Earnings Release • Mar 30, 2016
Earnings Release
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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: 020 8817 5283 |
| # Vigo Communications # Jeremy Garcia / Fiona Henson # www.vigocomms.com |
Tel: 020 7830 9700 |
| # Cenkos Securities plc (Nomad and Joint Broker) # Ivonne Cantu / Camilla Hume # www.cenkos.com |
Tel: 020 7397 8900 |
| # Liberum (Joint Broker) # Neil Patel / Chris Clarke # www.liberum.com |
Tel: 020 3100 2000 |
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
| 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 |
| 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 | ||||
| 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 |
This information is provided by RNS
The company news service from the London Stock Exchange
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