Tucows Acquires eNom & Becomes World's 2nd Largest Domain Registrar

NASDAQ: TCX (source: google.com)

NASDAQ: NAME (source: google.com)

Tucows Inc. acquires eNom from Rightside (via Tucows press release):

Tucows Inc. $TCX ($TC), a service provider of network access, domain names and other internet services, announced that it has signed a definitive agreement to acquire wholesale domain name registrar eNom from Rightside Group, Ltd. $NAME. The transaction is expected to close later today.

Tucows will pay $83.5 million and the transaction is expected to be immediately accretive to earnings. The acquisition will be funded through an amendment increasing Tucows' existing credit facility to a total of $140 million.

The acquisition of eNom will add 14.5 million domains under management and 28,000 active resellers. That will give Tucows a total network of over 40,000 resellers globally and 29 million domains under management, making it the second largest domain registrar in the world.

Conference Call
Tucows management will host a conference call today, Friday, January 20, 2017 at 11 am (ET) to discuss this announcement. Participants can access the conference call by dialing (888) 231-8191 or (647) 427-7450 or via the Internet at http://www.tucows.com/investors.

For those unable to participate in the conference call at the scheduled time, it will be archived for replay both by telephone and via the internet beginning approximately one hour following completion of the call. To access the archived conference call by telephone, dial 1-855-859-2056 or 416-849-0833 and enter the passcode 56195754 followed by the pound key. The telephone replay will be available until January 27, 2017 at midnight ET. To access the archived conference call as an MP3 via the Internet, go to http://www.tucows.com/investors.

"For years, eNom and OpenSRS have been the two leading registrars primarily focused on the needs of resellers. This focus means these businesses fit very well together," said David Woroch, Tucows' Executive Vice President of Domains. "The acquisition keeps eNom resellers where they will be well understood, well valued and well served and creates tremendous value for Tucows and resellers on both sides through efficiency and scale."

Elliot Noss, Tucows' CEO added, "This industry has changed so much since Tucows and eNom each launched wholesale registrar services over fifteen years ago and .com, .net and .org essentially represented the namespace. It is a lot more challenging and complex now. At the same time, it is more mature and much more competitive. Scale is absolutely critical. This is a rare deal that gives Tucows and its investors exactly that while offering an immediate cash on cash return."

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Rightside® Announces Sale of eNom to Tucows (via Rightside press release):
Divestiture of eNom Strengthens Alignment Between Rightside's Vision, Strategy and Financial Profile

Rightside Group, Ltd. (NASDAQ:NAME), announced that it has signed a definitive agreement for the sale of eNom to Tucows Inc. (NASDAQ:TCX) for $83.5 million, less a net working capital adjustment of $6.8 million, resulting in net cash at closing of $76.7 million. The eNom business is a leading wholesale registrar that provides domain services to a network of over 28,000 resellers. The agreement sharpens Rightside's focus on its Registry and retail Registrar businesses, and provides additional capital to drive growth and enhance shareholder value. The transaction is expected to close later today (Jan 20).

Rightside recently conducted an extensive strategic review and concluded that while it is in a strong position to leverage the global trends in the domain industry, it would further benefit from divesting eNom in order to place a greater focus on its higher growth and higher margin Registry and retail Registrar businesses. The divestiture is consistent with Rightside's strategy to position its portfolio of new generic Top Level Domains (new gTLDs) for long-term growth by leveraging the end-to-end domain services offered by Rightside through the vertical integration of its flagship retail registrar, Name.com, and its Registry business. The divestiture also enhances Rightside's ability to make additional investments in the Registry business as the market for new domains continues to develop.

"The divestiture of eNom creates a stronger alignment between Rightside's vision, strategy and financial profile and we believe this is the best way to increase shareholder value," said Chief Executive Officer Taryn Naidu. "The market for new gTLDs is rapidly developing and the divestiture enables us to more intensely focus on our higher growth and higher margin businesses, where our Registry and Name.com businesses are leading the way with the new domains."

"We would like to thank our eNom colleagues for their hard work in building such a well-respected business and for their dedication to Rightside. We look forward to seeing their continued success and continuing to work with eNom as a valuable distribution partner as part of Tucows," added Naidu.

"eNom is one of the great and long-lived brands in the domain industry, with an outstanding reputation among its large network of resellers," said Elliot Noss, President and Chief Executive Officer of Tucows. "We welcome eNom's talented team into the Tucows family as they continue to deliver innovative products and excellent service to resellers and end-customers."

eNom has approximately 14.5 million domains under management and generated approximately $116.5 million in revenue through Q3 2016, primarily from its wholesale registrar business. As part of Tucows, eNom will continue to be a distribution partner for Rightside's new gTLDs.

Rightside will receive $76.7 million of net cash proceeds from the transaction, net of working capital adjustments. Concurrent with close, Rightside will pay approximately $4 million of transaction related expenses and will repay all of the debt outstanding under its credit facility. Following the transaction, Rightside will be in a strong financial position with approximately $90 million in cash on its balance sheet.

Rightside has hired Barclays Capital Inc. as its financial advisor and Wilson Sonsini Goodrich & Rosati, P.C. as its legal advisor on this transaction. Following this transaction, Rightside will continue to evaluate strategic options, including the potential use of proceeds from this divestiture.

Conference Call and Webcast

Rightside will host a conference call and audio webcast with investors and analysts Monday, January 23, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time):
Live conference call: (844) 413-1777 (domestic) or (716) 247-5761 (international)
Conference call replay available through January 28, 2017: (855) 859-2056 (domestic) or (404) 537-3406 (international)
Conference ID: 57050879
Live and archived webcast: http://www.rightside.market

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DISCLAIMER

A Fair Analysis of Domain Name Industry Leader Rightside Group $NAME

Stock chart of Rightside Group (NASDAQ: NAME) (source: google.com)

There are few financial (stock) analysts covering the Domain Name Industry (domain name registry operators and registrars) so it was a pleasant surprise to see analyst Paulo Santos (Seeking Alpha) give his take on Domain Name Registrar and new gTLDs Registry operator and services provider, Rightside Group ($NAME, domain name: rightside.co, brands include eNom, Name).

From the chart above, you can tell $NAME stockholders have not had the "best ride" since Rightside started trading as a spin off from Demand Media in 2014.

Santos notes that the domain name registrar business is incredibly competitive: "with around 2,500 existing registrars ... [w]e cannot expect much improvement there in terms of margins, even though revenue has continued performing decently."  61% of Rightside's revenue in the first nine months of 2015 came from its wholesaler registrar services, which Santos says argues against investing in Rightside. In fact, Santos argues that Rightside's wholesale customer concentration is a potential negative:

"Namecheap, Inc. represents 27% of its domain names under management. Namecheap still has a $1 million promissory note outstanding, and doesn't seem in the best of conditions. This could lead both to a fundamental impact and negative news flow."

It is unclear why Santos concludes Namecheap "doesn't seem in the best of conditions." In fairness to Namecheap, it is among the most highly rated registrars in the business, as is Rightside's own Name registrar. The Q3 2015 10Q filed by Rightside discloses that Namecheap paid $1.5 million during 2015, leaving a balance of only $1 million due December 31, 2015. From SEC filings through today, it is unclear if the remaining balance has been paid in full or a further extension has, or will be, granted. In any event, a reason Santos judges Rightside's valuation as "expensive at present EBITDA run rate" seems to be influenced by the fact that all registrars' margins are thin and it is a very competitive industry, e.g., the Registrar giant GoDaddy has not reported a profit since 2009.

Which brings us to Rightside's new gTLDs. The new gTLDs' future potential profitability "means NAME [Rightside] deserves to be monitored ... gTLDs work like a legal monopoly of sorts, and can result in very favorable economics, as Verisign [registry operator of TLDs .COM and .NET] shows."

For more, read the Santos article at: Rightside Group: Pondering A Few Positives And Negatives - Rightside Group, Ltd. (NASDAQ:NAME) | Seeking Alpha

See also: seekingalpha.com/symbol/NAME


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DISCLAIMER

Rightside $NAME, Needham Interconnect, LIVE Webcast, August 5

Rightside (Nasdaq:NAME) 3-month stock chart (source: google.com)

Rightside Presentation at the Needham Interconnect Conference: Rightside Group, Ltd. (Nasdaq:NAME), new gTLDs registry operator and domain name registrar services provider, announced that its CEO, Taryn Naidu, and CFO, Tracy Knox, are scheduled to present at the Needham Interconnect Conference. The conference will be held at The Westin Grand Central Hotel in New York, New York. Rightside's presentation is scheduled for Wednesday, August 5, 2015 at 12:50 p.m. Eastern time (9:50 a.m. Pacific time).

The presentation will be available through a live audio webcast accessible from the investors section of Rightside's website at: http://investors.rightside.co/eventdetail.cfm?EventID=163134. An archived replay of the webcast will also be available for 90 days following the live presentation.

See also on Domain Mondo: Rightside Q2 2015 Financial Results, $NAME, Conference Call, August 4: Rightside reported a Q2 2015 Net LOSS of $5,673,000 (Q2 EPS of -$0.30)

About Rightside (source: rightside.co): "Rightside® inspires and delivers new possibilities for consumers and businesses to define and present themselves online. The company, with its affiliates, is a leading provider of domain name services, offering one of the industry's most comprehensive platforms for the discovery, registration, usage, and monetization of domain names. In addition to being a new gTLD registry operator, Rightside is home to some of the most admired brands in the industry, including eNom and Name.com. Headquartered in Kirkland, WA, Rightside has offices in North America, Europe, and Australia." For more information: www.rightside.co.


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New gTLD Domain Registry Rightside Q1 2015 Financial Results Today

UPDATE 2: "Gain on other assets, net, was $7.2 million representing the gain on withdrawals of its interest in gTLD applications during the period" (see below).

Rightside Group, Ltd. (NASDAQ:NAME), registrar (eNom, Name) and new gTLD registry, and provider of other domain name services, will announce first quarter 2015 financial results after market close today, May 7, 2015.

UPDATE: Q1 2015 financial results press release - excerpts below:

First Quarter 2015 Financial Highlights
(Unless otherwise noted, all comparisons are relative to the fiscal first quarter 2014.)

• Registrar services revenue increased 12% to $42.0 million compared to $37.5 millionprimarily due to new gTLD registrations, improved performance by existing resellers and the continued onboarding of eNom wholesale partners.
• Registry services revenue increased to $1.6 million compared to $42 thousand.
• Aftermarket and other revenue was $7.3 million compared to $7.0 million. 
• Total revenue increased 13% to $50.5 million compared to $44.6 million.
• Gain on other assets, net was $7.2 million representing the gain on withdrawals of its interest in gTLD applications during the period compared to $4.9 million (Q1 2014).
• Net income was $1.9 million compared to a net loss of $3.9 million. 
• Adjusted EBITDA was $0.6 million, compared to adjusted EBITDA of ($2.3 million).

Liquidity and Capital Resources

• As of March 31, 2015, Rightside had cash and cash equivalents of $45.9 million, compared to $49.7 million as of December 31, 2014.
• As of March 31, 2015, Rightside had $11.0 million of Letters of Credit outstanding under its $30 million revolving credit facility with Silicon Valley Bank, which was established on August 1, 2014 and matures in August 2017.
• As of March 31, 2015, Rightside had fully drawn its $30 million term loan credit facility with certain funds managed by Tennenbaum Capital Partners, LLC, which was established on August 6, 2014 and matures in August 2019.

Business Outlook
For the full year ending December 31, 2015, Rightside reaffirms its guidance :
Total revenue of $210 million to $220 million, inclusive of $6 million to $9 million of GAAP revenue from the registry services business; and
Total Adjusted EBITDA to break-even as Rightside invests margin generated by the business back into driving market development efforts.

Rightside Q1 2015 financial summary:

A conference call and audio webcast with investors and analysts will be held today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time).

Live conference call: 844-413-1777 (domestic) or 716-247-5761 (international)
Conference call replay available through May 12, 2015: 855-859-2056 (domestic) or 404-537-3406 (international). Conference ID: 28640125

Live and archived webcast here.

1 year stock chart of NAME as of May 1 (source: google.com)

As of May 1, 2015 (see screenshot above) Rightside had a market capitalization of $153 million. The stock's 52 week High was $17.00, Low was $6.42, current pricing here.

According to  new gTLD Statistics (source: ntldstats.com), Rightside Registry currently has 36 new gTLDs (new generic top-level domains) with a total of 238,145 domain name registrations.

Rightside, with its affiliates, is a well-known provider in the domain name industry. It offers "one of the industry's most comprehensive platforms for the discovery, registration, usage, and monetization of domain names. In addition to being a new gTLD registry operator, Rightside is home to some of the most admired brands in the industry, including eNom and Name.com. Headquartered in Kirkland, WA, Rightside has offices in North America, Europe, and Australia. For more information visit www.rightside.co."  (source: Rightside)


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New gTLD Registry Rightside, Wrongside Still A Downside?

3 month stock chart for Rightside (NASDAQ:NAME)
source: Marketwatch.com

New gTLD Registry Rightside Group Ltd. (NASDAQ: NAME), has had a rough 2014. At left is the most recent 3 month stock chart for this stock [52wk high: $17.00; 52wk low: $8.36] market close yesterday was $9.41. As reported previously on Domain Mondo (New gTLD Registry Rightside, Rename It Wrongside? and Rightside dot Wrongside? Further Downside For New gTLD Registry?) analyst Thunder Capital has been "negative" on Rightside which trades under the symbol "NAME" on the NASDAQ.

Yesterday Rightside had a conference call on its Q3 2014 financial results. Apparently, the only way to make money off the new gTLDs is to withdraw your applications. That's exactly what Rightside reported yesterday that it did in order to realize a one-time gain of $8.6 million which saved the company from having to report a Loss for Q3 2014. However, even with that one-time gain, it reported net income of only $4,097,000 for the quarter, and still reported a LOSS on "Adjusted EBITDA" of (-$593,000).

Oh yes, there was an isolated trade of 100 shares in "after hours" trading on the NASDAQ that excited at  least one domaining blogger--Time: 17:58    Price: $12.53   Number of Shares: 100

Note that the "after hours" trade that preceded the above was also only 100 shares for a lot less:
Time: 17:46    Price: $10.15  Number of Shares: 100

No other "after hours" trades occurred after 17:58 (5:58pm) until NASDAQ "after hours" trading closed at 20:00 (8:00pm). It will be interesting to watch this stock in the coming days and months.

By the way, you can find all this information and  NASDAQ's clearly stated advisory about "after hours" trades posted on the NASDAQ website:

"Investors may trade in the Pre-Market (4:00-9:30 a.m. ET) and the After Hours Market (4:00-8:00 p.m. ET). Participation from Market Makers and ECNs is strictly voluntary and as a result, these sessions may offer less liquidity and inferior prices. Stock prices may also move more quickly in this environment. Investors who anticipate trading during these times are strongly advised to use limit orders."  source: http://www.nasdaq.com/symbol/name/after-hours

As for Thunder Capital, haven't heard from him yet, but whenever we do, it should be enlightening--on October 3, 2014, in the article published on Seeking Alpha, Rightside: The Sky Is Falling Down, he said: "The gTLD initiative has not ramped and will continue to be a short with at least 30% downside." At that time Rightside (NASDAQ:NAME) had fallen from $11.83 when he initiated coverage (Rightside - It's Trending on the Wrong Side) to $10.53 as of 9/26/14, and since then the stock has traded (on some days) below $9 a share. On October 8th, in a reply to a comment on his latter Seeking Alpha article, he wrote: "In my analysis, I actually project 1.5mm domain name sign-ups for 2015. If I used a "look through the windshield analysis," the Company [Rightside] would default in 2015." [According to Rightside's own reported Q3 2014 results, the company had, as of September 30, 2014, 15 of Rightside's owned and operated gTLDs  in "general availability" for an average of 89 days each, with a total of only 80,000 registrations.]

If you have any interest in this stock, a good place to begin "due diligence" is on the NASDAQ website pages for NAME (Note Domain Mondo's Disclaimer near the bottom of the web version of this page).

Caveat Emptor!

UPDATE: see New gTLD Registry Rightside Stock Tanks on NASDAQ (5 Dec 2014)

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