Earnings Release • Mar 30, 2015
Earnings Release
Open in ViewerOpens in native device viewer
National Storage Mechanism | Additional information
RNS Number : 7601I
XLMedia PLC
30 March 2015
| For immediate release | 30 March 2015 |
XLMedia PLC
("XLMedia" or "the Group" or "the Company")
Final results for the year ended 31 December 2014
Strong 2014 results delivered on strategy, positioned for next phase of growth
XLMedia (AIM: XLM), a leading provider of digital performance marketing services, is pleased to announce its final results for the year ended 31 December 2014.
Financial highlights
| • | Revenues increased 47% to $50.7 million (2013: $34.5 million) |
| • | Revenues include 30% organic growth as well as additional $6 million from EDM |
| • | Gross profit increased 35% to $27.6 million (2013: $20.5 million) |
| • | Adjusted EBITDA1 increased 28% to $17.0 million (2013: $13.3 million) |
| • | Profit before tax increased 14% to $13.2 million (2013: $11.7 million) |
| • | Net cash from operating activities increased 42% to $16.9 million (2013: $11.9 million) |
| • | Cash and short term investments of $44.1 million (2013: $15.9 million) |
| • | Maintained progressive dividend policy with payment of 1.576 cent per share and total 2014 dividend payment of 3.156 c per share |
Business highlights
| • | A year of significant strategic progress for the Group | |
| ○ | Successful IPO on AIM in March | |
| ○ | Key strategic targets of organic and acquisitive growth achieved | |
| • | Acquisitive progress during 2014 | |
| ○ | Publishing - acquired a UK sports betting information website, a Danish focused network of information website and bolt on acquisitions of websites and domains targeted at the North American markets | |
| ○ | Media - acquired EDM, a leading social and mobile gaming marketing company | |
| ○ | By 31 December 2014 XLMedia had completed the planned integration of acquired businesses into our operations, and the acquisitions are performing as expected or above expectations | |
| • | Increase of presence in regulated markets including the U.S and the U.K through a combination of acquisitions and organic growth | |
| • | Expansion into new product verticals with the addition of social gaming which has extended the Groups' customer base and further diversified our marketing channels | |
| • | Invested in talent, management systems and infrastructure to create a platform capable of supporting the next phase of growth |
Ory Weihs, Chief Executive Officer of XLMedia, commented:
"We are very pleased to report our final 2014 results which exceeded expectations. The last 12 months have been truly ground-breaking for the Group with our successful IPO in March 2014, and the completion of a number of strategically important acquisitions alongside a strong organic growth performance.
"In addition, and by no means less important, we have strengthened our management teams, infrastructure and systems and recruited more employees to the Group. I believe we are well positioned to successfully execute our ambitious growth plans and to deliver another positive year of growth."
Current Trading and Outlook
The Group has made an excellent start to 2015, underpinned by new product verticals and strong customer traction, and continues to trade in line with market expectations. The Board believes that the outlook for 2015 remains positive with growth set to continue.
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:
For further information, contact:
| # XLMedia plc # Ory Weihs # www.xlmedia.com |
Tel: 020 8817 5283 |
| # Vigo Communications # Jeremy Garcia / Fiona Henson # www.vigocomms.com |
Tel: 020 7016 9570 |
| # Cenkos Securities plc (Nomad and Joint Broker) # Ivonne Cantu / Callum Davidson # www.cenkos.com |
Tel: 020 7397 8900 |
| # Liberum (Joint Broker) # Neil Patel # www.liberum.com |
Tel: 020 3100 2000 |
Operational Review
Introduction
2014 has been a truly transformational year for the Group in which we've expanded our operational footprint and delivered growth with revenue up 47% and Gross Profit up 35% compared with FY 2013, underpinned by a combination of the positive impact from acquisitions and strong levels of organic growth across segments.
As a result of our strategic progress, we have significantly increased our presence in regulated markets including the UK and the US whilst expanding into the high growth social gaming market which is already yielding positive results for the Group.
The demand for performance based marketing services remains strong and we feel confident in our ability to execute our growth plans. Following our strong 2014 performance we are pleased to announce a final dividend of 1.576 cent per share. This totals full year 2014 dividends of 3.156 cent per share, an increase of 14% (2013: 2.768).
Business Summary
During 2014 we delivered strong growth, enjoying the substantial market opportunities that exist for performance based marketing services. We continued to diversify our revenue base as we expanded both the Group's operational footprint and successfully targeted new market verticals. The Group is pleased to report the following progress:
· Regions 2
We currently generate approximately 21% of our revenues from the U.S, mainly through EDM customers (FY 2014: 11% and FY 2013: 1%). Additionally, we strengthened our position in the UK market with a UK sports betting informational website acquisition, and made bolt on acquisitions and increased our marketing efforts in other regions. We grew revenues in our core Scandinavian markets by 30%, to $28.2 million (2013: $21.7 million). We have also further diversified the regional revenues and current revenue run rate for the Scandinavian market has reduced to approximately 51% of our revenues (FY 2014: 63% and FY 2013: 79%).
· Verticals and customers 3
We entered new verticals such as social gaming and financial services, which has enabled us to diversify our revenues and extend our customer base. Currently our largest customer represents just 11% of the Group's revenues (FY 2014: 15%, 2013: 25%), with the majority of our customers at 5% or below. The acquisition of EDM added a strong US customer base, mainly social gaming developers and studios.
· Marketing channels
As an online performance marketing company we have expanded our marketing methods to reach more online and mobile traffic to drive our growth. The acquisition of EDM boosted our social and mobile activity, and we expect these channels to become more and more significant going forward.
· Building our infrastructure
We have built an infrastructure that will support our rapid growth. In 2014 we invested $1.65 million (2013: $0.6million) in our in-house developed technologies, in addition to our ongoing R&D expenses of $1.0 million (2013: $0.9 million). We have also doubled the size of our R&D team. We plan to continue this trend and increase our efforts further in 2015 focusing investment on our Business Intelligence ('BI') systems, tracking, mobile enhancements, content management tools and other enhancements to further drive efficiency and analysis to support strong operating margins. We also increased headcount across all other departments in 2014, bringing total Group employees to 200 at 31 December 2014.
· Acquisitions
The online marketing industry is a fragmented market and we believe there are opportunities to acquire more businesses that will complement our core capabilities. We continue to consider and engage with prospective targets which we evaluate based on carefully selected criteria. Acquisitions remain a core part of our growth strategy, having delivered considerable value from the ones completed in 2014.
Our markets
We see strong growth in our core markets and expect these trends to continue in the short and medium terms. This growth is underpinned by the following dynamics:
· Mobile and tablet growth - Mobile advertising is expected to grow by an average of 38% from 2014 to 2017; Mobile is the main driver of global adspend and is expected to account for 51% of all new advertising during 2014 to 2017, growing by $42 billion4.
· Social games are also expected to benefit from the strong growth of mobile devices use, with expected CAGR in the US of 24%5 between 2012 and 2016. This strong growth is driven by the tremendous demand in the mobile and smartphone markets and the free availability of many of these games.
· Mobile users have also become a significant part of the online gambling industry, with an anticipated 44% share of the global interactive gambling market by 20186.
· Internet advertising consistently grows, with CAGR for US market of 18% over the past 10 years to a total of $45.8 billion7 in 2014. The growth comprises 12% CAGR for non-mobile revenues and 123% CAGR for mobile advertising during 2010 to 2013.
We see strong demand for marketing services in our markets, and believe the above mentioned trends will continue to drive these markets to further growth.
Business Segments review
| ($'000) | Publishing | Media | Partner Network | Total |
| 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 | 77% | 41% | 11% | 54% |
| 2013 | ||||
| Revenues | 18,840 | 10,071 | 5,592 | 34,503 |
| % of revenues | 55% | 29% | 16% | 100% |
| Direct profit | 14,234 | 5,583 | 632 | 20,449 |
| Profit margin | 76% | 55% | 11% | 59% |
| Revenue growth | 27% | 105% | 9% | 47% |
· Publishing
Publishing revenues grew 27% to $24.0 million (2013: $18.8). The growth was mainly organic, with some additions from new assets acquired during the second half of 2014.
We see strong demand in our core Scandinavian markets, as well as in newer markets such as the UK and other European countries.
In November 2014 we launched "Palcon", our proprietary content management system, which enables improved day to day operation of our network of over 2,000 specialist content websites, as well as enhanced mobile and social features in our websites. We believe our well established operation allows us to scale our business and we continue to develop our in-house systems.
During 2014 we invested $11.5 million in new websites and domains and we plan to continue buying and developing more assets to further drive our growth.
· Media
Media revenues grew 105% to $20.6 million (2013: $10.1 million). The growth included the acquisition of EDM which contributed $6.0 million to 2014 revenues. Excluding EDM, Media revenues grew 45% compared to last year, enjoying the strong demand for digital advertising and growth of these services as mentioned above.
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 specialises in social and mobile advertising specifically targeted at 'user acquisition' for social gaming applications. EDM's principal geographical market is the US, in addition to other English and German speaking markets. EDM provides marketing services primarily to game developers in social and mobile platforms, primarily for a performance based fee. The acquisition of EDM enhanced the Group's presence in the US, adding new customers and complementary social and mobile capabilities. With the strong demand in these markets, and 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.
New media activities are more mass media oriented and are intended to reach a large audience by mass communication. Such activities have usually lower margins but can reach high volumes rapidly. As already outlined in 2014, we expect a further decrease in the media margins, in line with industry trends, but expect this trend to be compensated through higher volumes generated from these activities.
· Partner Network
Partner network revenues grew 9% to $6.1 million (2013: $5.6 million). Our partner network remains an important part of our business, allowing us flexibility to provide marketing services in new markets we do not operate in through publishing and media.
Financial Review
| ($'000) | 2014 | 2013 | Change % |
| Revenues | 50,720 | 34,503 | 47% |
| Gross Profit | 27,578 | 20,449 | 35% |
| Operating expenses | 12,979 | 8,447 | 54% |
| Operating income | 14,599 | 12,002 | 22% |
| Adjusted EBITDA | 16,982 | 13,275 | 28% |
We had a record year in 2014, with strong growth in both revenues and adjusted EBITDA. Revenues grew 47% to $50.7 million (2013: $34.5 million), and adjusted EBITDA grew 28% to $17.0 million (2013: $13.3 million). We saw strong growth in both key business segments, publishing and media, as shown in our financial statements:
Gross profit increased to $27.6 million or 54% gross margin (2013: $20.5 million, 59% gross margin). Gross profit in percentage terms has decreased due to the change in revenue mix, as expected. The increase in gross profit was a result of revenue growth.
We have seen a change in our mix of revenues over the period, which is even more pronounced since the acquisition of EDM. In 2014, publishing revenues contributed 47% of the Group's revenues compared to 55% in 2013, while media revenues in 2014 were 41% in 2014 compared to 29% in 2013.
Current revenue run rate includes 48% of media revenues and 40% of publishing revenues. As this trend in revenue mix continues, and as we continue to grow our media business, the Group's profit margins will reflect this shift and will decrease in percentage but overall profit will grow.
Operating expenses grew 54% to $13.0 million (2013: $8.5 million) reflecting our investment in infrastructure, as well as becoming a public company in March 2014, which added additional general and administration costs to our cost base.
Adjusted EBITDA grew 28% to $17.0 million (2013: $13.3 million) as a result of revenue growth.
Finance expenses for 2014 were $1.0 million (2013: $0.5 million), offset by $0.2 million of finance income (2013: $0.1 million). Finance expenses include mainly exchange rates differences. The group's functional currency is the USD. The Group is exposed to changes in the EUR and ILS against the USD.
Cash flow from operating activities grew 42% to $16.9 million (2013: $11.9 million), reflecting the cash generative nature of our business. During 2014 we concluded our IPO raising $48.9 million (net of issue costs). We used some of these proceeds for EDM acquisition ($10.0 million) and for website acquisitions ($11.5 million). As of 31 December 2014 we had cash, cash equivalents and short term investments of $44.1 million.
With our cash balance and strong balance sheet of 76% equity to total assets ratio the Board remains comfortable with the Group's growth plans and believes the Group is well positioned to execute its plans.
During 2014 we paid dividends of $8.2 million according to our dividend policy of distributing at least 50% of net profit. The Board declared a final dividend of 1.576 cent per share, payable on 8 May 2015 to shareholders on the register at 10 April 2015. The ex-dividend date is 9 April 2015.
Outlook
We continue to develop our business to further capitalise on the substantial market opportunities that exist for performance based marketing services. Our growth strategy includes expansion into new markets, adding more channels and verticals. We continue to invest in technology, offering a 'best of breed' service to our clients. While we maintain our strong organic growth we continue to evaluate acquisition opportunities.
The Board remains confident that through a combination of XLMedia's market leading position in performance based marketing, our proprietary technology platforms and broad customer base, we will continue to generate further value for our shareholders.
Footnotes:
1 - Earnings Before Interest, Taxes, Depreciation and Amortisation and excluding share based payments, IPO expenses and expenses related to EDM acquisition agreement
2 - Revenues per region refer to identified revenues, see also note 16 d to our consolidated financial statements.
3 - See also note 16 c to the consolidated financial statements.
4 - ZenithOptimedia
5 - Technavio
6 - H2GC
7 - IAB
| As of 31 December | ||||||
| 2014 | 2013 | |||||
| USD in thousands | ||||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | 27,351 | 15,455 | ||||
| Short-term investments | 16,714 | 428 | ||||
| Trade receivables | 11,548 | 4,498 | ||||
| Other receivables | 1,895 | 2,121 | ||||
| Financial derivatives | 264 | - | ||||
| 57,772 | 22,502 | |||||
| Non-current assets: | ||||||
| Long-term investments | 333 | 340 | ||||
| Other receivables | 456 | 552 | ||||
| Property and equipment | 864 | 738 | ||||
| Goodwill | 19,586 | 2,416 | ||||
| Domains and websites | 16,728 | 5,495 | ||||
| Other intangible assets | 4,014 | 1,358 | ||||
| 41,981 | 10,899 | |||||
| 99,753 | 33,401 |
| As of 31 December | ||||||
| 2014 | 2013 | |||||
| USD in thousands | ||||||
| Liabilities and equity | ||||||
| Current liabilities: | ||||||
| Trade payables | 9,073 | 1,536 | ||||
| Contingent consideration payable | 3,396 | 2,867 | ||||
| Other liabilities and accounts payable | 7,764 | 2,251 | ||||
| 20,233 | 6,654 | |||||
| Non-current liabilities: | ||||||
| Contingent consideration payable | 3,233 | - | ||||
| Deferred taxes | 332 | - | ||||
| Other liabilities | 42 | 227 | ||||
| 3,607 | 227 | |||||
| Equity attributable to equity holders of the Company: | ||||||
| Share capital | *) | *) | ||||
| Share premium | 62,271 | 14,311 | ||||
| Capital reserve from share-based transactions | 1,784 | 479 | ||||
| Capital reserve from transaction with non-controlling interests | (506) | 106 | ||||
| Retained earnings | 12,072 | 10,494 | ||||
| 75,621 | 25,390 | |||||
| Non-controlling interests | 292 | 1,130 | ||||
| Total equity | 75,913 | 26,520 | ||||
| 99,753 | 33,401 |
*) Lower than USD 1 thousand.
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
| Year ended 31 December |
||||||
| 2014 | 2013 | |||||
| USD in thousands (except per share data) |
||||||
| Revenues | 50,720 | 34,503 | ||||
| Cost of revenues | 23,142 | 14,054 | ||||
| Gross profit | 27,578 | 20,449 | ||||
| Research and development expenses | 1,008 | 907 | ||||
| Selling and marketing expenses | 2,239 | 1,785 | ||||
| General and administrative expenses | 9,732 | 5,755 | ||||
| 12,979 | 8,447 | |||||
| Operating income before expenses in connection with IPO | 14,599 | 12,002 | ||||
| Expenses in connection with IPO | 361 | - | ||||
| Operating income after expenses in connection with IPO | 14,238 | 12,002 | ||||
| Finance expenses | (1,001) | (496) | ||||
| Finance income | 231 | 123 | ||||
| Income before other income (expenses) | 13,468 | 11,629 | ||||
| Other income (expenses), net | (229) | 32 | ||||
| 13,239 | 11,661 | |||||
| Profit before taxes on income | ||||||
| Taxes on income | 1,329 | 552 | ||||
| Net income and other comprehensive income | 11,910 | 11,109 | ||||
| Attributable to: | ||||||
| Equity holders of the Company | 9,821 | 8,838 | ||||
| Non-controlling interests | 2,089 | 2,271 | ||||
| 11,910 | 11,109 | |||||
| Net earnings per share attributable to equity holders of the Company: | ||||||
| Basic net earnings per share (in USD) | 0.06 | 0.09 | ||||
| Diluted net earnings per share (in USD) | 0.05 | 0.09 | ||||
| Year ended 31 December |
||||
| 2014 | 2013 | |||
| USD in thousands | ||||
| Cash flows from operating activities: | ||||
| Net income | 11,910 | 11,109 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Adjustments to the profit or loss items: | ||||
| Depreciation and amortisation | 1,296 | 794 | ||
| Finance expense, net | 25 | 255 | ||
| Finance income from financial derivatives | (264) | - | ||
| Loss (gain) from sale of assets | 9 | (32) | ||
| Cost of share-based payment | 1,042 | 479 | ||
| Taxes on income | 1,329 | 552 | ||
| Exchange differences on balances of cash and cash equivalents | 482 | - | ||
| 3,919 | 2,048 | |||
| Changes in asset and liability items: | ||||
| Decrease (increase) in trade receivables | 994 | (1,546) | ||
| Increase in other receivables | (608) | (183) | ||
| Decrease in related parties | 142 | 93 | ||
| Increase (decrease) in trade payables | (256) | 682 | ||
| Increase in other accounts payable | 782 | 357 | ||
| Increase in other long-term liabilities | 18 | - | ||
| 1,072 | (597) | |||
| Cash paid and received during the period for: | ||||
| Interest paid | - | (136) | ||
| Interest received | 46 | 13 | ||
| Taxes paid | (421) | (547) | ||
| Taxes received | 417 | - | ||
| 42 | (670) | |||
| Net cash from operating activities | 16,943 | 11,890 |
| Year ended 31 December |
||||||
| 2014 | 2013 | |||||
| USD in thousands | ||||||
| Cash flows from investing activities: | ||||||
| Purchase of property and equipment | (350) | (482) | ||||
| Acquisition of initially consolidated company (a) | (9,950) | - | ||||
| Decrease in other financial assets, net, acquired in business combination | - | 457 | ||||
| Acquisition of domains, websites and other intangible assets | (11,528) | (936) | ||||
| Proceeds and collection of receivable from sale of assets | 328 | 50 | ||||
| Short- term and long-term investments, net | (16,315) | (607) | ||||
| Net cash from investing activities | (37,815) | (1,518) | ||||
| Cash flows from financing activities: | ||||||
| Issue of share capital (net of issue costs) | 48,917 | 14,311 | ||||
| Dividend paid to equity holders | (8,243) | (1,800) | ||||
| Acquisition of non-controlling interests | (1,490) | - | ||||
| Dividend paid to non-controlling interests | (2,287) | (2,055) | ||||
| Repayment of liabilities to related parties | (3,512) | (4,381) | ||||
| Prepaid expenses for share capital issuance | - | (707) | ||||
| Sale of shares to non-controlling interests | - | 31 | ||||
| Exercise of options | 12 | - | ||||
| Financing by non-controlling interests | 57 | 10 | ||||
| Dividend to equity holders as result of the acquisition of Subsidiary | - | (2,888) | ||||
| Repayment of long-term and short-term liabilities | (204) | - | ||||
| Net cash from financing activities | 33,250 | 2,521 | ||||
| Exchange differences on balances of cash and cash equivalents | (482) | - | ||||
| Increase in cash and cash equivalents | 11,896 | 12,893 | ||||
| Cash and cash equivalents at the beginning of the year | 15,455 | 2,562 | ||||
| Cash and cash equivalents at the end of the year | 27,351 | 15,455 | ||||
| (a) | Acquisition of initially consolidated company (Note 5(d): | |||||
| 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 | - | |||||
| Year ended 31 December |
|||||
| 2014 | 2013 | ||||
| USD in thousands | |||||
| (b) Significant non-cash transactions: | |||||
| Dividend payable to equity holders as result of the acquisition of Subsidiary | - | 512 | |||
| Dividend payable to non-controlling interests | 56 | 237 | |||
| Receivable from sale of assets | - | 826 | |||
| Payables for acquisitions of domains and websites | 1,712 | - |
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JRMFTMBITBAA
//<![CDATA[$.ajaxSetup({headers: {'__RequestVerificationToken':'mwAOsPFbLKF5SniAeAO4lUZipgi8i2E8nsVGDgGS8ZiEVMg5lWzczRX9iSlY8WaHB1NA-2aj4v-hlxubhJQGsVve6ro-UuNvimL4c-RZYe01:N1L9owrTqeL2pJGuA5TtTE4eWjI5PCGpWHxb0q3XqIfc--2xqzHAiI_iZ8IkDiIAQzrnNUZXbWf61kiY6ODZnlUuprjXZNMTwmOiAZBSU7o1'}});//]]>