The affiliate giant XLMedia is focusing on the US market this year, after selling its Europe and Canada gaming and sports betting assets. It hopes to make up for a net loss of $1.5 million in 2023.
XLMedia has sold its assets to Gambling.com Group for a price of $42.5m. (PS33.6m/EUR39.2m). This deal involves an initial payment of $20.0m. The rest including the possible earn-out payments up to $5.0m will be due in the following months.
This sale comes after a challenging year for XLMedia. Revenues fell by 29.1%, to $50.3m. The results are in line with the forecasts made in February. XLMedia claims that this is primarily due to declines in North America Sports.
Group members noted that the number of launches in 2023 was smaller than those made in 2022. In H1 of 2022, New York City, Louisiana and Ontario were launched. Only Ohio and Massachusetts were live during H1 2023. XLMedia described the latter launch as “disappointing”.
XLMedia said that the decline in both their owned sites as well as media partners was primarily due to the relative size of state launches. The company also noted that the cost-per acquisition rates (CPAs) in certain states have changed. In Europe, the company continued rebuilding sites to drive new customer acquisition and create new tail revenue. Europe’s revenue, however, fell by 2%.
Why is XLMedia so positive?
In the end, lower revenues, combined with an impairment charge of $44.6m pushed this group into a loss. David King, the CEO of the group, remains optimistic about its future. He said 2024 would be a “year of significant change”, as XLMedia prepared for the future.
King stated that “following the sale announcement of Europe Sports and Gaming, we focus on driving organic revenue in the North America Market.” King said that the company would continue to grow its footprint as it prepares for future state launches, and also reduce costs for 2025.
The group has refined its strategy to concentrate on the North American sports market while building the gaming business.
The market is expected to grow organically over time as more operators join the markets, and states begin legalising online gambling and sports betting.
The Breakdown of 2023
Looking at the year 2023 in more detail, sports betting revenue dropped by 33.8% and reached $36.6m. Gaming revenue declined 12.2% to reach $13.7m. XLMedia claims that this is due to its commitment to being a sports-led company. The company also mentions the rebuilding and launch of a US Casino brand, as well as the assets in Europe.
CPA generated $26.2m in revenue (down 45.8%). Revenue share, hybrid, and other activities, on the other hand, generated $24.1m, an increase of 6.6%. XLMedia reports that the US market has remained largely CPA driven. Europe is made up of a mix of hybrid, fixed and revenue-share deals. CPA revenue accounted for 52.0% and revenue sharing at 48.0%.
XLMedia reports that as the US market develops, hybrid deals and revenue-sharing deals are starting to be offered. They expect modest growth of revenue-sharing deals over the next few years in North America.
North America revenue fell 42.4%, to $27.5m. This was due to both gaming and betting on sports. Europe’s revenue fell only 1.7%, to $22.8m. Sports betting growth offset the gaming drop.
XLMedia reported that revenue from North America decreased primarily due to the scale of state launches. “Revenues from Europe declined; the old tail revenue of online casinos decreased, but this was offset by an increase in real-money player revenues both in sports and in gaming.”
XLMedia did not disclose all expenses for 2023. XLMedia did, however reveal a gross profit that was 26,1% less at $26.6m.
The operating loss, before depreciation costs, was $300,000. This is compared to the $6.2m profit of last year. The adjusted EBITDA also decreased 36.0%, to $12.1m with a margin that was lower at 24.0%.
XLMedia’s net loss was $45.5m after accounting for $44.6m in impairment charges. This compares to a $3.4m profit the year before.
King stated that “after the sale of Europe assets in April 2024 the group will focus on right-sizing its cost base to allow it to enter the year 2025 with a infrastructure comparable with North America’s requirements.”
XLMedia’s focus will remain on diversifying revenue in the future. The group’s focus will remain on maximizing existing states that allow sports betting and monetizing its audience, as no new state launches are confirmed by 2024.
The year 2024 will bring about a lot of change, as we consolidate and transfer assets to Europe and North America. We are also preparing for the years beyond.
