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Sep 2019
TECHNOLOGY-DRIVEN
PERFORMANCE MARKETING
Our Business
o A leading performance marketing and online publishing company
o We attract paying users from multiple online channels and direct them to online businesses in return for performance based payment models
o Main source of revenue generated from a wide network of publishing assets
o Focused on gambling and personal finance
o Cash generative business, high margin activities, supporting a progressive dividend policy
$42.5MRevenues
$18.6MAdj EBITDA
3 CentsInterim Dividend
2
H1 2019 Overview
3
o Core focus on higher margin publishing activities
o First six months impacted by regulatory headwinds in key Swedish, German, UK and Swiss markets
o US gambling market continues to develop positively – recent registration of subsidiary, XLMedia US Limited, by the Pennsylvania Gaming Control Board
o Record performance from the Group’s personal finance division, now representing 14% of Group's revenue
o Announced the appointment of Stuart Simms as Chief Executive Officer on 29 July 2019, effective 2 October 2019, with Ory Weihs, remaining on the board as a Non-executive Director of the Company
Key Highlights
4
o Despite strong rankings of key assets, regulatory headwinds highlighted above continue to create trading uncertainty for the group. These headwinds affecting trading in Q3.
o The combination of these regulatory headwinds and a slowdown in the Group’s acquisition activity this year means the Board is revising market guidance for the year ended 31 December 2019
o The Board now expects the Group to deliver revenues of circa US $80 million and adjusted EBITDA to be circa US $34 million, for the year ending 31 December 2019
Current Trading
5
6
Gambling Regulatory Summary
Asia Pacific• The Asian Gambling market is not a current focus although we
are exploring opportunities in the region.• As part of its strategic focus the company is decreasing some
of its non-core activities in the region (as part of the sale of Webpals Mobile
United Kingdom
• Increased compliance demands on operators, including more
stringent age verification and Know-Your-Customer rules, continue to
slow down our conversion rate for new depositing customers
• As of April 2019, the UK online casino tax has increased from 15% to
21%
• XLM maintaining high rankings but market has experienced an impact
on ARPU
Germany
• German online casino market remains in a state of flux with
regulatory uncertainty around online casino activity
• Some clients continue to operate as usual while others have paused
all activity in the market.
Sweden
• Since 2019, new regulations have come effective requiring casino
operators in Sweden to apply for a license from the Swedish
Gambling Authority (“SGA”)
• This change was followed by the introduction of tough monitoring
and sanctioning by the SGA of licensed operators which has caused
uncertainty in the market
North America• May 2018 - US Supreme Court reversed 1992 federal law
prohibiting authorised sports betting• Various US States in the process of introducing legislation to
regulate the market including Pennsylvania, West Virginia and Rhode Island.
• XLMedia has just obtained an affiliate license in Pennsylvania
6
Switzerland • A new gambling regulatory regime came into effect in
Switzerland in January 2019. • Under the new regime, licenses for online gambling are only
granted to a limited number of operators, mainly consisting of existing land-based casino operators.
• As a result, most of our customers have exited the market, negatively affecting the Group’s performance in the market.
Financial Results
7
XLMedia in Numbers
$42.5M $28.8M $18.6M
$12.15M $43.1M 300+
160+ ~370 20+
H1-2019 Revenues
H1-19 Net profit
Tier 1 Publishing assets
H1-19 Gross profit
Cash
Staff
H1-19 Adjusted EBITDA
Customers
Operating across
and short-term
investments
Employees Countries
8
Revenue Diversification
9
Revenues diversification –
Users’ Geography
Revenues Diversification –
Products
Revenues per
Business Model
Revshare, 71%
CPI, 0%
CPA, 29%
Other, 0%
Scandinavia,
44%
North America,
22%
Other
Europe, 14%
United
Kingdom,
14%
Other Territories, 7.0%
Gambling, 86%
Personal
Finance,
14%
10
Income Statement
*Earnings before interest, taxes, depreciation, amortization, impairment and excluding share based payments.
Item US$‘000 H1.2019 2018
Revenues 42,459 93,502
Cost of revenues 13,621 30,133
Gross profit 28,838 63,369
Operating expenses 14,514 26,684
Operating profit 14,324 36,685
Total adjusted EBITDA* 18,445 43,571
% Adjusted EBITDA 43% 47%
Finance expenses, net (529) (537)
Profit before taxes 13,795 36,148
Taxes on income 1,723 4,089
Income from continuing operations 12,072 32,059
Income (loss) from discontinued operations, net 79 (11,284)
Net income 12,151 20,775
Earnings per share from continuing operation 0.06 0.14
Cash Flow Statement
11
US$‘000 H1.2019 2018
Operating Activities
Net income 12,151 20,775
Depreciation, amortisation and impairment 3,618 6,503
Cost of share-based payment 674 1,667
Loss from planned media activity reduction - 9,938
Changes in Working Capital 5,921 (1,215)
Taxes received (paid), net 891 (4,987)
Finance (income) expense and exchange
differences on cash552 (896)
Net cash provided by operating activities 23,807 31,785
H1.2019 2018
Financing Activities
Dividend paid to equity holders of the Company (8,226) (14,362)
Share capital issuance - 42,618
Acquisition of treasury shares (9,653) (468)
Acquisition of non-controlling interests - -
Repayment of Bank loan (2,750) (4,000)
Dividend paid to non-controlling interests (319) (1,285)
Exercise of options 117 976
Receipt of long-term loan from bank - 5,965
Repayment of lease liabilities (703) -
Net cash used in financing activities (21,534) 29,444
Cash and short term investments at the end of the period 43,078 47,623
Investing Activities
Purchase of property and equipment (111) (553)
Acquisition of domains, websites, technology (4,311) (55,516)
Financial investments, net 139 2,005
Net cash used in investing activities (4,283) (54,064)
Balance Sheet 30 June 2019
0
12
30.6.19 31.12.18
Current liabilities
Current maturity of long-term bank loan 4,216 5,585
Lease liability 1,729 -
Trade payables 2,660 6,416
Other liabilities and accounts payable 17,436 16,107
Total current liabilities 26,041 28,108
Liabilities attributed to assets held for sale 3,431 -
Non-current liabilities
Lease liability 8,762 -
Long-term bank loan - 1,380
Deferred taxes 193 -
Other liabilities 146 248
Total non-current liabilities 9,101 1,628
Equity
Share premium 112,352 112,224
Capital reserves 778 145
Treasury shares (10,121) (468)
Retained earnings 58,167 54,623
Non-controlling interests 291 291
Total equity 161,477 166,815
Total equity and liabilities 200,050 196,551
US$‘000 30.6.19 31.12.18
Current assets:
Cash and short term investments 43,078 47,623
Trade receivables 9,410 16,112
Other accounts receivable 2,992 5,502
Total current assets 55,480 69,237
Assets held for sale 6,187 -
Non current assets
Long term investments 668 633
Property and equipment 10,891 1,296
Goodwill 23,652 23,652
Intangible assets 102,800 101,199
Other assets 372 534
Total non-current assets 138, 383 127,314
Total assets 200,050 196,551
Growth Strategy
13
o Multiple headwinds across key European [regulated] gambling markets
o Leverage gambling expertise with focus on broadening the Groups market reach
o Accelerate activities in US gambling market – committed to $7M investment programme during 2019-21
o Continue to build portfolio and reputation in the Personal Finance sector across North America including adding offerings such as loans, insurance and more banking products
o Develop assets to capitalize on the U.S gambling market
Focus on Publishing Expertise
14
o Personal finance business continues to grow and has increased its presence in the North American markets
o 14% of overall revenues now derived from this sector (FY 2018: 6%)
o Committed to expanding US operations – adding scale to grow our publishing assets
o Actively pursuing further growth opportunities
15
Expand The Personal Finance Sector
US Gambling Opportunity
Our plan for the US gambling market
o XLMedia actively investing in building and developing a more comprehensive portfolio of publishing assets as part of the recently announced plan
o The group will still be looking for strategic acquisitions in the region but generally focused on building assets
o We are developing assets targeting both specific products (sports betting, casino, poker) and specific regions (states) as well as more general ones.
o XLMedia has committed to spend $7m over the course of 3 years mainly targeting the US gambling market
16
Key Growth Initiatives
Pursuit of growth opportunities in North America to both build and develop a comprehensive portfolio of online assets targeting gambling & personal finance
NorthAmerica
Continue developing the Group’s core technology to retain competitive advantage
Technologyinvestment
Ongoing expansion of the Group’s publishing portfolio while using our media division as a supportive tool.
Focus on
Publishing
Seeking to acquire earnings accretive publishing assets, leveraging benefits of scale, technological edge & content creation abiliaties.
M&A
17
o Proactive exit from low margin media activities to focus on higher margin publishing business, management focused on the long termtargets
o Short-term financial impact but the Board is confident these steps will deliver higher profit margins and a much higher quality of sustainable earnings in long term
o Seeking to create a broader base of assets in its core verticals of personal finance and gambling
o Ongoing investment in optimising existing assets and developing new assets organically while adopting an opportunist approach to M&A in key markets and verticals
o New Management led by Stuart Simms, bringing a wealth of experience in growth and scaling up of businesses
Summary & Outlook
18
19
Any Questions?
Optimization Cycle
20
XLM self-funded campaigns
Bid on ads
Quality content Asset optimisation Place Brands
Target
Send users
Gather dataBig Data
Proprietary
tracking, data and
analysis tools
Place Brands
Send users
Experienced Senior Leadership
21
• Over 15 years' experience in the online
marketing industry
• Diverse background and expertise in
marketing strategy, operations and P&L
management, including heading the
888poker business from December 2011
to January 2014
• Entrepreneur with 15 years’ experience
in performance-based marketing
• Currently focused on business
development and strategy
• CEO of the company since inception
• Over 20 years’ experience in
publicly traded companies
• Serves as CFO (Israel) of the
company since its inception and
is responsible for financial
infrastructure
LIAT HELLMAN Acting CFO
ORY WEIHS
FOUNDER & GROUP CEOSHEILA KAGAN CEO (ISRAEL)
CHRIS BELL
NON-EXECUTIVE CHAIRMAN
• Former CEO of Ladbrokes between 2001
and 2010
• Has over 20 years’ experience in
the gambling sector
• Currently non-executive Director at Rank
Group plc and Spirit plc and a member of
the Responsible Gambling Strategy
board
MICHAL BADHAV GENERAL COUNSEL
• Over 20 years of global experience in senior
executive legal positions at public and
private technology companies
• Served as Deputy General Counsel
at Amdocs in the US and Israel and
as General Counsel at Risco Group
Disclaimer
22
THIS PRESENTATION (THE “PRESENTATION ”) WHICH HAS BEEN PREPARED BY
XLMEDIA PLC. (THE “COMPANY) IS FOR INFORMATION PURPOSES ONLY AND DOES
NOT CONSTITUTE AN OFFER OR INVITATION TO SUBSCRIBE FOR OR PURCHASE
ANY SECURITIES, AND NEITHER THE PRESENTATION NOR ANYTHING CONTAINED
HEREIN NOR THE FACT OF ITS DISTRIBUTION SHALL FORM THE BASIS OF OR BE
RELIED ON IN CONNECTION WITH OR ACT AS ANY INDUCEMENT TO ENTER INTO
ANY CONTRACT OR COMMITMENT WHATSOEVER.
Neither the Presentation, nor any part of it, may be taken or transmitted into the United
States of America, Australia, Canada, South Africa or Japan or into any jurisdiction where it
would be unlawful to do so )“Prohibited Territory”(. Any failure to comply with this
restriction may constitute a violation of relevant local securities laws.
The Presentation is issued solely to and directed at: (i) persons who have professional
experience in matters relating to investments falling within article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”( and are
“investment professionals” falling within the meaning of the Order; and (ii) high net worth
entities falling within article 49(2)(a) to (d) of the Order. This document is exempt from the
general restriction on the communication of invitations or inducements to enter into
investment activity and has therefore not been approved by an authorised person as
would otherwise be required by section 21 of the Financial Services and Markets Act 2000
)“FSMA”(. It is a condition of your receiving the Presentation Materials that you fall within,
and you warrant and undertake to the Company that:
1. you fall within one of the categories of persons described above;
2. you have read, agree to and will comply with the terms of this disclaimer;
3. you are not resident in, or a citizen of, a Prohibited Territory; and
4. you will not forward, reproduce or otherwise disclose the contents of this
document to any person in contravention of FSMA or any other applicable
law or regulation or to any person in a Prohibited Territory.
The Presentation should not be copied, distributed or passed on, directly or in directly,
to any other person. The Presentation contains only a synopsis of more detailed
information available in relation to the matters described in it and accordingly no
reliance may be placed for any purpose whatsoever on the sufficiency or completeness
of such information and to do so could potentially expose you to a significant risk of
losing all of any investment made by you. No reliance should be placed on the
information and no representation or warranty (express or implied) is made by the
Company, any of its directors or employees or any other person, and, save in respect to
fraud, no liability whatsoever is accepted by any such person, in relation thereto.
The statements contained in this document, such as “may,” “will,” “should,” expect,”
“anticipate,” “estimate,” “intend,” “continue”, “aiming” and “believe” and other similar
expressions are forward-looking statements and not historical facts. Due to various
risks, uncertainties and assumptions, actual events or results or the actual performance
of the Company may differ materially from those reflected in or contemplated by such
forward-looking statements. Past performance, targeted performance and projected
performance are not reliable indicators of future results and there can be no assurance
that targeted or projected returns will be achieved. The value of any investment made
by an investor can go down as well as up and an investor may lose its entire investment.