Team Internet Group (LSE:TIG) — Interim report for the nine months ended 30 September 2024

0:02 Good 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 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. Before we begin, as usual, we would just like to

0:32 submit the following poll. And if you could 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. Thank you, Jake, and welcome everyone to the TEAM INTERNET GROUP QUE two thousand twenty four results presentation. And I'm here with Billy Green, who will present the second chapter of this presentation after I have run you through the business profile and ultimately ultimately take, control back for the strategy and outlook session.

1:13 So for the for those who are new to the case, we always start the slide with this overview what we do. So TEAM INTERNET GROUP is active or a leading is a leading global Internet solutions company operating in two highly attractive segments, digital audience matching, which now reporting is called the online marketing segment, and digital identity solution, which now reporting we call the online presence segment. In online marketing, we match audiences across so called walled gardens. Walled gardens are the big Internet companies like Meta, ByteDance, Google, Amazon, and others who basically try to keep the users within their own ecosystem most of the time.

2:05 And we use artificial intelligence and first party data, so data that we have on the Internet users to basically build bridges between these walled gardens, make the kids surfing on TikTok, click on an advertising that someone has booked on Google. And in this business, we have generated $471,000,000 of revenue in the nine months in the first nine months of this year, which is almost 1% down compared to to last year. However, at the same time, we were able to extract more margin from this. So the the net revenue, so basically, what we get from Google, Amazon, and others, less what we paid to Automata, ByteDance, and others increased to $95,400,000.

3:02 That's 10,600,000 every month in the first nine months this year. And this, we have this, we have managed by increasing the number of visitors that engage with our with our conversion processes from 5,600,000,000 to six and a half billion, and will continue to grow this number. And in in in the following, we are going to present to you a few slides that that show how we will overcome these trends and and and and ride on a wave of success. In online in online presence, in contrast, we empower businesses and individuals worldwide to create, maintain, and protect the digital identities worldwide.

3:58 And digital identity typically starts with a domain name. So this is this is where we have a global subscriber base both through direct and indirect channels. And in this business, our revenue has grown to $144,000,000 in the first nine months, and also the margin has expanded notably from $44,000,000 to $48,000,000. And that is also the the growth is also due to further increases in pricing first because we are we are enforcing more fair pricing for the great value that we deliver for our customer, but we're also focusing on on more exotic products, which which are closer to our core purpose and and yield higher margins.

4:46 On the following three slides, we are going to present to you how how we will take the business forward, and the background is, of course, that the the numbers that you will have seen this morning were not necessarily what you were expecting. And so we understand that most of you will have the question on top of the head, what what is this company going to do to ultimately send the company back into the growth mode that that we were used to over the last couple of years. And on these three first public or this next few slides, which we present for for the first time publicly today, we explain how we transform our three largest businesses into the future.

5:39 So our largest business is our so called search business where I explained before, we bring people from TikTok and Instagram and bring it to our websites where they then click on ads that other people have cooked cooked at Google. So what's the problem that we solve here? The problem that we solve is we bridge the web 1.0, the p the companies that have been born on an on the early Internet when it was still dominated by media companies who created all the content, and bring them all the users that are now using the so called web 2.0, which is more about individual creators and user user generated content with Meta being being the biggest of these companies.

6:26 Why why does this business exist? Consumers, in particular, younger, shift away from traditional search engines and the open web in general and trend towards social media and user generated content. And we always we've already seen trillions of screen hours having drifted out of the open web into Facebook, Instagram, TikTok, x, you name it. Which means that if you're an advertiser on a search engine, you will buy a systematically over aged audience because fewer younger people use search engines classical search engines less frequently than in than older generations would do. And we basically bridge this gap by bringing these these parties together.

7:14 This is how this this is how we've grown most of the $471,000,000 of of revenue in the first nine months this year. What is now the opportunity? This you may know from prior investor presentations how the workflow looks, where, basically, the user then ends up on a domain name, where you see some graphical orientation elements, and then an ad in the center of the screen. This works perfectly for a client here that we refer to as performance advertisers, people people who want to sell a certain stuff. And, however, next to that is another market of so called brand advertisers who are not necessarily looking at selling something very quickly, but who who more are more interested in building the brand.

8:08 And these people don't typically opt into our workflow, and we want to change this in order to to expand our total addressable market.

8:20 To do this, we we need to harness generative AI, which can elevate this roughly 300,000 micro websites that we've told you about frequently into proper websites with proper content, maybe even videos in there, something that looks much more like a typical news or special interest website. And in close cooperation with our with our partner Google, we are implementing a new advertising format called related search on content that is specifically designed to not appear on the rather low content websites that we use now, but on content rich websites. What is the advantage? A, brand advertisers typically have bigger budgets.

9:09 The Louis Vuitton will always outcompete, an insurance broker, for example. And with this with this content environment, also, more more sources let us send traffic there. So for example, we would also also now be able to to send traffic from so called display networks. Twenty years ago, they were called manners in on on these websites, or we might even send traffic from in app sources where where we would where the user would have clicked in the app on an ad that we placed there and then be sent to one of our websites. Again, this will largely this will both rise the average click price and enlarge the total addressable market.

9:56 What do we need to do to get there is to fix the user engagement. Now in our current workflow, there's hardly there there's not many options. You can either click on click on back, close the browser, or click on the ad. Now with the content, you also have the opportunity to just get stuck with the content and not do anything.

10:18 So here, we now we now need to further develop this product and and make and make sure that we do all the optimization, and we've spoken about this that we want to be data driven. So our mottoes are data, science, and compliance. So by using these three tools, we will now meticulously simulate any kind of configuration of these websites, what is the right font size, what is the right contrast between the conf font color and the background color, where exactly go the ads, what kinds of ads resonate with what kind of language until until we get this product to the same performance level like our old product. And and once and once we are there, we we expect we expect, a decade of massive continued growth, just in the in the style that we experienced it. When we first discovered, this this principle that you could that you can could send social media traffic to to so called parked domain names to generate profit.

11:25 And the big question is, of course, what is our license? What's our license to win? Why why why will not others eat this this lunch? And the answer is in the in the current in the current prevailing workflow, we are the uncontested number one, which means we have we have more data on how consumers behave than anyone else, and we can also dedicate more traffic into testing the new format than anyone else. And through the acquisition and and we have a unique content and video publishing expertise, which comes through the acquisition of of Shines, which we announced in in early March. And you may have you may have noted from the report this morning that the stand alone performance of Shines is quite far from our expectations, which which is very regretful.

12:24 In this context, however, the data and the process that they have to create captivating content that keeps users not the typical one minute on a website, which is the standard for a news website, but rather keeps them there for three, four, or five minutes or even longer. That is super valuable in this process because if users don't click on the Google Ad, they will just start scrolling, and then we need to exactly apply the technology that the Giant has developed in order to generate incremental revenue that then ultimately help us to also become the world market leader in this, brand advertising brand advertiser targeted product related search on content.

13:17 Coming to coming to the the next the next slide, comparison. And we we noted in our in our reports this morning that that compare that the comparison or comparison business, which we built from the acquisition of VGL Publishing AG in 2022, has been doing very, very well, so well that we will need to include it as a separate reporting segment in our upcoming annual report, which is, of course, good news, which means it has grown from where it was to to now be nearly twice as profitable business than it was at at that time. And here, the big transformation opportunity is to transform a national champion into a global consumer guide authority.

14:11 So what is the problem that that the comparison business solves? It is to remove noise and bias on the Internet. Online consumers are exposed to extreme noise, biased messaging, and inconsistent data. Everyone claims to be the best. For some keywords, you you have one or two pages of of of ads on Google. This is not this is not very helpful for user, and we and we provide data driven consumer guides that cut through this noise by using trusted, independent, and data driven product recommendations. What is now the opportunity? The opportunity is to use generative AI to grow this business along three vectors. First is to go abroad.

14:56 It is now much easier to create a performing website in a in a in a foreign language once you have one that works in another language. So in the past, we've we've internationalized since we announced internationalized at the at the pace of one country per year. Now going forward, we are more looking into something like one country per month. So we've just we've just done we've just done Italy in October this week this this month, there will be Spain. And and and in the next in the next year, in relatively short order, we will then take most English speaking countries. So we also bring the the joy of using our portal not only to The UK, but also to The Canada and The United States.

15:45 The the second the second vector is going long tail. So today, every product review costs a certain amount of money to have it written by by a journalist with the right level of of quality. While we still keep people in the process because we need to stand behind the quality of our product, now one journalist using AI can produce many more reviews in the same in the same time. So the marginal cost for a new product review comes down dramatically, which means we would be able to afford way more reviews that will still make enough money to recover the content creation cost. So now we are thinking in adding we're now thinking hundreds of thousands of product reviews. In the future, we're thinking millions of product reviews on our website properties.

16:33 And the last step, even though that's that's that is more aspirational at this stage, is to to also turn us into a direct to consumer brand and and and and start selling products directly to customers, not only being an affiliate who drives traffic to other ecommerce companies, but at least for the product categories and the geographies where we have a where we high have a high and relevant market share, we might actually we might actually try to sell the products directly to the consumer, which would then bring margins with it when you compare to a typical drop shipping business like Wayfair in The United States who operate roughly at four times the commission rate that we make in the business currently.

17:18 So, again, another massive chance for margin expansion. And, of course, all of this opportunity doesn't come without its challenges. So in every in every country that we go, we will meet incumbents that have already conquered the market, which we then need to outcompete by achieving higher KPIs on conversion, just make more money

17:41 per user so that we can actually buy up the best ad placements. We will need to manage computing power for the long tail expansion, and and and, of course, also becoming a direct to consumer business means more more product more more customer service cost, which we we also need to to to offset by by using more AI driven support. But what's what's our what's our license to win here? So we can we can do all this at a very fast pace because over the last two years, we've transformed the business from being an SEO first business to an s a a first business.

18:27 What does that mean? SEO means to optimize your website in a way that Google puts it into the organic search results on the website. This, of course, very interesting because then you get the traffic for free. But this becomes more and more difficult, and we will not have enough time today. But there's good reasons to believe that SEO traffic will dramatically drop over the next few years. And anticipating this, we have experiment with our website so long until we found ways that we can now actually put paid ads on Google, which is much more controllable and and still make money from the process, which many companies can't do. The interesting thing is for paid ads, there's there are no penalties for using AI content.

19:16 So, basically, just this innovation or this anticipation that SEO will be so difficult now allows us to use generative AI at a very large scale. And this is why we believe that with our current setup, we will we will outpace any other competitor in all three growth vectors going abroad, going long tail, and going direct to consumer. Coming to the our most traditional business, the online division. So here, the the job is to transform a domain name business into a digital identity business. So the problem that we solve today is making all domains accessible to everyone. Domain names are the cornerstone of online navigation.

20:04 And in an increasingly globalized economy, we discovered the problem that also a Canadian must be able to own a Vietnamese domain name, which was not originally foreseen in the concept of domain names. And we overcame this hurdle, and this has grown us to a business that now handles more than 1,500 different domain extensions in around 300 countries, serving it to more than 4,000,000 direct and indirect customers. What opportunity to build on this? The domain name is is not just a string. The domain name is your digital identity. This is this is where your website is. This is from where you send an email, and your email, again, you use to log in to all kinds of services. And controlling controlling the access to domain names also enables you to promote all other kinds of digital of of tokens of digital identity.

20:59 So you if you start a new company, this is normally when you take a domain name. You might then take an LEI certificate that proves that that proves that you are really the company that that claim you are. You could you could order trademark marketing services to to file a trademark in the name that matches your domain name. You could order having social media handles created for your business. So the business today doesn't stop at domain names. And, however, very much to all surprise, no there are no really established dominant players who would handle these other these other areas. So we we actually seek to to be a first mover here and have a platform where you cannot only register the domain name that you need to start your online journey, but also all the other identity tokens that you need to prove that you are who you are.

21:56 The challenge here is that these other ecosystems are just as fragmented as domain names where every country has its own roots. Same here. Every country has different trademark roots. Every country has a different different structure of company houses, trade registers, or or similar. But that's ultimately great. This is our license to win because we have more than twenty five years experience in managing such ecosystems with high with high compliance standards. And so we believe that we are that we are very well poised to to conquer this opportunity because we are we are trained at managing a fragmented ecosystem, and we're also lucky to have the most important digital distribution channels for domain names as our partners.

22:44 So all GoDaddy, register.com, web.com, Squarespace, WordPress, etcetera, they would all use us to procure domain names that they need for their customers. And, and they've all and a few of them have already expressed interest that they might also buy such alternative products from us if we were to offer them on a fully automated level.

23:11 So where does this take us as the big picture? We're we're we're we're currently at the stage. We've we've we've worked over the last couple of of years to diminish our our dependency on the on pairing social media users with search engine ads. And we already see some some some progress here. So the income from search engine ads is now below 60%, 57% in the twelve months that have been reviewed here. And the social media part is still 52%, but so here we have a certain balance. And here we've explained how we expect to grow this by by by developing a parallel content rich customer acquisition process that then runs in parallel to the to the well proven low content channels that we currently operate.

24:11 And but you already see that we've got plenty of other suppliers from whom we source different services or users and and many other channels that that we that we expand. And, of course, these these strategies that we showed on on page on the last on the last two pages should should help us growing to the main business, which you see on on the bottom, notably by by adding adding more products. Now you see on the left hand side, there's only 1% value added services going in there. That number should become dramatically higher than it is today. And on and on the page before when when discussing our our comparison business, that that sliver of revenue coming from from from ecommerce should also dramatically increase.

25:01 And and probably already when we when we show this this slide at our year end result updated for the for the full year, that number would probably already be be notably higher than the 6% that we show here. This is in a nutshell what we do and and how we how we intend to to overcome the the current challenges and deliver again the the growth rates that you as our investor base were used to over the last couple of years. I now hand over to to Billy for a detailed discussion of the results released this morning. Thank you, Michael. Just taking you to the first page of the financials. The financial highlights for the nine months ended 09/30/2024.

25:53 You'll see in the top left hand corner, we delivered gross revenue growth year on year for the nine month period, growing by 1%. But that converts to a much higher percentage. Net revenue growth, net revenue being our term for gross profit, grew by more like 4% year on year. So that's indicative that gross margin percentage has improved year on year. So our higher margin products are currently growing at a faster pace than than our our lower margin products. And those of you who followed TEAM INTERNET for several years will remember that in the years in which the group's overall growth was highest, so in twenty twenty one, twenty twenty two into 2023, we generally experience the lower margin products growing at a faster rate than the higher margin products.

26:46 So we're seeing somewhat the opposite of that in the current year where we actually get a a benefit, a boost at a net revenue or gross profit level from the fact that the higher margin products such as the comparison business, as Michael referred to earlier, is growing faster than our search business, for example. So you end up with 4% net revenue growth. Then moving across one box to adjusted EBITDA, you'll see that adjusted EBITDA growth year on year for the nine months was 2%. So the fact that that 2% growth rate is slightly lower than the 4% net revenue growth, That is something that we'd already noted going into q three that we need to be careful as a business that the operating cost base of the business at a slower pace than revenue growth because, naturally, you would hope that you can you can manage your operating expenses to ensure that they should always grow at a at a slower rate than than your revenue growth. So having seen over the last couple of quarters that our consistent improvement in EBITDA conversion is at risk of of of becoming more flat, and we want to keep improving our EBITDA conversion, we've actually taken some cost actions recently to operating expense base in the business and to rebase that back down to a level whereby we can be confident prospectively that EBITDA conversion should continue to improve and operating expense growth should should be fairly fairly moderate as you'd

28:18 expect in any well controlled business. So the operating expense base and the the the the the excess of growth over EBITDA growth is something that we're we're focused on ensuring we're able to convert the same proportion of revenue growth into EBITDA growth as well as as as a minimum. The top right hand corner, you'll see there the operating profit is down 1% year on year. And for those of you who may be wondering, well, okay, how does how does a 2% growth in adjusted EBITDA translate into a 1% decline in operating profit?

28:54 The most material difference, as we'll see when we come on the next slide onto the more detailed income statement slide, the most material metric within that is that we have a higher amortization charge year on year. So amortization sits outside adjusted EBITDA. So the fact that the amortization charge, which which is a noncash charge, that being higher year on year, that does lead to

29:21 the operating profit being you'll see there are 200,000 lower year on year. And that is something that if we were to have percentage, for example, the the GAAP IFRS EBITDA, you would see that GAAP IFRS EBITDA is actually a couple of percent higher in terms of growth than adjusted EBITDA. So is a question of what profit metrics one chooses to highlight. We don't choose the profit metrics that just happened to suit us in a particular quarter. We consistently present adjusted EBITDA and operating profit so that people can see the adjusted EBITDA being the true underlying

29:57 trend of the business, operating profit being the the gap IFRS metric after all types of operating costs, including depreciation and amortization. So so it's a noncash charges there. But we we're we're we're we're confident that delivering levels of

30:15 operating profit of 30,000,000, and you'll see in the box in the bottom row, delivering profit after tax. So that's profit after interest tax, all kinds of costs. Bottom line profitability delivery is still 11,900,000 for the first nine months of the year. So delivering near $12,000,000 of bottom line profits in what's been quite a challenging year in some respects before we even get to our fourth quarter, which is seasonally the largest quarter both for our search and comparison businesses. That still indicates that TEAM INTERNET remains a profitable business and indeed a a cash flow generative business as we will as we will we will touch on in a minute. The bottom left hand corner, you'll see adjusted EPS.

30:59 Within EPS, tends to outstrip should always outstrip for us the growth in earnings because not only do you have you you have positive earnings, but also the lower share count as a result of our continuing share buyback program, that should always lead to EPS being being able to grow at a faster rate than than earnings themselves. The 7% growth there indicates that we're still fairly objectively adding to the value per share of what TEAM INTERNET represents as a business. And pretty much the only the only square we haven't dealt with on this slide, you'll see that net debt of 99,700,000 is 35% higher than the level at year end, but that's actually down

31:50 from where it was at the June 30. So following the acquisition of Shines, which we paid for in q two, net debt naturally increased from end of last year through to June 30. But in a quarter where we don't have any material m and a activity and we don't have a significant volume of share buybacks, which are funded through operating cash generation, we can instead use that operating cash generated to to to pay down some of our debt. So net debt is about $10,000,000 lower at September 30 than it was at the June 30. Just looking at the income statement in a little little bit more detail as promised. A lot of a lot of this page has already been been touched on, but you'll see there the increase in amortization of intangible assets, and you'll see the the individual interest costs and income income tax expense.

32:40 Just one point to expand on around the net finance costs, I. E. The, basically, interest expense. You'll see on the right hand side of the page, we've made a comment that net finance costs are decreasing during 2024. The for the full nine month period, finance costs are higher because we have more debt now than we did this time last year. But the reason why we're flagging that finance costs are decreasing is because gradually over the course of the year, the level of finance cost is lower in q three than it was in q two. So it's not as if it's a perpetual increase in net debt and a perpetual increase in finance costs in a quarter such as q three where we are successful in

33:24 in in in in slightly decreasing our net debt, we benefit from a slightly lower interest well, similar interest rate that the lower debt base. And therefore, gradually, over the course of the year and as we move into q four, we should see that net finance cost continue to be at a very manageable level. It's not as if the net finance costs are increasing significantly year on year. We still we we we still are well within

33:51 the covenants and bounds of our our our borrowing agreements. We still have a a material amount which which could be borrowed on our RCF revolving credit facility if we needed to. But in practice, because the company is cash generative, you know, literally in a quarter like like q three where there's no non or limited nonrecurring expenditure, the company generates cash and then uses that cash to pay down net debt. We are still rather a cash generation machine.

34:20 You'll see that being a little clearer as we move on to the balance sheet as well. I've heard a couple of comments about net debt and the fact that the although gross debt is higher and indeed net debt is higher than at the end of last year, it's actually $210,200,000 lower than where it was at June 30. Right. And if you look at the cash conversion of the business, the cash conversion is currently sitting at 91% for the nine months year to date, And that is actually higher than it was in in in the last couple of quarters. So we say that we expect it to continue to normalize to near 100%. This exact same slide for q one reflected cash generation from operations of 80%, and then it was up to 87% for the six months, and now it's 91% for the nine months. So if you were to look at each quarter in isolation, you'll see that each quarter is successively closer to 100% than q one was. So we're gradually inching towards being, hopefully, at least 95% plus by the end of the year. The aim, the target for every year with myself and the team throughout business, we try to get to at least 100% conversion operating profit to operating cash.

35:38 We sit as of the end of September at 91% for the year to date, which is not as close to the target as as as myself and the team would like. So the closer we get to 100% as we move move through to the end of the year, even if we don't quite hit 100%, it's not a binary metric on which we could judge ourselves, which needs to get as close to 100% as possible and then go again next year with a 100% target again that we're ensuring that as much as possible of that that $70,000,000 of of of EBITDA is able to be converted into cash that we can then use either in m and a activity or to buy back shares or to pay down debt, I e, in the interest of our shareholders. So you'll you'll you'll you'll see that the cash conversion is getting towards a level as the year progresses, which is more objectively satisfying than the q one position, indicating that the cash performance of the business is is getting back onto a track where we feel that we're doing everything that we can do, and we have a very steady, regular cash inflow and cash conversion from from all parts of the business. There are there are no there there are there are typically very few, or it's very rare to see any kind of interruption in any part of the business.

36:52 All three of the components of the business that Michael talked through earlier, search comparison and online presence, I. The domains business, they all continue to contribute contribute towards getting as close as possible to that 100% target. And with that, I will pass over to Michael for an overview on the company's strategy and the outlook. Thank you, Billy. So and this this this slide is a good old friend. And despite the outcomes report this morning, we still believe that the strategy is correct, which is trying to create a virtuous circle out of organic growth, operating leverage, competitive cost of capital, and focus bolt on m and a.

37:40 However, the the balance of these three factors will now need to again focus on organic growth. We presented to you on three slides how we how we intend to create organic growth. Topic operating leverage, we have already we've already taken during q three action to reduce the cost base, which will only become effective in q four and and and and q one. We have we've over the last few years worked hard to get our EBITDA conversion ratio. So that's we define it as EBITDA divided by our gross profit from the high thirties to now the low fifties, and we have full intention to keep it on that level where it currently is.

38:31 And on the competitive cost of capital, we also need to do more work. So we had, in summer, made some progress on share price, which is now all but we will now need to need to show other ways for shareholder for for for for for value discovery. For shareholders, and the board will not leave any stone unturned in in to find ways to to unlock value in in the given situation and focus on what we believe in the in the long term value of it. Don't expect any acquisition anytime soon. So what are what what are what are the objectives?

39:21 How we want to want how do we want to change the company? So we want a more diversified set of revenue streams and supply sources. We already we've already spoken about the the lower dependency on on Google than before. We also want to become a more vertically integrated business, keeping more of the value that we create in specific markets ourselves. And we will also live up to our aspiration to become a big global leader in all the segments in which we operate. So in that search business, we're already there. And for comparison, we are now a national champion, but with a proper strategy to also take us to the the global market. And in the domain business, we are already the number two globally.

40:09 And and with but, however, with our faster growth than our peers, we should also make it to the number one position at at the right time. In this endeavor, AI will help us. So we've basically got our AI strategy at three pillars. A, raising the floor, democratizing AI, making sure that every employee has, access to contemporary AI productivity tools to do to accomplish their task quicker, than they could in the past. Then raising the ceiling, training our engineers and data scientists in state of the art technology so that they can build products that don't that not only meet but exceed customer expectations.

40:57 And we also don't stop with all senior leadership and also send them to to trainings for creative thinking and similar techniques so that they would always be on the watch whether there's any whether any new technology trend offers offers potential for disrupting some other company's business and integrate their value chain into ours. We then we'll end with the with the with the outlook statement. The the outlook for the years '24 and '25 is is is owed to the to the current situation.

41:43 Still very strong results. And we we believe that that the market is probably designing a relatively high, not dramatic conglomerate discount to the business. We have a very we have a highly we have a highly profitable online presence business with with an market leading and forward looking strategy, which could either be a public company in its own right or would find a new home in in another group. We have we have a great comparison business that when we look at the when we when we look at its EBITDA potential, could also be a public company in its own right or would be of interest to to many to many other leading media groups across the world.

42:42 And all of this is not reflected in the business, and the and the board will now do everything that it has to do in order in order to to minimize close that that that value gap. The good thing is that given the high cash reserve that we have, the strong operating cash generation, and our committed credit facilities, Until we find such solution, we can still continue to invest in the future of our business and return cash to shareholders as we've done over over the last two years. We still have an ongoing share buyback program running. And this is this is this is this is why this is why despite the difficult news to to convey today, we are we're we're still bullish about the long term prospects of of the business and, in particular, in the ability to unlock value by having a more structural review of the group.

43:43 With that, we pre we've ended the presentation and now move on to q and a. Perfect. Michael, Billy, if I may just jump back in there. And 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 along with a copy of the slides and the published q and a can all be accessed via your investor dashboard. Michael, Billy, 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, guys, at this point, if I may just hand back to you just to make your way through the q and a tab just to read out those questions and give your responses where it's appropriate to do so.

44:31 And if I pick up from you at the end, that'd be great. Thank you. Thank you, Jake. Sure. Shall I take the first one we can see on screen about Yes, please. Meeting market expectations? So the question that we have here is at the interims in August and in and in subsequent share buyback RNSs through to September, we stated that the company we were confident the company would meet market expectations and basically what's changed since then. And, yeah, when when when it comes to the last earnings event in the middle of August, we were confident then that the company would meet market expectations. It it was it was a question then of the, to date, slight underperformance of Shine's being a a drag on the company's numbers compared to the consensus, but that there was enough going on in the rest of the business that would that would get the company back up to market expectations.

45:27 What's become apparent in the ensuing three months is that what looked like a slight drag is a bigger drag, and indeed, the rest of the business hasn't generated enough growth to mop up that underperformance in the short term in shine. So it's important that before the year gets any gets any further, that we are completely transparent today about the various different moving parts in the business, the Shines and general search underperformance compared to expectations versus the product comparison and online presence domains business overperformed. The net result is the change to the outlook that we've we've made public today. So the expectations then were that we'd meet what what what the market expected. Now we are changing that statement as a result of the last three months.

46:16 But we're hoping that now that we've now that we've revised that expectation, the company should now be on a good course to deliver what we what we believe will still be a I mean, it's it's it's it's gonna be, again, a super profitable year somewhere between 95 and a $100,000,000 of EBITDA, which compared to the levels that the company has has you know, was producing even a couple years ago is is materially higher. It's just a a revised growth outlook that we are you know, now that we've shared it, obviously expect to talk about that over over the coming months as we get back to, hopefully, a higher growth rate at some point in the in the near future. Thanks, Billy. So then on the valuation gap between peers in both the online marketing and and and and presence business.

47:07 So in the meantime, there's not so many companies left anymore and at all kinds of valuation levels. But we also believe that there there might be an additional conglomerate discount where given that you have two businesses, which are both great business to be in individually, but that address different different investment styles. And, again, the the the board is is working on it to fix this, and we'll we we hope that we will come back to you with with results during the year of 2025. So we really now need to address this this problem given that we, of course of course of course of course can't can't let the share price be where it is.

48:02 We've then got a question about how the shy how the Shine's acquisition proceeded given the experience that the management team have within the group of due diligence and successful acquisitions. And that's a very I think that's a very fair point to raise that if you look at the the management team and the team that have delivered the Shines acquisition, it's it's primarily the same group of individuals who also delivered the TEAM INTERNET AG acquisition in 2019, the acquisition of the code wise legacy code wise businesses in Poland in 2020, and the VGL acquisition in 2022. So if you look at the track record of the group over the years, we we do we do have a track record of very successful delivery of thoroughly diligent acquisitions.

48:49 Shines was, again, a thoroughly diligent acquisition. But but, ultimately, not every acquisition is going to is going to integrate seamlessly into the group and hit the ground running at the same in the same time frame at the same pace. So we we we have seen other acquisitions that we've made before go through an initial period of lower revenues and then and then recover strongly as we rebuild the business. So we do have a we do have a track record of ensuring that even if we buy something and it turns out there are operational or commercial needs within the business, we we we actually have very good integration processes. And we're confident the same will be the case with Shine. So there's nothing kinda different about Shine's in terms of approach or diligence.

49:34 It's it's it's it's it's a very it's it's it's a it's a very valuable asset to the group if if we we treat it with with the with the right due care and attention. It's just that we have a lot we have we have more work to do there than we did with some of our other businesses. But we've we've always been able to to make these businesses a a success before, and we we will do the same with Shine's. Right. And to the question, when do we anticipate a positive contribution from the Shine's acquisition? We already anticipate that next year, in particular, towards the the second half of the year. And the the the the the change the change will will largely be a change of the business model going more from paid for traffic to more organic traffic.

50:30 So think of it more going direction of of an LBG media or or or BuzzFeed to some part. And and on the other hand, also focusing on on short form short form video, which which will then make it ultimately a more valuable business probably than it than it was. And in the meantime, the technology that we acquired will then help the transition process or the transformation process of our search division so that that we transform quicker than our competitors and and and secure firmly our number one position in that search referral market. And then on the question whether the strategy has has been in response to the q three results, no. The this strategy has been in making for a very for a very long time.

51:31 However, we we now pull these slides out maybe a quarter earlier than we would have normally done because, of course, commercial sensitivity is always a trade off when when we need to explain invest investors what's what we do. I I guess, also today, some of our competitors will listen in. And but this is just why we've chosen to pull them out just at this point in time, but we also don't see a big problem with it. The technology that we've developed, we've put at least twelve months of development work in each of these in each of these strategies. So just someone listening in can't simply run away with the idea. The next question is partially partially, but not wholly repetitive of the of the question about the Shine's acquisition.

52:24 You have conducted various successful acquisitions over many years. What are the main issues as you see them with the Shine's acquisition in terms of the process of purchasing this company and also from a current operational standpoint operational and commercial standpoint, I'd say. And how do you intend to improve those aspects and any additional learnings? And, yes, the the the more successful acquisitions over the course of the last several years, certainly since I've been with the group in 2019 and Mike has been with the group since 2018, we've overseen many more more more quickly, more objectively successful acquisitions. We we naturally do look at the the the m and a process within the business. And and it's if if there is anything within the Shine's process that we that we see as a something we can do better in future, naturally, we'd look at that as we do with all of our control processes.

53:18 There are there are there are with any with any deal, there are there are there is a risk profile with any deal. And here, the risk profile, you know, had had had some risks, which were partly to do with timing, partly to do with the position of the target within the industry. Still an industry or rather a subsector of the industry where we're very confident that we can help Shines to win, but that is something we obviously need to need to prove. And we obviously need to take the learnings from that acquisition through to future m and a activity. And then the following question is, I think, on the same topic again. And then there's a slightly different topic. With changes to the budget to inheritance tax relief, does the company still believe that the AIM market is the right market for the company to be on?

54:10 And I'll be a bit careful what I say here because there are there are probably many people on the call who who are more directly involved with or have have a, I suppose, a stronger opinion on the inheritance tax relief related to AIM shares. I think most of the people that I speak to regularly and my own perspective is that compared to the changes that people might have been fearing with the inheritance tax regime, for the government to introduce effectively what's what's half the half the tax that one would pay on on on transfers of value in respect of other assets, other investments, AIM still remains attractive to investors. I mean, a zero relief going away and now 20% rate being introduced is is is obviously higher than it was before, but I, for one, am delighted that the government chose to retain differentiation and that competitive advantage that AIM has.

55:05 Obviously, it's not my place to say, over time, whether we see a change to how AIM is perceived now that there is not a not a complete relief, but only a partial relief on on inheritance tax. But I saw it as a pretty a pretty mild outcome compared to some of the speculation prior to. So for us, AIM is still a thriving market to be on. But there is obviously over the coming years, we obviously all have to see how we see the market develop. But it is it is it is the right market or the right index for for us to be on. The next question is to do with the debt levels. Market concern sometimes focuses on TEAM INTERNET's level of what's what's called here high debt.

55:56 The buybacks and dividend have made have made no substantive difference to the share price. And what's the balance in the company between buybacks and aggressively paying down debt? We we still don't believe it's appropriate to pay down to to to focus or to prioritize paying down debt. It's a it's a hugely subjective area, of course, and we fully appreciate that there will be some individuals and institutions within our shareholder base who would prefer pay downs of debts, and then there will be some who would prefer us to return cash to shareholders by way of share buybacks. So we we we, you know, we we we freely admit we're never gonna you can't can't keep everybody happy all the time. By having a balance between share buyback activity and, you know, debt debt has decreased during the during q three, which is a fact that I hope doesn't escape the the market's attention. You know, 10,200,000 lower at September 30 than it was at June 30. So even if we don't objectively see buyback activity leading to substantial appreciation in the share price, it's still important to us that we listen to a balanced balance a of all the different views across the market because there is a balance to be had between how we how we how we use our cash.

57:15 And indeed, the buyback activity has generally been well received. So the buyback the buyback scheme that we we launched in September continues to make progress. It is moving at a re at a relatively modest pace. The amounts of shares we're buying back each day is is very easily manageable within the cash flow that we're generating. So one one should see that net debt will be either the same or lower at the end of the year than it is now, and that that hopefully will, over time, help to remind the market that in a quarter when we don't have any nonrecurring m and a activity and only share buyback activity, we generate enough cash to ensure that we can still make a difference to our net debt and at least keep it at the same level and without needing to stop the share buyback activity that benefits so many shareholders.

58:09 Just looking at the next question. Yeah. So so here, at least I I thought I'd already spoke about it, but may maybe maybe I didn't. It was another investor call. So we had anticipated that we would see a broad recovery of of click prices during 2024, and many other other market participants have put out similar messages in the first quarter of this year. However, by now, most most have stopped that narrative. So the online advertising industry is still very difficult with, of course, a few lucky exceptions. And but we now hope that under the new presidency of Donald Trump, we will finally see a very business friendly politics in The United States and hopefully some recovery of of the advertising markets to follow in 2025 so that our '24 projections could finally hold true in 2025.

59:19 Right. Just trying to just trying to make sure that we focus on the on the questions that are on topics we haven't already addressed. So one question is, are you able to provide any more color around the options being considered to realize value for shareholders? And that's a that's a fair question because we've alluded to in our in our release today and in in in some of the narrative around the results that there are naturally, there are multiple options for realizing the value within our asset portfolio. We we we we have to be very, very careful that we that that we reiterate that all parts of the business you know, I can't think of a single part of the business we've acquired during my time with the group or prior that it either isn't profitable or doesn't or or is it core to the business. There are obviously some parts of the business that move quicker than others. And internally, we are laser focused on our EBITDA conversion and the parts of the business where their EBITDA conversion is lower than some of the others. You know, they might sometimes feel unloved, but it's important that we put together plans as indeed we are doing for how we how we normalize everything to, hopefully, a a a consistently high achieving level of EBITDA conversion. So there's nothing specific that we're looking at in terms of the asset base and options being considered, but it is important that in the best interest of the shareholders,

1:00:49 we look across the portfolio at least from time to time and see where, you know, where there might be options to realize value. So it is something that we're we're we're open to. We've, of course, followed with interest the the split bit of the carve out of Optima Health by by Marlowe. Well, this will be the option that we choose or something else is, of course, way, way too early to judge at at this stage. Yeah. Within the remainder of the questions, I can't see anything that we haven't already addressed. I don't know about you, Michael, if there's anything that you see there that we haven't already talked through. Yeah. So like, maybe just maybe just a general comment.

1:01:36 So, of course, we are very frustrated about the situation at the Chines, and our objective is to make money with acquisitions like our TEAM INTERNET acquisition back in 2019. Now returns a purchase price almost every year after tax. Also, VGL now delivers twice the profit even though they also had some scientific times in the trajectory. The important thing is to never get to never give up, to to assess what has gone wrong, and then and then fix it. I've already mentioned that we see a strategy to move it closer to a business like BuzzFeed.

1:02:23 There was also quite a question on BuzzFeed. BuzzFeed is written with with double zed, b u zed zed, f e e d, US public company, $100,000,000 market cap. So that will be a bit the the role model that that we will try to replicate with this business. Other than that, of course, we use all all typical tools. If when when revenue is not in line with with with expectations, also the cost must may not be in line with expectations. And we've already we've we've already taken action in September and October, which will mostly be visible to some degree in q four and mostly in in in q one, letting us start a new year with with a different cost base than we than during the summer.

1:03:20 And for the for the more specific disclosures, what what what went went wrong? So every SBA has certain protection clauses in there, which we're currently exploring with our lawyers. So in order not to jeopardize the case, we we we cannot disclose much more detail on what exactly what exactly happened here. But we have we have a very clear forward how how to build an even greater business from from what we acquired. Good. We are we are five minutes behind behind time. I think even though there's still some question on screen, I think we have these were mostly duplicates.

1:04:11 And well, thank thank thank thank you very much for taking the time today to to hear our story, how we want to build back the trust that's that you that you've given in us. We we understand that this is the first miss on on numbers in a very long time, and but our job is now to to pull all levers to finally get the the EBITDA north of the $100,000,000. And and also and also review whether whether TEAM INTERNET GROUP in the in the structure that it has today is is the smartest is the smartest composition of these assets or whether any any change is required.

1:05:02 But but these, of course, things that you can only do once, and so we will take the board together with Billy and I will take some some time to explore these options, assess them. And then when we when we think we have identified a superior option, then inform the market on what exactly we are going to do. Michael, Billy, if I may just jump back in there. And thank you very much indeed for being so generous for your time and addressing all of those questions that came in from investors this afternoon. And thank you also once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations? This will only take a few moments to complete, I'm sure it'll be greatly valued by the company.

1:05:50 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 to you all.