Jersey-based online gambling marketing company XLMedia has failed to meet expectations and raising guidance following the surprising profit warning issued on Monday. The trading update for the year ending December 31st, 2018 which was published on the official website of the digital performance marketing provider also resulted in a massive share price decline, which continued after the start of Tuesday trading.
Yesterday, XLMedia revealed that the company’s Board now expects to report lower revenues than initially projected. The iGaming marketing provider further shared its expectations for marginally lower adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in comparison to the results announced a year earlier. In comparison to the now-expected revenues of approximately $130 million, the Financial Conduct Authority Cenkos Securities has previously forecast a 2018 revenue amounting to $147.6 million.
Despite the fact that according to the company underlying trading in the year to date has been stable, XLMedia cited the negative impact from certain regulatory changes as one of the main reasons for the expected lower performance. The closure of the Australian market for online gambling companies at the end of 2017, as well as the ongoing uncertainty associated with the regulatory status of some gambling markets across Europe, have been blamed by the provider for the profit warning issued yesterday.
XLMedia revealed that the above-mentioned regulatory changes have triggered some turbulence when it comes to operators and marketers’ performance, despite they are supposed to bring more clarity to the legal environment and make it more functional.
XLMedia Still Remains Strong, Berenberg Says
The market valuation of XLMedia has reflected some skepticism, in spite of the fact that the provider has had a strong performance record so far. This is not the first time when the company has shared a profit warning.
So, what has actually gone wrong with the online gambling marketing provider’s performance, so that the company has lowered its expectations for the 2018 figures? According to the Jon. Berenberg, Gossler & Co investment bank, the past six months have seen a number of changes which had a negative impact on the company’s expected profits in the short term. In addition, Berenberg further evaluated the business model of XLMedia as strong enough to remain focused on the US market expansion, as well as to deal with several deals’ evaluation stages.
The recent US Supreme Court ruling in the New Jersey sports betting case which resulted in lifting the ban on sports betting operations in the US could have a positive influence on the company’s efforts to expand its presence in the country. For some time now, XLMedia has been investing a lot of efforts seeking increased market presence in the US, with the positive effects of such expansion expected to be actually seen in its medium to long term performance.
As explained by Berenberg, XLMedia has faced a number of regulatory authorities’ requirements to adapt their consumer protection policies and Terms and Conditions policies in order to make sure that their guidelines are adapted to the latest consumer protection rules. This resulted in certain one-off delays to some affiliate advertising practices, which eventually hurt the company’s performance.
What is more, the payment model of the XLMedia has seen certain changes, which brought lower short-term revenues as a result. Still, such changes are considered able to result in better opportunities and revenue increase in the long term. As Barenberg explained, the online gambling marketing company has also slashed some of its low-margin media revenue streams, making an attempt to become more focused on higher-margin opportunities.