Team Internet Group plc (TIG) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Team Internet Group plc Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Michael Riedl. Good afternoon to you.

Thank you for the introduction, and welcome, everybody, to our trading update call today on the 15th of June 2026. We are today here, Billy Green, our Group CFO; and I myself, Michael Riedl, the Group CEO, to talk you through the following agenda. First, the business and its strategy; secondly, the 2025 financials and the current trading update released this morning. And then we will conclude by talking about the value and the outlook for the group. Jumping straight into it. If I -- if you remember only one thing from today's presentation, it should be this. The market is still looking at us through the lens of the transition of the Search division that we've gone through the last 2 years and not yet on the business that we've built from what we were 2 years ago. People might not appreciate yet that today, approximately 80% of our EBITDA comes from the Domains, Identity & Software division on the one hand and the Comparison division on the other hand, 2 businesses that are growing strongly and that are unaffected by the Search division that has caught the attention over the last couple of quarters. The Search business itself has completed the transition. The industry has consolidated dramatically, and we are believing that we are emerging as one of the leading players in a much smaller competitive field in this vast nascent market opportunity, but we'll add a little bit more flavor to that when we discuss the different businesses individually. You will also have taken from the RNS this morning that we've strengthened the balance sheet. You will have seen that the strategic review is progressing well, and we are also now actively pursuing recovery for historic anticompetitive conduct that has harmed the group and also its peers. So the question that we want to address today is simple. Does the current valuation reflect the business of Team Internet today. For those who are new to the story, let us quickly recap what Team Internet does. The first thing that I want to highlight here is how different the group looks today compared to how many investors might still remember us. So we have the 3 divisions, Domains, Identity & Software, which is running a recurring digital identity infrastructure business. We have Comparison that is an AI-powered consumer decision platform, and we'll talk later about how we are using artificial intelligence in the smartest way for this specific vertical. And then last but not least, we have Search, where we are engaging with users on platforms like on social media platforms and bring them to the merchants where they can then consider their purchasing options. But I started with the first slide with one of the key facts. Today, Domains, which is a global super resilient business and Comparison, which still has a very long runway for growth, given that today, we are extracting most of the revenue only from the German-speaking part of Europe. together represent 80% of the entire earnings of the group and Search presents much more of a future upside opportunity, and I'll come to the fact how we get there. Yet many investors still mentally equal the Search division and Team Internet even though we've grown past that stage entirely. And with that said, I would now go through the 3 different divisions to explain to you how exactly we intend to win the game in each of the 3 of them. So in DIS, DIS is a high-quality infrastructure business. Everybody needs domain names. And whether you're a small business or a large business, this is how identity is defined on the internet still in 2026. DIS benefits from recurring revenue. You can never really outright own a domain name, you have to renew it year after year. So most of the revenue just walks back through the door again and again with strong retention, given that we have integrations via so-called APIs with most of our customers, things that our customers tend to never give up on. We've demonstrated pricing power in this business, and we are also growing our value-added services. But let me go through them one by one. So we've deliberately optimized lower-margin customer relationships during the year. Which has led to reduced domain volumes, but improved economics. So our value added is that we can procure domain names in any country in the world, and we are paying -- we are being paid good value for that. We are not interested in replicating what some other competitors are doing, trading huge volumes of dot-com domain names to Chinese network operators. We are focusing on the quality end of the spectrum, which has then led that the revenue per domain name has increased as it has done over all of the last 5 years. It has also led to the share of the value-added services increasing from 16% of the total revenue in DIS to 18% of DIS. And this then in combination has led to the entire profitability of the DIS segment increasing. And given that everyone is -- or I should say most people are constantly asking about what does AI do to all of your businesses. The most important thing here is domains remain the foundation of digital identity and in an AI-driven world, identity becomes more and more important. Where can you see evidence of my claim? Verisign, the world market leader on the registry part of the domain industry, the operator of .com and .net released every quarter market research. And this demonstrates that 2025 was the year of the fastest growth of the domain industry in 10 years. And it should not be a real surprise because when you think about it, every byte-coded app that should become publicly available must be uploaded to some website, which is then -- which requires a domain name, and that's why we are seeing a very healthy business here. While DIS has been our stem cell from which the entire Group has been created in the first place, Comparison is a business that holds outsized potential and continues to be one of the most exciting parts of the group. We understand that we have seen a certain weakness in the customer engagement in the first half of 2025 due to some algorithm changes that Google, which still is the major channel for customer acquisition worldwide. But we protected the economics through improved monetization. So at the same time, we've been able to extract more value from every customer that comes to our website. The international expansion is becoming -- is beginning to contribute meaningfully. France is now well established being the lion's share of the international revenue. Italy, Spain and the U.K. are continuing to scale. But what is particularly important here is that we are using AI to industrialize content creation optimization. Let me shortly explain to you why that is. People are asking us, why don't people just go to ChatGPT and ask them what the best product is. And I can tell you exactly why. We have chosen the approach to also use large language models at scale to produce the consumer guides out there. However, by pre-building them rather than responding on the fly to a prompt by a consumer, we can guarantee a few advantages. First, the quality is higher because the result is not depending on the individual prompting skills of the consumer, and we want to reach all consumers, not only a small intellectual need who is -- who are senior prompt engineers. Secondly, it means it is cheaper because we can combine thousands, if not millions of prompts into one and deliver the same answer to the same question. It also takes away the risk of hallucination and data decay to unsolved problems of large language models because we can still review the content before it's being shown to the customer. But it also leads to other more operational advantages. The pages load much faster and page load time is one of the most important vital steps of any e-commerce business. People just hate to wait for 15 seconds until they see the results. They want instant gratification, and that's what we are delivering all the time, again, again, million times -- hundreds of millions of times, I should say, over the course of a year. And this is why even 3.5 years after the advent of ChatGPT and other large language model-based companies, we are still thriving where others struggle with this new era of the internet. So Comparison, huge massive growth potential given that we are today only addressing about 7% of the global total addressable market through the predominantly German-speaking countries that we are covering. But let's also speak about Search. So the transition is effectively complete as of today. The move away from AdSense for Domains is complete. There is not a single dollar of AdSense for Domains revenue with us anymore in the second quarter of the year. There was only some remaining revenues in the first quarter of the year. So we can call the transition completed. We believe that we have taken the right choices in how to position us in the market and which is not -- and therefore, we are now firmly established as a podium player in this new vast and nascent market opportunity to our regret because also personal fortunes are tied to this. About half of our competitors have not made it and have closed the shop, but we have not been giving up and are now very well positioned. Through cost optimization, automation and innovation in how the monetization actually works, we are now in a very good position to have a profitable second half in Search for the second half of the year. And all of this in aggregate now makes us confident to say that we here -- that we see a significant future opportunity to build one of the few scale operators in the sector. And while today, the profitability of the group is largely relying on the shoulders of DIS and Comparison, we still expect that going forward, Search will start once again to contribute materially to the group earnings. But that is the backdrop to what Billy is now going to present to you, which are the 2025 financials and the current trading where he demonstrates to you that how what I just said translates into actual U.S. dollars. Thank you, Billy.

Yes. Thank you, Michael. Apologies that I'm off camera, but transmission speeds indicate that I should not have my camera on. It's significantly more important that you can hear what I'm saying as opposed to seeing me as I run through the slides. The first slide we have here, a lot of this data will already have been known to people who followed Team Internet for some time. The 2025 financial highlights have been out there in the market for a couple of months. We've all known and seen and indeed, we saw and flagged during 2025 that 2025 would be a year of lower revenue and profitability than 2024, but an understandable, well-communicated, managed pivot to a temporarily lower level of EBITDA, $42.7 million in 2025 is already a well-known number, and we're confident that there will be a higher level this year. So we won't see further years of lower profitability. If you look at the second row there, one of the important metrics to call out is that net debt actually decreased during 2025, illustrating that even in a challenging year for the company from a trading perspective, it is still within our -- not only our aspiration, but also within our control to delever slightly, both gross and net debt decreased during 2025, even as the Search part of the business engaged in the pivot from AdSense for Domains to Related Search on Content. The Comparison and DIS businesses continue to make good progress. And then adjusted operating cash flow, you'll see there a figure of $66 million for 2025. And we'll come back to that in a little more detail later, but still a very significant level of operating cash generation. This is still a very cash-generative business. So even in a year that proved to be more challenging than previous years, we still generated $66 million of operating cash. So that's still a huge amount of cash that we generated. In terms of the income statement in more detail, the top half of the income statement down to adjusted EBITDA, as I said, has been out there for a while already. There's a couple of items I should just point to within the bridge effectively from adjusted EBITDA to operating loss -- by their nature, the costs within that section tend to be primarily nonrecurring in nature. So you'll see, for example, we had an impairment of intangible assets, and that relates to our Search division, given that the short-term profitability of that division is lower than it had been over the previous years of fantastic growth, it's prudent and appropriate to record impairments of the intangible assets and goodwill within that Search part of the business. But it means that there's less carried on the balance sheet in respect of the Search business and future growth in that business is then all upside with less intangible assets to amortize. The other highly nonrecurring item within that bridge from adjusted EBITDA to operating loss, you'll see the level of foreign exchange losses there was much, much higher than usual. We typically experience net foreign exchange gains and losses in our operating profit of $1 million to $2 million. We experienced net exchange gains in 2024. That flipped back somewhat in 2025 when we experienced net foreign exchange losses just over $6 million. But then in 2026 to date, we've been seeing exchange gains again. So there is a certain amount of exposure within our business to fluctuations in certain currencies. We correctly report in U.S. dollars, but we have not insignificant overheads denominated in sterling, euro and zloty amongst other currencies, but those are the 3 material ones. So there will be foreign exchange gains and losses from time to time, but the level of foreign exchange losses experienced in 2025 is in no way indicative of any change or decline in the quality of our underlying cost base, which is still very, very competitive. Just taking a quick look at the balance sheet. You'll see that there was a -- we're looking at slightly lower levels of working capital. So current assets, for example, lower now than they were a year, 18 months ago. And that's mainly because of the -- there was naturally a high level of working capital within the Search part of the business. So now that is trading at a lower level for the next couple of quarters. We anticipate that current assets, for example, will remain at that lower level. And as I referred to earlier, net debt decreased by $8.8 million, and that was even after returning $6.7 million to shareholders via the company's share buyback program, which was still running in the first half of 2025. So absent that return of cash to shareholders, the net debt decrease within the year would actually have been north of $15 million. So indicative of the level of cash that we are generating. On the subject of cash, cash conversion was very, very strong in 2025. We had already achieved a pleasing level of conversion of operating profits to operating cash in 2024. We then achieved 155% in 2025. Our target every year remains to convert operating profit into operating cash at a rate of higher than 100% in a year like 2025, when working capital was coming out of the Search part of the business as we work through the pivot from AdSense to the Related Search on Content, you could reasonably expect the cash conversion to be very impressive because we're releasing working capital into the business from the Search business. But to get to 155% was a real achievement. And that's something that as a business, it effectively keeps the bar very high for us in terms of cash conversion. We target 100% cash conversion again this year, and we'll be working very hard to ensure that the high levels of cash generation experienced over the last several years remain at a very impressive level. The last word I'll say on financials, and we decided that given that the 2025 numbers have already been out there in summary for a while, and indeed, we're already partway through June, we thought it would be helpful just to give an update in respect of how 2026 has started as a business. The group has experienced a very strong start to 2026 to date. We generated in the first 5 months of the year, $16 million of adjusted EBITDA. That would indicate an EBITDA run rate that's higher than the level achieved in H2 2025. And as a reminder for everybody, the second half of the year tends to be almost without exception. 2025 was one exception because of the time frame in which AdSense for domains gradually wound down. But usually, H2 is the bumper half of the year. So because the Comparison and Search businesses, so the e-commerce and advertising industries more generally because they are so heavily Q4, H2 weighted. H2, we would expect to be the higher of 2 halves. So we expect even better things to come this year. H1 has already started very well, progressing very well. And we expect a higher level in H2 again so that we can hopefully show that we've returned to year-on-year growth this year following the decline we saw in financial terms in 2025. The reasons behind that growth, the DIS and Comparison businesses both continue to grow at a phenomenal rate really, both individually and in combination, those 2 parts of the business have shown very pleasing levels of growth versus 2025. The Search side of the business, whilst it's contributing less to profitability right now than it was this time last year, it's showing signs of returning to full profitability contribution in the second half of the year for 3 reasons, one of which is the gross revenue of the Search business has been stronger in recent weeks and months than it was around the start of this year when Related Search on Content was still really at its nascent stages. We're also targeting margin expansion within the Search part of the business, gross profit gross margin expansion, plus as well, the cost base of the business has been reset at a more competitive level prospectively. So right the way through the P&L for the Search part of the business, we've been successful in effectively rebasing, restructuring the business for a new lower level of revenue generation, and we're confident that Search's contribution in the second half of the year will be more significant than it was in the first half of the year. And with that, I will hand back over to Michael.

Thank you, Billy. So we're coming to the last chapter of today's presentation. And we're starting with the highlights. the strategic review. And the strategic review is progressing very well as we've confirmed this morning, we are continuing discussions with selected parties so that they can do their final homework like confirming financing capacity, et cetera. As you know, the Board always said we will only pursue a transaction if it delivers fair value. We are under no pressure to transact. But the offers that we are received of, as we have now repeatedly confirmed, are materially in excess of GBP 120 million. Given that we are reporting in dollars, it's materially more than $160 million. And therefore, it also means it will be in excess of the entire gross debt that the company currently holds and also leave some material spare change for other purposes, but we'll come to that in the Q&A section. The business itself that we are selling here is performing very well, as you know, from the first few slides that we presented to you. And in terms of time line, you have all been very patient with us to find the right partner or the right potential partners plural for this transaction, but I understand it's time to come to the final call here, which we expect to deliver in the first half of Q3. And given that the domain names have some level of regulation, subject to customary conditions and approvals, we then expect the transaction still to complete in the course of 2026, given transaction is finally agreed. Again, the most important point is here, we reaffirm our guidance on value and are looking forward to the next update on this topic. On the last slide, I mentioned that we are under no pressure to sell the business other than our relentless effort to crystallize the value that we've built in this business. We have renegotiated our credit facilities, which now include aligned maturities. So no part of the debt becomes due before about 16 months as of today, which gives us a lot of headroom to find the best solution for the future balance sheet of the group. The banks being cognizant of the progress that we're making with this business have rewarded this with a notably widen covenant headroom which is very much appreciated. We've, at the same time, also rightsized the volume of the loan facilities given that currently, we are rather looking at generating sales proceeds rather than doing material M&A. We've also downsized the facility a bit just to bring it in line with our current ambitions, aspirations and needs, which avoids unnecessary cost of financing. And the full refinancing is still progressing. But again, now with a slightly improved -- well, I should say, materially improved time line until when we need to present you with a long-term solution for the topic. But again, next maturity is only in 16 months, which gives us considerable time as of today. Then to the -- to something completely new. I wanted to address the antitrust claim that you will have read about this morning. So this claim arises from conduct of a material intercompany that has already been established by a final regulatory decision. We've also, in the last couple of weeks, either seen court rulings or have seen court rulings being announced for the near-term future. And we now felt that the claim becomes sufficiently substantiated that we believe it is now the right time to disclose this process in order to not -- in order to prejudice the process, we must retain the exact amounts, strategy, the exact allegations, the exact party for us. But we can confirm that we are now actively pursuing recovery of the losses that we've suffered and also our peers have suffered for an extended period of time. The timing, the outcome and the amount still remain uncertain. This is why under International Financial Reporting Standards, we have not recognized an asset. However, on our best commercial judgment, we believe that the successful outcome could be material in the context of the company's current market capitalization. And we will update you on this topic as appropriate when there is any progress on it. Moving to the last part, wrapping it up. Let me finish where I started. So we are cognizant of the challenges that the group has seen, but we still believe that the current the current view is still too much on the disruption that we are now through with and too little on the business as it stands today. Again, 80% of group -- of the 2025 group EBITDA was coming from DIS in Comparison, unaffected by the Search transition and both performing strongly. Search is now through the transition and positioned for recovery. The strategic review is progressing. The balance sheet has been strengthened, and we've now got an additional potential source of value through the antitrust claim. Therefore, we enter the second half of the year with a position of strength. And we've not yet put it into paper, but I want to give that I know it will come up in the questions later. The question is what will Team Internet be once the strategic review would finally end with the sale of the DIS segment. And without keeping it simple, in e-commerce, you typically speak of 3 stages of conversion, the awareness phase, so people get aware of your product. They consider it for potential purchase and they ultimately convert. What the Search division does, it takes consumers from the awareness phase to the consideration phase. And the Comparison division then takes users from -- or consumers from the consideration phase to the actual conversion phase. So over the 2 businesses, we can then cover the entire conversion funnel as the online marketers call it in one single business model. Comparison all delivering high teens million EBITDA contributions, even though we are today only addressing 7% of the global market opportunity. and Search has already demonstrated that this business model once fully refined and homes to perfection can deliver double-digit million EBITDA contributions. And we hope that this future growth story will be exciting for you to also to enjoy being a shareholder of Team Internet more than you did for the last 2 years. This is where -- this is the message of today, and we are now happy to take your questions.

That's great, Michael. Billy, thank you very much indeed for your I would like to remind you that recording of this copledboard. [Operator Instructions] Michael, if I may now hand back to you to chair the Q&A, and I'll pick up from you at the end.

Yes. Very, very happy to. And I'll take the questions in the sequence that I see them on screen. But also at first glance, it looks like we can summarize some of them quite well. So in the event DIS proceeds at a level that exceeds the debt repayment, what is management authority for the surplus buybacks, dividends, M&A or reinvestment? So yes, first of all, the expectation is that the proceeds would exceed the amount -- the total amount of debt. So there would be a surplus. And while the Board is yet -- while the quantum and timing are yet uncertain, the most likely use for it would be a tender offer. Helping the market to rebalance the register based on the strategic pivot so that we would later then be starting the journey with a share register that is very comfortable with the growth story for the remaining digital commerce platform that we are building. And the general dividend strategy and M&A are then steps that come later. But in general terms, I should say the Board will -- the Board will be more careful and on the M&A side, fading, being very selective, looking only into highly adjacent pieces of M&A that very neatly fit into the strategic vision of the digital commerce platform. And -- but that is still way out for now, focus on the topics of the delivery of the review, then the material distribution. And only then we will turn our attention again to growing the new core of the business. Going to the next question, right. It has the same focus on DIS, but more a question around has the process now moved to a preferred bidder or exclusivity stage. We don't see need to grant exclusivity at this point, and we are carrying on we've chosen our words carefully in the RNS. We are moving on with selected parties who are now allowed to do their final homeworks, including confirming their financing capacity. And yes, so there is material progress from our last announcement on topic on the 24th of April. Next question is now that the AFD to ASOC transition in search is described as substantially complete, has the Search segment's revenue run rate stabilized in absolute terms through the first part of 2026? Or is there still some sequential decline as the new model scales? I would really like to differentiate here between AdSense for Domains revenues and ASOC revenues, while because it's 2 different journeys for consumers, for the advertisers. The revenues that we are currently doing with Related Search on Content are already higher than the revenues the business was doing with AdSense for Domains when we took control of it in December 2019. That's for me the main reference point. the margins in ASOC are not yet quite where they were at the end of 2019 when we -- when, of course, the business had already 9 years of constant optimization of the ad spends for the main consumer journey, whereas for Research on content, we can now only speak about a little bit more than 1 year of true optimization effort. But I understand that this is a valid question, and we will consider because I don't want to make a mistake in now reciting any figures spontaneously. We will consider updating the market on this in more detail when we come out with the H1 trading update, which we hope we can provide you with before the Annual General Meeting is being conducted in the next month. The next question is -- sorry, I overlook one. Depending on what has or hasn't been published this morning, could the Board give shareholders a clear sense of how the DIS process currently stands? I think I added detail to what we said in the RNS. Yes. So level of interest is still very strong. I think there is well, the question is then again -- the question ends again with the future distributions. So yes, the dividend policy, we've never canceled the dividend policy that you've seen for the first time in our 2022 annual report published, I think, in April 2023. We've just currently suspended it for the reason being that today liquidity preservation was more important in the face of this transition. However, in a world where we have materially paid off all debt -- well, we will have paid off all debt. We would only have fresh debt if we would consider it helpful for, for example, tax optimization or other purposes. But we should then also then again reestablish our dividend policy. However, the exact quantum and the exact timing is yet to be deliberated by the Board depending on the progress of the other topics we talked about. So here, the next point is it would be useful if you could say a few words and update on the strategic direction and future of the Comparison division. In particular, how do you see the partnership with BestPick developing and scaling in the U.S. market? And does the Board envisage retaining the Search division to support that growth or is Search also under review as part of the wider portfolio assessment? So first which is one of our own brands. So we are pursuing a strategy to have dedicated brands for each market, given that product comparison markets individually tends to be rather national markets, a few people who have their normal residence in one country, do a lot of Comparison shopping in other countries. So the growth of Comparison business has multiple dimensions. For now, we are talking mostly about the internationalization because this is the first one that we've launched. It is the one that is very live. And that is also on -- this is also the largest on a pure numbers play. I mentioned before that the current German, Austrian and Switzerland market that happen our historical core market only represents 7% of the global e-commerce market. The other vector along which we are expanding is the number -- the channels through which we engage with consumers. And here, classical search engines like Google and Bing are still very dominant. But also here, we're experimenting with engaging with users on social media and other similar types of websites, which again holds a material potential to engage with users that we currently cannot reach with the way that we interact with the market. And the third vector would be extracting more of the value that we create in the market for ourselves. So we have already in -- we have historically relied very much on commissions from e-commerce partners, which are still the bulk of all our income, but we've also struck partnerships with the manufacturers of the products who now pay us additional commissions on top. And here, we might go deeper and potentially just accept offers from -- directly from the customers and going from a commission-based model to a drop shipping-based model, similar large American companies like Wayfair are operating which then holds even more potential for expecting more percentage margin of the gross merchandise value that has been referred. So these are the 3 main vectors. And we will see to also add to the set of strategic KPIs that we share with the market once these 2 additional growth vectors have picked up more momentum. The next question is, has management confident in achieving the DIS valuation materially above the November market cap? Yes, Yes, we are cognizant of the fact that the market cap today is lower. This is why we've always been very specific in the -- in our RNS to make clear that we are talking about the 11th of November market cap of around $160 million. And again, in the deck today, we have put the word materially in both. So we're not talking about a tiny bit above $160 million. Second sub-question, following the refinancing, does the Board now feel it has sufficient time and flexibility to maximize value rather than being driven by finance deadline? Yes, absolutely. That is true. Third, assuming a DIS transaction completes, how should shareholders think about the value of the remaining Search and Comparison business? Valid question. While I have already alluded to some aspects of it, we have a business or Comparison business that is succeeding in what I call the end game of e-commerce. So we can already today put fully paid ads on search engines like Google and Bing and still extract a lot of value from then converting the consumer that has only considered the transaction to make them an actual customer. So we take the risk whether the customer actually buys something. But given that we are really good at converting these customers and actual buyers of the goods, we make considerable money from this operation. And in terms of all the business model that you see online, it doesn't get any better than that. If you can make a living from taking the risk of converting a customer who's only considering a transaction into an actual customer, then you're basically unstoppable. And that's what we now need to prove that we cannot only do that in the German-speaking market that we can also do that internationally. And France is a very good example and proof point that we will get there. And Search. Search at the end on the last slide, I was talking about the conversion funnel, awareness, consideration, conversion. This is then another important growth vector. And while, well of course, we have to concede that this business has shown unprecedented volatility and admittedly also moves unforeseen moves by our largest trading partner that have been unforeseen by us and everyone else in the industry. The good news is we've now found a floor. And from here on, it can only get better with this business. Many have given up. We have not, and we are now poised to reap the rewards of that bold move. Moving on to the next question. How are you financing your substantial damages claim? Given the specifics of the case, we determined that doing self-funding would be better than litigation funder, given that there is already a regulatory approval or regulatory decision that clearly proves the fact that there was anticompetitive conduct we feel confident that it's the economically wiser choice to self-fund and we're only talking about a low single-digit percentage of the potential award that we're working towards.