IONOS Group SE plans Initial Public Offering in the first quarter of 2023
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- IONOS is the leading digitalization partner for SMBs in Europe, providing technology solutions to around six million customers around the world
- With sustainable growth, strong profitability and high cash flow generation, IONOS is well positioned in large and fast-growing markets driven by secular trends
- An Initial Public Offering is the next logical step to accelerate the Company’s growth trajectory and strengthen its brand
- Intended listing of shares and admission to trading on the Regulated Market (Prime Standard) of the Frankfurt Stock Exchange
Karlsruhe/Berlin, January 17, 2023. IONOS Group SE (together with its subsidiaries “IONOS” or the “Company”), the leading European digitalization partner for small and medium-sized businesses (“SMB”), together with its shareholders United Internet AG (“United Internet”) and WP XII Venture Holdings II SCSp, an affiliate of Warburg Pincus (together “Warburg Pincus”), announced plans for an Initial Public Offering (“IPO”) and listing of its shares on the Regulated Market of the Frankfurt Stock Exchange (Prime Standard) in the first quarter of 2023, subject to market conditions. The IPO is expected to consist of the offering of existing shares held by United Internet and Warburg Pincus, with United Internet retaining a majority stake in IONOS following the completion of the IPO. The targeted free float is expected to create a liquid market for IONOS Group SE’s shares.
Achim Weiss, CEO of IONOS Group SE, says, “The planned IPO marks a new chapter in the IONOS success story. Our Web Presence & Productivity business has proven its capabilities for many years, and our Cloud Solutions business is growing quickly and already self-sustaining. Building on our strong financial profile, we expect that an IPO will enhance the appeal of our brand, which already enjoys a high recognition in many countries, and support IONOS in its ambitions to strengthen its position as the leading European partner for the digitalization of SMBs and as a powerful cloud enabler.”
Ralph Dommermuth, designated Chairman of the Supervisory Board of IONOS Group SE and CEO of United Internet AG, says, “Following the powerful growth and successful development of IONOS in recent years, an IPO is the next logical step on IONOS’ journey. As a standalone, publicly listed company, IONOS would enjoy greater flexibility.”
René Obermann, Co-Head Europe of Warburg Pincus and designated Member of the Supervisory Board of IONOS Group SE, adds, “Having contributed to IONOS’ successful journey over the past years, we are proud to accompany the Company on its way to the capital markets. The IPO marks an important milestone for IONOS, allowing it to explore many new growth opportunities in the future, and is a very exciting step for all stakeholders in the business.”
Growing Web Presence & Productivity business driven by clear leading European web hosting position
As the #1 European SMB digitalization partner and trusted cloud enabler, IONOS supports its customers along their digitalization journey. The Company operates a strategic footprint in a total of 18 markets in Europe and North America with its platform being accessible worldwide. It has leading #1 and #2 web hosting market positions in the core markets Germany, Spain, UK, France and Poland. IONOS has a broad portfolio of products and services, supported by award-winning customer service and state-of-the art infrastructure. It serves a large, diversified and loyal customer base with around six million customers worldwide (as of September 30, 2022).
IONOS provides digital infrastructure that is often mission-critical to these companies as a large, increasing number of SMBs have growing digitalization needs to enhance visibility and efficiency in order to ensure their operations and growth. IONOS’ businesses and markets have shown resilience even in times of crisis and have great potential to continue their growth trajectory. The Company’s served addressable market is expected to grow at a compound annual growth rate (“CAGR”) of approximately 19% from EUR 38 billion in 2021 to EUR 89 billion until 2026, with the Web Presence & Productivity (“WP&P”) market segment expected to grow at a 2021-2026 CAGR of approximately 9% to reach EUR 34 billion and the Cloud market segment of such served addressable market expected to grow at a 29% 2021-2026 CAGR to reach EUR 55 billion by 20261.
IONOS’ scalable platform and diversified product portfolio in WP&P as well as Cloud Solutions are designed to enable customers to grow online by providing them with fundamental and mission-critical digital solutions and infrastructure. In WP&P, which generated approximately 90% of the Company’s revenues2 in 2021, IONOS offers a one-stop shop for all digitalization needs of SMB customers across their lifecycle: from domains and web hosting to classic website builders and do-it-yourself solutions, from professional e-mail to e-commerce solutions and online marketing tools. Further, the Company offers comprehensive aftermarket activities including among others the operation of a marketplace for domains. The aftermarket business has grown significantly over the past few years.
The business model is predominantly based on customer contracts with fixed monthly charges and contractually defined terms, providing stable, recurring and predictable revenue and cash flows. This offers protection against cyclicality and creates financial flexibility to exploit opportunities in new business areas and new markets. Additionally, IONOS targets revenue growth of the WP&P business at a high single-digit CAGR in the medium term while benefiting from significant barriers to entry.
Fast-growing and already self-sustaining Cloud Solutions business
One of IONOS’ main growth engines is its already self-sustaining Cloud Solutions business, which accounted for approximately 10% of revenues2 in 2021. Recent investments, fully financed by reinvested earnings, have contributed to the division’s growth momentum: the Cloud Solutions business grew at 19% CAGR from 2019 to 2021. IONOS intends to significantly benefit not only from a global shift towards the cloud, as well as from the fact that it has its own tech stack that is independent from US providers.
Resilient business model based on sustainable growth, profitability and cash generation
IONOS’ resilient business model combines sustainable growth, strong profitability and high cash generation that fares better than many of its peers, in the Company’s assessment.
The Company generated total revenues of EUR 1.1 billion in 2021 and estimates to have achieved a total revenue growth year-on-year of 15-18% in 2022. In the first nine months of 2022, IONOS grew its total revenue by approximately 19% compared to the first nine months of 2021, thereby bolstering its growth trajectory in both WP&P and Cloud Solutions. In the mid-term, the Company aims for a total revenue growth CAGR of around 10%, with an underlying assumption that Cloud Solutions would deliver a CAGR of around 20%.
IONOS operates a highly profitable and asset-light business, with an Adjusted EBITDA Margin of 32.2% in 2021. While it estimates a lower margin for 2022 due to further investments in the IONOS brand, the Company aims to achieve an Adjusted EBITDA Margin that will progressively exceed and steadily remain above 30% in the mid-term.
Driven by the large share of subscription-based recurring revenue, the scalability of its business model and a high cash generation combined with low levels of maintenance capital expenditures in 2021, the Company has a Cash Conversion Rate of 89.5%.
Further growth supported by multiple growth levers and continued brand investments
With leading web hosting positions in several European markets underpinning IONOS’ strong position in the large and growing web hosting market, a best-in-class financial profile and a resilient business model, the Company is confident to be very well positioned for future growth. Besides continuous organic growth resulting from previous successful investments, e.g. in Cloud Solutions and the expansion across existing as well as into new local markets, IONOS aims to capitalize on further growth potential. At the same time, building the industry’s strongest brand is a key element to secure future market success, with up- and cross-selling of today’s product portfolio marking another strong growth opportunity. In the long-term, further international expansion, a broadening of the product portfolio and driving consolidation via opportunistic M&A are additional options to accelerate growth.
As a standalone, publicly listed company, IONOS believes that it will have an enhanced flexibility to implement this growth strategy. The Company further aims to benefit from increased visibility and prominence of IONOS’ brands, as well as direct access to the capital markets following an IPO, to further accelerate its growth trajectory and consolidate its leading position in the European web hosting market. IONOS has secured financing through intercompany loans provided by United Internet.
Further details on the intended IPO
IONOS Group SE’s current share capital is held by United Internet (75.1%) and Warburg Pincus (24.9%). The offering is expected to consist of a public offering in Germany and international private placements. The listing of the shares of IONOS Group SE is planned on the Regulated Market (Prime Standard) of the Frankfurt Stock Exchange. J.P. Morgan, Berenberg, Deutsche Bank and BNP PARIBAS are acting as the Joint Global Coordinators in connection with the planned transaction. Barclays and Goldman Sachs are acting as Joint Bookrunners. COMMERZBANK, DZ BANK and Landesbank Baden-Württemberg are Co-Lead Managers.
1 McKinsey (2022): The SMB Market for Digitization and Cloud Solutions. For its served addressable market, IONOS has deducted Cloud North America and server hosting North America from total McKinsey figures to align with IONOS current addressability.
2 From contracts with customers.