Company paints its vision of the future as it continues to face growth challenges.
Rightside released its first earnings statement and held its first investor in its post-eNom reality yesterday. Here’s my take:
The business going forward
The divestiture of eNom means Rightside is doubling down on its new top level domain name business. It will also focus on its retail registrar Name.com for, among other things, selling its 40 TLDs.
Despite this focus, the reality is that the company still depends on the aftermarket business for more than a third of its revenue. This includes domain parking and sales of .com domains. Unfortunately, this business is still in a questionable state thanks to domain name parking.
In fact, Rightside predicts lower revenue in 2017 than in 2016 thanks to questions about domain name parking revenue. It is forecasting $58 million to $62 million. 2016 saw just over $62 million in revenue.
New top level domains
Revenue from new top level domain names continues to tick upward. In Q3 2016 it was $3.0 million; in Q4 it was $3.2 million.
For all of 2016, it was $11.8 million, up 40% from 2015.
The growth rate is strong, but Rightside has promised some big numbers. It still forecasts $50 million to $75 million in registry revenue per year “within the next few years.”
It also expects $16 million to $18 million of cash bookings for the registry business in 2017.
The company ended 2016 with 565,000 domains under management for its 40 TLDs.
Its overall new TLD renewal rate is 59%. First-year renewals are 50% and second-year renewals (as well as renewals of premium domains) are over 75%. The first year numbers seem fairly strong given the amount of discounting the company has done on initial registrations.
Rightside hopes to get MIIT approval in China this spring.
What about all of the cash?
Rightside was sitting on $87 million of cash and no debt at the end of January after selling eNom to Tucows. It has decided to return up to $50 million of it over the next two years to shareholders in the form of stock buybacks.
Cost cutting ahead
It’s worth noting that the company’s market capitalization when you net out cash is under $100 million. It’s a much smaller company than it was before, and it has gone from a small publicly traded company to a tiny one (when considering top line revenue).
The company laid off 15 people when it sold Tucows, but more is still likely. The company says it plans to reduce costs this year to align its overall structure.
This likely means more layoffs and perhaps compensation haircuts for top management. This makes sense; the company needs to “Rightsize” (sorry) its expenses to the smaller size of the company.