Demand Media, Inc. (NYSE: DMD) just reported its earnings for the 1st Q of 2012 beating expectations and sending the stock soaring in aftermarket trading up almost 20%
Some interesting stuff in this report including that Demand invested $18 Million in new gTLD’s.
Previously Demand reported it was allocating $5 Million for new gTLD’s meaning that they were going to apply for some 25 new gTLD’s but now at $18 Million Demand is going to be one of the biggest players for new gTLD program as this equates to some 100 new gTLD applications.
Demand now become a way to play the new gTLD market without having to apply yourself.
eNom revenue was up 17% and grew by about 600,000 domains in the quarter.
These results maybe why Demand reportedly turned down an offer of $1.2 Billion a couple of weeks ago to go private.
Q1 2012 Financial Summary:
- Content & Media revenue ex-TAC grew 4% year-over-year and increased 1% compared to the fourth quarter of 2011. Year-over-year comparisons were impacted by early 2011 search algorithm changes. The 1% sequential improvement included the second consecutive quarter of revenue growth for eHow.
- Registrar revenue (eNom) grew 17% year-over-year and 3% compared to the fourth quarter of 2011.
- During the first quarter of 2012, the number of registered domains grew by a net 593,000 compared to 442,000 in the first quarter of 2011, due to growth from new partners and organic growth from resellers.
- Loss from operations and net loss include $1.8 million of accelerated non-cash amortization expense associated with content intangible assets removed from service in conjunction with the Company’s previously announced plan to improve its content creation and distribution platform.
- Free cash flow increased by $11.8 million year-over-year. The increase was driven by an 81% reduction of investment in intangible assets to $2.7 million. The intangible assets investment decline was the result of planned decreased content spend on eHow as the Company continued to make improvements to its content creation and distribution platform.
“Our first quarter growth and significant free cash flow marks a great start for 2012, particularly in light of a tough year-over-year comparison due to early 2011 search algorithm changes,” said Charles Hilliard, President and CFO. “Demand Media’s increased guidance reflects our first quarter performance, our improved outlook for the remainder of 2012 and, for the first time in more than a year, a return to accelerating year-over-year revenue growth beginning in Q2.”
Business Highlights:
- In April 2012, Demand Media invested $18 million in pursuit of its generic Top Level Domain (“gTLD”) initiative, which it believes represents a complementary strategic growth opportunity for its Registrar services.
- On a consolidated basis, Demand Media ranked as a top 20 US web property
- throughout the first quarter of 2012, ranking as #18 in March 2012(1). Demand Media’s worldwide unique users exceeded 104 million in March 2012(1).
- On a standalone basis, eHow.com ranked as the #17 website in the US in March 2012, up from #19 in July 2011(1).
- LIVESTRONG.COM/eHow Health continued to rank as the #3 Health property in the US based on unique visits throughout the first quarter of 2012(1). In May 2012, LIVESTRONG.COM won the People’s Voice Webby award for Health Websites.
- Cracked.com continued its ranking as the most visited humor site in the US throughout the first quarter of 2012(1), and more time was spent on the site than any other humor website(1). In May 2012, Cracked.com won the People’s Voice Webby award for Humor Websites.
- In February 2012, Demand Media introduced its innovative Social Feed ads, which allow advertisers to deliver customized social media content directly into their live rich media ads.
- In March 2012, Demand Media launched the eHow.com Tech channel, with RadioShack as its lead sponsor, to help users master everyday tech-related tasks and projects.
- In April 2012, Demand Media launched eHow Pets, the third major channel in its partnership with YouTube.
- During the first quarter of 2012, Demand Media repurchased 421,000 shares of common stock for $3 million under its Board-authorized $50 million share repurchase program. Since the program’s inception, the Company has repurchased 2.8 million shares of common stock for $20 million.
“Driven by continued growth across our businesses, our first quarter revenue exceeded our seasonally strong Q4 2011 results,” said Richard Rosenblatt, Chairman and CEO of Demand Media. “We are pleased with our first quarter results and remain focused on investing in our long-term growth initiatives, including enhancing the quality of our Owned & Operated properties, expanding our content distribution channels and partnerships, and pursuing new generic Top Level Domain opportunities.”
What the price of the Demand IPO? $15/share? I’d say the only ones who made money on this company are the execs.
“Previously Demand reported it was allocating $5 Million for new gTLD’s meaning that they were going to apply for some 25 new gTLD’s but now at $18 Million Demand is going to be one of the biggest players for new gTLD program as this equates to some 100 new gTLD applications.”
Does this mean if Demand isn’t selected by ICANN for any of the gTLD’s they’ve applied for, then Demand would lose the entire $18 million?
Chris
$17 a share was the IPO
But the low for the year was $5.24 so you could have almost doubled your money had you bought shares close to the low
Shares are currently trading at $9.50 after hours
Silly
If Demand applies for an extension no one else applies for they should get it.
If they apply for a extension there are other applications for they can
1. Go to auction and win it
2. Make a deal with the other(s) applicants to avoid an auction making a deal to own part of a registry or get its application bought out.
3. Withdraw certain applications along the way that will result in a partial refund.
I sold my DMD at little over $10 while back, buying in at $7, good trading stock at $5
Holy cow, at just application fees, that is over 90 strings.
How much more slated for auctions, etc?
I guess Demand are one of those ‘portfolio’ investors Minds and Machines referred to who would apply for more than tldh.
Reveal day cannot come to soon for me.
According to the final version of the gTLD application guidebook, any entity which has lost three or more UDRP proceedings in the preceding four years is not able to apply for a new gTLD extension.
Demand Media / eNom.com has lost more than three UDRP cases in the prior four years, thus they are not able to apply for any new gTLD extensions.
It is confusing and boggles the mind Demand Media has applied for more than 100 gTLD extensions considering ICANN has clearly put restrictions in place for any individual or entity with three or more UDPR losses. Bottom line, Demand Media does not have the right to apply for any gTLD extensions!
Why should ICANN make an exception for Demand Media?
Rules are rules…… it is time for ICANN to step up to the plate and stand behind the rules & restrictions they have put into place. What about all of the other individuals or entities who did not think they were able to apply because they had three or more UDPR losses?
Frank Michlick wrote a great post about this very issue on November 15, 2011:
http://www.domainnamenews.com/icann-policy/applican-guidebook-blocks-godaddy-demand-media-applying-tlds/8355
Rules are rules – fundamentally it should not matter if Demand Media has paid over $18 million application fees.
And yet again, we have another conflict of interest with ICANN. While ICANN should to the right thing and stand behind its rules and block ALL of Demand’s gTLD applications, they will lose $18 million in application fees. Who provides official oversight and full transparency in regards to ICANN decisions.
Joe
Joe
Its a fair question
I’m on the conference call trying to ask that question but not sure I will make it on.
However checking UDRPsearch I’m not seeing any losses by Demand, eNom has losses but Demand does not
Totally agree. This just makes ICANN look moronic if they allow Demand Media to get a TLD. Rules are rules.
They are the same entity.
Demand Media rolls up all of its revenue from its different brands (including eNom) into its operating results. Everything including the management, collection of data, payroll, etc. is rolled up under the publically traded Demand Media company.
In May of 2006 eNom.com was acquired by Demand Media and was a separate company prior to the acquisition, but eNom.com has been interwoven into the Demand Media operating entity.
So from my perspective….it absolutely has no bearing if Demand Media or eNom is listed as the official applicant (or any of its officers.) They are all the SAME entity and thus NOT allowed to apply for any new gTLD’s.
ICANN only has one choice in my opinion – to outright reject ALL of Demand Media applications because they simply do not qualify!
This is going to be very interesting to see how this plays out!
Joe
I am confident that the directors of Demand Media and their counsel have thought about this quite thoroughly.
Whatever they needed to do, they did. Whether it be create new entities, whatever.
Get you’re popcorn ready
and you thought eNom was hording the namespace and filling it with parked page garbage? if demand media has its way, if its gtld applications are approved, and icann gets away with this scam, we ain’t seen nothin’ yet.
more garbage than you can possibly imagine. at the worst, let’s say 500 million names per gtld. how many parked pages is that?
Reply
Well in defense of Demand which I’m not a shareholder they did say on the conference call that they deleted 600,000 pages of crap in the last quarter and their visitor count indicates they made it through Panda fine and dandy.
You are also assuming they are going to use the TLD’s for their own use rather than as a true registry selling registrations
I think that is not the goal offhand
that’s great news. they made a mess and then cleaned it up. bravo. 😉
no, i’m not suggesting they will keep the names to themselves. i’m suggesting they will be sold to domainers, who will park them. and wait.
basically same situation as we have now in a zone with 500 million names. and then multiplied by 90. what percentage of .com/.net/.org/etc. is parked? it’s quite a large one. and enom is a prime contributor. that’s there business. (along with machine/lowly paid writer-generated “content”.)
i guess i’m just not imagining some radically different use of domain names in the future.
forgive my lack of vision.
Sounds like if you want to invest in new tlds the easy solution is to invest in Demand.
UPDATE
Shares of Demand are up in an otherwise down market today:
Day’s Range: 9.15 – 9.66
Wow! It seems that someone gets slapped by Panda and Penguin yet someone else can afford 18M for buying great domains and put rubbish on it. I guess that’s the way it goes with “brands” 🙂