23 September 2021

XLMedia PLC

("XLMedia" or the "Group" or the "Company")

Results for the six months ended 30 June 2021

Strategic momentum continues: solid performance across all business units,

with major organisational redesign accelerated

XLMedia (AIM: XLM), a leading global digital performance publisher, announces the Company's audited results for the six months ended 30 June 2021.

Financial summary

·    Revenues of $32.2 million (H1 2020: $27.7 million)

·    Gross profit of $18.3 million (H1 2020: $16.6 million)

·    Adjusted EBITDA⁽¹⁾ of $6.6 million (H1 2020: $5.1 million)

·    Reported loss before tax of $0.4 million (H1 2020, profit: $0.2 million)

·    Cash and short-term investments of $36.9 million (31 December 2020: $13.9 million)

·    In H1 2021 the Group recorded transformation costs of $1.0 million⁽²⁾ following the continuation of the restructuring plan of the Group (H1 2020: $1.5 million)

(1)    Adjusted EBITDA in all references is defined as Earnings Before Interest, Taxes, Depreciation and Amortisation, and excluding any share-based payments, impairment and reorganisation costs

(2)    Excluding M&A activity

Outlook

·    The Company maintains guidance of revenue for full year 2021 of between $65 million and $70 million although impact of transformational activities (including M&A and fundraising) likely to suppress operating profit across FY 2021 and FY 2022

o  Continue to see improved productivity across business units as we enter H2 2021, supported by US Sports and reinvigorated Casino business

·    As Covid-19 restrictions ease, the Company is accelerating organisational changes and will incur more costs in FY 2021 than previously budgeted

·    Across the medium term, the Group expects to benefit from more diverse revenue streams, with a focus on new money growth, greater operational efficiency and a built-for-purpose platform and data architecture, positioning XLMedia well for operational and financial progress 

Operating summary 

·    Solid performance in H1 2021 across all business units: Sports, Casino, and Personal Finance

·    Successful equity raise enabling accelerated growth of US Sports division through the acquisition of Sports Betting Dime ("SBD"), a multichannel sports betting publisher, with significant technology and content capabilities, acquired in March 2021

·    Accelerated organisational initiatives across 2021/22 include:

o  Re-organisation of audience-centric teams by industry vertical and target locations, lowering the Group's fixed labour cost base, and aligning resource with target audiences and growth opportunities

o  Increased use of best-in-breed external partners for specialised and scalable expertise, creating cost efficiencies to support audience-centric teams

o  Re-building of the executive team: appointment of new CIO Nigel Leigh, interim CFO Rowan Ellis, Alya Chaudhry as Global Operations Director, David Weliver as Managing Editor of Personal Finance and promotion of Ken Dorward to the Chief Growth Officer role

o  Fundamental overhaul of data architecture and tools, delivering improved business analytics and commercial decisioning, alongside trailing data-driven inventory management

·    Completed acquisition of Saturday Football Inc, a major online publisher of college football news, for $24 million, in September 2021 to further enhanced US Sports vertical

·    Announced today, the acquisition of BlueClaw for a total consideration of up to $2.5 million to provide a UK hub for the EU Sports business

·    Accelerating key initiatives to deliver ongoing financial and operational benefit across the next 18 months

o  Transition of audience-centric teams in Sports and Personal Finance from Israel to the UK, North America and Cyprus, supported by improved utilisation of external agency partners

o  Phased introduction of distributed shared services model to improve functional expertise, drive Group operational efficiencies and create a scalable service delivery model

o  Implementation of data utilisation platform (data science, technology and operations) in Q4  2021, and completing in Dec 2022, to support utilisation of first party data, resulting in improved yield

Stuart Simms, Chief Executive Officer of XLMedia, commented:

"We continued to make further organisational progress in the first six months of the year, as we expanded our portfolio of high-quality branded sites, whilst also laying the foundations to improve the use of our first party data.  The combined positive impact resulted in a strengthened US Sports division, increase of regulated market and new money revenue, as well as the development of a significantly improved data architecture and infrastructure to serve the Group's long-term ambitions.

"The equity raise proved to be a pivotal point in my tenure, having weathered the storm of the first 18 months, we could finally accelerate and execute plans to realise the ambition I set out when joining the business. Namely to build a platform (data, technology and operations) which powers a portfolio of branded assets operating across a number of verticals, offering an enhanced, content-rich consumer experience and improved advertiser performance.

"To achieve this ambition, during 2021, I have challenged the business to accelerate the acquisition of new assets, reorganise and re-build our capability and to develop a new data and technology platform. I am proud of the team and our achievements, and have confidence that the necessary changes will result in improved focus, productivity and growth in H2 2022 and beyond."

Analyst and Institutional Investor webcast

A presentation webcast and live Q&A conference call for analysts and investors will take place on 23 September 2021 at 9.00am UK Time, and a webcast of the presentation will be made available thereafter on the Company's website at https://www.xlmedia.com/investor-relations/webcasts/

To access this event please go to: https://secure.emincote.com/client/xlmedia/2021-half-year-results

This announcement contains inside information for the purposes of the UK version of Article 7 of Regulation (EU) 596/2014 ("MAR").

For further information, please contact:

Notes:

XLMedia is a global digital performance publisher. Operating across a variety of verticals including online gambling, personal finance, sports and technology, the Group uses proprietary tools and methodologies to identify and target high value clients for platform operators.

XLMedia has a clear transformation strategy, which will enable it to shape the future of the performance publishing industry. The Company has set out its strategic agenda under two fundamental priorities:

·    A balanced portfolio of online assets

o  XLMedia seeks to create a balanced portfolio of websites to cover a range of attractive geographies, both stable and high-growth verticals and with greater exposure to regulated markets. In doing so, the Company will focus particularly on developing presence in North American sports, primarily through targeted acquisition

·    Branded, content-rich, engaging websites

o  XLMedia will consolidate its online portfolio, concentrating on a much smaller number of publishing assets, and focusing its resources on optimising this core set of premium sites for its chosen markets. These content-rich, engaging websites, underpinned by intelligent market-leading technology, will seek to build stronger lasting relationships with consumers and enhance monetisation opportunities

Chief Executive Officer review

The Group has delivered a much-improved financial performance in the first half of the year, in addition to delivering major operational progress. The easing of social restrictions relating to the global pandemic is helping us to accelerate plans to drive meaningful change.

In H1 2021, the Group delivered revenue of $32.2 million (16% increase on H1 2020: $27.7 million), gross profit of $18.3 million (10% increase on H1 2020: $16.6 million) and adjusted EBITDA of $6.6 million (29% increase on H1 2020: $5.1 million).

Key H1 highlights include:

·    Sports and Personal Finance divisions both continued to deliver growth in the period, with revenues stabilised in the Casino division and the unit well-positioned for growth going forward

o  Record organic growth in European Sports

o  Further positive momentum generated from US Sports, buoyed by multiple acquisitions

·    Right-sized and re-established European Casino assets with emphasis on generating new revenue

We will continue to focus on developing a balanced portfolio of premium assets, which are content-rich and consumer-centric, across target markets and geographies - with opportunities to enhance performance and efficiency through proprietary data. 

Organisation Redesign and Capability

The ongoing transformation of the Group continues to gather momentum; we have overhauled our audience-centric capability across all verticals, which is expected to be completed by the end of the year. The acquisition of BlueClaw, announced today, is of crucial importance in supporting this overhaul, bringing strong operational capability, processes and workflow.  

The final phase of our change plan has already commenced and will involve an overhaul of our shared service functions, most notably legacy technology and systems. Throughout H1, management have been working towards this goal and engaging with outsourcers and technology providers to ensure the Group has the correct platform (data, technology and operations) to accelerate our transition to a data-driven business.

Further to the recruitment of CIO Nigel Leigh, we will continue to evolve our data science capability, and improve data capture (tracking) to drive increased consumer engagement, activation and asset performance. The required technology and operations will continue to be tested and trialled during H2 2021, with the expected migration of all sites over to the platform during in 2022. This data-driven methodology and the utilisation of first party data will enable XLMedia to develop its platform, which both improves returns and profit going forward. 

Management expects the final phase of the Group's transformation to be delivered across H2 2021 and into 2022.  

Key milestones achieved include:

·     Migration of all audience-centric functions, except Casino, to outside Israel - moving closer to target audiences and improving access to talent at lower costs

·     Improved use of external agencies to access best practice and delivering a more agile cost base

·     Created strong organisation in North America through acquisitions, including very capable content and technology teams which will aid future shared services evolution

·     Completed the fundamental rationalisation of our portfolio - from over 3,000 sites to fewer than 100

·     Upgraded site structure and content, monetising through more diverse revenue streams

·     Laid foundations for transition to data-driven business through the implementation of a new data architecture and analytics engine, with business intelligence system - providing improved visibility across key performance metrics and access to data to drive performance

·     Re-built the executive team, with new appointments:

o  Interim Chief Financial Officer, Rowan Ellis

o  Chief Information Officer, Nigel Leigh

o  Professional transformation leader, Alya Chaudhry

o  Managing Editor of Personal Finance division, David Weliver (former owner and CEO of Money Under 30)

o  Promotion to Chief Growth Officer, Ken Dorward

·    Strengthened Board with the appointment of Julie Markey as Non-Executive Director, bringing a wealth of experience in the organisation and management of people in international businesses

Divisional summary

Sports

The Group's Sports division has delivered a strong performance in the period, delivering revenues of $11.7 million in H1 2021, of which $6.7m was new money, an increase of $5.8m (600%) over the same period in 2020.

·    EU Sports

o  Strong performance with record organic growth across H1 2021 following the resumption of professional sports and major events like the delayed UEFA European Football Championship

o  A number of key assets upgraded, in terms of content, structure and working practices

o  We are confident of continued growth in the division, boosted by further relaxation of restrictions resulting in both more professional and mass sports events taking place

·    US Sports

o  Delivering revenues of $6.1 million in the period, the Group now has a strong foothold in the market, which is continuing to show a good growth trajectory, driven by increasing regulation

o  CBWG, the digital media publishing business acquired in December 2020, is now fully integrated and is exceeding management expectations, capitalising on growth in the US Sports betting market

o  Sports Betting Dime ("SBD"), acquired in March 2021, boasts an unrivalled audience which the Group is seeking to leverage as we develop our offering and expand the reach of sites across regulated states in North America. SBD also brings strong product and technology expertise to benefit the wider Group

o  Saturday Football Inc., acquired post-period end, converted an existing agency partnership and enabled XLMedia to access to the sizeable US College Football marketplace and delivers significant cross marketing opportunities for the wider Group

Personal Finance

The Personal Finance division delivered strong revenues in H1 2021 of $6.6 million. As previously disclosed, the division was heavily impacted in 2020 with a reduction in traffic to our sites.  Ongoing migration of team and resources to the US will result in marginal operational disruption in H2 2021. However, we are confident that in the longer term, there will be a return to pre-pandemic revenue levels as we invest to sharpen capabilities, drive stability and improve profitability.

·    Leadership within the Personal Finance division strengthened with key hires:

o  David Weliver, founder of Money Under 30, which XLMedia acquired in 2017, as Managing Editor to oversee delivery of high-quality editorial content across the portfolio as well as leadership for the business unit

o  Chris Muller, recruited as Director of Audience Growth, tasked with driving operational excellence and the application of data analytics

o  Together they will recruit a team to ensure the assets are highly attuned to the market's specialised needs and trends, and can grow and scale in accordance with market opportunity

·    Through the relocation of our audience-centric teams, we now have a team of approximately 20 people focused on the Personal Finance market, working from locations throughout the United States and Canada. Further to this we are working to onboard agencies to support the transition, and further accelerate our content and digital PR strategy

·    The Personal Finance sites currently all remain on legacy platforms, therefore, during H2 2021 and 2022, we anticipate transitioning these sites onto the new platform, which will improve site performance and SEO operations as well as enhancing consumer experience and engagement.

o  The application of these best practices runs in line with Google's consumer-centric approach and its latest algorithm changes

Casino

Our Casino division delivered revenues of $12.5 million in H1 2021. We have focused our efforts on a smaller number of profitable sites and their ability to generate new revenues; we will seek to grow the reach of these existing sites and more sustainable revenues.

During 2022, the Group will evolve our casino offering to operate brands across multiple territories as opposed to previous strategy of single territory sites. We believe that this will provide a more agile approach to responding to changes in regulation. We continue to believe in the high quality of our premium casino assets relative to peers.

The Casino business unit remains in Israel, supported by local shared services (finance, legal, HR and technology). Since the beginning of the year, we have maintained revenues whilst halving the division's headcount.

Regulation

The process of achieving the relevant regulatory permissions and operating within clear regulatory parameters is a core competency of XLMedia, and something we will seek to leverage further going forward. 

Additionally, the experience and expertise garnered by XLMedia and required to operate in regulated markets introduces additional barriers to entry for potential new providers. Our approach of developing high-quality, educational, engaging and customer-centric websites also positions the business well from a sustainability perspective.

Outlook

The Group has delivered steady growth across the period and accelerated structural changes and enhanced use of data across the business. Management continues to right-size the business, shifting the historical operational focus from Israel, alongside backing key strategic hires in finance, technology and business transformation. By the end of September, headcount in Israel will be reduced further by approximately 30 roles.

The recent acquisitions of CBWG, SBD and Saturday Football Inc. have strengthened our offering in US Sports, and established the Group with immediate scale, and the skills to drive growth. The strengthening of our US Sports division also represents progress in rebalancing the Group, focusing more heavily on regulated and high-growth markets.

The combined positive impact of a strengthened US Sports division, a focus on regulated markets, our investment in data infrastructure to serve the Group long-term and restructuring of the business, gives the Group confidence of delivering growth in the second half, with XLMedia ideally placed for operational and financial progress in the medium term.

The Group maintains guidance of revenue for full year 2021 of between $65 million and $70 million. As Covid-19 restrictions ease, the Company is accelerating organisational changes and will incur more costs in FY 2021 than previously budgeted. Across the medium term, the Group expects to benefit from more diverse revenue streams, with a focus on new money growth, greater operational efficiency and a built-for-purpose platform and data architecture, positioning XLMedia well for operational and financial progress.

Stuart Simms

Chief Executive Officer

22 September 2021

Financial Review

¹ Earnings Before interest, Taxes, Depreciation, Amortisation and excluding share-based payments, impairment and reorganisation costs  

(*) Reorganization costs in previous period were reclassified as general and administrative expenses.

XLMedia revenues in H1 2021 totalled $32.2 million (H1 2020: $27.7 million), an increase of 16% compared to the previous year primarily driven by US Sports, which benefitted from recent acquisitions.

Gross profit for H1 2021 was $18.3 million and gross margin was 57% (H1 2020: $16.6 million, 60% gross margin), representing a 3% decrease, as a result of the recent business acquisition and new hires in low season.

Operating expenses for H1 2021 were $18.8 million (H1 2020: $16.3 million). This increase is largely driven by redundancy costs, coupled with new hires, and an uplift in transformation costs associated with both M&A activity and reorganisation.

Adjusted EBITDA for H1 2021 was $6.6 million (H1 2020: $5.1 million), an increase of 29% on the previous year, driven by the increase in revenues.

Net financing income for H1 2021 was $0.04 million (H1 2020: $0.1 million, expense).  

In H1 2021 the Group recorded transformation costs of $3.6 million following the continuation of the restructuring plan of the Group, as well as significant M&A activity (H1 2020: $1.5 million).

As at 30 June 2021, the Company had $36.9 million in cash and short-term investments (31 December 2020: $13.9 million).  The change in cash is a reflection of $3.7 million generated by operating activities and $35.3 million provided by financing activities, offset by $15.5 million used for investment activity.  

Current assets as at 30 June 2021 were $48.6 million (31 December 2020: $25.2 million).  The increase in current assets was predominantly as a result of the increase in cash and cash-equivalents mentioned above.  

Non-current assets as at 30 June 2021 were $99.5 million (31 December 2020: $66.9 million).  The increase in non-current assets is primarily as a result of the acquisition of SBD for $26.2 million.

Current liabilities as at 30 June 2021 were $34.6 million (31 December 2020: $23.3 million). The increase in current liabilities was predominantly as a result of the first deferred consideration payable for SBD.

Non-current liabilities as at 30 June 2021 were $9.9 million (31 December 2020: $1.6 million). The increase in non-current liabilities is primarily attributable to the new leases liabilities of $4.4 million relating to new office space and $3.6 million relating to the second deferred consideration payable for the SBD acquisition.

Total equity as at 30 June 2021 was $103.5 million or 70% of total assets (31 December 2020: $67.3 million or 73% of total assets).  The increase in the equity was mainly as a result of the issue of $37.4 million of new company shares, undertaken in March 2021.

The first half of 2021 was a year of continued progress for the Company. Alongside the challenges of the ongoing headwinds from the Covid-19 pandemic, XLMedia has continued to make progress with restructuring the business and ensuring it is appropriately sized as it returns to a growth trajectory. The Group has now completed three important acquisitions in the US Sports market, our EU Sports and Personal Finance divisions are performing well, and our Casino market is refocused on profitable sites. With our renewed focus on delivering engaging and captivating content for our end customer, we remain optimistic about the Group's prospects moving into the second half of 2021 and beyond.

Rowan Ellis

Interim Chief Financial Officer

22 September 2021

XLMEDIA PLC. AND ITS SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF 30 JUNE 2021

US DOLLARS IN THOUSANDS