29 September 2022

XLMedia PLC

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

Results for the six months ended 30 June 2022

Significant momentum within the Group's North American sports business

XLMedia (AIM: XLM), a leading global digital media group that connects audiences with advertisers, announces the Company's audited results for the six months ended 30 June 2022.

Key Highlights

·    North American Sports growing to 68% of revenue, all in regulated markets.

·    Signed major partnership with high quality publisher in Ohio ahead of January 2023 online sports betting launch.

·    Live in 2 new legalised States in the U.S. (New York and Louisiana) and one Canadian Province (Ontario).

·    Further rationalisation of the portfolio enabling focus on primary sites.

·    Stabilisation of the Gaming business.

·    Annualised cash savings of approximately US$5-6 million expected to be realised during 2023.

Financial Summary

·    Revenues of US$44.5 million (H1 2021: US$32.2 million).

·    Gross profit of US$20.9 million (H1 2021: US$18.3 million).

·    Adjusted EBITDA⁽¹⁾ of US$10.6 million (H1 2021: US$6.6 million).

·    Reported loss before tax of US$1.7 million (H1 2021: US$0.4 million loss).

·    US$17.7 million in cash and short-term investments as of 30 June 2022.

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

Operational Summary

·    Strong performance from Sports vertical generating first half revenues of US$34 million - 76% of Group revenues (H1 2021: US$11.7 million)

-      New regulated markets opened, notably, the state of New York launched legal online sports betting in January 2022. The Group now operates in 16 states.

-      New media partnership agreements drove revenues of US$20.5 million, (H1 2021: $1.5 million) including amNewYork.

-      The Group's owned (Owned and Operated) portfolio delivered revenue growth of US$9.6 million, up 107%, including ESNY, which was acquired in December 2020.

-      New partnerships signed with Cleveland.com in May 2022 ahead of Ohio's January 2023 launch.

-      New partnership recently signed with MASSlive.com in September 2022 in preparation for Massachusetts' 2023 launch.

-      European Sports vertical delivered a performance that met expectations in H1 2022 with revenues of US$3.8 million (H1 2021: US$5.8 million).

·    Gaming revenues stabilising at US$8.4 million (H1 2021: US$12.5 million)

-      Gaming revenues (Casino and Bingo), as expected, continue to trade below historical levels while remaining a high margin vertical for the Group.

-      Following a major portfolio consolidation, Gaming activities will now focus on four leader brands, and seven brands in total.

-      The division's cost base has been downsized to reflect its reduced scale.

·    Operations and infrastructure initiatives gathering momentum

-      Key new leadership in the business brings deep expertise across the media and gaming sectors

o  Marcus Rich - Chair (appointed 31 March 2022);

o  David King - CEO (appointed 1 July 2022);

o  Caroline Ackroyd - CFO (appointed 21 March 2022);

o  Karen Tyrrell - Chief People and Operations Officer (appointed 1 September 2022)

-      The Group continues its focus on talent acquisition to match the new and changing mix of the business. 

-      The operational reset is largely completed.  Annualised full year savings of some US$5-6 million are expected in 2023, of which approximately US$4 million is expected to be realised during 2022. The Group will continue to look for and invest in further cost and operational efficiencies.

-      The Tech team has made significant progress in upgrading site infrastructure and enhancing security while commencing the roll out of the new content management system ("CMS"), which will continue into 2023.

-      Work continues to integrate acquisitions, including supporting the business with SEO specialist advice from our inhouse Blueclaw SEO team.

Outlook

·    During H1 2022, the Group has delivered on its strategy to make a shift towards sports betting in regulated markets, a revenue stream that is predicted to show strong growth in the medium term.

·    US sports betting revenues currently remain in line with management expectations for the full year, having benefited in H1 from the additional marketing investment made by its customers during the New York state launch. Major new state launches typically see an increase in marketing activity, creating a significant revenue upside for the Group, before settling into a more normalised rhythm.

·    The Gaming business performance is tracking in line with expectations and the Group is on course to deliver cost savings of some US$4 million in the year.

·    Following the impact of Google's Your Money Your Life ("YMYL") requirements on the Personal Finance division, the strategic decision was taken to replatform the business and renew its content.  Revenue recovery is taking significantly longer than planned and revenue of the Personal Finance business is now expected to be approximately US$1.5 million for the full year, resulting in a move from profit to loss of approximately US$1-2 million which will negatively impact the Group's full year performance.

As a result, the Group expects full year Adjusted EBITDA to be broadly in line with the prior year, returning to growth in 2023.

David King, Chief Executive Officer of XLMedia, commented:

"Refocusing the business towards the rapidly growing US online sports betting market, managing the reduction in Personal Finance, while stabilising the Gaming vertical, alongside rightsizing the Group's cost base, remains a key priority to ensuring new XLMedia is well placed for further growth.

"Having recently joined, I look forward to updating all our stakeholders on our progress."

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

Analyst and Institutional investor webcast

A presentation webcast and live Q&A conference call for analysts and institutional investors will take place at 9.00 a.m. BST on the day of publication 29 September 2022, and a webcast of the presentation will be available on the Company's website at:

https://www.xlmedia.com/investors/webcasts/

To register for this event, please go to:

https://secure.emincote.com/client/xlmedia/2022-interim-results

Retail investor webcast

Management will also be hosting a presentation for retail investors in relation to the Company's results on Monday, 3 October 2022 at 2.30 p.m. BST.

The presentation will be hosted on the Investor Meet Company ("IMC") digital platform. Investors can sign-up for free and request to meet XLMedia via:

https://www.investormeetcompany.com/xlmedia-plc/register-investor

Investors who already follow XLMedia on this platform will automatically be invited.

For further information, please contact:

About XLMedia:

XLMedia (AIM: XLM) is a leading global digital media company that creates compelling content for highly engaged audiences and connects them to relevant advertisers.

The Group manages a portfolio of premium brands with a primary emphasis on Sports and Gaming in regulated markets. XLMedia brands are designed to reach passionate people with the right content at the right time.

Chief Executive Review

Introduction

We are able to report a strong six months of trading across H1 2022, which represents the next phase in the Company's development, with revenues up 38% to US$44.5 million (H1 2021: US$32.2 million) and adjusted EBITDA up 60% to US$10.6 million (H1 2021: US$6.6 million) in the period.

This solid performance has been largely driven by our North American sports business which now represents 68% of revenue at US$30.2 million, driven entirely from regulated markets. Performance has been underpinned by the expansion of regulation in the US including New York, now legalised, while also securing major partnerships with high quality publishers during the period.

Elsewhere across the business, we continue to rationalise our existing online portfolio, enabling our team to focus on our marquee sites (for example, Freebets.com and Caziwoo.com). As a result, the Group will successfully deliver in year savings of approximately US$4 million.

In H1 2022, we acquired 116,000 real money players ("RMPs") which is defined as first time depositing and post initial depositing customers.

We remain focused on implementing our existing strategic priorities including:

·    Targeting regulated territories to deliver new revenue while reducing the risk of disruption.

·    Focussing on high growth Sports and Gaming verticals by building on the Group's strong relationships with leading operators.

·    Expanding the Media Partnership Business ("MPB") leveraging internal skills and experience.

·    Prioritising North America Sports market in order to capitalise on US trajectory.

·    Investing behind some 20 marquee brands to enhance quality and engagement.

Divisional Summary

Sports

The Group delivered a strong performance from its Sports vertical, generating revenues of US$34.0 million (H1 2022: US$11.7 million, up 191%). Our sports business now accounts for 76% of Group revenues, of which 68% comes from the US, highlighting the strategic importance of this high growth, regulated market.

We are now active in 16 states, including New York, Louisiana and Kansas. A state launch offers an immediate spike in registrations as betting enthusiasts take advantage of legalisation. Building local partnerships enables us to maximise the opportunity offered by new state launches, working with the partner to connect their sports audience with advertisers. In particular, we benefited from working with our partner amNewYork to maximise new revenue when New York went live, coupled with the annual uplift from the Super Bowl.

Partners will typically be either high quality regional publishers with loyal audiences, or sports focussed speciality sites with highly engaged fandoms. This complements the Group's Owned and Operated national footprint provided by Sports Betting Dime ("SBD"), and the Group's Owned and Operated regional fandom sites including Saturday Down South and Elite Sports NY. Our content is written by local sports experts who are themselves fans, writing for local sports fans, which builds trust and return visits, which in turn allows us to grow our audience and connect them with relevant advertisers.

The Group's Owned and Operated portfolio delivered revenue of approximately US$9.6 million in the period.

Since the end of the period, we have extended our partnership with Cleveland.com, and signed new agreements with Advance Local to work with MASSLive.com ahead of both Ohio launching in January 2023 and Massachusetts at some point in 2023. 

Our European Sports vertical, which includes Freebets.com, generated H1 revenues of US$3.8 million (H1 2021: US$5.8 million). Our Freebets site is in the process of being refreshed, having been re-platformed, and is now rebuilding its content to ready it for growth.

Gaming

Our Gaming vertical, which includes both casino and bingo assets (currently largely in Europe) traded in line with management's targets, generating revenue of US$8.4 million (H1 2021: US$12.5 million).

These assets, despite trading below historic levels, remain a high margin vertical for the Group and remain part of our strategic plans.

Following a major reduction in the number of websites operated by the Group, Gaming activities will now have seven brands in total with a focus on four leader brands, Caziwoo, Casino.se, Nettikasinot and Whichbingo.

This represents a significant departure from how this division was managed previously. The focus will now be on quality, not quantity. The division's cost base has been downsized to reflect the reduced scale and prominence of these assets.

Nettikasinot is our Finnish language site with revenues of US$2 million in the period and remains our largest site in the Nordic market. We will continue to monitor potential changes to the monopoly in Finland and remain cautious regarding incremental growth opportunities within the European portfolio.

Other Activities

Other external revenues, largely comprised of the Group's SEO agency Blueclaw, its affiliate partnership network Reef Media and the Personal Finance business totalled US$2.1 million (H1 2021: US$8.0 million) in the period.

Personal Finance, which is now a marginal activity, delivered revenues of US$ 0.8 million (H1 2021 US$6.6 million), only 2% of Group revenues. The decline in revenue has significantly impacted the Group's revenue and profit performance during the period. Following the move of the business from Israel to the US, the focus of the team has been to commence the migration of the sites to a new platform, refresh the content to meet Google's YMYL* parameters and prioritising two of our premium brands, Moneyunder30 and InvestorJunkie.

In line with the original acquisition plan, Blueclaw will prioritise optimising the SEO around the Group's Owned and Operated sites. We will also provide services to a small number of clients.

*From Google's Search Quality Evaluator Guidelines: Some topics have a high risk of harm because content about these topics could significantly impact the health, financial stability, or safety of people, or the welfare or well-being of society. We call these topics "Your Money Your Life" or YMYL.

Operations and infrastructure

The period saw a significant number of staff reductions as part of the transformation program, including changes in Personal Finance and Technology, as well as, downsizing the Gaming infrastructure.

The transformation program referred to above, is largely completed. Part year savings will be delivered in the year, while our estimates of annualised cash savings remain at some US$5-6 million in FY 2023.

Following the appointment of the new CFO, Caroline Ackroyd, and the new Chair, Marcus Rich, I joined the Group as CEO in July and on 1 September our new Chief People and Operation Officer, Karen Tyrrell joined the leadership team. Like Caroline, Karen also has substantial gaming sector experience.

Summary

The Group is now focused on implementing its existing strategy as we seek to leverage our footprint in Sports and Gaming.

Our growing exposure to the US Sports arena is now in a position to capitalise on the US sports betting market. The Group also continues to look for new partners and opportunities to develop its Owned and Operated assets in preparation for the legalisation of further US states in the near term.

The Board and I are committed to driving the business forward and providing reporting and transparency. In addition, we have launched a new corporate website providing further information and insight to investors and other interested parties.

David King

Chief Executive Officer

29 September 2022

Financial Review

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

N/m = not meaningful

Reconciliation of profit / (loss) for the period with Adjusted EBITDA

2 Net finance costs / (income) is comprised of finance income, finance expense and foreign exchange gains / (losses).

XLMedia revenues in H1 2022 totalled US$44.5 million (H1 2021: $32.2 million), an increase of 38% compared to the previous year, primarily driven by growth in North America sports following the integration of our strategic acquisitions.

In H1, the Company generated US$30.2 million of revenue in North America sports which included US$20.5 million of revenue from media partnerships and $9.6m from the Group's Owned & Operated ("O&O") websites.

European Sports revenue has declined overall from US$5.8 million to US$3.8 million, largely due to websites no longer in operation and which were cost prohibitive to continue operating along with a declining Finnish asset. The Group's UK focused assets have grown year on year by 7% in a market which is mature and impacted by regulatory headwinds.

Personal Finance, Blueclaw and Reef Media revenues were less than 5% of overall revenue.

The Group's gross profit for H1 2022 was US$20.9 million and gross margin was 47% (H1 2021: US$18.3 million, 57% gross margin). The 14% increase in gross profit was driven by the increase in revenue discussed above. The reduction in gross margin year over year was largely due to the change in revenue mix towards North America sports - in particular, due to the increase in revenue from media partnerships which have a lower gross margin as revenue is paid to media partners for accessing their audience. Gross profit is calculated as revenue less the costs associated with generating revenue*.

*Cost of revenue includes direct costs, marketing cost, Media Partnership Business revenue share, and people costs. Note, these costs are also identified and associated with operating, sales and marketing expenses as defined in the interim condensed consolidated financial statements.

Operating expenses for H1 2022 were US$20.9 million (H1 2021: US$18.8 million). This increase was driven by the impairment relating to Personal Finance of US$3.5 million, partially offset by cost savings relating to the re-platforming and relocation of roles from Israel to Cyprus, UK and US.

Largely as a result of the increase in revenue year over year, Adjusted EBITDA for H1 2021 was US$10.6 million (H1 2021: US$6.6 million), an increase of 60% on the previous year.

Net financing costs for H1 2022 was US$0.25 million (H1 2020: US$0.04 million, income).

In H1 2022 the Group recorded transformation costs of US$3.0 million due to the continuation of the restructuring plan of the Group, as well as integration activity relating to prior acquisitions (H1 2021: US$3.1 million).

As at 30 June 2022, the Company had US$17.7 million in cash and short-term investments (31 December 2021: US$24.6 million). The change in cash reflects US$11.0 million generated by operating activities, offset by US$5.6 million used for investment activity and US$10.1 million used in financing activities. Short-term investments reduced by US$0.6 million and the Company reported an out flow for net foreign exchange differences of US$1.6 million. The Group has made payments of US$13 million in respect of deferred consideration and earn-out payments in relation to its North America sports acquisitions in the period.

Current assets as at 30 June 2022 were US$27.4 million (31 December 2021: US$39.4 million). The decrease in current assets was predominantly because of the decrease in cash and cash-equivalents mentioned above as well as the seasonal decrease in Trade Receivables.

Non-current assets as at 30 June 2022 were US$121.9 million (31 December 2021: US$123.0 million). The decrease in non-current assets is primarily due to the $3.4m impairment of Personal Finance assets.

Current liabilities as at 30 June 2022 were US$28.7 million (31 December 2021: US$42.1 million). The decrease in current liabilities was predominantly due to payments of deferred consideration relating to prior acquisitions and a release of prior period income tax provisions.

Non-current liabilities as at 30 June 2022 were US$10.7 million (31 December 2020: US$11.2 million).

Total equity as at 30 June 2022 was US$109.9 million or 73% of total assets (31 December 2021: US$109.2 million or 67% of total assets).

The first half of 2022 was a period of continued progress for the Group, cementing our position in the fast-growing US market and with key media partnerships secured ahead of the launch of Ohio and potentially Massachusetts in 2023. The project to restructure the Group is progressing well with a right-sized cost base and integration of the strategic acquisitions largely complete.

Caroline Ackroyd

Chief Financial Officer

29 September 2022

XLMEDIA PLC

Interim Condensed Consolidated Financial Statements as at 30 June 2022

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