, and we’ve also demonstrated that we’ve that we’ve increased the share of non domain revenues from 16% to 17, so that’s in relative 6% increase.
Again, a quantitative evidence that we’re making progress on the strategies that we have presented on the right side of this of the screen. If we then move forward to to comparison, here, our focus is resilience and expansion of of the business. So our first priority has been resilient traffic economics. Those, those who follow the company will have will, of course, have noticed that, over the last, almost three years, Chekipity and later other AI products have evolved as, as as challengers to to search engines. However, with the strategies that we’ve applied, we managed to keep the volume of traffic or the volume of visitors that we could acquire from from search engines constant at 100 and almost 180,000,000 visitors over over twelve months.
We’ve also we’ve also shown that our that our business model is resilient in in converting these consumers in into into actual customers. So in in both periods, we generated on average 235 and $236 per every thousand visitors that came to our website. What we have what we have increased, though, is our is our revenue from countries outside the German speaking community, so everything other than Germany, Austria, and Switzerland, which has gone from around 0% in the 2024 to now only 5% on average during the first half of this year. And here we are here we will make more more progress. We have the The UK website is already is already live.
The US website will be will be live in in a few weeks, and then we will also start promoting both of these websites big time on the Internet in order to to generate sales during the Black Week also from UK and The United States. The ultimate the ultimate why do I why do we put so much focus on internalization? Because it is the biggest lever that we have. When we we think about the the market that we address today, which is very much the the German speaking community within Germany and within, yeah, within Europe, Only by going into Italy, France, and Spain, we have almost tripled the the total addressable market in terms of population that can now use our our services. And with the with the step that we’ve already committed to complete in the second half of the year, The United Kingdom and The United States, we will have multiplied the total addressable market by a factor of seven in terms in terms of population and the factor of nine in terms of gross domestic product.
It will, of course, take years until to until we our our market shares in these in these markets align with the market share that we’ve been able to secure in, within within Germany and the adjacent German speaking countries. However, when you when you look at when you look at the the potential of this expansion, it is, of course, very significant and this is this is I would not be surprised if this, business will be our biggest business, if it would meet again in in ten years from today. Moving on moving moving on to moving on to search. Search is the search is the business around which we which which triggered our our forecast the reset of our forecasts on the March 4. What you what you again, for for those who might be newer to this story, we have historically been using a Google workflow called AdSense for domains where, basically, we were allowed to show in individual ads on otherwise empty websites, which is some which is something that that that Google wants to deprioritize in the future, and they want us to show not only a single ad, but the full Google search results embedded into a contextually aligned content environment.
Something that strategically, we are very much in line with, which, however, gives us a few temporary challenges at least that we that we are currently working on. But the most important the most important KPI, which we show on the left, is the number of visitors. So in the twelve months to the 06/03/2024, we had a bit more than 6,000,000,000 visitors from all across the world, and we’ve been even been able to grow that further to seven more than 7,000,000,000 users in the last in the last twelve months ending on the June 3 this year. And that why do I focus so much on that? Because on the Internet, the first thing that you need to accomplish is that users engage with your product.
If you if you don’t get there, then everything is lost. However, here, we’ve actually we’ve very successful in even fur in even further growing this this number, and that’s basically the basis of the of the turnaround that is that is yet to happen. What we’ve seen, though, is that the that the revenue per thousand visits has come down quite dramatically from 88% $88 per thousand sessions to $47 per thousand sessions. And those who follow us for a longer while will know that this KPI has been a north of $100 in in the heydays in in 2020 in 02/2023. And people might not be worried, oh, but if if if the revenue that you generate comes down, then at some point, you will not be able to make profit anymore because you have to buy the traffic.
And here the great news is we don’t see any of that in the market because what we what we see is that there is an almost perfect price elasticity on the on the buy side, and this is why this is despite the fact that with AdSense for domains we’re, again, connecting the dots where where Google has announced that they are basically forcing the customers out so that they would have to basically proactively opt in again. Of course, that’s of course, that hits the demand on that on that platform, and yet we were able to to basically to basically push or propagate these the the lower the lower click price levels virtually fully to the buy side, and this is why we generate the same percentage margin as as before, which is a very strong very strong signal that our monetization channel is still one of the most performant on the Internet, and this is why we can still, despite this this this headwind, buy tons of traffic profitably. And, of course, in the in the long run, we must we must learn to to generate all of our revenue from this new product related search on content, and here we see a very strong market validation.
So the click prices that we see on rate search on content are notably higher than the click price on AdSense for domains, which is which is a which is a great basis to start from. What we still need to what we still need to figure out is is to our machine learning needs to figure out is to how exactly to design websites so that more users would click on the paid ads, less users would click on the organic ads. I mentioned before that rather than showing one single app, we’re not showing the full Google search results in the page. And and that’s despite the fact that we have that that we are writing great and helpful content. We also must make sure that users still click out.
These are things that are all manageable. The the important things is venture capitalists always talk about product market fit. The product market fit is very strong. Advertisers are really happy to pay us much higher click prices. So from here, it’s it’s it’s basic all execution, optimizing optimizing the developed experiences just the same way that we’ve done it from 2019 to 2023 when we scale AdSense for remains from $75,000,000 of revenue half a billion dollars of revenue, and now we will do the exact same thing with ASOC.
ASOC today is already bigger than AFD was, at the 2019 when we entered the sector. So this is why management has all confidence that if you bear with us for a few more quarters, we will we will see very strong validation and uplift from profits from this. This basically ends the business and strategy part of the presentation. I’m now handing back to Billy to run you through financials and the outlook.
Billy Green, CFO, Team Internet Group plc: Thank you, Michael. Just starting to take a look at the the financials of the company. Across this highlights page, you’ll see a number of metrics which are in line with what we expected the business to do in the first half of the year when we when we revised the expectations for the year back in back in March. So in in q one of this year, we we set new expectations, and the for the first half were in line with those expectations. Of all the of all the of all the different revenue streams, you’ll see that gross revenue decreased at a higher rate than net revenue.
So the the the slightly lower decrease in net revenue is a function of stronger gross margin experienced in the first half of this year and continues to be experienced in the second half of this year. Those of you who followed Team Internet and previously Central Net Group PLC for a number of years will remember that what the last time our search business was growing at a rapid rate, we experienced a a an almost continual or a fairly consistent decrease in gross margin percentage. Gross profit was increasing, but gross profit gross margin percentage was decreasing. We’re now experiencing somewhat the opposite in a period like the first half of this year when search revenues are lower and our domains business is a higher proportion of our business than search. We get some of that gross margin percentage back, and therefore, you see a slightly lower decrease in in net revenue.
We’ll talk more about adjusted EBITDA and operating loss when I flip to the next slide, which is a more detailed p and l. The adjusted earnings per share of the group still generating a positive contribution from that adjusted earnings per share and indeed benefiting from a lower share count having continued to buy back shares in in the the first quarter of this year. And the net debt of the company, the decrease from the level of net debt at year end to the 93,300,000.0 as of the 06/30/2025 doesn’t really give the full picture as to how much net debt has decreased in the last year. Net debt was near 110,000,000 at the 06/30/2024. So net debt had already decreased from 06/30/2024 through the ’24 and continues to decrease in the first half of this year.
So moving from near 110 to 93,300,000.0 just illustrates that in a period in which we have no m and a activity that we’re able to to to generate cash and to to to gradually pay down our external facility. Adjusted operating cash flow, you’ll see there in the first half of this year, generating 26,900,000.0 of adjusted operating cash flow. And I’ll flip on to the next slide now so we can talk in more detail about the income statement. So you’ll you’ll see on this slide that the operator we we present effectively two different profit metrics. Adjusted EBITDA is a non GAAP metric, but it’s more reflective of the underlying profitability and trends and performance of the business, whereas operating profit, that’s a gap.
That’s an IFRS measure. So the operating profit or the operating loss rather of 7,000,000 for the first half of this year, you’ll see that that is impacted by not only a 6,000,000 foreign exchange loss in the first half of this year. So that’s a 6,800,000.0 swing in operating in in foreign exchange gain to loss as a comparative. So that that naturally impacts the the operating profitability. But also as well as those nonrecurring foreign exchange losses, we also had 7,200,000.0 of noncore operating expenses in the 2025.
Those, by their by their nature, are nonrecurring. The reason we we peel out and disclose separately those operating expenses as noncore is because they are not related to the underlying trade of the business, and they are nonrecurring. So if you look in the detail of the the r and s interim report we released this morning, you’ll see that $4,700,000 of that 7,200,000.0 noncore operating expense relates to restructuring activity. So effectively, that we’ve incurred upfront in order to reduce the future operating cost base of the business. So an investment of $4,700,000 in reducing the operating cost base of the business, which will continue to then benefit us by lower operating expenses prospectively.
So the naturally, the return on that 4,700,000.0 investment and I use I use the term investment very broadly because, of course, that’s not a capital investment. No no gap enable you to capitalize those redundancy costs, those restructuring costs. But that 4,700,000.0 investment that we’ve made in the first half of this year naturally yields significant dividends in the future. The final comment I’ll make on the income statement before we proceed to the balance sheet, you’ll see that that our net finance costs were lower in the 2025 than in 2024. And and if you look at the detail in the notes of the the r and s, you’ll see that that’s mainly driven by a a lower level of external interest on our external debt.
That’s driven by two factors. The decrease in net debt I referred to earlier, naturally having a a lower level of net debt gives us a a benefit in lower interest expense. And like the slightly lower interest rates compared to last year have have been a benefit to us and continue continue to enjoy a lower a lower rate of of of interest on our debt. Moving forward to the balance sheet, I’d referred earlier to to to net debt and what’s been what’s been going on there, and you’ll see the the decrease from year end to to to the to the June 30. Worth also pointing out that not only has net debt decreased, but gross debt has actually decreased at a higher rate given the given the reduced working capital needs of the business and given that a lower proportion of the business is made up of our search segment than our domain segment.
And given the significant working capital needs of our search segment, the amount of cash we need to have on hand has decreased, and therefore, the decrease in gross debt exceeds both in absolute terms and proportionally the decrease in net debt. So, the amount of gross interest bearing debt at the end of thirtieth of June twenty twenty five is our 150,000,000 fixed term loan and then just under 20,000,000 of revolving credit facility. As a reminder, our complete capacity on our revolving credit facility is $100,000,000. So to be down to a mere 20,000,000 drawn down on that, so with 80,000,000 capacity remaining, just indicates that we’re aware we we have significant headroom in terms of our external borrowings. Just taking a look at the the last financial slide that we’ll present for today.
There are, of course, more detailed financials in the RS released this morning. The cash conversion of the business, I’ve I’ve become relatively accustomed to to indicating for the first half of each year that the the level of cash conversion was relatively modest for the first half of the year, and we then expect that to normalize or grow to an excess of a 100% in the second half of the year. We’ve we’ve we’ve had a we’ve had a very good performance in terms of cash convert in month of 2025 converting successfully converting operating profit to operating cash at a rate of 109%. We always aim for at least 100% in terms of conversion of operating profit to cash. So to achieve a 109% in the first half of the year illustrates two factors.
One is the continued working capital discipline of working through all vendor and supplier relationships to ensure that we extract the the the maximum possible cash conversion out of the profitability. But also, as I alluded to earlier, the higher proportion of domains business, DIS business, versus search business in the mix does lead to us in in the short term, a more a more efficient working capital structure. And as we’ve been able to reduce our working capital needs as the search business is producing significantly lower gross revenue and and somewhat lower net revenue than last year. While we’re working through that that rebase of that business, that does release working capital needs and therefore means that we we were able to convert EBITDA at higher than 100%. We continue to target converting operating profit to cash at higher than 100% for the second half of this year so that we can be confident we will remain above 100% conversion for the remainder of this year.
In terms of in terms of the outlook for the year, there is no no significant change from the the last time we communicated in detail with the market. It’s worth it’s it’s worth restating by division that the very realistic expectation is that profitability in the second half of this year will be will be higher than profitability in the first half of this year for two sets of reasons, really, or or maybe even three sets of reasons. One is the the the usual seasonal benefit that we have in in in our comparison and search segments, less so in our domains identity and software segment. But in our comparison and search segment, there is a definite seasonal trend that leads to h two of each year being stronger than h one, q four of each year being the bumper quarter with, as Michael alluded to earlier, Black Week and the and the run up to Christmas. So both in terms of the product comparison, the ecommerce business, and in terms of the the search, the online advertising business, we look forward to seeing h h two continue as as a a growth segment.
It’s been it’s been it’s been strong to date, and we look forward to that continuing. You’ve then got the amount of costs that we’ve removed from the business. I alluded earlier to the to the upfront costs that we’ve incurred to remove costs out of the business where we then start to see the return in the way of a lower cost base in the second half of this year and into next year, plus as well the business wins the the net impact of the business wins we’ve had in the DIS segment leads to higher revenue in DIS compared to the first half of this year, plus as well the comparison segment will continue to to to to to grow as our international businesses start to contribute more materially to the makeup of the group. Comparison, frankly, internationalization was a was a slight drag on profitability in the first half of this year, in line with business plans. So in line with our budget for this year, we knew that into our international businesses in comparison would would be loss making in the first half of this year, but they start to turn towards breakeven now, and then they should be profitable by the end of this year.
So they’re actually contributing more into into the second half of this year and and and flowing through into next year. So there’s better momentum and more confidence in each part of the business than there was the last time we we updated the market when we when we reviewed and presented our annual report in March. We look forward to continue to update you as we hopefully go from strength to strength, putting putting our best foot forward in respect of every part of the business and enjoying the different speeds at which they continue to succeed and in the case of search, recover from the the the the the reset that we announced earlier this year. So thank you all for listening, and I believe we can now open the floor to questions.
Jake, Moderator/Presenter, Team Internet Group plc: Perfect, guys. 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 to review those questions that have been submitted already, I’d just like to remind you that a recording of this presentation, along with copy of the slides and the published Q and A, can all be accessed via your investor dashboards.
Guys, you can see that we have received a number of questions throughout your presentations 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 just hand back to you 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 you.
Michael, CEO, Team Internet Group plc: Yes. Thank you, Jake, and I thank everyone on this on this call for submitting the questions, and we’ve done well to keep a bit of time towards the end to answer all of them. So the base starts with frustration over the share price that has that has gone from an all time high a little bit more than a year ago to where we are today. The frustration is, of course, very much shared among everybody on this on the on the on this call and the entire board. The to put this into into perspective, our first half our our profit in the first half two thousand twenty one was way lower than the profit that we reported today.
We already had net debt at that point in time, and so our share price was more than two times higher than it is today. So so very, very, very clearly, there is a certain massive change in in multiples in the in in the business, which is not necessarily warranted given that today, the share of the of the very predictable domains business is higher than it was at that at that point in time, but it is what what it is. The there have been a few missteps, a failed acquisition where and I also see that a few questions later in the in the in the thread address this. Has has not has had been has basically kicked us off the of the of our trajectory. Changes that Google has implemented have again thrown us off of our of our course.
And this is why why we why we spend so much time today talking about what we are changing in the business so that what we see today is actually the trough, and and we would, going forward, again, see change for the positive and bit by bit replace aspirations with with actual deliverables bit by bit, earning back the trust that we might have lost on this. We are very confident in in the strategy, so neither video or I are running away. So we are we are still here in order to in order to manage the business through this transition period, and we are we are confident that we will end at the end. We will come out as a stronger, more balanced business with with modernized products and the streamlined cost basis, which will then be even more investable than TV than it was just if just a year or two ago. One, one one more specific question that’s that was asked, is the is the loss of the RedX account.
For those who have not followed the news as as much detail, RedX is like an customer of the first hour of our company when we were still called CentralNick. Today, this customer is mature is economically materially insignificant, representing something maybe, like, 1% of group gross profit. And we were surprised by the news because we don’t do not agree with the with the termination of the agreement, but but that’s another matter. One one day or another, we will lose this customer. The dot co win that reported is notably larger than than than the loss of Redix.
And this is why why the time when this happened in in accordance with our with our Nomad, no ad hoc release was required given that it is just too marginal in the total schemes of thing. And in particular, given that we have a notable that we had a notable number of wins of some of the biggest names in the in the industry. For for, confidentiality reasons, I can’t give any names, but, we’ve signed up a lot of customers who are really like the among the who is who of the online presence, cybersecurity, and brand protection industry. So this is why why we consider why we, of course, regret Reddix leaving, and this is the only notable loss of a customer that we have to expect in since a very long time, it has materially hardly any impact on the future prospects of the business. And, well, and, give give given that we’re also not, that this press release went out without giving us any head heads up.
Unfortunately, we could also not set this record straight. I didn’t also didn’t expect that it would cause any waves in the investment committee given that it is just a very small piece of business. Going further on the list, it is then about the it is then about about France. Let me quickly read read this. So here, there there’s question.
Is this is this slightly behind slightly behind schedule? So fra Italy Italy, Spain, and France just happened exactly on schedule, and we’ve given ourselves a bit of time to first learn from these experiences before going into the more significant markets, UK and and United States. It doesn’t change anything at all in the long term, you know, the long term prospects of that of that business, and we expect okay. And there’s a question. Actual site addresses somewhere so we can visit the sites.
I would suggest we we communicate the websites through investment company afterwards so that no one has to has to write them down. But no problem. They’re they’re all live, and you could you can actually go there and already shop today if you want. Next question is there has been no director purchases as far as I can see. That is not entirely accurate.
So Billy, who’s here with me, and also Marie Holliev have both bought shares. There’s only very short windows when when management can actually buy shares given given my rules, given that there’s always something going on in the company. I myself hold shares for many many years. My my my my salary way way north above the recommendations for CEO, shareholdership. So no one should read this as as a as a as a lack of as a lack of belief in the company.
I think I want also want to point you back to to the fact that I have never in my life sold a single share, which many other CEOs have done when their companies were in in transition periods. What is happening to your market share and what are you doing to increase it? That’s, of course, a difficult question because we’re in many markets. If someone meant the domain market, here, we are growing the market share. Let’s not forget, we are mostly here in working in niches.
So for for example, .com, which is the largest product in the world, representing roughly 40% of all domain name sales in the world, for us, it’s only about 20%. And that’s not a weakness, that’s a strength because we are the experts to get the domain names that others can’t get, and this is where we make the money. So in the in in these in these in these sectors, like selling domain names, like .co, .io, .ai, the domain names that that are basically replacing .com bit by bit in the market or the or xyz.online and .icu, another example. We are one of the leaders. This is our specialty.
And in this market, we are only winning market share. So we’re definitely happy, and we are what we’re doing for this is more is more sales, building regional sales hubs. For now, we’ve also covered North America and Asia Pacific very largely out of out of Europe, but we will we will add resources and also addressing these markets more more actively in order to penetrate them deeper. Despite the fact of not not not not having not having, a lot of local sales, reps in Asia Pacific and North America, we’ve still been able to to acquire some of the most formidable accounts in in these markets. It just now, that we need to penetrate the market deeper, that we will change our approach, and, this will then help us to grow our market share even quicker than we already do.
Next question is, can you elaborate how the move away from a towards AASO will impact park domain monetization for domain owners and the impact it has on the industry dynamics? That’s, that’s, of course, interesting question. So the domain parking has only been representing a single digit percentage of sales of the search divisions revenues. So here, it has lower a lower impact. Domain parking through AFD is still live and works.
We are also experimenting with using RSOC for it and many other formats, And we we believe that we have some of the most innovative solutions in the market. So we pretty much still have all all the manias that have been parked with us historically are still all there. So we just need to go through this process, and most of the main investors who hold domain names hold them for hold them for the purpose of reselling them at a later stage So we would all also not see many people dropping their domain names just because they make a little a little bit less money. If you if you own something like a i.com, you will you will hold onto it whatever happens to your parking income, whether it’s a thousand dollars a month or $10 a month. It’s an irrevocacy for for these owners, and that’s that is the bulk of these domain investors who will, just like Bitcoin owner owners, hold on for their life to the assets until they get the price that is good enough to sell them.
So the industry dynamics have not changed as much as one might have thought from this observation. Please provide update on legal action against sellers of Shines. This, given that this is a public call, I think we have to refrain from making any comments on pending litigation. Apologies for that. Congratulations to your efforts and progress of thank thank thank thank you.
Appreciate it. How many Gen Z employees are working for you? Quite quite quite many. Let’s not forget that Gen Z is officially defined as anyone being born 1995 or later, so that’s everyone who’s 30 or younger, which is which is which actually a focus area that we’re also working on. We are we are hiring
Jake, Moderator/Presenter, Team Internet Group plc: we’re big
Michael, CEO, Team Internet Group plc: while while while people might have seen our own message about about us having reduced our headcount as probably every company that would have gone through a profit forecast reset like we did, we’re also hiring at the same time. So we’re we’re we’re not operating in panic mode. We are just in a very targeted fashion reshuffling the base, hiring more in territories where we can get top talents for moderate salaries, bringing in exactly Gen Z talent to help us think through think through problems from perspective of the next generation who will be the majority of customers only only two decades away from here. So it’s very important, and this is why why we don’t only see Gen Z as as a customer base, but also as a resource to make our business more nimble going forward. Per my personal searches are strongly gone away from Google search for perplexity searches.
What about corporation perplexity and similar AI search machines? Yes. That’s a that’s a very astute view. It’s also a slightly biased view. I mean, biased in the most respectful and positive and positive way.
Many investors are among the more intellectually curious part of the population. When we when we when we look at the pure search volumes for transactional searches like what’s the best vacuum cleaner, we see a very low market share, from, AI in the market. Google has well, keep in general, was it already with the I think it was already with the q one results that Google presented. They’ve they’ve shared some data, which if I would have anticipated this question, we would have put it into into the deck. So trans transactional searches are very are very rare.
And also when you look at the also when you look at the at the searches where Google shows AI results, if you if you it it is mostly these kind of searches where you ask, like, what is the meaning of intricate or some other or some other word or what is what is the what is what is three times five? Where there was a plethora of websites out there who tries to to basically sift in traffic off Google, and all these guys, they will have a very bad year 2025 because this is exactly what the item will destroy that someone requires a click out from Google just to get a simple answer to a question what is one point one plus two. And they are they are you would be surprised how many how many people use Google as a calculator. For our for our searches, that is that is less. We we actually have conversations with with with perplexity.
AI OpenAI has very different ideas about how to do this. I think the the the stronger answer, which we can’t demonstrate today, but we will we will showcase that probably in the not too distant future is doing our own AI product and basically putting putting the power to ask us about using large language models about the products and enroll it enroll it out to the market. This, think, we we see as a even stronger approach in the German market for glife.org. Our main portal is is an actual household brand. We’ve done we’ve we’ve shown the numbers of of website visits given that these were largely still come from German community.
Basically, in Austria, Switzerland, and Germany in the last year has gone has visited our website twice in the last year. So there’s very strong strong traction. So we will not shy away from the aspiration to build our own AI product and and directly and not only rely on third party partners when it comes to something as important as artificial intelligence. More more on that definitely at the next at the next Investor Meet company session. How can you be so confident of search reset being successful in the coming quarters as you state?
What should I what should I follow? The again, the the first the first metric is do customers engage with the product? That’s a strong yes. Can we profitably procure traffic, for these, for these customer journeys? Yes.
We can. So from from from here, it is largely it is largely process. Google Google is at the same time tightening controls of our of our traffic quality, so which, of course, then thinks that these are this is a trend that we have been anticipating for the last two years and have been have invested millions of dollars in in building in building compliance and traffic quality tools to keep to keep Google Google happy. And I personally believe that we are more advanced on this than anybody else. But your skepticism is, of course, respected.
Yes. We need to we need to win back the the trust of the market. The numbers the numbers that we presented today, I think speak volumes in terms of custom adoption and also the transition of the model where now 24% of the search revision revenue were already coming from non AFD products. And we would we would expect that in the next half year, that number will even be higher. And this this way, step by step, we will we will demonstrate to you that what we tell what we say here is not only aspirations, but actual delivery.
Is Max Roy Castro involved in any way with the exploring ways to maximizing shareholder returns including capital allocation review and asset ownership? Yes. Of course, he is like like any like all our board members. He is involved in the deliberations around these topics. So that’s a yes, and he’s a very fair, constructive, and experienced partner in this.
So happy to have him. Traffic providers for AFD appears to be highly consolidated across the largest four to five providers as Google stopped onboarding new partners since 2013. Do you expect similar consolidation to emerge over time for ASRock? Yes. Absolutely.
So a AFD was pretty much limited to a number not much higher than the number here on screen. With ASOC, there have been more contracts out there, but don’t confuse the number of contracts if you would ever come across a number with competitors in this in this paid traffic flow conversion. You can also have an ASRock contract just for your organic kitten video website or your music portal. So that is that is widely available, but only if only if you have the access to all the tools within within our SOC to actually conduct paid to properly conduct paid traffic flows for which you need a lot of additional statistical tools. And and and Google has recently restrained the access to these tools to only a small subset of of partners.
We don’t know exactly how many this. It might still be more than it has been for AFD, but it will again be a small oligopoly. Google Google has no interest in in having to manage thousands of of partners. They they want to they want a small set of small sorry. There’s a small set of successful and scaling partners, and we will be one of them.
Would you consider selling the DIS division if high enough PO offer? Well, I mean, as a public company, the entire group is always up for sale. And if I think that’s general rule. If an offer is too good to be rejected, we would, of course, study it and and consider it. However, the bar for business of the quality of DES is, of course, a very high bar without giving the quantum on this call today, and the bar is probably only moving upwards given that the given that the profits of this business still expected to grow over time.
But but, of course, yes, if there was an offer where the board would come to conclusion that it will be value accretive to the shareholders After all that has happened over the last twelve months, we would, of course we would, of course, consider any reasonable proposal.
Billy Green, CFO, Team Internet Group plc: I’ll jump in with the next one if that’s okay, Michael. So if if I if I understood it correctly, then it says it’s it’s a smaller concern, but but I think it’s an interesting one. Current ratio below one. Plan to change this, comma, is it a focus, question mark. So if if the current ratio is is just current assets to current liabilities, then the fact that it’s that it stands below one of the June 30 is purely a factor of the mix of working capital requirements between different parts of the business.
So when I first joined Central NIC as it was then in 2019, I remember that one of the first topics that I discussed with with Michael when he interviewed me for my role was the working capital cycle within the domains sector, which I which I didn’t know much about at the time. But at that time, CentralNIC always traded with a current ratio of below one, and that’s a that’s that’s a positive. It literally means that we are paid by our customers before we pay out our vendors in in broad terms. Over the years since then, since I joined in 2019, that current ratio has increased to above one because the segment our comparison and search segments where we we pay our we we pay our vendors before we’re paid by the customers, They have been bigger than the domain segment. So gradually, if you traced it over 2019 through 2024, you’d see a current ratio of above one.
It now happens to be below one again because of the relative size of the domains business as opposed to the comparison search businesses. So so there’s no concern about it, and there’s no plan to change it. But I would expect that when the search segment recovers more fully in twenty twenty twenty twenty six, we should then see the current ratio naturally organically without us needing to to intervene in any way going back above one. But that that’s purely just a a function of a different mix within the working capital cycles of the business.
Michael, CEO, Team Internet Group plc: Right. And I think you can also take the next one, which is also quite related.
Billy Green, CFO, Team Internet Group plc: Yes. How do you expect the net debt to change over the next six to twelve months? So having seen net debt decrease from its pretty much its peak at the 06/30/2024 through to the ’24 and to the current date, I would expect it to continue to decrease, but it but it it it may be moderate. And the reason I say that is although operationally, in terms of our operational cash flow forecast, we will continue to continue to to to generate cash as we do every month, every quarter. It does take time to deleverage significantly.
So I wouldn’t necessarily expect a large decrease in net debt in the second half of this year. I’m relatively pleased with where we got to in the first half of this year even considering we were buying back shares. But I I I would be I would be cautious about about promising a large decrease in net debt in the second half of this year. We need to balance all the different cash needs of the business. And whilst we continue to generate cash, that does obviously come a time again when we’ll look to pivot back to returning cash to shareholders.
Michael, CEO, Team Internet Group plc: Thanks. Thanks. Thanks, Billy. So look at redundancies in the business. Can you comment on who are affected and whether those people leaving have any effect on their potential rollout?
But for for of of first of all, we we can, of course, not mention any affected person. And but but redundancies have come through basis streamlining both DIS and and adjusting the cost base for of of of search for the expected lower income. However, we’ve we’ve we’ve taken good care that the that the composition of of the staff that that we’ve retained for the future is is quite biased towards ASOC, basically building the future products and and rather leaving a smaller crew in there to maintain the legacy products. A couple of question. How has your market share and search evolved?
Almost impossible to say given that most many players are are private. Any update on Shines? We already we said we can’t comment given that it’s a pending litigation. The FX loss
Billy Green, CFO, Team Internet Group plc: Yeah. The the FX loss is is is just the the usual operating FX gains and losses. It’s it’s the net impact of all of the gains and losses of retranslating our balance sheet or current assets and liabilities at the end of each period. The the loss is somewhat related, the loss we experienced in h one, and and this this this fluctuates. Sometimes it’s a gain.
Sometimes it’s a loss. And we’ve never consistently produced FX losses, but it is somewhat related to the the the the increase in in the ratio of current liabilities to current assets we referred to earlier. Because in a period when when our foreign currency current liabilities are increasing, we’re generally then generating FX losses month to month. If you look much, much, much further down the p and l, and I don’t we didn’t wanna call this out as a highlight in the interim report because it is it is more of an accounting point than an actual operational or or trading point. But if you look right the way down the bottom of the p and l, you’ll see that there’s a large FX gain in respect of our investments in euro businesses.
So if you look at if you look at at a net profit level, there’s a net loss. But if you look at it on a on a total gains and losses level, we actually recorded a a total gain because of the large gains we’ve made by significant accretion in the value, the underlying value of all the euro denominated businesses we bought and assets we own. So, yes, we will be doing everything that we can to ensure that trading and operational FX losses are minimized, but the net impact of FX overall is is not negative on us as an overall business. What exactly is the restructuring expense related to? There is a breakdown of the of of of the non core operating expenses in in the note.
And and as I referred to earlier, the restructuring expense is $4,700,000 in the first half of this year. That mainly relates to severance payments to employees who’ve left the business. So that is literally an investment that we’ve made in order to reduce the cost base of the business, and we see that investment being repaid many, many times over the prospective years.
Michael, CEO, Team Internet Group plc: Yeah. Thanks. I think thanks, Billy. Another question. Has TIG received further merger approaches?
We can, of course, not comment. There’s an ask to break out our financials by quarters again. We’ve we’ve just followed market practice, only reporting twice a year. So we we can, of course, not go back on this. Just trying to see whether there’s any question.
If you’ve not answered yes yet, RedX again, Shines again. Search again. Just seeing whether there’s anything that we have not really addressed yet given that we are coming to the end of the time. Well, there there’s there’s a question around there’s a question around the around the cost savings. So these are whether whether they are realistic, as a matter of fact, they’ve largely all been implemented.
There’s there’s only some some delay in in certain in certain in certain changes. So, yes, the number is realistic, and and we’ve also we’ve also put in certain guardrails that make sure that we can still deliver our our services despite this. Right. The okay. Maybe here’s a good question that’s that might affect many what what is the reason for this different drop from net revenue to adjusted EBITDA conversion?
This this this this this this this because the the net revenue dropped quicker than we could adjust our expenses. And to some degree, like in like in search, we can also not compensate each dollar of loss in net revenue by reducing by reducing operational expenditure. This this was always run as a very lean business, so even even taking out 100% of the cost would not have helped keeping the profit where it was. So we’ve we’ve we’ve found the best, from our perspective, best balance between keeping resources in the business to to basically modernize and grow and and regrow each business and and and mitigating the impact of the relatively sharp drop of revenues given the active Google action that Google has taken on Adsense for remains. And that’s that’s basically where we are, and we’ve we’ve today laid out division by division what what we planned to build even more resilient businesses for the future.
Going going today, the group has a much more balanced composition of its earnings with with DIS as the biggest contributor contributing 1440% of the earnings, whereas in prior years, search has been delivering more than 60% of the earnings. And as we regrow all businesses, we will also keep an eye on on maintaining this this this balance to have three ideally equally profitable businesses and not and not have all x in one basket. We’re learning we’re we’re learning from from our past and and taking action accordingly, and thank you all of you for for the time dedicating to us today. We’ll still review the questions after this call whether we’ve we’ve missed anything that was not answered yet. But I think from what I see on screen, and there’s a lot on this on the screen, I think we’ve addressed pretty much everything that is still showing up here.
Hope you take this serious, and we appreciate the questions. Thank you for giving us your time to explain ourselves and looking forward to the next investor week company session.
Jake, Moderator/Presenter, Team Internet Group plc: Perfect. Michael, Billy, I may just jump back in there. Thank you once again for updating investors today. Could I please ask investors not to close this session? She will 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’ll be greatly valued by the company. On behalf of the 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 to you all.
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