#111: XLMedia PLC; Malcolm Ingalsbe and Ladislao Zichy

In this episode, I sit down with Malcolm Ingalsbe and Ladislao
Zichy Thyssen, co-author Quantrarian Research, a research blog
covering microcap equities. We discuss a long position of theirs,
XLMedia PLC


 
Summary

XLMedia PLC (LSE: XLM) is a leading digital publishing and
affiliate marketing company that owns 2000+ informational
websites across several high-growth verticals. The company
generates sales primarily through revenue-sharing agreements;
they publish editorials and other informational content (i.e.
product reviews, rankings, ongoing deals, etc.) on their websites
which drive visitors to their clients’ services.


 
History and Problems

XLMedia has experienced tremendous growth in the past decade,
increasing revenues by over 750%. However, XLMedia’s top-line
growth has retracted in recent years as it faces a combination of
regulatory headwinds, search engine demotions, and the
cancellation of sporting events. Worries over these complications
have driven the share price down over 80% in the last two years,
yet the company produced over 50% free cash flow TTM. 


 
New strategy

The hindrances currently being faced have precipitated the
company’s plan to employ a “quality over quantity” consolidation
strategy. This entails a shift of focus towards selling non-core
assets and establishing a meaningful presence in mature and
regulated markets that are less prone to volatility. This
includes infiltrating the U.S. sports-betting market, which
should experience very high growth via regulatory tailwinds over
the next several years. The company’s new management team is well
incentivized and brings more experience to the table than the
prior team. 


 
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