Final Results

RNS Number : 4636T

XLMedia PLC

30 March 2016

 

For immediate release

30 March 2016

XLMedia PLC

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

Final results for the year ended 31 December 2015

Strong financial performance underpinning strategic development

XLMedia (AIM: XLM), a leading provider of digital performance marketing services, is pleased to announce its final results for the year ended 31 December 2015.

The Group continued to deliver strong performance during the year, building on the foundations that it had laid over the past two years. By setting a clear strategy and focusing on execution, the Company has continued to deliver in all key areas, namely revenues and profit growth, investment in technology, and ongoing diversification of the business. The Board is confident that the Group remains well positioned to continue this strong growth and to further develop its business.

Financial highlights

·     Revenues increased 76% to $89.2 million (2014: $50.7 million)

·     Gross profit increased 49% to $41.1 million (2014: $27.6 million)

·     Adjusted EBITDA increased 67% to $28.4 million (2014: $17.0 million)

·     Profit before tax increased 84% to $24.3 million (2014: $13.2 million)

·     Net cash from operating activities increased 68% to $28.4 million (2014: $16.9 million)

·     Net income increased 70% to $20.2 million (2014: $11.9 million)

·     Strong balance sheet with $42.6 million cash and short term investments

Operating highlights

·     Positive impact of acquisitions continues to accelerate profit growth and strategic progress

o  Strong performance from Marmar Media acquisition, adding skills and client base in additional verticals, namely software and ecommerce

o  First phase integration of EDM now completed, second phase progressing well

o  Extension of our network through ongoing bolt on acquisitions within the Publishing division of mainly UK based websites

·     Ongoing R&D has strengthened the Groups in house operations and enhanced our analytics capabilities

·     Continued organic growth in all business segments and geographies

The Board continues to remain confident of the Company's ability to continue to execute and deliver in the key areas and is focussed on maximising value for shareholders.
 

Ory Weihs, Chief Executive Officer of XLMedia, commented:

"We are extremely pleased to report another record breaking year. During 2015 we continued to invest in our technology, systems and people which are the key drivers for performance and future growth. We also made significant progress regarding acquisitions, and successfully diversified our business further.

"Over the last two years we have consistently reported strong financial performance, invested in organic growth opportunities, completed several successful earning enhancing acquisitions and declared $21.25 million in dividends to shareholders.

"We continue as always to maximise value for our shareholders, both through our ongoing work in developing the business as well as through the strategic review process which was announced on 26 January 2016.

"The Board would like to thank management and our employees for the excellent delivery of 2015 results. We look forward to further progress and achievements in 2016."

Our full annual financial statements are available on our website at the following address:

http://www.xlmedia.com/company-reports/

For further information, please contact:

 

XLMedia plc Ory Weihs www.xlmedia.com	Tel: [phone]
Vigo Communications Jeremy Garcia / Fiona Henson www.vigocomms.com	Tel: [phone]
Cenkos Securities plc (Nomad and Joint Broker) Ivonne Cantu / Camilla Hume www.cenkos.com	Tel: [phone]
Liberum (Joint Broker) Neil Patel / Chris Clarke www.liberum.com	Tel: [phone]

 

Business review

During 2015 we continued to execute our strategic plan and establish our position as a dominant player in the online and mobile traffic monetisation arena.

Our strategic plan includes the following key growth initiatives: broadening our reach to additional geographies and verticals; developing our technology infrastructure to enable our growth and competitive edge; and driving organic growth.

We are proud to report progress on executing our plan in all aspects, which resulted in the delivery of record breaking revenues and profit in 2015.

Our efforts to accelerate growth through acquisitions have also progressed well during the year with the following milestones achieved:

·     Addition of bolt on domains and websites through acquisition, complementing our publishing asset base and providing access to additional markets and products. The focus of these additional assets was for the UK as well as other European markets, and for diversified verticals. Additional bolt ons were targeted at mobile traffic in these markets. All of these acquired assets have been integrated into our publishing division and in house platforms.

·    Completed the first phase of integration of EDM (acquired September 2014) into the Group during the period and due to EDM's strong performance in the first year following its acquisition we decided to waive performance conditions for contingent consideration to accelerate full integration into the Group. The Board believes that such integration will help to improve performance and increase scale which is important as it expects social and mobile gaming to be a strong growth driver for XLMedia over the coming years.

·    On 1 July 2015 we announced the acquisition of the majority stake in Marmar Media, a performance media company for web and mobile.  Marmar Media adds additional know how and scale, as well as widening the Group's customer base and adding further vertical diversification.

·   All of the acquired assets and companies are performing in line with or above management's expectations.

Below is an overview of the progress in execution of our plan during 2015:

·     Technology infrastructure to enable our growth and competitive edge

o We continued to increase our investment in technology and our R&D team now has over 50 staff and continues to grow.

o Following the launch of our Palcon system for the management of publishing assets at the end of 2014, we migrated our major assets to Palcon. Following migration we have seen continuous improvement in mobile performance of these websites.  

o In the media segment we developed tracking tools and campaign management infrastructure to enable efficient optimization and management of campaigns.

o In December 2015 we launched Rampix - EDM's system for centralized management of social campaigns with unique targeting methodologies and dashboards.

o We further enhanced our Business Intelligence ("BI") capabilities to support information gathered from thousands of information sources, analysed and presented to our campaign managers for efficient optimization of campaigns.

·     Broaden our reach to additional geographies and verticals, diversifying our client base and markets

o We successfully broadened our business to new geographies and products, through organic growth as well as acquisitions

o The acquired websites extended our reach and established our position in the UK market

o We made our first acquisitions of websites in the financial services vertical in Europe. We believe there are growth opportunities within the financial services vertical, where we can use our online marketing expertise to bring further revenue growth

o The addition of Marmar Media added more activity in software and e-commerce verticals

o EDM continues to develop the Group's offering for mobile apps and social gaming

o Following the Marmar Media acquisition the largest customer in the group¹ represents 8% of the Group's revenues

·     Continue our organic growth

o The Group continues to deliver strong organic growth in all of its business segments with the 2015 year-end trading performance exceeding initial market expectations

o Organic growth continues to be strong in our core Scandinavian markets, while in other European countries as well as other English speaking countries  we have increased our revenues even faster, with these countries becoming more dominant in the revenue distribution

o With the implementation of technology and tools we see improved performance and organic growth for websites and campaigns. We expect to continue this trend into 2016 and coming years

Business Segments review

($'000)	Publishing	Media	Partner Network	Total
2015
Revenues	30,297	45,777	13,145	89,219
% of revenues	34%	51%	15%	100%
Direct profit	23,855	15,411	1,810	41,076
Profit margin	79%	34%	14%	46%
2014
Revenues	23,965	20,632	6,123	50,720
% of revenues	47%	41%	12%	100%
Direct profit	18,345	8,548	685	27,578
Profit margin	76%	41%	11%	54%

·     Publishing

Publishing revenues grew 26% to $30.3 million (2014: $24.0 million). The growth was primarily organic, with some additions from new assets acquired mainly during the second half the year.

We invested significant amounts in technology infrastructure to support the centralised management of our assets and we have seen improvement in conversions and performance of our assets as a result, with increased improvement in mobile results.

During 2015 we invested $7.1 million in acquiring new websites and domains and we plan to continue buying and developing more assets to further drive our growth.

·     Media

Media revenues grew 122% to $45.8 million (2014: $20.6 million). The media segment includes the activity of the Company as well as EDM acquired in September 2014 and Marmar Media acquired in July 2015. EDM and Marmar Media add diversification of our activity with additional marketing channels, products and markets. The majority of revenues from the acquired businesses is derived from the US for marketing of social games, mobile apps, ecommerce and software.

Marmar Media has contributed $9.1 million to 2015 revenues. Excluding Marmar Media and the EDM additions (EDM's contribution of $6.0 in the last 4 months of 2014 compounded annually), organic growth in the media segment was 28%.

We continue to focus on performance, using our technology to improve ROI of spend in marketing campaigns.

·     Partner Network

Partner network revenues grew 115% to $13.1 million (2014: $6.1 million). Our partner network remains an important part of our business, giving us the opportunity to provide marketing services to our clients which are not currently serviced through our existing publishing and media networks. All of the partner network growth is organic, as we continue to attract new partners to join our network and enjoy the benefits offered to them.

Current Trading and Outlook

Demand for our services has continued across our geographic footprint and the Group has made a strong start in 2016.  We will continue to seek ways in which to maximize shareholder value at the same time as continuing to commit to expanding our core offer through a combination of ongoing investment, product development and acquisitions.

 

Financial review

$ millions

	2015	2014	Change
Revenues	89.2	50.7	76%
Gross Profit	41.1	27.6	49%
Operating expenses	18.1	13.0	40%
Operating income	23.0	14.2	61%
Adjusted EBITDA	28.5	17.0	68%
Financial income, net	1.7	(0.8)	N/A
Profit Before Tax	24.3	13.2	84%

2015 has been another year of strong performance for XLMedia. Revenues for the year were $89.2 million, reflecting 76% growth compared to the last year. Revenues in 2015 include the acquisition of Marmar Media, acquired in July 2015, and the consolidation of EDM, acquired in September 2014, as well as strong organic growth in all business segments during the period. 

Gross profit reached $41.1 million or 46% of revenues, representing 49% growth compared to last year (2014: $27.6 million, 54%). Over the course of 2015, the media segment has grown to be the largest segment in XLMedia and generating 51% of FY 15 revenues. As we continue implementing our strategy to further increase and develop our media business, the Group's revenue mix will shift further towards media, lowering gross margins. As such we expect total gross margins (in terms of percentage) to decrease further across the Group.

Operating expenses during 2015 were $18.1 million, an increase of 40% compared to last year (2014: $13.0 million). As expected, recruiting pace was stronger in the second half of the year as we worked hard to recruit additional staff to support our growing operations.

Operating expenses included $1.4 million of research and development costs, reflecting an increase of 43% compared to last year (2014: $1.0 million). These expenses are in addition to the increase of 123% in investments in internal systems developed through capitalized costs during the year of $2.0 million (2014: $0.9 million). The Group expects to invest further in technology as we see this a key driver to growth and profit for the coming years.

Adjusted EBITDA² reached $28.4 million or 32% of revenues, reflecting an increase of 67% to the previous year (2014: $17.0 million, 34%). As the mix of revenues changes towards more media, we expect adjusted EBITDA to decrease in terms of margins but to grow in absolute numbers.

Net financial income for year was $1.7 million, attributed to the Company's dynamic hedging activity to mitigate material exposure to foreign currencies. As a significant portion of the Group's revenues are denominated in Euros, the Company entered into a series of forward contracts for the sale of Euros and purchase of US Dollars. The Euro exchange rate decreased by 6.6% versus the US Dollar during this period. The Company gained financial income from its hedging activity which partially compensated for the decrease. The financial income was received in cash (when forward contracts matured) while the amounts recorded as fair value gains for forward contracts not yet matured was not material. The Company has entered into additional forward contracts which will mature over the course of the next 12 months.

As a result of the high adjusted EBITDA as well as the financial gain from changes in exchange rates, profit before tax increased by 84% to $24.3 million (2014: $13.2 million).

As of 31 December 2015 we had $42.6 million cash and short term investments compared to $44.1 million on December 31, 2014.  The change in cash reflects an increase of $28.4 million provided by operating activity, offset mainly by spending $19.7 million on investments in technology and acquisitions and $8.0 million of dividends paid during 2015.  

Current assets at 31 December 2015 were $60.9 million (31 Dec 2014: $57.8 million) and non-current assets reached $57.9 million (31 December 2014: $42.0 million). The increase in non-current assets is attributed mainly to the acquisition of Marmar Media shares, investments in domains and websites, as well as additions to our in-house technology.

Total equity on 31 December 2015 reached $90.0 million, or 75% (2014: 76%). This, with cash and short term investments of $42.6 million, positions the Group well to continue executing its strategic plan.

¹ Revenues for the six months ending 31 December 2015

² Earning Before interest, Taxes, Depreciation and Amortization and adjusted to exclude share based payments and expenses related to acquisition agreements

PRELIMINARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION AS OF DECEMBER 31, 2015

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

			As of 31 December
				2015		2014
				USD in thousands
Assets
Current assets:
Cash and cash equivalents				35,741		27,351
Short-term investments				6,866		16,714
Trade receivables				16,088		11,548
Other receivables				2,042		1,895
Financial derivatives				165		264
				60,902		57,772
Non-current assets:
Long-term investments				1,102		333
Other receivables				332		456
Property and equipment				1,190		864
Goodwill				26,302		19,586
Domains and websites				23,897		16,728
Other intangible assets				4,837		4,014
Deferred taxes				256		-
				57,916		41,981
				118,818		99,753

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

			As of 31 December
				2015		2014
				USD in thousands
Liabilities and equity
Current liabilities:
Trade payables				11,146		9,073
Contingent consideration payable				5,373		3,396
Other liabilities and accounts payable				12,151		7,764
				28,670		20,233
Non-current liabilities:
Contingent consideration payable				-		3,233
Deferred taxes				317		332
Other liabilities				155		42
				472		3,607
Equity attributable to equity holders of the Company:
Share capital				*)		*)
Share premium				64,447		62,271
Capital reserve from share-based transactions				1,390		1,784
Capital reserve from transaction with non-controlling interests				(506)		(506)
Retained earnings				22,774		12,072
				88,105		75,621
Non-controlling interests				1,571		292
Total equity				89,676		75,913
				118,818		99,753

*) Lower than USD 1 thousand.

 

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

				Year ended 31 December
				2015		2014
				USD in thousands (except per share data)
Revenues				89,219		50,720
Cost of revenues				48,143		23,142
Gross profit				41,076		27,578
Research and development expenses				1,438		1,008
Selling and marketing expenses				3,038		2,239
General and administrative expenses				13,640		9,732
				18,116		12,979
Operating income before expenses in connection with IPO				22,960		14,599
Expenses  in connection with IPO				-		361
Operating income after expenses in connection with IPO				22,960		14,238
Finance expenses				(523)		(1,001)
Finance income				2,259		231
Income before other expenses				24,696		13,468
Other expenses, net				(403)		(229)
				24,293		13,239
Profit before taxes on income
Taxes on income				4,093		1,329
Net income and other comprehensive income				20,200		11,910
Attributable to:
Equity holders of the Company				18,719		9,821
Non-controlling interests				1,481		2,089
				20,200		11,910
Earnings per share attributable to equity holders of the Company:
Basic earnings per share (in USD)				0.10		0.06
Diluted earnings per share (in USD)				0.10		0.05

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Year ended 31 December
		2015		2014
		USD in thousands
Cash flows from operating activities:
Net income		20,200		11,910
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to the profit or loss items:
Depreciation and amortisation		3,775		1,296
Finance expense income, net		231		25
Finance income from financial derivatives		99		(264)
Loss  from sale of assets		-		9
Cost of share-based payment		839		1,042
Taxes on income		4,093		1,329
Exchange differences on balances of cash and cash equivalents		310		482
		9,347		3,919
Changes in asset and liability items:
Decrease (increase) in trade receivables		(3,580)		994
Increase  in other receivables		(432)		(608)
Decrease in related parties		-		142
Increase (decrease) in trade payables		1,155		(256)
Increase in other accounts payable		3,892		782
Increase in other long-term liabilities		99		18
		1,134		1,072
Cash received (paid) during the period for:
Interest paid		(2)		-
Interest received		72		46
Taxes paid		(2,352)		(421)
Taxes received		-		417
		(2,282)		42
Net cash provided by operating activities		28,399		16,943

			Year ended 31 December
			2015			2014
			USD in thousands
Cash flows from investing activities:
Purchase of property and equipment			(644)			(350)
Acquisition of initially consolidated companies			(4,459)			(9,950)
Payment of contingent consideration in respect of acquired company			(3,500)			-
Acquisition of  domains, websites and other intangible assets			(12,326)			(11,528)
Proceeds and collection of receivable from sale of assets			300			328
Short- term and long-term investments, net			9,625			(16,315)
Net cash used in investing activities			(11,004)			(37,815)
Cash flows from financing activities:
Issue of share capital (net of issue costs)			-			48,917
Dividend paid to equity holders			(8,017)			(8,243)
Acquisition of non-controlling interests			-			(1,490)
Dividend paid to non-controlling interests			(694)			(2,287)
Repayment of liabilities to related parties			-			(3,512)
Exercise of options			943			12
Financing by non-controlling interests			-			57
Payments of liabilities to former shareholders of acquired businesses			(927)			-
Repayment of long-term and short-term liabilities			-			(204)
Net cash provided by ( used in) financing activities			(8,695)			33,250
Exchange differences on balances of cash and cash equivalents			(310)			(482)
Increase  in cash and cash equivalents			8,390			11,896
Cash and cash equivalents at the beginning of the year			27,351			15,455
Cash and cash equivalents at the end of the year			35,741			27,351

 

NOTES TO PRELIMINARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION

NOTE 1:         GENERAL

The Group is an online performance marketing company. The Group attracts paying users from multiple online and mobile channels and directs them to online and mobile businesses who, in turn, convert such traffic into paying customers.

Online traffic is attracted by the Group's publications and advertisements and are then directed, by the Group, to its customers in return for mainly a share of the revenue generated by such user, a fee generated per user acquired, fixed fees or a hybrid of any of these models.

NOTE 2:         OPERATING SEGMENTS

(a)  General:

The operating segments are identified on the basis of information that is reviewed by the chief operating decision maker ("CODM") to make decisions about resources to be allocated and assess its performance. Accordingly, for management purposes, the Group is organised into operating segments based on the products and services of the business units and has operating segments as follows:

Publishing

-

The Group owns over 2,000 informational websites in 17 languages. These websites refer potential customers to online businesses. The sites' content, written by professional writers, is designed to attract online traffic which the Group then directs to its customers online businesses.

Media	-	The Group's Media division acquires online and mobile advertising targeted at potential online and mobile traffic with the objective of directing it to the Group's users. The Group buys advertising space on search engines, websites, mobile and social networks and places adverts referring potential users to the Group's customers' websites or to its own websites.
Partners Network	-	The Group manages marketing partners, whose role is to direct online traffic to the Group's customers for which the Group receives revenues. The Group is responsible for paying its partners. The Group's partner programme enables affiliates to have a single point of contact to direct traffic to, and receive monies from, rather than engaging in multilateral negotiation, administration and collection of revenues.

Segment performance (segment profit) is evaluated based on revenues less direct operating costs. Items that were not allocated are managed on a group basis.

(b) Reporting on operating segments:

		Publishing		Media		Partners Network		Total
		USD in thousands
Year ended 31 December 2015:
Revenues		30,297		45,777		13,145		89,219
Segment profit		23,855		15,411		1,810		41,076
Unallocated corporate expenses								(18,116)
Other expense, net								(403)
Finance income, net								1,736
Profit before taxes on income								24,293
Year ended 31 December 2014:
Revenues		23,965		20,632		6,123		50,720
Segment profit		18,345		8,548		685		27,578
Unallocated corporate expenses								(13,340)
Other income, net								(229)
Finance expense, net								(770)
Profit  before taxes on income								13,239

(c)       Geographic information:

Revenues classified by geographical areas based on internet user location:

	Year ended 31 December
	2015		2014
Scandinavia	29,414		28,164
Other European countries	16,732		7,457
North America	19,588		4,918
Oceania	2,788		942
Other countries	2,610		3,116
Total revenues from identified locations	71,132		44,597
Revenues from unidentified locations	18,087		6,123
Total revenues	89,219		50,720

 

END

 

 

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