Interim Results

RNS Number : 8663R

XLMedia PLC

17 September 2014

 



For Immediate Release

17 September 2014

XLMedia PLC

("XLMedia " or "the Group")

Interim Results for the six months ended 30 June 2014

Continued growth and investment underpins strong start to second half of the year

XLMedia (AIM:XLM), a leading provider of digital performance marketing services, is pleased to announce its interim results for the six months ended 30 June 2014.

Financial Highlights:

·     Revenues increased 24% to $19.9M (H1 2013: $16M)

·     Gross Profit increased 10% to $11.3M (H1 2013: $10.3M)

·     Adjusted EBITDA was $6.4M (H1 2013: $7.2M) reflects increased investment in line with strategy to generate future growth, which is showing results

·     Increase of 8% compared to H2 2013 and positive outlook for second half of 2014

·     Cash balance of $56.6 million (June 30, 2013: $4.2M)

·     Interim dividend of $3M declared

o  Dividend to be paid on 31 October 2014 (the ex-dividend date is 24 September 2014 and the record date for the dividend is 26 September 2014. The dividend equates to $0.0158 per share

Operating Highlights up-to-date:

·     Strong six month trading in core performance marketing segment

o  Maintained market leading position in Nordic markets

o  Accelerated growth in newer territories including Canada, Greece, Denmark, Austria and Germany. Continued to position for US market

·     Significant progress with acquisitions, a strategic priority since listing on AIM in March 2014

o  Successful entry into the social and mobile gaming arena following the acquisition of EDM (September), a leading company in the social gaming market with excellent track record of growth, the Group's largest transaction to date

o  Bolt-on acquisitions include Nordic Content Network (July) and Sports Betting Content Site (August)

o  Acquisitions are all earnings enhancing and strengthen the Group's position in newer markets and products

o  Acquisition pipeline remains strong in a highly fragmented market

The Board is confident the outlook remains positive for the rest of 2014 and beyond.

Ory Weihs, Chief Executive Officer of XLMedia, commented:

"We are delighted to report the Group has made an excellent start to 2014, reflecting strong sales momentum in our core European markets.  The demand for our services remains high with gaming operators continuing to seek out our services in order to maintain significant levels of high quality traffic to their sites.

"We have also made good progress with our acquisition strategy, a key growth initiative articulated at the time of our IPO earlier this year.  The acquisition of EDM, our largest to date, on 1 September 2014, takes the Group into the fast growing social gaming arena, which we believe will be a significant growth engine for XLMedia in the coming years.

"Our investment across the business is now generating positive results. We have already made a strong start to the second half of the year and believe the business is now very well placed for the remainder of 2014.  It is this continued positive momentum which underpins our confidence in meeting market expectations for the full year and supports our dividend policy."

For further information, contact:

XLMedia PLC                                                                                                                     

Ory Weihs                                                                                                           Tel: [phone] (today)

                                                                                                                                Tel: [phone] thereafter

www.xlmedia.com

Buchanan

Jeremy Garcia / Sophie McNulty  / Clare Akhurst                              Tel: [phone]

www.buchanan.uk.com

Cenkos Securities plc

Ivonne Cantu/ Callum Davidson                                                               Tel: [phone]

 1 Adjusted EBITDA - Earnings before interest, taxes. depreciation and amortisation, and adjusted to exclude share based payments

Operational Review

Introduction

We are pleased to report a strong period of both operational and strategic progress for the Group.  Our successful listing on AIM earlier this year continues to act as a positive catalyst for the Group and has significantly enhanced our brand, market presence and more importantly, ability to execute our strategy and consolidate additional businesses into ours. 

Our core online gambling and social gaming markets continue to expand, underpinned by the global proliferation of mobile and tablet devices.  These strong market fundamentals reinforce our continued confidence in the Group's core business.

During the period we have generated significant levels of organic revenue growth and completed a number of acquisitions, culminating with the acquisition of Excitead Digital Marketing Ltd ("EDM"), a leading operator in the social and mobile segment of our industry, for up to $19 million.

Turning to our results, revenues were up 24% to $19.9M (H1 2013: $16M) and gross profit up 10% to $11.3M (H1 2013: $10.3M), underpinned by high levels of organic growth in all segments. Results reflect the operational foundations we have laid down during the past two years, resulting in a strong platform for future growth to implement our acquisition strategy. With the effect of these investments in infrastructure and organisation, we remain confident of our performance for the remainder of the year and beyond.

As previously stated, the business model and growth prospects for the Group support a progressive dividend policy.  As such management reaffirms its intention to return at least 50% of retained earnings in any financial period to equity holders as dividends and the Board is recommending an interim dividend of $3 million or $0.0158 per share to shareholders on the register on 26 September 2014. In June 2014 the Group announced the 2013 dividend of $5.25 million.

Business Summary

The Group has leading marketing capabilities that attract online users who are then directed to online gambling and social gaming operators' sites and applications, in return for either a share of the revenue generated by such players, a fee generated per player acquired or action performed, fixed fees or a hybrid of any of these models.

The three principal revenue generating activities of the Group are: content and search, digital media buying and our own affiliate network.

Content and search: XLMedia earns the majority of its revenue from the monetisation of traffic generated by its own portfolio of websites. The Group owns more than 2,000 websites which provide gambling related content, in 18 languages, to potential players. These sites' content, written by professional writers, is designed to attract online gamblers which the Group then directs to gambling operators. The sites either direct players to a certain operator or allow the players to select the operator most relevant to their requirements.

Media Buying: The Group's Media Buying division acquires online advertising media targeted at potential players with the objective of directing them to the Group's customers. The Group buys advertising space on search engines, websites, mobile websites & applications and social networks and places adverts referring potential players to the Group's customers' websites or to its own websites. The Group uses proprietary campaign optimisation and analysis tools as well as a strong business intelligence ("BI") backend expertise.

Affiliate network: The Group currently manages approximately 300 active affiliates, whose role is to direct potential players to the Group's customers for which the Group receives revenues. The Group is then responsible for paying its affiliate partners. The Directors believe that the Group's affiliate programme is attractive to existing and potential affiliates as it enables them to have a single point of contact to direct traffic to, and receive monies from, rather than engaging in multilateral negotiation, administration and collection of revenues from the operators.

Growth strategy

Since its IPO in March 2014, XLMedia has had a very clear growth strategy to expand and diversify its activities into complementary areas and act as a consolidator in a fragmented market. As demand for digital marketing within the gambling and social gaming sectors continues to grow, XLMedia is perfectly situated to capitalise on this growth.

XLMedia continues to focus on growing its market share in key territories, including Scandinavia and English and German speaking countries particularly, as the EU remains the biggest and most sophisticated gambling arena worldwide. The current operation structure, following all additions made during 2013 and H1 2014, allows for expansion without significant capital expenditure and the Group looks towards extending its reach in territories such as the US,  Canada, Austria, Germany, Switzerland, Greece and Denmark as potential growth geographies.

Since its IPO earlier this year, XLMedia has made good progress towards this strategy, completing acquisitions all of which are highly complementary to the existing business, delivering a wide range of synergies and strategic benefits. 

Mobile and tablet users are becoming increasingly important to the online gambling industry with mobile users expected to account for 44% of the global interactive gambling market by 2018, according to H2 Gambling Capital. As this growth continues, the Group's online marketing practices become even more essential to maintain market presence for gambling and social gaming operators. As industry leaders in mobile marketing and social media activities, with content and search skills set to continue to evolve and further investment in innovative marketing technologies and optimisation, the Group is well positioned to maximise its potential.

Turning to the US market, although it is currently in its initial stage, it is expected to generate growth in the regulated states in the near future with the introduction of regulated online gambling to new states. The Group is positioning itself as a leading provider once further states open, and has established a strategic partnership with a leading online gambling operator, has acquired a number of domains and websites targeted at the north American markets and has recruited the appropriate teams as well as discussing with both New Jersey and Nevada regulators to obtain a full marketing licence to allow more flexible revenue models. 

Acquisitions

The acquisition strategy of the Group is consistent with our broader growth strategy to increase our presence in regulated markets; expand and develop new territories; and diversify across selected vertical markets, products and channels; whilst acting as a consolidator in a largely fragmented market. The mobile arena and more specifically mobile enabling technology, is now a key focus for the Group as both mobile and tablet gaming and gambling increase.  

We have a pipeline of potential acquisition prospects in these areas.

We are pleased to have made significant progress securing attractive acquisitions for the Group, which include the following transactions:

·     Q2 2014 - completing two small bolt-on acquisitions of high potential domains operating in North American markets for a total consideration of $430,000.

·     June 2014 - a leading Scandinavian website network within the online gaming sector for a cash consideration of $2.3 million - offering a complementary geographic footprint to XLMedia's existing Scandinavian presence and extending its reach into Denmark, a fully regulated market.

·     August 2014 - the Group acquired a website which is focused on UK web and mobile traffic and specialised in sports betting content for a cash consideration of £4 million ($ 6.72 million). This acquisition gives the Group access to new sports betting customers in this regulated market and management is planning to enhance the new websites, translating them into more languages and extending them to new markets.

·     September 2014 - the Group announced its largest deal to date with the acquisition of ExciteAd Digital Marketing Ltd ("EDM") for a total consideration of up to $19 million in cash and shares.  EDM provides marketing services to game developers and eases the Group penetration to the social and mobile gaming market, which is a rapidly developing and growing market and one that is not subject to the same regulatory requirements as the online gambling market.

In addition, earlier this month the Company announced it had agreed to acquire an additional 21% in the joint venture which operates the Group's Finnish websites (the "JV"), for a cash consideration of US$1.49 million. The acquisition will take XLMedia's holding in the JV to 93% (previously 72%). This acquisition will increase the Group's net income attributable to its shareholders. This will in turn increase the retained earnings available for distribution to shareholders as dividends.

Management believes that consolidation in what is a highly fragmented market within the gaming arena will help accelerate innovation, geographic reach and the Group's market position.  Our strengthened balance sheet following the successful placing and admission to AIM continues to allow the Group to accelerate its growth objectives through its acquisition strategy.

EDM Acquisition

On 1 September, the Group announced its largest deal to date with the acquisition of EDM (trading as "Dauup.com").  EDM specialises in social and mobile advertising specifically targeted at 'user acquisition' for social gaming applications.

EDM provides marketing services to game developers in social and mobile platforms, providing the Group with an improved footprint in the social and mobile gaming market, which is rapidly developing and growing and one that is not subject to the same regulatory requirements as the online gambling market.  EDM's principal geographical market is the US, in addition to other English and German speaking markets.

EDM's revenue model is based mainly on performance and for the 12 months ended 30 June 2014 EDM delivered revenues of $12.8M and PBT of $3.0M with approximately 50% of revenues generated through mobile users. The acquisition was earnings enhancing and management expects EDM's contribution to support a strengthened performance in the second half of the current financial year and beyond.

The acquisition of EDM will diversify the business into new products and markets, targeting a new customer base, as well as providing enhanced growth opportunities within existing markets. In particular, benefits for the Group include:

·     Strong growth in a fast paced and expanding market - social and mobile games and applications are a fast expanding market which is not subject to the same regulatory regime as the online gambling market. EDM will provide the Group additional growth opportunities in this new area.

·     Social  expertise  - EDM's  expertise  in  social  and  mobile  marketing  supplements  XLMedia's knowledge and understanding in marketing online gambling.

·     Mobile expertise - approximately 50% of EDM's revenues are generated through mobile users. 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, according to market research provider H2 Gambling Capital (H2).

·     Revenue streams from regulated products and markets - social gaming, which does not involve real money gambling, does not require a licence. Expanding XLMedia's product range into this sector will therefore strengthen the Group's position in regulated online gambling markets such as the US and UK.

·     A new customer base - EDM's customers typically comprise of game developers in social platforms, presenting a new target audience for XLMedia.

·     An expanded geographic reach - EDM's principal market is the US, with additional revenues derived from other English and German speaking markets as well as other countries outside of XLMedia's core Scandinavian markets, representing diversification for the Group into new geographies.

·     Strong analytic systems - EDM uses its proprietary internal systems for both analysis of performance as well as for campaign definitions and building. Integrating these tools into XLMedia's own network will contribute to the Group's performance and improvement.

Divisional update

As we add scale and geographic diversity across our business, our operational divisions have also expanded.

Within Media Buying, growth continues to be supported by new media channels, such as display and social media, which represent new areas for the Group compared to 2013. Whilst revenues within Media Buying grew, as expected, segment profit remained stable due to lower margins resulting from the entry into this new media channel. Despite the lower margin in display and social media buying compared to the Pay Per Click search campaigns we anticipate substantial volume increases and platform innovation to offset any margin dilution going forward.  Both social media and mobile remain significant revenue and profit drivers for our Media Buying activities in the near term.

Content and search, which remains a highly specialised division, continues to innovate and invest in platform development.  Customer activity with key European gaming operators remained strong.

Elsewhere, we have increased our ongoing investments in R&D, developing our core BI systems to support sophisticated campaign management and improve margins for new media channels such as social and mobile networks, which represent the Group's significant growth engines. We believe that technology is a competitive advantage in our market and therefore intend to invest more in developing and acquiring mobile, social and BI capabilities in the coming years.

Our Affiliate Network continues to generate significant traffic for both the Group and our customers.  We continue to expand our incentive packages and have invested in additional back office support providing greater levels of statistics and intelligence for our partners. 

We are also pleased to have broadened our customer base during the period with our largest customer now accounting for 17% of Group revenues compared to 25% in 2013 and 31% in 2012.

Current Trading & Outlook

The Group has performed strongly in the first six months of the year, with good sales momentum in core European markets.

The recent acquisitions are expected to have a positive impact on both H2 2014 and FY 2015.  As a result, management expects both sales and EBITDA in H2 to exceed H1 2014 with full year results in line with market expectations.

The Group continues to see strong levels of demand in its core markets and anticipates further traction in new and expanding territories.  In addition, the Group remains well placed to pursue further strategic bolt-on acquisitions, underpinned by its strong financial position.

With the progress made in H1 2014, and in view of the strong second half weighting to our business, the Board remains confident of delivering continued growth in 2014 and beyond.

Financial Review

Results summary, US$ millions:

	H1 2014	H2 2013	H1 2013
Revenues	19.9	18.5	16.0
Gross Profit	11.3	10.2	10.3
Gross Margin	57%	55%	64%
Operating expenses	6.2	5.1	3.3
Adjusted Operating expenses          excluding share based payments	5.4	5.0	3.3
Adjusted EBITDA*	6.4	6.0	7.2

* Earnings before interest, taxes, depreciation and amortization and excluding IPO expenses and share based payments

The first six months to 30 June 2014 saw a record performance in revenues.  Content and Search accounted for 53.6% of revenues or $10.7 million (H1 2013: $9.4M, 58.6%), Media Buying for 33.8% or $6.7 million (H1 2013: $4.0M, 24.8%) and the affiliate network for 12.6% or $2.5 million (H1 2013: $2.7, 16.6%).

Growth in the content segment was mainly due to increased performance of our current website network, whilst the H1 2014 results do not reflect the additions of the recent acquisitions.

Growth in the Media segment is attributable to the fast growing of new media channels such as social networks and mobile advertising as well as posting ads with display networks. Management expects to see even higher increase in growth of this segment with recent acquisition of EDM which is focused on social and mobile advertising for game developers.

Gross profit rose 10.8% in H1 2014 to $11.3 million (H2 2013: $10.2M). Gross margin reflects an increase to 57% (H2 2013: 57%) as benefits of scale take effect as the business grows as well as additional BI tools and organisation backend support implemented and increased efficiency. Gross margins reflect a decrease compared to Gross margins in H1 2013 (64%) due to lower margins resulting from expansion of media channels, such as display media buying and social media, which are characterised by lower margins compared to the paid search campaigns in previous years.

Operating Expenses have increased to $6.2 million (H1 2013 $3.3M, H2 2013: $5.1M). The increase compared to H2 2013 is mainly attributed to share based payments to employees. Excluding share based payments operating expenses increased 8% reflecting the additional costs involved with being a listed company.  The significant investments in building our operational teams to position the Group for growth are completed and the current run rate of operational expenses (excluding share based payments) reflects the required levels of expenses going forward for current size of the group.  

Adjusted EBITDA was $6.4M (H1 2013: $7.2M; H2 2013: $6.0M) reflecting an 8% increase compared to H2 2013 as a result of increase in sales and gross profit. Adjusted EBITDA reflects a decrease compared to H1 2013 as a result of the additional operating expenses as a PLC.

As at 30 June 2014 XLMedia presented a very strong balance sheet:

·     Cash balance of $56.6M (H2 2013: $15.5M)

·     95% total equity to total assets ratio (H2 2013: $79%)

·     Working capital of $59.7M (H2 2013: $15.8M)

Cash flow from operating activities increased as well, to $5.8M (H2 2013: $4.1M). Cash flow for investing activity amounted to $3.5M (H2 2013: $0.8M) reflecting the acquisition of Scandinavian network in June this year and additional domain acquisitions as well as investing in our software and BI systems. Cash flow from financing activities amounts to $38.9M (H2 2013: $8.0M) which consisted of the net IPO proceeds of $48.9M offset by dividend payment of $5.2M, other long term liabilities paid as well as dividends to non-controlling interests.

The Board is recommending an interim dividend of $3 million or $0.0158 per share to shareholders on the register on 26 September 2014. The interim dividend is in line with the Group's stated strategy to return at least 50% of retained profits to shareholders and reflects the strong outlook for the Group.

INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION AS OF JUNE 30, 2014
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
		Six months ended 30 June				Year ended 31 December
		2014		2013		2013
		Unaudited				Audited
		U.S. dollars in thousands (except EPS data)
Revenues		19,877		16,005		34,503
Cost of revenues		8,611		5,747		14,054
Gross profit		11,266		10,258		20,449
Research and development expenses		427		392		907
Selling and marketing expenses		1,129		826		1,785
General and administrative expenses		4,677		2,122		5,755
		6,233		3,340		8,447
Operating income before expenses in connection with IPO		5,033		6,918		12,002
Expenses  in connection with IPO		461		-		-
Operating income after expenses in connection with IPO		4,572		6,918		12,002
Finance expenses		(263)		(428)		(496)
Finance income		310		136		123
Income before other income (expenses), net		4,619		6,626		11,629
Other income (expenses), net		(9)		-		32
						11,661
Profit before taxes on income		4,610		6,626
Taxes on income		324		124		552
Net income and other comprehensive income		4,286		6,502		11,109
Attributable to:
Equity holders of the Company		3,001		5,415		8,838
Non-controlling interests		1,285		1,087		2,271
		4,286		6,502		11,109
Net earnings per share attributable to equity holders of the Company:
Basic and diluted net earnings per share (in  U.S. dollars )		0.02		0.05		0.09
Weighted average number of shares used in computing basic earnings per share (in thousands)		159,103		100,000		101,436
Weighted average number of shares used in computing diluted earnings per share (in thousands)		162,087		100,000		101,820

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

							30 June				31 December
							2014				2013
							Unaudited				Audited
							U.S. dollars in thousands
Assets
Current assets:
Cash and cash equivalents							56,632				15,455
Short-term investments							465				428
Trade receivables							4,912				4,498
Related parties							-				147
Other receivables							1,675				1,974
							63,684				22,502
Non-current assets:
Long-term investments							346				340
Other receivables							507				552
Property and equipment							759				738
Intangible assets							9,939				6,853
Goodwill							2,416				2,416
							13,967				10,899
							77,651				33,401
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables								1,808			1,536
Related parties								-			605
Contingent consideration payable								-			2,867
Other liabilities and accounts payable								2,164			1,646
								3,972			6,654
NON-CURRENT LIABILITIES								-			227
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:
Share capital								*)			*)
Share premium								62,152			14,311
Capital reserve from share-based transactions								1,997			479
Capital reserve from transaction with non-controlling interests								106			106
Retained earnings								8,248			10,494
								72,503			25,390
Non-controlling interests								1,176			1,130
Total equity								73,679			26,520
								77,651			33,401

*) Lower than U.S. dollars 1 thousand.

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Six months ended 30 June				Year ended 31 December
		2014		2013		2013
		Unaudited				Audited
		U.S. dollars in thousands
Cash flows from operating activities:
Net income		4,286		6,502		11,109
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to the profit or loss items:
Depreciation and amortisation		514		317		794
Finance expense (income), net		(318)		119		255
Loss (gain) from sale of assets		9		-		(32)
Cost of share-based payment		1,137		-		479
Taxes on income		324		124		552
		1,666		560		2,048
Changes in asset and liability items:
Decrease (increase) in trade receivables		(414)		59		(1,546)
Decrease (increase) in other receivables		(508)		79		(183)
Decrease (increase)  in related parties		(3)		275		93
Increase in trade payables		272		533		682
Increase in other accounts payable		455		171		357
		(198)		1,117		(597)
Cash paid (received) during the period for:
Interest paid		-		(131)		(136)
Interest received		21		4		13
Taxes paid		(98)		(249)		(547)
Taxes received		113		-		-
		36		(376)		(670)
Net cash provided by operating activities		5,790		7,803		11,890

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Six months ended 30 June				Year ended 31 December
		2014		2013		2013
		Unaudited				Audited
		U.S. dollars in thousands
Cash flows from investing activities:
Purchase of property, plant and equipment		(174)		(99)		(482)
Decrease in other financial assets, net, acquired in business combination				-		457
Purchase of intangible assets		(3,484)		(383)		(936)
Proceeds from sale of assets		178		-		50
Short- term and long-term investments		-		(265)		(607)
Net cash used in investing activities		(3,480)		(747)		(1,518)
Cash flows from financing activities:
Prepaid expenses for share capital  issuance		-		-		(707)
Sale of shares to non-controlling interests		-		31		31
Financing by non-controlling interests		57		-		10
Dividend paid to equity holders		(5,247)		-		(1,800)
Dividend to equity holders as result of the acquisition of Subsidiary		-		-		(2,888)
Repayment of long-term and short-term liabilities		(716)		-		-
Dividend paid to non-controlling interests		(1,301)		(1,098)		(2,055)
Issue of share capital (net of issue costs)		48,917		-		14,311
Proceeds from exercise of options		12		-		-
Repayment of liabilities to Related Parties		(2,855)		(4,381)		(4,381)
Net cash provided by (used in) financing activities		38,867		(5,448)		2,521
Increase  in cash and cash equivalents		41,177		1,608		12,893
Cash and cash equivalents at the beginning of the period		15,455		2,562		2,562
Cash and cash equivalents at the end of the period		56,632		4,170		15,455

Significant non-cash transactions:
Dividend payable to equity holders as result of the acquisition of Subsidiary		-		-		512
Dividend payable to non-controlling interests		-		-		237
Receivable from sale of assets		-		-		826

NOTES TO INTERIM CONDENSED CONSOLIDTED FINANCIAL INFORMATION

NOTE 1:    GENERAL

The Group is a global digital publisher and marketing company which attracts paying users from different online channels and directs them to online gambling operators.

The Group operates as a marketing affiliate to multiple gambling operators. The Group attracts players through online marketing techniques and subsequently seeks to channel high value "traffic" (i.e. players) to gambling operators who, in turn, convert such traffic into paying customers. Online gamblers are attracted by the Group's publications and advertisements and are then directed, by the Group, to online gambling operators in return for a share of the revenue generated by such players, a fee generated per player acquired, fixed fees or a hybrid of any of these three models.

NOTE 2:    OPERATING SEGMENTS

(a) General:

The operating segments are identified on the basis of information that is reviewed by the chief operating decision maker ("CODM") to make decisions about resources to be allocated and assess its performance. Accordingly, for management purposes, the Group is organised into operating segments based on the products and services of the business units and has operating segments as follows:

Content and Search     - Engine Optimisation (''Content'')

-

The Group owns more than 2,000 websites which provide gambling related content, in 18 languages, to potential players. The sites' content, written by professional writers, is designed to attract online gamblers which the Group then directs to gambling operators. The sites either direct players to a certain operator or will allow the players to select the operator most relevant to their requirements.

Media	-	The Group's Media Buying division acquires online advertising Media targeted at potential players with the objective of directing them to the Group's customers. The Group buys advertising space on search engines, websites and social networks and places adverts referring potential players to the Group's customers' websites or to its own websites.
Affiliates Network	-	The Group manages affiliates, whose role is to direct potential players to the Group's customers for which the Group receives revenues. The Group is responsible for paying its affiliate partners. The Group's affiliate program enables affiliates to have a single point of contact to direct traffic to, and receive monies from, rather than engaging in multilateral negotiation, administration and collection of revenues.

Segment performance (segment income) is evaluated based on revenues less direct operating costs.

Items that were not allocated are managed on a group basis.

NOTE 2:    OPERATING SEGMENTS (cont.)

(b) Reporting on operating segments:

		Content segment		Media segment		Affiliates Network segment		Total
		U.S. dollars in thousands
Six months ended 30 June 2014 (unaudited):
Revenues		10,659		6,716		2,502		19,877
Segment profit		7,986		2,927		353		11,266
Unallocated corporate expenses								(6,694)
Other expenses, net								(9)
Finance income, net								47
Profit before taxes on income								4,610

		Content segment		Media segment		Affiliates Network segment		Total
		U.S. dollars in thousands
Six months ended 30 June 2013 (unaudited):
Revenues		9,374		3,976		2,655		16,005
Segment profit		7,340		2,567		351		10,258
Unallocated corporate expenses								(3,340)
Finance expense, net								(292)
Profit before taxes on income								6,626

		Content segment		Media segment		Affiliates Network segment		Total
		U.S. dollars in thousands
Year ended 31 December 2013 (audited):
Revenues		18,840		10,071		5,592		34,503
Segment profit		14,234		5,583		632		20,449
Unallocated corporate expenses								(8,447)
Other income, net								32
Finance expense, net								(373)
Profit before taxes on income								11,661

NOTE 2:    OPERATING SEGMENTS (Cont.)

(c) Geographic information:

Revenues classified by geographical areas based on internet user location:

		Six months ended 30 June				Year ended 31 December
		2014		2013		2013
		Unaudited				Audited
		U.S. dollars in thousands
Scandinavia		12,921		9,812		21,748
Other European countries		2,320		2,340		4,708
North America		765		162		418
Other countries		428		246		760
Total revenues from identified locations		16,434		12,560		27,634
Revenues from unidentified locations		3,443		3,445		6,869
Total revenues		19,877		16,005		34,503

 

END

 

 

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