XLMedia has released its full-year 2022 financial results, showing a 10% year-on-year increase in revenue as the group embraces a new operating structure.
Topline numbers
XLMedia’s audited 2022 results fell broadly in line with previously issued guidance reported by iGaming NEXT in January.
Total revenue for the year came to $73.7m, up 10.2%, with $71.8m coming from continuing operations (up 24.2%) and $69.6m coming from XLMedia’s core affiliation business (up 27.5%).Non-core business areas include the discontinued personal finance division, affiliate network revenue and external agency revenue.
Adjusted EBITDA across the group was $16.7m, down 6.7%, however the figures suggest that adjusted EBITDA from the core business ($18.2m, up 24.7%) was negatively impacted by losses in non-core business segments.
North America was the company’s highest earning region in 2022, generating $47.7m in revenue, up 114.9%.
Of the North American revenue, the vast majority came from sports betting, at $46.4m (up 111.9%), while iGaming generated just $1.3m (up from $0.3m).
European operations showed a more equitable split between sports betting and iGaming, albeit biased in favour of online casino.
The European iGaming segment generated $14.3m in revenue, a reduction of 37.6%, while sports betting in Europe generated a further $7.6m, down 20%.
Operating profit from continuing operations totalled $5.1m for the year, up more than fourfold from $1.1m in 2021. Overall profit for the year from continuing operations was $2.4m, down from $2.8m.
Discontinued operations, however, left the business with an $11.8m loss in 2022, compared to a $2.8m profit in 2021. That was largely the result of a $10.7m impairment charge.
News nugget
Growth in North American markets alongside a reduction in European revenue appears to be in line with XLMedia’s expectations and objectives for the future.
The business is nearing the end of a restructuring process which has seen it turn its core focus away from European iGaming and towards US sports betting.
XLMedia said its strategy going forward is “to diversify our revenue streams in North America while expanding our footprint, optimising our sustainable gaming business and upgrading and innovating our European sports sites.”
Since beginning its restructuring, the business has made significant changes to its senior management team with the introduction of David King as CEO in July, as well as the appointment of Caroline Ackroyd as CFO.
Other senior management changes in 2022 included the appointment of Karen Tyrrell as chief people and operations officer with responsibility for European sports and gaming, the promotion of Elizabeth Carter to CMO, and the addition of Peter McCall as company secretary and group legal counsel.
Overall staff numbers, meanwhile, have been reduced, with the business entering 2022 with 267 staff and ending the year with 193.
“This major programme of change is now largely complete, and we anticipate a more stable operational base going forward,” XLMedia said.
Following the end of the reporting period, Kevin Duffey took up his new role as president of XLMedia North America in early 2023.
Duffey was the founder of Saturday Down South, one of XLMedia’s US sports media sites, and has now been tasked with overseeing all of XLMedia’s North American assets.Those assets include acquired businesses such as CBWG, Sports Betting Dime and Saturday Football Inc, the integration of which into XLMedia’s core business has now been completed, the business said.
The integration of those acquired businesses saw the departure of the founders of Crossing Broad, a Philadelphia-based sports blog, and Elite Sports NY.
Best question
A highly topical question came from one of the listeners on today’s earnings call, referred to only as Natalie.
Natalie asked how the business intends to leverage the possibilities offered by new AI technologies, and what the related opportunities and threats would be.
In response, CEO King said: “We don’t use it at the moment to generate content. And indeed, in traditional search, Google puts a premium on ‘EAT’, meaning expertise, experience, authority and trust.
“Therefore, we have been putting a premium on creating content that fulfils those obligations, and we’ve looked very carefully and done a number of tests in the world of ChatGPT.
“We obviously see lots of opportunities and indeed have already started using this technology to educate ourselves about word selection and optimisation in our casino brands.
“We think that there’s a lot of use for selectively targeting these tools at specific areas of expertise, applying them to our own content, and educating ourselves not just through our own A/B testing, but also through using these tools to learn what others have done and apply that to our optimisation programmes.
“We also see opportunities to actually educate these tools to help us in creating our content and updating our content on a more regular basis.
“By writing high quality content that meets the ‘EAT’ criteria, we think we can then apply technology and AI to enhance and republish that content, to give the user a more fulsome experience.”
Best quote
CFO Caroline Ackroyd on XLMedia’s debt arrangements: “We’re providing sufficient headroom for investment in organic growth. The business currently has no debt arrangements in place, but this remains a consideration for the future if working capital or acquisitions present a reason for the board to put this in place.”
Current trading and outlook
XLMedia said it has “enjoyed a strong start to 2023 with Ohio going live in January 2023 and Massachusetts going live in March 2023,” though it noted that no additional state launches have been confirmed for the remainder of the year.
With regards to its North American strategy for the remainder of the year, the business holds two key priorities.
One is to increase its focus on iGaming markets in the US, of which there are currently seven regulated state markets.
XLMedia holds a presence in just one of those markets at present, however, and said building its gaming presence is a key priority for the business.Another of the firm’s key objectives is to turn towards rev share model agreements with operators in the US, where currently it operates on a principally cost-per-acquisition (CPA) basis.
In 2022, CPA agreements generated 69.4% of core revenue, at $48.3m, while rev share deals generated 26.6% at $18.5m.
XLMedia is currently in discussions with several of its US operator partners to shift its agreements from pure CPA to hybrid deals, offering reduced upfront costs to operators but allowing the affiliate to benefit longer term from the players they refer.