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XLMedia eyes US growth after posting full-year net loss in 2023

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Affiliate giant XLMedia will focus on growth in the US this year after selling off its Europe and Canada sports betting and gaming assets, with the group seeking to improve on a year of net loss in 2023.

XLMedia sold the assets to Gambling.com Group in April for a total consideration of $42.5m (£33.6m/€39.2m). The deal includes an initial $20.0m, with the rest, including a possible $5.0m earn-out payment, due over the coming months.

The sale follows a difficult year for XLMedia, which saw revenue fall 29.1% to $50.3m. This is in line with forecasts published in February.  This, XLMedia says, is mainly the result of declines in the North America Sports vertical. 

The group noted 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 comparison, only Ohio and Massachusetts went live in H1 of 2023, with XLMedia describing the latter roll-out as “disappointing”.

XLMedia added that both its owned sites and media partners declined mainly due to the relative scale of new state launches. It also notes changing cost per acquisition (CPA) rates in some states. Meanwhile, in Europe, it continued to rebuild sites, driving new customer acquisition, and creating new tail revenues. That said, Europe revenue fell 2%.

Reason for positivity at XLMedia?

Ultimately lower revenue, coupled with a heavy impairment charge of $44.6m, pushed the group to a net loss. However, CEO David King remains upbeat over its future. He says 2024 will be a year of “considerable change” as XLMedia prepares for 2025 and beyond.

“Following the announcement of the sale of the Europe Sports and Gaming business, we are focused on driving organic revenues in the North America market,” King said. “This is 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.

“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.”

Breaking down 2023

Taking a closer look at 2023, revenue from sports betting dropped 33.8% to $36.6m while gaming revenue fell 12.2% to $13.7m. XLMedia says this is in line with its focus on being sports-led. It also notes the rebuilding of Europe casino assets and launching a new US casino brand.

CPA accounted for $26.2m of all revenue, down 45.8%. In contrast, revenue share, hybrid and other activities generated $24.1m in revenue, up 6.6%. XLMedia says the US has continued largely as a CPA-led market. Europe, meanwhile, is a mixture of fixed, hybrid and revenue share deals.  As a result, CPA revenues accounted for 52.0% of continuing revenues, with revenue share at 48.0%. 

“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,” XLMedia says.

In terms of geographical performance, revenue in North America was down by 42.4% to $27.5m, with declines across both gaming and sports betting. Europe revenue only fell 1.7% to $22.8m after sports betting growth limited the impact of gaming decline. 

“Revenue from North America region decreased due primarily to the relative scale of new state launches,” XLMedia said. “Revenue from Europe decreased; old tail revenues in online casino declined but was offset by growth in new real-money players revenue in both sports and gaming.”

XLMedia stopped short of fully disclosing information on expenses in 2023. However, it did reveal that gross profit was 26.1% lower at $26.6m.

Operating loss before impairment costs stood at $300,000, in contrast to a $6.2m profit in the previous year. As for adjusted EBITDA, this also declined 36.0% to $12.1m, with a lower margin of 24.0%.

After accounting for the $44.6m impairment charge, XLMedia was left with a net loss of $45.5m, compared to the previous year’s $3.4m profit. 

“Following the sale of the Europe assets at the start of April 2024, the group is focused on right-sizing the cost base allowing it to enter 2025 with an infrastructure commensurate with the requirements of North America business,” King said.

“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. 

“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.”

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