XLMedia (AIM: XLM), a leading provider of digital performance marketing services, announced today its final results for the year ended 31 December 2014.
2014 has been a truly transformational year for the Group in which we’ve expanded our operational footprint and delivered growth with revenue up 47% and Gross Profit up 35% compared with FY 2013, underpinned by a combination of the positive impact from acquisitions and strong levels of organic growth across segments.
As a result of our strategic progress, we have significantly increased our presence in regulated markets including the UK and the US whilst expanding into the high growth social gaming market which is already yielding positive results for the Group.
The demand for performance based marketing services remains strong and we feel confident in our ability to execute our growth plans. Following our strong 2014 performance we are pleased to announce a final dividend of 1.576 cent per share. This totals to full year 2014 dividends of 3.156 cent per share, an increase of 14% (2013: 2.768).
- Revenues increased 47% to $50.7 million (2013: $34.5 million)
- Gross profit increased 35% to $27.6 million (2013: $20.5 million)
- Adjusted EBITDA increased 28% to $17.0 million (2013: $13.3 million)
- Profit before tax increased 14% to 13.2 million (2013: $11.7 million)
- Net cash from operating activities increased 42% to $16.9 million (2013: $11.9 million)
- Cash and short term investments of $44.1 million (2013: $15.9 million)
- Maintained progressive dividend policy with payment of 1.576 cent per share and total 2014 dividend payment of 3.156 c per share
- Revenues include 30% organic growth as well as additional $6 million from EDM
During 2014 we delivered strong growth, enjoying the substantial market opportunities that exist for performance based marketing services. We continued to diversify our revenue base as we expanded both the Group’s operational footprint and successfully targeted new market verticals. The Group is pleased to report the following progress:
- Regions 
We currently generate approximately 21% of our revenues from the U.S, mainly through EDM customers (FY 2014: 11% and FY 2013: 1%). Additionally, we strengthened our position in the UK market with a UK sports betting informational website acquisition, and made bolt on acquisitions and increased our marketing efforts in other regions. We grew revenues in our core Scandinavian markets by 30%, to $28.2 million (2013: $21.7 million). We have also further diversified the regional revenues and current revenue run rate for the Scandinavian market has reduced to approximately 51% of our revenues (FY 2014: 63% and FY 2013: 79%).
- Verticals and customers 
We entered new verticals such as social gaming and financial services, which has enabled us to diversify our revenues and extend our customer base. Currently our largest customer represents just 11% of the Group’s revenues (FY 2014: 15%, 2013: 25%), with the majority of our customers at 5% or below. The acquisition of EDM added a strong US customer base, mainly social gaming developers and studios.
- Marketing channels
As an online performance marketing company we have expanded our marketing methods to reach more online and mobile traffic to drive our growth. The acquisition of EDM boosted our social and mobile activity, and we expect these channels to become more and more significant going forward.
- Building our infrastructure
We have built an infrastructure that will support our rapid growth. In 2014 we invested $1.65 million (2013: $0.6million) in our in-house developed technologies, in addition to our ongoing R&D expenses of $1.0 million (2013: $0.9 million). We have also doubled the size of our R&D team. We plan to continue this trend and increase our efforts further in 2015 focusing investment on our Business Intelligence (‘BI’) systems, tracking, mobile enhancements, content management tools and other enhancements to further drive efficiency and analysis to support strong operating margins. We also increased headcount across all other departments in 2014, bringing total Group employees to 200 at 31 December 2014.
The online marketing industry is a fragmented market and we believe there are opportunities to acquire more businesses that will complement our core capabilities. We continue to consider and engage with prospective targets which we evaluate based on carefully selected criteria. Acquisitions remain a core part of our growth strategy, having delivered considerable value from the ones completed in 2014.
We see strong growth in our core markets and believe these trends are expected to continue in the short and medium term. This growth is underpinned by the following dynamics:
- Mobile and tablet growth – Mobile advertising is expected to grow by an average of 38% from 2014 to 2017; Mobile is the main driver of global adspend and is expected to account for 51% of all new advertising during 2014 to 2017, growing by $42 billion.
- Social games are also expected to benefit from the strong growth of mobile devices use, with expected CAGR in the US of 24% between 2012 and 2016. This strong growth is driven by the tremendous demand in the mobile and smartphone markets and the free availability of many of these games.
- Mobile users have also become a significant part of the online gambling industry, with an anticipated 44% share of the global interactive gambling market by 2018.
- Internet advertising consistently grows, with CAGR for US market of 18% over the past 10 years to a total of $45.8 billion in 2014. The growth comprises 12% CAGR for non-mobile revenues and 123% CAGR for mobile advertising over 2010 to 2013.
We see strong demand for marketing services in our markets, and believe the above mentioned trends will continue to drive these markets to further growth.
Business Segments review
|% of revenues||47%||41%||12%||100%|
|% of revenues||55%||29%||16%||100%|
Publishing revenues grew 27% to $24.0 million (2013: $18.8). The growth was mainly organic, with some additions from new assets acquired during the second half of 2014.
We see strong demand in our core Scandinavian markets, as well as in newer markets such as the UK and other European countries.
In November 2014 we launched “Palcon”, our proprietary content management system, which enables improved day to day operation of our network of over 2,000 specialist content websites, as well as enhanced mobile and social features in our websites. We believe our well established operation allows us to scale our business and we continue to develop our in-house systems.
During 2014 we invested $11.5 million in new websites and domains and we plan to continue buying and developing more assets to further drive our growth.
Media revenues grew 105% to $20.6 million (2013: $10.1 million). The growth included the acquisition of EDM which contributed $6.0 million to 2014 revenues. Excluding EDM, Media revenues grew 45% compared to last year, enjoying the strong demand for digital advertising and growth of these services as mentioned above.
Our revenue model is performance based – either through revenue share, cost per acquisition, cost per installation or other models. Customers pay for performance only, avoiding the risk of applying funds to media campaigns that don’t deliver ROI. We use our expertise, in-house proprietary systems and trained staff and own funds to run thousands of simultaneous campaigns which yield positive ROI for us and for our customers.
EDM specialises in social and mobile advertising specifically targeted at ‘user acquisition’ for social gaming applications. EDM’s principal geographical market is the US, in addition to other English and German speaking markets. EDM provides marketing services primarily to game developers in social and mobile platforms, primarily for a performance based fee. The acquisition of EDM enhanced the Group’s presence in the US, adding new customers and complementary social and mobile capabilities. With the strong demand in these markets, and the performance of EDM since acquisition, the Board believes social gaming will be a strong driver of the Group’s growth in the coming years.
New media activities are more mass media oriented and are intended to reach a large audience by mass communication. Such activities have usually lower margins but can reach high volumes rapidly. As already outline in 2014, we expect further decrease in the media margins, in line with industry trends, but expect this trend to be compensated through higher volumes generated from these activities.
- Partner Network
Partner network revenues grew 9% to $6.1 million (2013: $5.6 million). Our partner network remains an important part of our business, allowing us flexibility to provide marketing services in new markets we do not operate in through publishing and media.
We continue to develop our business to further capitalise on the substantial market opportunities that exist for performance based marketing services. Our growth strategy includes expansion into new markets, adding more channels and verticals. We continue to invest in technology, offering a ‘best of breed’ service to our clients. While we maintain our strong organic growth we continue to evaluate acquisition opportunities.
The Board remains confident that through a combination of XLMedia’s market leading position in performance based marketing, our proprietary technology platforms and broad customer base, we will continue to generate further value for our shareholders.
Our full annual financial statements are available on our website at the following address:
Our updated investor presentation is also available on our website at the following address:
Earnings Before Interest, Taxes, Depreciation and Amortisation and excluding share based payments, IPO expenses and expenses related to EDM acquisition agreement
Revenues per region refer to identified revenues, see also note 16 d to our consolidated financial statements.
See also note 16 c to the consolidated financial statements.