REG - XLMedia PLC - Interim Results <Origin Href="QuoteRef">XLM.L</Origin>

XLMediaAnnouncement

11/09/2017 07:07

RNS Number : 2987Q
XLMedia PLC
11 September 2017
For immediate release
11 September 2017
XLMedia PLC
("XLMedia" or "the Group" or "the Company")
Interim results for the six months ended 30 June 2017
Further strategic progress underpins record performance
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 2017.
Financial highlights
 Record revenue performance of $67.9 million, up 33% (H1 2016: $51.2 million)
o Strong organic revenue growth of 32% in publishing division and 12% in the media division;
 Gross profit increased 30% to $35.2million (H1 2016: $27.0million);
 Adjusted EBITDA increased 30% to $22.9 million (H1 2016: $17.7million);
 Profit before tax up 23% to $19.5 million (H1 2016: $15.8 million);
 Interim dividend of $8.0 million or 4.0226 cent per share, an increase of 5% (H1 2016: 3.8205 cent per share); and
 Strong balance sheet with $43.1 million cash and short term investments underpins key growth initiatives.
Operating highlights
 Strong organic growth in the publishing & media divisions while maintaining high margins;
 Acquired www.Greedyrates.ca ("Greedyrates"), a Canadian credit card comparison website, and US financial services information website, www.Moneyunder30.com("Moneyunder30"),acceleratingthe Group's entry into the financial services sector;
 Completed the acquisition of www.securethoughts.com ("Securethoughts"), a US cyber security comparison website, the Company's first move into the high growth Cyber security sector;
 Acquired ClicksMob, a mobile performance-based user acquisition platform, providing expertise in user acquisition for mobile apps and games;
 Commenced operations in Romania with the acquisition of a leading publishing asset and obtained a license to operate as an online gambling affiliate in the Romanian market; and
 Continued development of our technology and in-house systems; Dau-Up awarded 'Instagram Marketing Partner' for Ad Technology.
Ory Weihs, Chief Executive Officer of XLMedia, commented:
"We are delighted to report another record period of strong profit growth for the Group. The combination of both organic and acquisitive growth has accelerated our progress extending our business into new verticals and new geographic regions.
"Current trading remains strong andwe are confident that the ongoing implementation of our strategic focus will continue to yield excellent results, underpinning the board's ongoing confidence in the Company's near and medium term prospects."
A webcast of our results presentation will be available on our website later today: http://www.xlmedia.com/media/
For further information, please contact:
XLMedia plc
Ory Weihs
www.xlmedia.com
Tel: 020 8817 5283
Vigo Communications
Jeremy Garcia / Fiona Henson / Natalie Jones
www.vigocomms.com
Tel: 020 7830 9703
Cenkos Securities plc (Nomad and Joint Broker)
Ivonne Cantu / Camilla Hume
www.cenkos.com
Tel: 020 7397 8900
Berenberg (Joint Broker)
Chris Bowman / Mark Whitmore
www.berenberg.com
Tel: 020 3207 7800
Business review
We have made an extremely positive start to 2017 and have seen significant demand across both our publishing assets as well as media traffic from our customers. The solid organic growth from both our publishing and media divisions has been further augmented by a number of acquisitions which we completed during the period. 
We continued to execute on our stated strategy and, during the period, completed a series of earnings enhancing acquisitions. We have evaluated dozens of potential assets and targets, carefully considering each of them as part of our robust due diligence process. As a result we have selected to complete only the ones that represent the very best fit for our business.
To date in 2017, we have completed $24.3 million worth of acquisitions, including North American financial services comparison websites, Greedyrates and Moneyunder30; US cyber security comparison website, Securethoughts; mobile performance marketing platform, ClicksMob; as well as a Romanian website network following the obtaining of a Romanian license. All of these transactions demonstrate further diversification of our revenue base, adding new verticals and geographies, whilst providing further opportunities for future growth. 
We continue to identify and evaluate additional targets and expect to continue this process as part of our stated strategy, looking to add incremental value to the business while benefitting from greater economies of scale. 
As mentioned above, a combination of strong organic and acquisitive growth has seen the Group continue to diversify its revenues both geographically and by sector. In H1 2017 26% of revenues derived from Scandinavia (H1 2016: 33%), North America generated 28% (H1 2016: 21%) and other European countries generated 29% of revenues (H1 2016: 25%). 
Following the acquisition of ClicksMob we have now seen the first significant revenues from Asia, which contributed approximately 5% of Group's revenues in H1 2017. We continue to invest efforts in developing our activities in new geographies and expect recent acquisitions to further increase revenues from North America and Asia. 
Sector diversification continues as new acquisitions contribute further with gambling accounting for 63% of H1 2017 revenues (H1 2016: 71%) andwe expect the proportion of gambling to further decrease following recent acquisitions of finance and cyber security websites. 
We believe that the results delivered in H1 2017 reflect the continued success of our strategy and expect growth to continue. 
Business Segments review
($'000)
Publishing
Media
Partner Network
Total





H1 2017




Revenues
29,809
33,895
4,225
67,929
% of revenues
43.9%
49.9%
6.2%
100%

Direct profit
24,863
9,964
346
35,173
Profit margin
83.4%
29.4%
8.2%
51.8%

H1 2016




Revenues
21,332
24,223
5,625
51,180
% of revenues
41.7%
47.3%
11.0%
100%
Direct profit
17,809
8,415
757
26,981
Profit margin
83.5%
34.7%
13.4%
52.7%
H1 2017 showed significant progress for both the publishing and media divisions, driven by strong organic growth complemented with recent acquisitions. 
Publishing
Publishing revenues grew 40% to $29.8 million (H1 2016: $21.3 million) with an organic growth of 32%. During 2017 we acquired new websites and domains for $19.2 million and we plan to continue buying and developing more assets to further underpin growth. Although the Group has acquired new publishing assets in the period, the majority of the growth reported in the period has been organic.
Direct profit margins remained high with $24.9 million or 83% of publishing revenues (H1 2016: $17.8, 84%). We expect publishing direct profit to marginally reduce as a percentage, as we continue to invest and develop our existing assets and optimize the recently acquired assets for improved performance going forward. 
Media
Media revenues grew 40% to $33.9 million (H1 2016: $24.2 million). The growth was primarily driven by the acquisition of ClicksMob in February this year, but did also include organic growth of 12% compared to H1 2016. 
During the first half of the year, we merged ClicksMob and DAU-UP to create a unified mobile unit, focusing on user acquisition for mobile apps and games. The integration process is now complete and we have now combined business development and customer relationships, with day to day operations all aligned under one banner. The scale and operational efficiencies generated by this unification are starting to be evidenced through an improved profit performance in this division.
ClicksMob delivers performance-based user acquisition to leading apps across a number of verticals, including e-commerce, travel, entertainment and finance. The acquisition further strengthened DAU-UP's increasing dominance in verticals outside of gaming and added significant presence in Asia, with over 30% of ClicksMob's 2016 traffic generated from the region. ClicksMob also has a strong footprint in Europe, MENA and the Americas. Coupled with DAU-UP's significant presence in North America, as well as its expertise in social media and media buying capabilities, the unified DAU-UP and ClicksMob is fully equipped to deliver unparalleled mobile user acquisition solutions across multiple territories and channels. 
Direct profit for the media segment increased 18% to $10.0 million or 29% of revenues (2016: $8.4 million, 35%). The decrease in profit margin was in accordance with expectations. As we grow the media business with lower margin products we expect profit margins in this segment to decrease as a percentage but absolute profit to continue to grow. 
Partner Network
Partner network revenues decreased 25% to $4.2 million (H1 2016: $5.6 million). In 2016 we undertook a full review of our partners in this network, with a view to implementing more stringent sign up and operations criteria and, where necessary, ceasing activity with certain partners to improve overall quality. Although this review has led to lower revenues in the short term, the impact on profit is limited.
Our partner network serves as a complementary channel, giving us the opportunity to provide marketing services which are not currently offered through our publishing and media networks.
Current Trading and Outlook
The business has established strong foundations for growth, adding both scale and product diversity. We believe we have demonstrated an ability to be highly selective with regards to acquisitions and only complete those that are aligned with the Company's stated strategy and will ultimately increase shareholder value.
The acquisitions completed in the first half of 2017 provide a vision of management ambitions to expand the Group's market reach and further leverage XLMedia's performance marketing expertise. Our expansion into Financial Services, and more recently the high growth Cyber Security markets, offers significant growth opportunities and a chance to capitalise on the Group's market leading pedigree in the gambling sector.
The Board is therefore confident of comfortably meeting profit expectations for the full year and as such is declaring a dividend of $8 million or 4.0226 cents per share payable on 13 October 2017 to shareholders on the register at 22 September 2017. The ex-dividend date is 21 September 2017. 
Financial review

H1 2017
H1 2016
Change
Revenues
67,929
51,180
+33%
Gross Profit
35,173
26,981
+30%
Operating expenses
16,028
11,203
+43%
Operating income
19,145
15,778
+21%
Adjusted EBITDA
22,893
17,672
+30%
Profit Before Tax
19,490
15,829
+23%
The first half of 2017 has delivered another set of record revenues for the business with revenues of $67.9 million, reflecting 33% growth compared to the same period last year. 
Gross profit reached $35.2 million or 52% of revenues, representing 30% growth compared to last year (H1 2016: $27.0 million, 53%). 
Operating expenses during the first six months of the year were $16.0 million, an increase of 43% compared to the same period last year (H1 2016: $11.2 million). The increase in costs is primarily attributable to staff and relevant overhead, mainly in research and development as well as an increased amortization expense in general and administration. 
Operating expenses included $2.5 million of research and development expenses, reflecting an increase of 127% compared to the same period last year (H1 2016: $1.1 million). These expenses are in addition to investments in technology and internal systems developed during the period of $1.8 million (H1 2016: $2.2 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 $22.9 million or 34% of revenues, reflecting an increase of 30% to the same period last year (H1 2016: $17.7 million, 35%). 
As a result of the high revenues and gross profit, profit before tax increased by 23% to $19.5 million (H1 2016: $15.8 million). Net income for the period was $15.5 million, reflecting an increase of 14% (H1 2016: $13.6 million). Net income included non-controlling interests of $0.9 million. Following our acquisition of the minority rights in Marmar Media, reported last month, the minority rights going forward will decrease.
As of 30 June 2017 we had $43.1 million cash and short term investments compared to $35.2 million on 31 December 2016. The change in cash reflects an increase of $23.6 million provided by operating activity, offset by spending $9.4 million on investments mainly for technology and acquisitions and $7.5 million of dividends paid out during the first half of 2017. 
Current assets as of 30 June 2017 were $65.7 million (31 Dec 2016: $56.7 million), and non-current assets reached $77.5 million (31 Dec 2016: $70.4 million). The increase in non-current assets is attributed mainly to investments in domains and websites as well as the ClicksMob acquisition.
Total equity on 30 June 2017 reached $111.4 million, or 78% of total assets (2016: 81%), and with cash and short term investments of $43.1 million the Group is well positioned to continue executing its strategic plan.
[1]Earnings Before interest, Taxes, Depreciation and Amortization and adjusted to exclude share based payments 
INTERIM CONDENSED CONSOLIDATEDSTATEMENTS OF FINANCIAL POSITION
30 June
31 December
2017
2016
Unaudited
Audited
USD in thousands
Assets
 Current assets:
Cash and cash equivalents
39,881

32,095
Short-term investments
3,181

3,091
Trade receivables
18,837

17,075
Other receivables
3,021

3,463
Financial derivatives
777

1,002



65,697

56,726



Non-current assets:



Long-term investments
673

609
Other receivables
72

171
Property and equipment
1,180

1,229
Goodwill
30,086

26,302
Deposit for acquisition of websites
-

9,300
Domains and websites
37,090

26,739
Other intangible assets
7,854

5,948
Deferred taxes
584

85


77,539

70,383



143,236

127,109
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATEDSTATEMENTS OF FINANCIAL POSITION
30 June
31 December
2017
2016
Unaudited
Audited
USD in thousands
 Liabilities and equity
 Current liabilities:
Trade payables
12,346

9,274
Financial derivatives
1,520

-
Contingent consideration payable
503

-
Other liabilities and accounts payable
17,166

14,196


31,535

23,470



 Non-current liabilities:




Deferred taxes
126

126
Other liabilities
223

228





349

354




 Equity:



Share capital
*)

*)
Share premium
67,652

66,812
Capital reserve from share-based transactions
1,311

1,208
Capital reserve from transactions with non-controlling interests
(506)

(506)
Retained earnings
41,432

34,349


Equity attributable to equity holders of the Company
109,889

101,863



Non-controlling interests
1,463

1,422



 Total equity
111,352

103,285



143,236

127,109
*) Lower than USD 1 thousand.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Six months ended
30 June
Year ended
31 December
2017
2016
2016
Unaudited
Audited
USD in thousands
(except per share data)
Revenues
67,929

51,180
103,605
Cost of revenues
32,756

24,199
50,282



Gross profit
35,173

26,981
53,323



Research and development expenses
2,518

1,062
2,228
Selling and marketing expenses
2,742

2,138
4,142
General and administrative expenses
10,768

8,003
16,856



16,028

11,203
23,226



Operating income
19,145

15,778
30,097



Finance expenses
(148)

(284)
(403)
Finance income
493

335
1,306


15,829
31,000
Profit before taxes on income
19,490

Taxes on income
3,981

2,268
5,416



Net income and other comprehensive income
15,509

13,561
25,584


Attributable to:


Equity holders of the Company
14,587

12,610
23,937
Non-controlling interests
922

951
1,647



15,509

13,561
25,584



Earnings per share attributable to equity holders of the Company:






Basic and diluted earnings per share (in USD)
0.07

0.06
0.12
Weighted average number of shares used in computing basic earnings per share (in thousands) 
198,357

193,627
195,127
Weighted average number of shares used in computing diluted earnings per share (in thousands)
201,004

197,175
198,838


The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended
30 June
Year ended
31 December
2017
2016
2016
Unaudited
Audited
USD in thousands
Cash flows from operating activities:










Net income

15,509
13,561

25,584






Adjustments to reconcile net income to net cash provided by operating activities:












Adjustments to the profit or loss items:












Depreciation, amortisation and impairment

3,353
1,511

3,878
Finance (income) expense, net

(395)
43

(69)
Finance expense (income) from financial derivatives

1,745
(245)

(837)
Cost of share-based payment

338
472

646
Taxes on income

3,981
2,268

5,416
Exchange differences on balances of cash and cash equivalents

(1,313)
 201

589







7,709
4,250

9,623
Changes in asset and liability items:












Decrease (increase) in trade receivables

(1,762)
373

(987)
Decrease (increase) in other receivables

1,047
(178)

(930)
Increase (decrease) in trade payables

3,072
(2,186)

(1,872)
Increase (decrease) in other accounts payable

(72)
(598)

1,032
Increase (decrease) in other long-term liabilities

(5)
97

73

2,280

(2,492)

(2,684)
Cash paid and received during the period for:












Interest received

15
68

139
Taxes paid

(2,214)
(4,027)

(5,710)
Taxes received

305
-

-







(1,894)
(3,959)

(5,571)






Net cash provided by operating activities

23,604
11,360

26,952
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)
Six months ended
30 June
Year ended
31 December
2017
2016
2016
Unaudited
Audited
USD in thousands
Cash flows from investing activities:

Purchase of property and equipment

(120)

(301)

(479)
Payment of contingent consideration in respect of acquired company

-

(2,000)

(5,500)
Payment for acquired business

(4,597)

-

-
Acquisition of and additions to domains, websites, technologies and other intangible assets

(4,825)

(3,765)

(6,742)
Deposit on account of acquisition of domains and websites

-

-

(9,300)
Proceeds and collection of receivable from sale of assets

150

150

300
Short- term and long-term investments, net

41

(13,361)

4,333





Net cash used in investing activities

(9,351)

(19,277)

(17,388)






Cash flows from financing activities:






Dividend paid to equity holders of the Company

(7,504)

(4,828)

(12,362)
Dividend paid to non-controlling interests

(881)

(384)

(1,805)
Proceeds from exercise of options

605

259

1,546





Net cash used in financing activities

(7,780)

(4,953)

(12,621)





Exchange differences on balances of cash and cash equivalents

1,313

(201)

(589)





Increase (decrease) in cash and cash equivalents

7,786

(13,071)

(3,646)
Cash and cash equivalents at the beginning of the period

32,095

35,741

35,741





Cash and cash equivalents at the end of the period

39,881

22,670

32,095
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: GENERAL
XLMEDIA PLC and its subsidiaries (The Group) are 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.
For further information regarding online marketing and the Group's business segments, see Note 3.
NOTE 2: SUPPLEMENTARY INFORMATION
(a) Significant acquisition of websites and domains during the period:
(1) In January 2017, the Company completed the acquisition of credit card comparison websites in Canada, for a total cash consideration of USD 9.3 million. 
(2) In June 2017, the Company acquired a leading US cyber security comparison website, for a total cash consideration of USD 2.0 million.
(b) In February 2017, the Company, through Dau-Up Clicksmob Ltd ("Dau-up Clicksmob"), a wholly owned subsidiary, acquired the business and assets of ClicksMob Inc for a total consideration of $5.1 million comprising of an immediate cash payment and additional contingent consideration payable in cash within six months subsequent to the acquisition date based on a working capital target for the purchased business. ClicksMob delivers performance-based user acquisition to leading apps across a number of verticals, including gaming, e-commerce, travel, entertainment and finance. 
Total acquisition cost:
USD in thousands
Cash paid
4,080
Contingent consideration liability
1,020
Total acquisition cost
5,100
Acquisition cost allocation:
Fair value of identifiable net assets (primarily software)
1,316
Goodwill arising on acquisition
3,784
5,100
The allocation is provisional and is subject to changes upon obtaining additional information regarding certain matters.
The goodwill arising on acquisition is attributed to the expected benefits from the synergies of the combination of the activities of the Group's media segment and the acquiree.
From the acquisition date, the acquired activity has contributed USD6.8 million to the consolidated revenues. If the business combination had taken place at the beginning of 2017, the effects on consolidated revenues and results of operation would not have been material.
(c) On 2 March 2017, the Company paid a dividend to its shareholders of USD 7.5 million (USD 3.784 cent per share).
(d) In March 2017, the Company granted to non- executive directors of the Company 280,000 options to purchase 280,000 Ordinary shares. The options will vest over three years from the grant date and are exercisable up to period of eight years from the date of grant.
The following table specifies the inputs used for the fair value measurement of the grant: 




Option pricing model


Black-Scholes-Merton formula
Exercise price GBP (USD)


1.06 (1.3)
Dividend amount (GBP)


0.22
Expected volatility of the share prices (%)


47.9%
Risk- free interest rate (GBP curve)


0.59%
Expected life of share options (years)


5.2
Share price GBP (USD)


1.06 (1.3) 
The total fair value of the options granted was calculated at USD 103 thousands at the grant date (USD 0.37 per option)
(e) The Group is currently in discussions with the Income Tax Authorities in Israel ("ITA")regarding tax positions taken in income tax returns for the years 2012 - 2015. Management believes that the consolidated financial statements include a provision sufficient to cover any possible exposure. However, there is no certainty as to the final outcome of these discussions.
NOTE 3: 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 2,300 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 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.
NOTE 3: OPERATING SEGMENTS (Cont.)
(b) Reporting on operating segments:
Publishing
Media
Partners Network
Total
USD in thousands
Six months ended 30 June2017 (unaudited):
Revenues
29,809
33,895
4,225
67,929
Segment profit
24,863
9,964
346
35,173
Unallocated corporate expenses
(16,028)
Finance income, net
345
Profit before taxes on income
19,490
Publishing
Media
Partners Network
Total
USD in thousands
Six months ended 30 June2016 (unaudited):
Revenues
21,332
24,223
5,625
51,180
Segment profit
17,809
8,415
757
26,981
Unallocated corporate expenses
(11,203)
Finance income, net
51
Profit before taxes on income
15,829
Publishing
Media
Partners Network
Total
USD in thousands
Year ended 31 December 2016 (audited):
Revenues
46,057
47,645
9,903
103,605
Segment profit
38,384
13,779
1,160
53,323
Unallocated corporate expenses
(23,226)
Finance income, net
903
Profit before taxes on income
31,000
(c) Geographic information:
Revenues classified by geographical areas based on internet user location:

Six months ended
30 June
Year ended
31 December

2017
2016
2016

Unaudited
Audited

USD in thousands

Scandinavia

17,910
16,957
33,054
Other European countries

19,407
12,641
28,295
North America

18,887
10,954
21,724
Oceania

2,145
1,720
4,951
Asia

3,395
149
178
Other countries

922
847
2,037


Total revenues from identified locations

62,666
43,268
90,239
Revenues from unidentified locations

5,263
7,912
13,366


Total revenues

67,929
51,180
103,605
NOTE 5: SUBSEQUENT EVENTS
(a) In August 2017, the Company has entered into an agreement to acquire the remaining minority shareholding (46%) in Marmar (the "Acquisition") for a total consideration of approximately USD 2.4 million.
(b) In August 2017, the Company acquired a US focused price comparison website for financial services, for a total cash consideration of USD7 million. 

This information is provided by RNS
The company news service from the London Stock Exchange
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