REG - XLMedia PLC - Final Results
17/05/2024 07:00
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RNS Number : 8187O XLMedia PLC 17 May 2024
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014. Upon the publication of this announcement, this
information is now considered to be in the public domain.
17 May 2024
XLMedia PLC
("XLMedia" or the "Group" or the "Company" or the "Business")
Results for the Year Ended 31 December 2023
XLMedia (AIM: XLM), a sports and gaming digital media company, announces
audited results for the year ended 31 December 2023 ("FY 2023").
Key Highlights
· Delivered revenue from continuing operations (1) of $50.3 million.
· Adjusted EBITDA(2) from continuing operations of $12.1 million.
· Loan free with cash balances (including short-term deposits) of $4.8
million as at 31 Dec 2023.
· $2.05 million sale of XLMedia's Personal Finance business in H1 2023,
and $4.0 million sale in July 2023 of three Europe gaming domains and
associated websites.
In addition, $37.5 million proceeds (and potential earnout of up to $5.0
million) following sale of the Group's Europe and Canada assets to
Gambling.com Group Limited ("GAMB") on 1 April 2024.
Continuing operations (1) 2023 2022 Change 2023 vs 2022
Revenue ($'m) 50.3 70.9 (29)%
Gross profit ($'m) 26.6 36.0 (26)%
Operating (loss) / profit before impairment ($'m) (0.3) 6.2 -
Adjusted EBITDA ($'m) (2) 12.1 18.9 (36)%
Adjusted EBITDA margin (%) 24% 27% (3)% pts
Non-cash net impairment charge ($'m) (44.6) - -
Statutory (loss) / profit for the period ($'m) (45.5) 3.4 -
Basic (loss) / earnings per share ($) (0.173) 0.009 -
( )
(1) Defined as total Group financial performance less discontinued operations.
For 2023, the Group classified the Personal Finance and Blueclaw verticals as
discontinued.
(2) Adjusted EBITDA is defined as the operating profit after adding back
depreciation, amortisation, impairment, share based payments, exceptional
minimum guarantee cost, restructuring costs and aborted deal related costs.
· The Group paid $7.4 million of deferred and earnout acquisition
payments in FY 2023, using approx. $6.0 million of gross proceeds from asset
sales to support the payments.
· Operating loss of $44.9 million driven mainly by a non-cash net
impairment charge of $44.6 million for the US Sports and Europe Sports net of
a write back on Europe Gaming (2022: $6.2 million).
· At the year end, the Group had cash at bank of $4.8 million including
short-term deposits and had no borrowings.
Revenue split by geography
2023 2022 Change 2023 vs 2022 (%)
($m) ($m)
North America (Sport) 26.9 46.4 (42)%
North America (Gaming) 0.6 1.3 (54)%
North America 27.5 47.7 (42)%
Europe (Sport) 9.7 8.9 9%
Europe (Gaming) 13.1 14.3 (8)%
Europe 22.8 23.2 (2)%
Total 50.3 70.9 (29)%
· In the period, revenues from North America represented 55% of Group
revenues (FY 2022: 67%).
· The Group's core operations are defined as its sport and gaming
activities.
Operating summary
· The Group continued to expand its presence in the US, now operating
across 21 regulated states which have legalised online sports betting,
including North Carolina from March 2024.
· Key initiatives in the period included:
o Further expansion of the Media Partnership Business including entering
agreements with Atlanta Journal-Constitution and WRAL. After the period end,
contracts were also signed with Star Tribune and NOLA.com.
o The Group's Media Partner minimum guarantee contracts end in summer 2024.
o Supporting PENN Entertainment's re-entry into the market with the launch
of ESPN BET in Q4; and
o Further rationalisation of the US structure and cost base.
· The Group re-platformed its Europe Sports websites alongside
investing in its Europe Gaming websites, this delivered 9% year-on-year growth
in Europe Sports, led by Freebets.com. Premium gaming marketing sites,
Nettikasinot.com and WhichBingo, also returned to growth.
· Further progress was made across FY 2023 in streamlining business
operations through the sale or closure of non-core activities, delivering cost
savings of over $8 million.
Post Balance Sheet Event
· On 21 March 2024, the Group announced the sale of its Europe and
Canada assets ("Assets") to GAMB for a fixed sum of $37.5 million and a
potential earnout of up to $5.0 million.
· The transaction completed on 1 April 2024, with the first instalment
of $20.0 million received on 2 April 2024. A further fixed instalment of $10.0
million is due on the six-month anniversary, with a final instalment of $7.5
million and up to $5.0 million in earnout, payable on the first anniversary.
· Following the sale of Assets, the Group will continue to provide
Assets transition support for a period of six months.
Outlook
· In North America, working with all the large operators, the year
started well, albeit the absence of a January state launch will impact period
on period comparisons. The launch of online sports betting in North Carolina
on 11 March 2024, after the end of the NFL season, saw good growth in customer
registrations and offers the prospect of a further revenue uplift when the new
season launches in September.
· The North America business is now in the off season and will see the
normal seasonal dip in sports revenues. During this period, the team
continue to prepare the portfolio to maximise revenues from the new NFL
season, including working with new and existing partners.
· Following the sale of the Group's Europe and Canada assets, Adjusted
EBITDA for continuing operations is estimated to be around $5.0 million for
full year 2024, with 2025 benefiting from the full year effect of cost savings
made in 2024.
· The Group anticipates an initial return of capital to shareholders
from the sale proceeds of the Europe and Canada assets in Q4 2024.
David King, Chief Executive Officer of XLMedia, commented:
"Following the announcement of the sale of the Europe Sports and Gaming
business on 1 April 2024, we are focused on driving organic revenues in the
North America market, while continuing both to expand our footprint in
preparation for new state launches when they happen, while also right sizing
the Group's cost base for 2025."
Marcus Rich, Chair of XLMedia, commented:
"We are delighted to have realised value for shareholders from the sale of the
Group's Europe and Canada assets whilst also providing cash to clear legacy
liabilities and working capital for the North America business. We anticipate
an initial return of capital to shareholders from sale proceeds in quarter
four 2024".
Financial Statements and Notes to the Accounts
For access to the Financial Statements and Notes to the Accounts for the year
ended 31 December 2023, please click on the following link:
http://www.rns-pdf.londonstockexchange.com/rns/8187O_1-2024-5-16.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8187O_1-2024-5-16.pdf)
Analyst and Institutional investor webcast
A live presentation and Q&A conference call for analysts and institutional
investors will be held on Friday, 17 May 2024 at 9.00 a.m. BST. To register
for this event, please go to:
https://secure.emincote.com/client/xlmedia/2023-full-year-results
(https://secure.emincote.com/client/xlmedia/2023-full-year-results)
A webcast of the presentation will be available shortly afterwards on the
Company's website at: https://www.xlmedia.com/investors/webcasts/
(https://www.xlmedia.com/investors/webcasts/)
For further information, please contact:
XLMedia plc ir@xlmedia.com
David King, Chief Executive Officer via Vigo Consulting
www.xlmedia.com (http://www.xlmedia.com)
Vigo Consulting Tel: 020 7390 0233
Jeremy Garcia / Fiona Hetherington / Kendall Hill
www.vigoconsulting.com (http://www.vigoconsulting.com)
Cavendish Capital Markets Limited (Nomad and Broker) Tel: 020 7220 0500
Giles Balleny / Callum Davidson (Corporate Finance)
Charlie Combe (Corporate Broking)
www.cavendish.com (http://www.cavendish.com)
About XLMedia
XLMedia (AIM: XLM) is a sports and gaming digital media company that creates
compelling content for highly engaged audiences and connects them to relevant
advertisers.
The Group manages a portfolio of premium brands in regulated markets which are
designed to reach passionate people with the right content at the right time.
Chief Executive Review
Introduction
2023 saw the Business make further strategic progress, growing its premium
Europe assets, continuing to rationalise its cost base and selling non-core
assets.
In the US, there was a strong start to the year with the legalisation of
online sports betting in Ohio in January. However, over the year the US market
dynamics continued to evolve at a rapid pace, putting pressure on North
America revenues. In particular, the market saw increased competition from
large publishers, average customer acquisition payment ("CPA") rates gradually
falling and rates varying in different states.
The Group ended the year with continuing revenues of $50.3 million (FY 2022:
$70.9 million) delivering a gross profit margin of 53%. Adjusted EBITDA from
continuing operations was $12.1 million (FY 2022: $18.9 million). Revenues
from North America activities were $27.6 million, while revenues from our
Europe Sports and Gaming assets were $22.8 million. The Europe business was
sold after the balance sheet date on 1 April 2024 for a fixed price of $37.5
million plus an earnout of up to $5.0 million.
The Group paid $7.4 million of deferred and earnout acquisition payments in FY
2023, using approximately $6.0 million of gross proceeds from asset sales to
support the payments. At the year end, the Group had cash at bank of $4.8
million and no borrowings.
Sale of Europe and Canada Gaming Assets
On 21 March 2024, the Group announced the divestment of its Europe and Canada
assets for a fixed sum of $37.5 million and a potential earnout of up to $5.0
million. The transaction completed on 1 April 2024, with the first instalment
of $20.0 million received on 2 April 2024. A further fixed instalment of $10.0
million is due six-months after completion, with a final instalment of $7.5
million and up to $5.0 million in earnout, payable on the first anniversary.
The Group will provide transition support for a period of six months to GAMB,
the acquirer of these assets.
Following the sale of the Europe Sports and Gaming business, the Group is now
focused on driving organic revenues in the North America market, while
continuing to expand its footprint in preparation for new state launches.
Having delivered cost savings of some $8.0 million in FY 2023, and following
the sale in April 2024, management remains focused on right sizing the Group's
remaining cost base commensurate with the requirements of our North America
business, with the objective of completing this process by the end of 2024.
Delivering Shareholder Value
In December 2023, the Board confirmed it had been in discussions with
potential acquirors regarding the possibility of a sale of the whole Company.
At that time, it became clear that while there was demand for the Group's
assets, given the prevailing share price, a sale of the whole Company was
unlikely to create maximum value for shareholders. In parallel, the Board
began exploring alternative opportunities to create shareholder value through
separate asset sales and had some early discussions with potential
purchasers.
As announced at the time of the sale of the Group's Europe and Canada assets,
the Board intends to use the Net Cash Proceeds to pay the final deferred
acquisition payment of $4.0 million due in 2024, provide working capital for
the North America business, settle outstanding tax provisions while
returning cash to shareholders and anticipates making an initial return of
capital from proceeds to shareholders in Q4 2024.
Strategy
Having previously focused the Group's strategy towards becoming sports-led
with a strong gaming presence, we have now refined this to focus the Group's
activities in the North America sports market, while seeking to build the
gaming side of the business. The market offers the opportunity for organic
growth over the longer term as new operators enter the existing markets and
new states legalise online sports betting and online gaming.
The core elements of the Group's strategy remain unchanged. We will seek to
expand our footprint, deepen audience relationships and diversify revenue
streams with the goal of developing more predictable income for the longer
term. This will take time as the market currently remains a predominantly
CPA-led market with a relatively small number of operators.
In preparation for growth in online gaming, the Business will continue
building its US Gaming vertical and in 2023 it soft launched a new website,
Honey Monkey Pineapple, which will take time to build its rankings and attract
audiences.
North America Sports Opportunity
The Group is one of the leading affiliates in the US online sports betting
market. As new US states legalise online sports betting, the Group is well
placed to grow new revenues through its portfolio of Owned and Operated
("O&O") sites and its Media Partner Business ("MPB"). The Group's North
America business only operates in legalised states.
The Group currently operates in 21 states with legalised online sports
betting. There are 20 states yet to legalise online sports betting, including
California and Texas, the two most populous states.
Update on US regulated online sports betting as at 16 May 2024:
· 30 states are live, legal (North Carolina launched post-period March
2024). The Group does not participate in nine of these states due to limited
affiliate opportunity e.g., single operator monopoly (Florida) or in-person
registration requirements.
· 20 states are not yet live, legal for online sports betting including
California, Texas, Georgia. Four of these states are in active ballot
discussions (Minnesota, Missouri, Hawaii and Oklahoma).
· One Canadian Province, Ontario is live and permits legal online
sports betting.
In Sports, our O&O websites aim to combine analysis, opinion, information
and unique insights to engage with sports fans and where appropriate,
introduce them to opening a new 'book' or to place a bet with an operator.
Similarly, our Media Partners create high quality, engaging content that
attracts audiences and we support them with excellent sports betting and
gaming commercial content. Across the portfolio, our content and promotions
find ranking in Google news, an important source for new customer acquisition,
particularly around a state launch.
North America Gaming Opportunity
In Gaming, informative content, how to play explanations, best apps lists,
best offers, and help with operator enquiries are all ways of providing
value-added services to audiences, rather than simply listing games and
offers.
The Group operates in four legal online gaming states. There are 44 states yet
to legalise online gaming.
Update on US regulated online gaming as at 16 May 2024:
· Six states are live, legal: Connecticut, Delaware, Michigan, New
Jersey, Pennsylvania, West Virginia. Nevada only allows online poker. Delaware
and Connecticut are states in which XLMedia does not participate due to
limited affiliate opportunity.
· 44 states are not yet live, legal including eight out of the 10 most
populous states (California, Texas, Florida, New York, Illinois, Ohio, Georgia
and North Carolina). Rhode Island is now regulated with a launch date is
subject to confirmation.
· No states are confirmed to launch or in active ballot discussions at
present.
Online casino engagement is typically less seasonal than sports betting and
over time can offer a more predictable revenue stream, albeit in the US, this
too is currently a CPA-led market.
The Group is significantly underweight in gaming, with modest revenues,
largely earned from gaming pages on sports sites. Critical to growth is
expanding the Group's reach through increased SEO rankings, working with Media
Partners and developing our O&O sites, including Honey Monkey Pineapple.
2023 Business Mix
The following FY 2023 analysis presents the business as a whole in 2023 prior
to sale of the Europe assets.
In 2023, 55% of revenues came from North America, with the balance from
Europe. Of the North America revenue, 26% came from spikes following new
states launching in the year. Sports represented 98% of North America
revenues, and 93% of total North America revenues came from CPA income.
The North America business was created through a series of acquisitions in
2020 and 2021, and the development of a Media Partnership Business.
Having delivered significant revenues since acquisition, the annual impairment
review concluded that it was necessary to write down the carrying value of US
assets by some $57.3 million. This reflects the uncertainty over the timing
and level of future revenues, particularly from state launches, and in
particular the requirement to discount future cashflows at 25%. This
impairment charge is a non-cash charge to the profit and loss account.
Organisation and Operations Update
Sustainable cost savings of approximately $8.0 million delivered in the
period including a reduction in technology, expenditure, content creation
costs and headcount.
In January 2024, Caroline Ackroyd resigned from the Group to pursue other
interests. Her final day with the Company was 31 March 2024.
Karen Tyrrell, our Chief People and Operations Officer who is a qualified
accountant, was appointed Interim Chief Operating Officer in March 2024. In
2023, Karen was responsible for leading Europe Sports and Gaming, as well as
our People Team. Karen is now responsible for Finance, People and overseeing
the transition following the sale of the Europe and Canada assets.
The Group has also seen changes in staff numbers during the period. Having
started 2023 with 193 staff, we continued our restructuring programme and
ended the year with 146 staff. The sale of the Europe and Canada assets saw 28
staff transferred to the GAMB on 1 April 2024. The current employee base for
the Company at 3 April 2024 was 100 staff.
Financial Performance
In Europe, we saw good growth from our premium brands offsetting decline in
the long tail of revenue share, ending the year with revenue of $22.8 million
(FY 2022: $23.2 million). In the US, we delivered a strong performance in
January 2023 following the legalisation of sports betting in Ohio, however,
this was not of the scale of New York's launch in January 2022, resulting in
revenues for FY 2023 of $27.5 million, significantly lower than the prior year
(FY 2022: $47.7 million).
In the Europe Gaming market, success in developing our data tracking, enhanced
testing and the launch of our 'auto exposure' tool for online casino game
listings contributed to a significant growth in new real money players
("RMPs"), particularly in Nettikasinot.com, with the same tools being rolled
out across other gaming sites. Furthermore, WhichBingo recorded a record month
in H1 2023.The Group's Freebets brand grew revenue 107% year-on-year, led
by Freebets.com. The Group's Europe Gaming premium
brands Nettikasinot.com and WhichBingo both returned to growth, up 38% and
23% year-on-year respectively.
Europe Sports, particularly Freebets.com benefited from a new, stable
platform, and enjoyed considerable success across the year, with strong
performance at Cheltenham, the Grand National, Ascot and across the Premier
league season, as well as the Champions League, despite some unfavourable
sport results.
Across the year, Google algorithm updates were regularly rolled out, often
with no impact, on occasion benefiting our websites, and similarly on occasion
slowing progress, latterly slowing down the success we delivered in H1 from
WhichBingo. The team continue to enhance content across all our websites with
the objective of ensuring we are well positioned when algorithm changes take
place.
The US market saw considerable change including the reduction of average
customer acquisition payment rates. The Barstool Sportsbook brand exited the
sport betting market and was replaced in mid-November by ESPN BET. Fanatics
Sportsbook acquired PointsBet, while some smaller operators withdrew from
selected states. bet365 continued its US rollout state by state and, in May
2023, we were able to enter revenue share arrangements with them having
previously worked on a CPA only basis.
The US business enjoyed considerable success in Ohio following the launch of
online sports betting, working with our partners, Advance Local, and their
premium site, Cleveland.com. The launch of online sports betting in
Massachusetts in March 2023, after the NFL season, proved disappointing.
Legislation enabling affiliate marketing companies to work with operators was
approved only days before launch, providing no time for pre-registration
marketing.
The start of the new season saw a pick-up in activity, and the launch of
online sports betting in Kentucky in late September 2023. The absence of PENN
Entertainment's Barstool Sportsbook in the market impacted revenues in the
period to mid-November, but these then benefited from the launch of ESPN BET,
delivering a strong close to the year.
During the year we were pleased with the progress made working with Daily
Fantasy Sport operators and have now developed this as a new revenue stream.
The successful partnership with Schneps Media for amNY was extended for a
further three years. New Media Partnerships were signed with Atlanta
Journal-Constitution based in Georgia and WRAL the latter in preparation for
the launch of online sports betting in North Carolina in 2024.
In July 2023, we announced the disposal of three of the Group's Europe Gaming
domains and associated websites, Casino.se, Casino.gr and Casino.pt, for a
total upfront cash consideration of $4.0 million. This followed the disposal
of the Group's Personal Finance asset portfolio for a total cash consideration
of $2.05 million in May 2023.
Operating Risk
Following the sale of Europe and Canada assets, the Group operates affiliate
marketing services in legalised online sport and legalised online gaming
states in North America. Period-on-period performance is impacted by the scale
and timing of state launches, and level of investment by operators in new and
existing states.
From 5 May 2024, Google applied manual actions to a number of media
organisation's websites judged to feature third-party content that promotes
coupons and offers, including in some instances online casino and sports
betting offers, that are not consistent with the Brand's authority. These
manual actions may impact the visibility of this content in Google search.
XLMedia's O&O websites have not been affected and a number of pages have
seen ranking improvements.
Outlook
The Group saw a solid start to the year in Europe and North America. North
Carolina launched online sports betting on 11 March 2024, after the NFL season
had finished and, while we delivered a strong performance, revenues in the
quarter were below 2023 which saw the launch of online sports betting in Ohio
in January 2023 during the NFL season.
Following the sale of the Europe assets at the start of April 2024, the Group
is focussed on right sizing the cost base allowing it to enter 2025 with an
infrastructure commensurate with the requirements of North America business.
Looking forward, XLMedia will retain its focus on revenue diversification.
With no further state launches confirmed for 2024, the Group will continue its
focus on optimising existing legalised sports betting states and monetising
its audiences. This will include daily fantasy sport advertising and
sponsorship as well as new customer acquisition. In the period to date we have
signed two new media partners, Star Tribune, a highly respected publisher in
Minnesota, and NOLA.com in Louisiana.
Growing the Media Partner business remains a key element of the strategy.
Having added five new partners in H2 2023 through Q1 2024, including securing
partners in preparation for new state launches, we will seek to further expand
our partner footprint. No new minimum guarantee arrangements have been entered
into.
The Group is working closely with all its Media Partners following the Google
update, the majority of which have been unaffected by the changes to date,
while continuing to focus on its O&O websites which have seen some early
improvements in rankings. We continue to monitor the situation very closely.
2024 will be a year of considerable change as we transfer our Europe assets,
consolidate our position in North America and prepare for 2025 and beyond.
David King
Chief Executive Officer
17 May 2024
Financial Review
Financial Highlights
The Business has delivered revenue from continuing operations of $50.3
million, with adjusted EBITDA from continuing operations of $12.1 million.
Operating profit has declined to a reported loss of $44.9 million driven
mainly by a net impairment charge of $44.6 million for the US Sports and EU
Sports verticals, reflecting uncertainty over the timing and level of future
revenues.
Cash balances (including short-term deposits) reduced from $10.8 million in
the prior year to $4.8 million at the year end. Cash generated from continuing
operations of the Group, together with receipts from assets disposed of, were
offset by capital expenditure, payments in respect of acquisitions in prior
periods, and tax payments for the period 2016 to 2020.
Continuing operations (1)
2023 2022 Change 2023 vs 2022
Revenue ($'m) 50.3 70.9 (29)%
Gross profit ($'m) 26.6 36.0 (26)%
Gross profit margin (%) 53% 51% 2% pts
Operating (loss) / profit before impairment ($'m) (0.3) 6.2 -
Net impairment charge ($'m) (44.6) - -
Operating (loss) / profit ($'m) (44.9) 6.2 -
Adjusted EBITDA ($'m) (2) 12.1 18.9 (36)%
Adjusted EBITDA margin (%) 24% 27% (3)% pts
Statutory (loss) / profit for the period ($'m) (45.5) 3.4 -
Basic (loss) / earnings per share ($) (0.173) 0.009 -
( )
(1) Defined as total Group financial performance less discontinued operations.
For 2023, the Group classified the Personal Finance and Blueclaw verticals as
discontinued.
(2) Adjusted EBITDA is defined as the operating profit after adding back
depreciation, amortisation, impairment, share based payments, exceptional
minimum guarantee cost, restructuring costs and aborted deal related costs.
Continuing Operations Revenue
Revenue from continuing operations for 2023 was $50.3 million (FY 2022: $70.9
million), a 29% decline compared to the previous financial year. The decline
in revenues was driven primarily by the North America Sports vertical, and
particularly the smaller scale of new state launches during 2023, compared to
those launched in 2022. H1 2022 saw launches in New York, Louisiana and
Ontario. In H1 2023, Ohio launched in January and performed well. The launch
of Massachusetts in March 2023 after the end of the NFL season was
disappointing. Both our owned sites and our Media Partners declined primarily
as a result of the relative scale of new state launches, and changing CPA
rates in some states. In Europe, we continued to rebuild our sites, driving
new customer acquisition, and creating new tail revenues. Total Europe
revenues declined by 2% as a result of decline in historical tail revenue
shares.
The decline can be seen in customer volumes with Real Money Players ("RMPs")
from core websites (including Media Partners) of c.160,000 in 2023 (FY 2022:
c.180,000), a decrease of 11% year-on-year, reflecting the relative size of
state launches and demonstrating the impact of reducing average CPA levels on
total revenues.
The Group's operations are reported on the basis of two core operating
verticals, Sports and Gaming (Casino and Bingo), and two geographies, North
America and Europe.
Revenue and Estimated Adjusted EBITDA by vertical 2023
Revenue Estimated Adjusted EBITDA
($m) ($m)
North America 27.5 5.5
Europe 22.8 6.6
Total 50.3 12.1
The Group runs its operations on an integrated basis, sharing cost and
resource where possible. The Adjusted EBITDA estimates are after the
allocation of all shared group costs, including XLMedia plc costs. Europe
includes sub-affiliate partner revenues and costs.
Revenue split by geography
2023 2022 Change 2023 vs 2022 (%)
($m) ($m)
North America (Sport) 26.9 46.4 (42)%
North America (Gaming) 0.6 1.3 (54)%
North America 27.5 47.7 (42)%
Europe (Sport) 9.7 8.9 9%
Europe (Gaming) 13.1 14.3 (8)%
Europe 22.8 23.2 (2)%
Total 50.3 70.9 (29)%
Revenue from the North America region decreased 42% to $27.5 million (FY 2022:
$47.7 million) due primarily to the relative scale of new state launches and
accounted for 55% of the Group continuing operations revenues (FY 2022: 67%).
Revenue from the Europe region decreased by 2% to $22.8 million (FY 2022:
$23.2 million). Old tail revenues in online casino declined year-on-year
offset by growth in new RMPs revenues in both sports and gaming.
Revenue split by type
2023 2022 Change 2023 vs 2022 (%)
($m) ($m)
CPA 26.2 48.3 (46)%
Revenue share / hybrid and other (2) 24.1 22.6 7%
Total 50.3 70.9 (29)%
(2) Other defined as Fixed Deals, Sponsorship Deals, Display Advertising
The US market has continued largely as a cost per acquisition ("CPA") led
market whereas the Europe market continues to operate with a mixture of fixed,
hybrid and revenue share deals. As a result, CPA revenues accounted for 52% of
continuing revenues, declining from 68% in the prior year. Revenue share has
increased to 48% of total revenue due to the overall decline in US revenues as
a percentage of total revenues. As the US market continues to develop, we have
started to see some hybrid and revenue share deals offered and expect to see
modest growth in revenue shares deals in the near to medium term in North
America.
Revenue split by category
2023 2022 Change 2023 vs 2022 (%)
($m) ($m)
Sport (3) 36.6 55.3 (34)%
Gaming 13.7 15.6 (12)%
Total 50.3 70.9 (29)%
(3 ) Includes the North America Sports, Media Partnerships and Europe Sports
verticals.
( )
In 2023, 73% of revenues came from Sport in line with the Group's focus on
being sports led in the US, while also rebuilding its Europe casino assets and
launching a new casino brand in the US.
Revenue split by Operation
2023 2022 Change 2023 vs 2022 (%)
($m) ($m)
North America (Sport) 26.9 46.4 (42)%
Europe (Sport) 9.7 8.9 9%
Sport 36.6 55.3 (34)%
North America (Gaming) 0.6 1.3 (54)%
Europe (Gaming) 13.1 14.3 (8)%
Gaming 13.7 15.6 (12)%
Sport revenues decreased by 34% year-on-year to $36.6 million (FY 2022: $55.3
million) driven primarily by the relative scale of state launches in North
America, partially offset by a strong performance from Freebets.com, which
returned to growth in the period.
Europe Sports revenues grew to $9.7 million in 2023 (FY 2022: $8.9 million).
In Europe, Freebets, our primary brand, grew revenue by 107% year-on-year.
Gaming revenues declined by 12% to $13.7 million (FY 2022: $15.6 million) as
tail revenues declined in Europe gaming markets against the prior year. Our
marquee brands Nettikasinot and WhichBingo grew by 38% and 23% respectively in
2023, year-on-year. Europe remains the main Gaming region for the Group, with
revenues of $13.1 million (FY 2022: $14.3 million), accounting for more than
90% of Gaming revenue in both 2023 and 2022.
Our US Gaming revenues are driven by gaming pages provided on our sports
websites, in particular Crossing Broad which had previously enjoyed a large
Barstool Sportsbook audience. US Gaming revenues declined year-on-year to $0.6
million (FY 2022: $1.3 million).
Revenue split by Partnership and owned and operated ("O&O")
2023 2022 Change 2023 vs 2022 (%)
($m) ($m)
North America Partnership 18.5 28.4 (35)%
Europe Partnership 1.2 1.3 (8)%
Total Partnership 19.7 29.7 (34)%
North America O&O 9.0 19.3 (53)%
Europe O&O 21.6 21.9 (1)%
Total O&O 30.6 41.2 (26)%
Total revenue 50.3 70.9 (29)%
Revenue from Partnerships decreased by 34% to $19.7 million (FY 2022: $29.7
million) again reflecting the relative scale in state launches.
Partnership revenues represented 39% of Group revenues (FY 2022: 42%).
Revenue from O&O decreased by 26% to $30.6 million (FY 2022: $41.2
million). In Europe, O&O Casino sites were impacted by ongoing reduction
in tail revenue from closed sites, but this was offset by growth in new RMPs
revenues in both sports and casino, in particular Freebets.com and
Nettikasinot.
North America O&O sites were impacted by the relative size of their
footprint in new state launches and changing CPA rates in some states.
Gross profit (4) and gross margin
2023 2022 Change 2023 vs 2022 (%)
Gross profit from continuing operations ($'m) 26.6 36.0 (26)%
Gross profit margin (%) 53% 51% 2% pts
( )
(4) Gross profit is calculated as revenue less the costs associated with
generating revenue. Cost of revenue includes direct costs, marketing costs,
Media Partnership revenue share costs, and staff costs, and excludes
exceptional minimum guarantee costs. Note, these costs are part of operating,
and sales and marketing expenses as defined in the consolidated financial
statements.
The Group's gross profit from continuing operations for 2023 was down 26% to
$26.6 million, with a gross margin of 53% (FY 2022: $36.0 million, 51% gross
margin). Europe Sports and Europe Gaming margin improved to 55% and 78%
respectively offsetting the decline in North America margin to 40%. Revenue
share payments to Media Partners, which form part of the reported sales and
marketing expenses, were $10.9 million in 2023 (FY 2022: $16.3 million).
Earnings
The Group recognised an operating loss from continuing operations of $44.9
million (FY 2022: $6.2 million profit).
EBITDA from continuing operations included items which affect comparability.
The Group excludes these items in calculating Adjusted EBITDA metrics. These
are detailed below:
Reconciliation of operating profit for continuing operations to Adjusted
EBITDA
2023 2022 Change 2023 vs 2022 (%)
($m) ($m)
Operating (loss) / profit from continuing operations (44.9) 6.2 -
Depreciation and Amortisation 6.5 7.3 (11)%
Net impairment charge 44.6 - 100%
Share-based payments 0.2 0.9 (78)%
Reorganisation 2.6 4.5 (42)%
costs
Minimum guarantees shortfall 3.1 - 100%
Adjusted EBITDA from continuing operations ($'m) 12.1 18.9 (36)%
Adjusted EBITDA margin from continuing operations 24% 27% (3) % pts
Adjustments to earnings
From the annual impairment review of non-financial assets, the Group
recognised a net impairment charge of $44.6 million for continuing operations
in 2023. This consists of an impairment charge of $58.5 million for US Sports
and EU Sports assets, offset by an impairment reversal of $13.9 million for
Casino assets. Note 11 of the Financial Statements provides a further
breakdown of the impairment.
The impairment of EU Sports and the reversal of previous impairments for
Casino were both impacted by the sale of the Europe and Canada assets in April
2024 as the sales price was deemed to be an indicator of the recoverable
amount of those assets at the balance sheet date.
The Group incurred $0.2 million of share-based payment charges (FY 2022: $0.9
million), with the reduction year-on-year due to senior management leavers
from the schemes in 2023.
In addition, the Group incurred $2.6 million of reorganisation costs in 2023
(FY 2022: $4.5 million) relating to the continuation of the Group's
restructuring plan and integration, and deal-related costs.
In 2023, the Group classified $3.1 million of costs from the minimum
guarantees in the contract with one media partner as an adjusting item to
EBITDA due to the size and short-term nature of this agreement. The agreement
expires in summer 2024. Further minimum guarantees have not been offered to
extend this contract.
Adjusting for these one-off items:
· Adjusted EBITDA from continuing operations was $12.1 million (FY
2022: $18.9 million), with a margin of 24% (FY 2022: 27%).
· Group adjusted EBITDA including Personal Finance and Blueclaw was
$11.7 million (FY 2022: $16.8 million).
The Group completed the sale of Personal Finance assets and the restructuring
of non-core activities in H1 2023 removing marginal and loss-making activity,
while allowing resources to be focused on the continuing business.
Sales and marketing costs
Direct costs associated with our revenue streams decreased to $18.6 million
from $22.8 million. This includes the revenue shares payments to our Media
Partners in the US amounting to $14.0 million (FY 2022: $16.3 million)
including $3.1 million of minimum guarantee top ups. Excluding revenue shares
payments to Media Partners, sales and marketing costs were $4.6 million (FY
2022: $6.5 million), a reduction of 29%. These costs relate largely to content
and SEO expenses.
Operating costs
Operating costs of $25.6 million include $2.6 million of reorganisation costs
and $0.2 million of share-based payment charges (FY 2022: $34.6 million
including $4.5 million of reorganisation costs and $0.9 million of share-based
payment charges).
Operating costs include staff costs, technology investment and other operating
costs.
Staff costs
Staff costs from continuing operations was $16.7 million (FY 2022: $19.9
million). The reduction year-on-year was partly due to refining operations in
the US and Canada, as well as the closure of the UK Blueclaw operation in
2023. This has also been reflected in the reduction in total Group employee
numbers (including Personal Finance) to 146 from 193.
As a result of the sale of the Europe and Canada assets in April 2024, the
total Group employee numbers have fallen to 100 at 3 April 2024, including 28
employees transferring to the Gambling.com Group Limited upon completion of
the transaction.
Technology investment
The Group has continued to invest in its technology in 2023, including
replacing legacy technology for data platforms and implementing a new finance
billing system. Cost was reduced to $2.7 million of operating costs (FY 2022:
$5.2 million).
Other operating costs
Other operating costs were $6.2 million (FY 2022: $9.5 million). These include
all other operating costs such as administrative expenses, professional
service costs and one-off reorganisation costs of $2.6 million (FY 2022: $4.5
million).
Earnings per share (EPS)
2023 2022 Change 2023 vs 2022 (%)
Basic and diluted EPS from continuing operations ($) (0.173) 0.009 -
Basic and diluted EPS ($) (0.179) (0.036) (397)%
Basic and diluted EPS remained the same (FY 2022: same) due to the number of
weighted average number of shares. In 2023, the Group recognised a basic and
diluted loss per share from continuing operations of $0.173 (FY 2022: EPS of
$0.009).
Including the discontinued operations of Personal Finance (before it was sold)
and Blueclaw, the Group recognised a loss per share of $0.179 (FY 2022: loss
per share of $0.036).
Finance costs
Net financial costs amounted to $0.2 million (FY 2022: $1.7 million). The
prior year comparative includes a $1.5 million foreign exchange loss due to
re-translation of monetary balances held in GBP and EUR to USD, the
presentational currency of the Group, which was not replicated in 2023.
Excluding this forex impact, net financial costs were consistent year on year
at $0.2 million relating to bank charges and lease finance costs.
The Group does not hold any external debt financing as at 31 December 2023.
Tax
The Group has a tax-presence in the regions where the Group is incorporated,
which are Jersey (where the parent company is incorporated), UK, US, Cyprus,
Canada and Israel. The Group structure consists of a UK parent company with a
shared service centre in Cyprus, both of which support the intellectual
property based in Israel and Cyprus and the growing operations in the US.
The Group recognised a total tax charge of $0.6 million in 2023 for its
continuing operations (FY 2022: $1.6 million charge). A deferred tax charge of
$3.2 million was recognised upon sale of the Personal Finance business in
discontinued operations to reverse a previous deferred tax asset recognised in
2022.
The Group recognised an income tax provision of $5.7 million (FY 2022: $4.5
million). The increase in the income tax liability relates to an increase in
specific tax provisions to mitigate tax risks across jurisdictions. In 2023,
the Group paid $3.5 million to tax authorities in Israel in respect of the tax
years 2016 to 2020 and a further $1.6 million in the jurisdictions it operates
(FY 2022: $0.9 million).
The Group understands the importance of the tax contribution it makes, and we
have a tax strategy which supports this commitment. The Group is committed to
paying all of its taxes in full and on time, in all the jurisdictions in which
the Group operates.
Summary balance sheet and cash flow metrics
2023 2022 Change 2023 vs 2022 (%)
($m) ($m)
Free cash flow (5) 4.0 7.6 (47)%
Cash from operations (6) 4.6 15.8 (71)%
Normalised Capital expenditure (7) 5.7 6.8 (16)%
Acquisition-related payments 7.4 18.4 (60)%
(5) Defined as cash from operations excluding tax payments or refunds, less
capital expenditure.
(6) Includes working capital and trading from discontinued operations.
(7) Defined as reported capex less acquisition-related capital expenditure.
Cash and working capital
Group cash balance (including short-term deposits) at 31 December 2023 was
$4.8 million (FY 2022: $10.8 million). After adjustment for forex movements,
overall cash balances decreased due to acquisition-related payments,
historical tax payments and lower trading performance, offsetting
consideration received from the sale of assets.
The Group recognised free cash inflows of $4.0 million in 2023 after adjusting
for one-off cash items compared to an inflow of $7.6 million in 2022. The main
driver of the reduction in free cash outflows was the decline in underlying
trading.
Whilst the Group did not acquire any businesses in 2023, it continued to
invest in its assets, mainly in its domains and enhanced websites, spending
$5.7 million on capital expenditure (FY 2022: $6.8 million).
The Group received $6.05 million for the disposal of three of the Europe
Gaming domains and associated websites, Casino.se, Casino.gr and Casino.pt,
and domains and websites relating to the Personal Finance business.
The Group's acquisition programme between Q4 2020 and Q4 2021 resulted in it
committing to future acquisition and earn out payments as part of the
acquisition consideration, to be substantially funded from the Group's free
cashflow.
During 2023, the Group paid out $7.4 million of deferred acquisition and
earnout payments (FY 2022: $18.4 million). Post period, the Group has paid a
further $3.5 million on earnout payments with a final payment of $4.0 million
of deferred consideration expected in H2 2024. Included in the 2023 cash
outflow was a one-off settlement for all existing obligations with the
previous owners of Blueclaw Media Ltd. This final settlement was paid in
January 2023 and the Group has no further obligations in this matter.
The cash flows above included the cash flow from operations and working
capital balances for the Personal Finance and Blueclaw businesses.
Glossary of financial terms
Although the Group is not subject to the Guidelines on Alternative Performance
Measures issued by the European Securities and Markets Authority, we have
provided additional information on the metrics used by the Group. The
Directors use the metrics listed below as they are critical to understanding
the financial performance and financial health of the Group. As they are not
defined by IFRS, they may not be directly comparable with information
published by other companies who use similar measures.
Profit measures
Metric Closest equivalent IFRS measure Definition
Continuing operations revenue Revenue Group revenue less discontinued operations revenue.
For 2023, the Group classified the Personal Finance and Blueclaw verticals as
discontinued.
Adjusted EBITDA Operating Profit (1) Earnings before Interest, Taxes, Depreciation and Amortisation, and excluding
any impairment, share-based payments, exceptional minimum guarantee costs,
restructuring costs and aborted deal related costs.
Adjusted EBITDA from continuing operations Operating Profit (1) As above but excluding discontinued operations
Adjusted Basic and diluted earnings per share from continuing operations Basic and diluted earnings per share Based on profit for the period from continuing operations.
( )
(1) Operating Profit is not defined under IFRS. However, it is a generally
accepted profit measure.
Cash flow measures
Metric Closest equivalent IFRS measure Definition
Free cash flow No direct equivalent Cash from operations excluding one-off tax payments or refunds, excluding
acquisition costs, less capital expenditure.
Normalised capital expenditure No direct equivalent Reported capital expenditure excluding acquisition-related capital
expenditure.
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