2018/03/06 Minutes

Minutes of the Meeting of the CIRA Board of Directors held at the Pan Pacific Hotel in Vancouver, British Columbia on March 6, 2018 at 8:00 a.m.

Directors attending: Alex Beraskow, Ryan Black, Andrew Escobar, Michael Geist, Jill Kowalchuk, Rowena Liang, Louise Macdonald, Tyson Macaulay, Helen McDonald, Marita Moll, Bill Sandiford, Rob Villeneuve

Advisors: John Demco, Byron Holland, Pamela Miller

Corporate Secretary: Paul Havey

Guests:  Albert Chang, Steven Barry, Dave Chiswell, David Fowler, Rick Koeller, John Matson

Recording Secretary: Lynn Gravel

1. Approval of Agenda

It was moved by R. Black and seconded by M. Moll that the agenda for the meeting be adopted as presented.

2. Chair’s remarks

The Chair noted that a large number of items had been placed on the consent agenda to allow sufficient time for the budget discussion prior to the risk management session in the afternoon. Any items requested to be moved to the regular agenda would be discussed at the end of the meeting, time permitting.

3. Consent Agenda

The Chair called for any items to be removed from the consent agenda for discussion. It was noted that there would be an opportunity to discuss the registration numbers and product revenue under the budget item.  In response to a Director inquiry, staff provided a brief update on Round 5 of the Community Investment Program.

3.1 Draft Minutes of the November 16, 2017 Board of Directors' Meeting

3.2 Report on Statutory Obligations

3.3 Management Report

3.4 Q3/FY18 Financial Results

3.5 Report from the Market Strategy Committee

3.6 Report from the Community Investment Committee

3.7 2018 Policy on Nominations and Elections

It was therefore resolved that all items on the consent agenda be approved.

(Moved: R. Black, seconded: J. Kowalchuk, unanimously carried)

A. Beraskow joined the meeting.

4. Committee Reports

4.1 Report from the Governance Committee

The Chair of the Committee noted that the Terms of Reference of the Compensation and Review, FAIR and Market Strategy Committees were revised to include risk management, but otherwise, the changes were predominantly format changes to ensure consistency amongst the Terms of Reference of the various committees.

It was therefore resolved that the Board of Directors approve the terms of reference of the Compensation and Review, FAIR and Market Strategy Committees as presented.

(Moved: L. Macdonald, seconded: R. Black, unanimously carried)

4.2 Report from the Finance, Audit, Investment and Risk Management Committee

Revised Travel Guidelines:

The Chair of the Committee noted that the changes to the travel guidelines were minor.

It was therefore resolved that the Board of Directors approve the revised travel guidelines as presented.

(Moved: M. Moll, seconded: L. Macdonald, unanimously carried).

Revised Corporate Authorization Matrix and Schedule A Banking Resolution:

The Chair of the Committee noted minor edits to the revised Corporate Authorization Matrix and the Financial Signing Policy (Schedule A - Banking Resolution). The Committee was not recommending any change to the specified dollar threshold levels at this time.

It was therefore resolved that the Board of Directors approve the revised Corporate Authorization Matrix and Schedule A Banking Resolution as presented.

(Moved: L. Macdonald, seconded: M. Moll, opposed: A. Beraskow, motion carried).

5. Operational Plan and Budget 2018-2019

The Chair of the FAIR Committee noted the Committee had met on three occasions to review the Operational Plan and FY19 Budget. The Committee first reviewed preliminary high-level revenue and expenditure allocation assumption, the detailed fully balanced budget presented by staff, and subsequently, considered the optional marketing expenditure proposed by staff. It was noted that the business case for the additional marketing expenditure gave members of the Committee comfort in approving the optional expenditure. Overall the Committee was satisfied with the proposed FY19 budget plan, including the optional expenditure.

Staff noted they were presenting a fully balanced budget for the second consecutive year, prior to any management proposal to address other opportunities that may further the Strategic Plan objectives. It was noted that this is the third year in the four year FY17-20 Strategic Plan, and that the budget reflects the corporate priorities and is consistent with the overall Strategic Plan. Staff noted a few changes as compared to last year’s budget. Under the Reference Plan, registration revenue will see a large increase as a result of the full year impact of the price increase and continued growth in the domains under management; other revenue is anticipated to exceed the $1M threshold for the first time; and the fund to the Community Investment Program Fund will be increased 25% or by $250K.

Staff noted that the operating priorities for the FY19 Reference Plan budget are to complete the migration of .CA onto the FURY Registry platform (including a new To Be Released (“TBR”) and membership platform); further invest in the security of our .CA infrastructure, IT resources and data management; and continue our branding and channel programs (marketing and co-op programs, sales funnel, .CA marketplace, brand awareness initiatives, etc.).

Staff presented a general overview of the key initiatives under the strategic pillars and strategic enablers that the proposed budget is intended to fund. Staff noted that there is a lot of activity under Stewardship with an update on our NFP tax status, a possible review of CIRA’s objects and a mid strategic plan update and discussion, with a consideration of the linkage of risk management to our strategy.

It was noted that the budget is prepared based on information available in November with an estimate of the transactional and sales activity for the remaining 4 months of the FY18 fiscal year.  As such, staff noted that the revenue budget is subject to recalibration and adjustment based upon actual year-end results.  In this regard, three different revenue scenarios (Pessimistic, Reference Plan and Optimistic) were presented. The FY19 Reference Plan reflects 515,000 new registration units, an estimate of the FY18 Year-end DUM (YEDUM) assuming transactional activity for the remainder of the FY18 fiscal year and an estimated FY19 renewal rate of 80.1%. Other revenue is comprised of D-Zone Anycast DNS services (International & Domestic), D-Zone DNS Firewall, Fury Registry Services, IPT City subscriptions, Smart Community workshops and Registry Lock. It was noted that there is growth in the TLD Anycast business and in particular, that there is more significant potential for growth with the recently launched DNS Firewall service. The IPT Municipal subscription service is being adjusted to make it more attractive to municipalities. The domestic D-Zone Anycast business continues to grow at just under 10% growth.

Staff presented the FY19 Core Operating Expenditures by nature, by function and the more significant absolute year-over-year dollar changes. Staff noted  the core operating expenditure increases are related mostly to the following: anticipated changes to salaries and benefit costs (i.e. full cost of FY18 take-on-strength, compensation rate and market adjustments and changes to the variable compensation program); Computer Operations & Networking costs, and software licensing costs on the Firewall service offering; Communication Awareness and Education, Consulting and Capital Expenditures (CAPEX). It was noted that the CAPEX budget is $600K higher than the FY18 budget mostly due to the replacement and upgrade to the blade centre equipment, enhancements to CIRA’s security posture (data masking software) and site upgrades and increased memory capacity/costs for the DNS.  It was also noted that the overall CIP expenditure level including indirect allocation of related staff support has been increased to $2.0M. In this regard, the Committee will be reviewing the program this year with the expectation that the program should evolve to the next stage.

There was some Board discussion regarding whether it was sustainable to keep increasing headcount and the proposed 13% increase in year-over-year operating expenditures. In response, staff noted that the overall increase in operating expenditures relates largely to the increase in registration revenues and the realization in FY19 of a full year impact of last year’s price increase (i.e. versus a half-year impact in FY18).  In the absence of a change in price, future revenue increases will be limited to the growth in the registration domains under management (DUM) portfolio and any growth in Other revenue.  Staff noted that the Board and management have various levers at their disposal to manage expenditures and that in the last ten years, CIRA has only had a handful of deficits while increasing its net asset position over this timeframe.

There was also Board discussion regarding the associated expenditures against the Other revenue from new products and services.  The Chair noted that the FAIR and Market Strategy Committees would be working closely to define the principles and approach of cost allocation to new projects.

It was also raised that the Superior Talent section in the Corporate Plan did not include specific reference to diversity.  Staff agreed there should be a reference as CIRA has a diverse workforce. For example, it was noted that CIRA is gender balanced and has a significant number of female managers and in this regard, significantly outperforms industry averages.  Moving forward, it was agreed that staff would update the Superior Talent section in the Corporate Plan to include diversity, and as well, to use this as an opportunity to recruit talent by articulating what CIRA is already doing in regards to diversity.

The Board next considered the optional marketing expenditure request. The Chair considered whether this optional expenditure request created any conflict with those Directors employed or affiliated with Registrars on the basis that this increased expenditure in marketing would likely lead to more domain name registrations and increased renewals rates, which would provide a real or perceived financial benefit to Registrars. In response, it was noted that this optional expenditure request is a strategic spend for the .CA brand, and did not contemplate additional co-op marketing dollars for registrars. It was also noted that this is a strategic spend that would benefit all .CA, and not specific Registrars.

Under the optional expenditure request, staff is recommending investing an incremental $750K in communications and marketing initiatives in FY19 to support the business development efforts of .CA and to test the hypothesis that additional resources in this area will drive further growth.  The objective is to increase top of mind brand awareness of .CA; cultivate the next generation of domain buyers, the Millennials; and continue to support the existing target market (SME’s).

Staff referred the Board to the business case for the FY19 .CA Marketing Plan noting that it contained insights from previous marketing activities and a Preliminary FY19 budget allocation reflecting areas of spend. Staff noted that there were uncertain possible outcomes – this level of spend has never been tested for .CA - but believe that the incremental volumes are plausible, and that this was the right strategic investment at this time.

Overall, the Board was supportive of the additional spend and understood that it was important to test the appropriate level of marketing expenditure in the market. Staff noted that to identify the impact in one year and understand the media spend, staff will continue to monitor the impact of media expenditures, key metrics associated with the organization’s website and sales funnels, as well as the key business metrics of new DUM creates, renewal rates, overall DUMs, LTV and revenue. It was also noted that the FAIR Committee would review and monitor the impact of this incremental expenditure on an ongoing basis for the duration of the related program.

It was therefore resolved that the Board approve a) the FY19 Revised detailed budget submission, as submitted including the .CA Marketing Plan expenditure, as recommended by the FAIR Committee, and b) the underlying FY19 Corporate Plan.

The FY19 revised detailed budget submission reflects the Revised Reference Plan scenario (i.e. operating and capital expenditures and related registration activity parameters under the Optimistic view).

(Moved: R. Black, seconded: L. Macdonald, abstaining: A. Beraskow, motion carried)

R. Koeller and J. Matson joined the meeting.

6. Risk Management Session

The Board and management engaged in a facilitated session.  The focus of the session was to examine CIRA’s risk management program with particular attention to strategic risks.  The facilitator will provide a written report from the session, observations and possible next steps.

R. Koeller and J. Matson withdrew from the meeting.

7. AGM Venue

Staff proposed holding the 2018 AGM in Ottawa. Staff noted that historically, Member participation in Ottawa is stronger. Staff also noted that the savings from holding the AGM is Ottawa would be applied to more substantive Member events in three markets during the fiscal year. 

It was therefore resolved that the 2018 AGM be held in Ottawa on September 27, 2018.

(Moved: A. Escobar, seconded: R. Black, unanimously carried)

8. Other Business

There was no other business to discuss.

9. Next Meeting

The next meeting of the Board will be held in Ottawa on May 3, 2018.   

S. Barry, A. Chang, D. Chiswell, D. Fowler, P. Havey, B. Holland and L. Gravel withdrew from the meeting.

10. In-Camera Session

The Board of Directors held an in camera session.

11. Adjournment

On motion by L. Macdonald and seconded by A. Escobar, the meeting was concluded at 5:10 p.m.