XLMedia, the digital publishing group active in the US sports betting sector, has published a trading update for the first six months of the 2020 financial year, showing revenue running around $2m lower than before January’s Google deranking.
The first half of the year, as previously reported said the firm, was impacted heavily by a manual penalty being applied by Google to over 100 of its websites in January this year, and the subsequent global slowdown caused by the Covid-19 pandemic. For the first six months of 2020 XLMedia expects to report revenue of approximately $27.5m and EBITDA of circa $3.5m.
The company added that its balance sheet remains strong, with cash balances at the end of June of approximately $27.9.
In the investor update, the firm noted: “As anticipated, monthly revenue is currently running around $2m below the level being achieved before the impact of the Google deranking, with the vast majority of this dropping through to the bottom line.
“The company believes that around half of the revenue drop is directly associated with the deranking of these predominantly casino websites, with the remainder caused by the impact of Covid-19 on the sports and personal finance verticals and the management decision to discontinue the media buying operations.”
The first quarter of the year was, said XLMedia, stronger than the second with revenue of $15.6m, due to a normal period of trading before the deranking in late January and the impact of Covid-19 not being felt until the middle of March. A strong focus on cost management and the recently announced reduction in employee numbers contributed to the healthy cash position at the end of June.
On the Google deranking situation, the company said that it had significantly impacted the search ranking of the affected websites, and therefore the ability to generate new business; 23 of the impacted sites were premium revenue generating assets.
It has been, and will remain, focused on reranking these sites it said and for the last six months has been raising the quality of the content on the sites to make it more relevant and engaging. Measures include including user-generated content, enhancing the offerings for a more targeted audience, assisted by data science, and migrating to an outsourced platform, which enables it to benefit from the accelerated innovation provided by an open-source community.
Focusing on more recent events, the firm reflected on the appointment of Ken Dorward who joined as President, North America. “Ken’s successful track record and deep knowledge of the industry will help to expedite progress in North America, where the company sees the opportunity as very significant in both sports and personal finance,” it said.
On the outlook, the company said that while financial performance in the first six months was disappointing, it continues to make good progress on its transformation agenda and the delivery of its strategic priorities.
“Alongside this, the company is prioritizing removing the penalties imposed by Google on some of its premium sites,” it advised. “Combined with recent encouraging signs of increased activity in sports and personal finance, this would provide an increasing level of confidence in the company’s ability to grow revenue and profit in 2021 and beyond.”