Interim results

RNS Number : 5927Z

XLMedia PLC

21 September 2015

 

For immediate release

21 September 2015

XLMedia PLC

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

Interim results for the six months ended 30 June 2015

Strong momentum continues

XLMedia (AIM: XLM), a leading provider of digital performance marketing services, is pleased to announce its interim results for the six months ended 30 June 2015.

Financial highlights

·     Revenues increased 85% to $36.8 million (H1 2014: $19.9 million);

·     Gross profit increased 63% to $18.4 million (H1 2014: $11.3 million); 

·     Adjusted EBITDA increased 103% to $12.9 million (H1 2014: $6.4 million);

·     Profit before tax up 187% to $13.2 million (H1 2014: $4.6 million);

·     Net cash from operating activities increased 111% to $12.1 million (H1 2014: $5.7 million);

·     Interim dividend of $5.0 million or 2.595 cent per share; and

·     Strong balance sheet with $43.2 million cash and short term investments.

Operating highlights

·   Continued development of mobile capabilities through investments in technology and in house systems;

·   Extended reach of existing network through  bolt on acquisition of UK focused, mobile targeted websites;

·   First stage of EDM integration completed and accelerated into the Group;

·   Post period end, the Group announced the completion of the acquisition of a majority stake in Marmar Media broadening the Group's offering and operational profile; and

·   Strong six months of trading reflecting the results of investments made during the past 18 months.

Ory Weihs, Chief Executive Officer of XLMedia, commented:

"We are delighted to report another record breaking six months. During the first six months of the year we continued to develop the business and invest in our main technology and mobile capabilities, which further underpin our key revenue and profit drivers.

"We made significant progress with executing our strategic plan, with acquisitions of performance marketing companies as well as bolt on publishing assets. These acquisitions complement the Group's existing business and add diversification through the addition of more clients, products, regions and marketing channels. EDM, which was acquired last year, is performing well and as such the integration of the business has been accelerated. We believe that using a unified technological infrastructure throughout the Group will enhance performance and bring additional benefits of scale to the Group.

"The Board is extremely confident of meeting expectations for the full year. Our confidence level is demonstrated by our declaration of an interim dividend of $5.0 million or 2.595 cents per share.

"We believe we have a set of strong foundations underpinning the growth potential of our business and we look to reporting on our continued progress."

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

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

Our updated investor presentation is also available on our website at the following address:

http://www.xlmedia.com/media/ 

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]

 

Operational review

Following the Company's IPO in March 2014, we have been in the process of executing our strategy of driving growth and establishing our position as a dominant player in the area of online monetisation.  Furthermore, we have continued to build on the positive momentum and footprint established in 2014 and the Group has delivered record profits in the first half of 2015.  This delivery is a result of a combination of factors; inter alia, our strong organic growth, the positive impact from the acquisitions as well as the benefit of less expenses falling in to the first half than had been anticipated.

As a reflection of the growth seen in the first half of 2015, the Group has maintained its progressive dividend policy and will be issuing a dividend of 2.595 cents per share payable on 30 October 2015 to shareholders on the register at 2 October 2015. The ex-dividend date is 1 October 2015.  We remain confident that demand for performance marketing services is set to continue to grow across all media platforms.

Business Summary

Over the course of the last 18 months, we have successfully executed a number of growth initiatives. Below is an overview of the progress we have achieved to date:

·     Successful acquisitions have broadened our market reach across geographies and verticals

o Completed a series of bolt on acquisitions of domains and websites complementing our publishing asset base and providing access to additional markets and products. All of these acquired assets have been integrated into our publishing division and platform and are benefitting from our increased scale and access to our in house technology.

o Continued efforts to evaluate potential acquisitions have resulted in the Company acquiring a group of UK focused, mobile targeted websites.

o Acquired EDM, a leading social and mobile gaming marketing company, in September 2014. Deriving the majority of its revenues from the US, EDM provides the Group with access to complementary markets as well as giving it entry in to a new vertical focused on social gaming. We completed the first phase of EDM's integration in to the Group during the period and, as reported earlier this month, due to EDM's strong performance in the first year following its acquisition we have decided to waive performance conditions for contingent consideration in order to accelerate the full integration into the Group. The Board believes this was an essential action for the Group as it is expected that social gaming will be a strong growth driver for XLMedia over the coming years.

o On 1 July 2015 the Group announced the completion of 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 a wider customer base and vertical diversification.

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

·     Significant increase in organic revenues and client base

o Together with the Group's stated acquisition strategy, the Group continues to deliver strong organic growth in all of its business segments with the 2014 year-end trading performance exceeding market expectations.

o The first half of 2015 delivered record revenues for the business, representing growth of 85% and 103% in revenues and adjusted EBITDA respectively. We expect to deliver further solid performance during the second half of the year.

·     Investments in Technology

o We have continued to make significant investments in our technology and our staff to support expansion in our media division as well as continuing to support organic growth in the publishing division.

o We use our in-house marketing technology to optimize media buying and enhance performance.

o We will continue to invest further in our technology so that we can continually improve performance and efficiency.  This will ensure we maintain our strong position in the market place and that we can adapt to changes in the online and mobile search ecosystem.

Business Segments review

($'000)	Publishing	Media	Partner Network	Total
H1 2015
Revenues	14,449	17,463	4,863	36,775
% of revenues	39.3%	47.5%	13.2%	100%
Direct profit	11,601	6,242	558	18,401
Profit margin	80.3%	35.7%	11.5%	50.0%
H1 2014
Revenues	10,659	6,716	2,502	19,877
% of revenues	53.6%	33.8%	12.6%	100%
Direct profit	7,986	2,927	353	11,266
Profit margin	74.9%	43.6%	14.1%	56.7%

·     Publishing

Publishing revenues grew 36% to $14.4 million (H1 2014: $10.7 million). The growth was primarily organic, with some additions from new assets acquired during the second half of 2014 and 2015.

We invested significant amounts in technology infrastructure to support the centralised management of our assets and to improve conversions and performance of our assets.

Since the launch of our proprietary content management system, "Palcon", in November 2014, we have seen an improvement in the day to day operation of our network of over 2,000 specialist content websites. Palcon is a consolidated management system across all websites, enabling fast and dynamic updates and upgrades, comprehensive tracking support for website optimization as well as enhanced mobile and social features in our websites. All of the new assets we have acquired have been integrated and adjusted to our Palcon technology as well as existing websites migrated to the new technology, allowing us to benefit from the advantages of scale. We continue to develop our in-house systems to ensure we benefit from the maximum efficiencies possible.

During 2015 we invested $1.7 million in new websites and domains and we plan to continue buying and developing more assets to further drive our growth.

·     Media

Organic growth in the Media division came from strong and growing demand for digital advertising and resulted in revenues growing 160% to $17.5 million (H1 2014: $6.7 million). Further growth in this division was also achieved through the acquisition of EDM which contributed $6.0 million to H2 revenues in 2014.

Our revenue model is performance based - either through revenue share, cost per acquisition, cost per installation or other models. Customers pay for performance only, avoiding the risk of applying funds to media campaigns that don't deliver return on investment ("ROI"). We use our expertise, in-house proprietary systems and trained staff and own funds to run thousands of simultaneous campaigns which yield positive ROI for us and for our customers.

EDM specializes in social and mobile advertising specifically targeted at 'user acquisition' for social gaming applications. The acquisition of EDM in September 2014 significantly added to our expertise in the social and mobile advertising, gave the Group a further presence in the US and delivered new customers and capabilities. With the strong demand in EDM's markets,  demonstrated by the performance of EDM since acquisition, the Board believes social gaming will be a strong driver of the Group's growth in the coming years.

We continue to build our media base both organically and through acquisitions of EDM and Marmar Media. By increasing our media operations we aim to reach the widest possible audience by mass online communication. Although these activities can have lower margins they reach high volumes rapidly.  As previously outlined, although we expect to see a decrease in the Group's media margins, in line with industry trends, we believe this decrease will be more than compensated for with the increased traffic generated through our operations. Hence we expect to continue growing Media earnings. The acquisition of a majority stake in Marmar Media, announced during the period, will bolster our offering in this space and provides us with additional scale and exposure to new markets for our media business.

·     Partner Network

Partner network revenues grew 94% to $4.9 million (H1 2014: $2.5 million). Our partner network remains an important part of our business, offering the opportunity to provide marketing services which are not currently serviced through our existing publishing and media networks.

Current Trading and Outlook

The Group has continued to trade strongly into the second half of the year. The business has established solid foundations for growth and continues to enhance and improve its offering, notably with the recent acquisition of Marmar Media. The Board is extremely confident of meeting expectations for the full year and has maintained its progressive dividend policy by declaring a dividend of $5 million or 2.595 cents per share payable on 30 October 2015 to shareholders on the register at 2 October 2015. The ex-dividend date is 1 October 2015.

Financial review

	H1 2015	H1 2014	Change
Revenues	36,775	19,877	85%
Gross Profit	18,401	11,266	63%
Operating expenses	7,409	6,233	19%
Operating income	10,992	5,033	118%
Adjusted EBITDA	12,933	6,377	103%
Financial income	2,409	310	NA
Profit Before Tax	13,170	4,610	186%

The first half of 2015 has delivered another set of record revenues for the business. Revenues in the first six months of the year totaled $36.8 million, reflecting 85% growth compared to the same period last year. Revenues in 2015 reflect the consolidation of EDM which was acquired in September 2014, as well as strong organic growth in all business segments during the period. 

Gross profit reached $18.4 million or 50% of revenues, representing 63% growth compared to last year (H1 2014: $11.3 million, 57%). In the first half of 2015 the media segment has grown to be the largest segment with 48% of revenues. As we continue implementing our strategy of  further increasing and developing our media business, revenue mix  will shift further towards media  lowering gross margins, and as such we expect total gross margins (in terms of percentage) to decrease further across the Group.

Operating expenses during the first six months of the year were $7.4 million, an increase of 19% compared to the same period last year (H1 2014: $6.3 million). During the first six months of 2015, we saw some delays in our planned recruitments, partially due to our focus on successful integration of our acquired businesses as well as due to market conditions for recruiting technology experts. We are now recruiting more employees and therefore operating expenses will grow in the second part of 2015.

Operating expenses included $0.7 million of research and development expenses, reflecting an increase of 66% compared to the same period last year (H1 2014: $0.4 million). These expenses are in addition to the increase of 146% in investments in technology and internal systems developed during the period of $1.6 million (H1 2014: $0.7 million). The Group expects to further enhance investment in technology as we see technology as a key driver to growth and profit for the coming years.

Adjusted EBITDA¹ reached $12.9 million or 35% of revenues, reflecting an increase of 185% to the same period last year (H1 2014: $6.4 million, 32%). 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.

Financial income for the first six months of the year was $2.4 million, attributed to the Company's   dynamic hedging activity to mitigate material exposure to foreign currencies. Since the majority of the Group's revenues are denominated in Euro, the Company entered into a series of forward contracts for the sale of Euro and purchase of US Dollars. The Euro exchange rate decreased by 8% versus the US Dollar during this period. However, the Company gained financial income from its hedging activity which partially compensated for the decrease. Out of the financial income $1.3 million was received in cash (when forward contracts matured) while the remaining $1.1 million is recorded as fair value gains for forward contracts not yet matured. The remaining forward contracts will mature over the course of the next 12 months and therefore if the Euro vs. USD exchange rate increases the Company will record financial expenses.

As a result of the high adjusted EBITDA as well as the financial gain from changes in exchange rates, profit before tax increased by 186% to $13.2 million (H1 2014: $4.6 million).

As of 30 June 2015 we had $43.2 million cash and short term investments compared to $44.1 million on December 31, 2014.  The change in cash reflects an increase of $12.1 million provided by operating activity, offset by spending $9.4 million on investments in technology and acquisitions and $3 million of dividends during the first half of 2015.  Investments during the period include a payment of $5.4 million on account of acquisition of Marmar media.

Current assets as of 30 June 2015 were $58.9 million (31 Dec 2014: $57.8 million), and non-current assets reached $50.0 million (31 Dec 2014: $42.0 million). The increase in non-current assets is attributed mainly to the payment on account of Marmar media shares ($5.4 million), investments in domains and websites of $1.7 million, as well as additions to our in-house technology of $0.7 million.

With total equity on 30 June 2015 reached $85 million, or 78% (2014: 76%), and cash and short term investments of $44.1 million the Group is well positioned to continue executing its strategic plan.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

		30 June		31 December
		2015		2014
		Unaudited		Audited
		USD in thousands
Assets
Current assets:
Cash and cash equivalents		27,366		27,351
Short-term investments		15,807		16,714
Trade receivables		12,445		11,548
Other receivables		1,857		1,895
Financial derivatives		1,430		264
		58,905		57,772
Non-current assets:
Long-term investments		5,890		333
Other receivables		398		456
Property and equipment		997		864
Goodwill		19,586		19,586
Domains and websites		18,440		16,728
Other intangible assets		4,692		4,014
		50,003		41,981
		108,908		99,753

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

		30 June		31 December
		2015		2014
		Unaudited		Audited
		USD in thousands
Liabilities and equity
Current liabilities:
Trade payables		9,575		9,073
Contingent consideration payable		3,478		3,396
Other liabilities and accounts payable		7,072		7,764
		20,125		20,233
Non-current liabilities:
Contingent consideration payable		3,313		3,233
Deferred taxes		247		332
Other liabilities		117		42
		3,677		3,607
Equity attributable to equity holders of the Company:
Share capital		*)		*)
Share premium		63,898		62,271
Capital reserve from share-based transactions		1,295		1,784
Capital reserve from transactions with non-controlling interests		(506)		(506)
Retained earnings		20,129		12,072
		84,816		75,621
Non-controlling interests		290		292
Total equity		85,106		75,913
		108,908		99,753

*) Lower than USD 1 thousand.

 

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

		Six months ended 30 June				Year ended 31 December
		2015		2014		2014
		Unaudited				Audited
		USD in thousands (except per share data)
Revenues		36,775		19,877		50,720
Cost of revenues		18,374		8,611		23,142
Gross profit		18,401		11,266		27,578
Research and development expenses		708		427		1,008
Selling and marketing expenses		1,324		1,129		2,239
General and administrative expenses		5,377		4,677		9,732
		7,409		6,233		12,979
Operating income before expenses in connection with IPO		10,992		5,033		14,599
Expenses  in connection with IPO		-		461		361
Operating income after expenses in connection with IPO		10,992		4,572		14,238
Finance expenses		(231)		(263)		(1,001)
Finance income		2,409		310		231
Income before other expenses		13,170		4,619		13,468
Other expenses, net		-		(9)		(229)
				4,610		13,239
Profit before taxes on income		13,170
Taxes on income		1,774		324		1,329
Net income and other comprehensive income		11,396		4,286		11,910
Attributable to:
Equity holders of the Company		11,057		3,001		9,821
Non-controlling interests		339		1,285		2,089
		11,396		4,286		11,910
Net earnings per share attributable to equity holders of the Company:
Basic net earnings per share (in USD)		0.06		0.02		0.06
Diluted net earnings per share (in USD)		0.06		0.02		0.05
Weighted average number of shares used in computing basic earnings per share (in thousands)		190,942		159,103		174,398
Weighted average number of shares used in computing diluted earnings per share (in thousands)		195,141		162,087		178,803

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Six months ended 30 June				Year ended 31 December
		2015		2014		2014
		Unaudited				Audited
		USD in thousands
Cash flows from operating activities:
Net income		11,396		4,286		11,910
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to the profit or loss items:
Depreciation and amortisation		1,079		514		1,296
Finance expense (income), net		49		(318)		25
Finance income from financial derivatives		(1,166)		-		(264)
Loss from sale of assets		-		9		9
Cost of share-based payment		470		1,137		1,042
Taxes on income		1,774		324		1,329
Exchange differences on balances of cash and cash equivalents		87		(44)		482
		2,293		1,622		3,919
Changes in asset and liability items:
Decrease (increase) in trade receivables		(897)		(414)		994
Increase in other receivables		(170)		(508)		(608)
Decrease (increase) in related parties		-		(3)		142
Increase (decrease) in trade payables		502		272		(256)
Increase(decrease) in other accounts payable		(190)		455		782
Increase in other long-term liabilities		75		-		18
		(680)		(198)		1,072
Cash paid and received during the period for:
Interest received		25		21		46
Taxes paid		(887)		(98)		(421)
Taxes received		-		113		417
		(862)		36		42
Net cash provided from operating activities		12,147		5,746		16,943

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)

		Six months ended 30 June				Year ended 31 December
		2015		2014		2014
		Unaudited				Audited
		USD in thousands
Cash flows from investing activities:
Purchase of property and equipment		(292)		(174)		(350)
Acquisition of initially consolidated company (a)		-		-		(9,950)
Acquisition of  domains, websites and other intangible assets		(4,677)		(3,484)		(11,528)
Proceeds and collection of receivable from sale of assets		150		178		328
Short- term and long-term investments, net		(4,558)		-		(16,315)
Net cash used in investing activities		(9,377)		(3,480)		(37,815)
Cash flows from financing activities:
Issue of share capital (net of issue costs)		-		48,917		48,917
Dividend paid to equity holders		(3,000)		(5,247)		(8,243)
Acquisition of non-controlling interests		-		-		(1,490)
Dividend paid to non-controlling interests		(336)		(1,301)		(2,287)
Repayment of liabilities to related parties		-		(2,855)		(3,512)
Proceeds from exercise of options		668		12		12
Financing by non-controlling interests		-		57		57
Repayment of long-term and short-term liabilities		-		(716)		(204)
Net cash provided (used in) from financing activities		(2,668)		38,867		33,250
Exchange differences on balances of cash and cash equivalents		(87)		44		(482)
Increase  in cash and cash equivalents		15		41,177		11,896
Cash and cash equivalents at the beginning of the year		27,351		15,455		15,455
Cash and cash equivalents at the end of the year		27,366		56,632		27,351

(a)	Acquisition of initially consolidated company:
	Assets and liabilities at date of acquisition:
	Working capital (excluding cash and cash equivalents)		-		-		(2,057)
	Long-term investment		-		-		26
	Property and equipment		-		-		69
	Intangible assets		-		-		1,689
	Goodwill		-		-		17,170
	Deferred taxes		-		-		(402)
	Contingent consideration payable		-		-		(6,521)
	Non-current liabilities		-		-		(24)
			-		-		9,950

CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)

(b)  Significant non-cash transactions:
Dividend payable to non-controlling interests			61		-		56
Payables  for acquisitions of domains and websites			112		-		1,712

NOTES TO INTERIM CONDEST 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 businesses.

The Group attracts users through online marketing techniques (such as publications and advertisements) which are then directed, by the Group, to its customers in return for a share of the revenue generated by such user, a fee generated per user acquired, fixed fees or a hybrid of any of these three 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 18 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 advertising targeted at potential online 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
Six months ended 30 June 2015 (unaudited):
Revenues		14,449		17,463		4,863		36,775
Segment profit		11,601		6,242		558		18,401
Unallocated corporate expenses								(7,409)
Finance income, net								2,178
Profit before taxes on income								13,170

		Publishing		Media		Partners Network		Total
		USD in thousands
Six months ended 30 June 2014 (unaudited):
Revenues		10,659		6,716		2,502		19,877
Segment profit		7,986		2,927		353		11,266
Unallocated corporate expenses								(6,694)
Other expenses, net								(9)
Finance income, net								47
Profit before taxes on income								4,610

 

(b) Reporting on operating segments (Cont.):

		Publishing		Media		Partners Network		Total
		USD in thousands
Year ended 31 December 2014 (audited):
Revenues		23,965		20,632		6,123		50,720
Segment profit		18,345		8,548		685		27,578
Unallocated corporate expenses								(13,340)
Other expense, 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:

		Six months ended 30 June				Year ended 31 December
		2015		2014		2014
		Unaudited				Audited
		U.S. dollars in thousands
Scandinavia		14,121		12,921		28,164
Other European countries		6,987		2,320		7,457
North America		5,950		765		4,918
Other countries		2,679		428		4,058
Total revenues from identified locations		29,737		16,434		44,597
Revenues from unidentified locations		7,038		3,443		6,123
Total revenues		36,775		19,877		50,720

- - - - - - - - - - - - - - - - -

^[1]Earning Before interest, Taxes, Depreciation and Amortization and adjusted to exclude share based payments IPO expenses and expenses related to EDM acquisition agreement 

 

END

 

 

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