Regulatory headwinds contribute to XLMedia 2019 losses

Affiliate marketing publisher XLMedia has reported that 2019 was a year of ‘limited financial progress’ for the group as it sought to ‘mitigate a number of operationally frustrating scenarios and global sector headwinds’.

Publishing its results for the year ended 31 December 2019, XLMedia reported a full-year loss after it wrote down the value of its assets, reporting revenues of $79.7 million, a 14.8% decrease from $93.5 million reported in 2018. 

XLMedia reported gross profits of $53.7 million, compared to $63.4 million in 2018, while EBITDA saw a 23.2% decrease, falling from $43.6 million in 2018 to $33.5 million in 2019.

Meanwhile, pre-tax losses for the year amounted to $57.7 million, compared to a profit of $36.1 million in 2018.

Christopher Bell, Non-Executive Chairman of XLMedia, commented: “There is no question that the business is now undergoing a significant period of transformation with our new management team evaluating new geographies and end markets, alongside an improved focus on our efforts to generate greater levels of end-consumer engagement.

“To that end, we remain committed to investing in the core business alongside additional organic investment initiatives.

Following the decision made by Google to de-rank a number of XLMedia’s online casino sites, the affiliate marketing publisher emphasised that it was optimistic that a number of its premium sites would be re-ranked by Google and fully operational during the second half.

In his statement, Stuart Simms, Chief Executive Officer commented: “On 18 January 2020, the Company became aware that a number of its casino sites had been manually demoted by Google, impacting their online ranking and therefore significantly reducing their ability to generate revenues. The Company is continuing to work with Google to restore their rankings as soon as possible.

“Currently, 105 sites have been demoted, ranging from ‘premium’ revenue-generating sites to low grade, typically legacy sites, or low commercial value domains. Of the 105 sites demoted by Google, 23 are ‘premium’ sites and are predominantly within the online casino vertical. Currently, Google has not impacted personal finance.

“Management understands that the large number of low-grade, typically legacy sites, operated by the Company had a collective negative impact when reviewed by Google. Therefore, we have removed or de-indexed a large number of these sites.”

XLMedia has begun to undertake a review of its entire publishing portfolio, focusing on reducing the number of ‘non-revenue’ effective sites, shifting resources to its premium inventory in addition to developing new titles. 

Simms continued: “Part of this review was to analyse the Groups technology platform strategy, specifically Palcon. As a consequence of this review and analysis, XLMedia is transferring its premium revenue generating sites impacted by the Google demotion to a new operating environment, that supports improved content management, innovative design and more commoditised resources / operational support. 

“The broader implications for the business will be a shift to a flexible, lower operating cost model, which supports the Company’s aspirations as a premium performance marketing company.”

To offset the impact of the Google demotion, XLMedia has outlined plans to make further investments into regulated markets to pursue stable revenue growth. They will also target high revenue growth by looking into US Sports and Personal Finance investment.

Simms concluded: “We continue to invest in fully regulated gambling markets which we believe provide a solid framework from which to generate stable revenue growth, with a specific focus on developing our Sports assets and associated technology.

“XLMedia has already established a solid revenue foothold within personal finance and will seek to further develop growth opportunities by deploying local resources and increasing localised editorial content. Acquisitions and partnerships remain key vehicles to delivering growth.”

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