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Eric Schleien discusses value investing, rational investment analysis, and vital mental models.
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Monday Jul 27, 2020
Monday Jul 27, 2020
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.
Staying In Touch With Eric Schleien
Staying In Touch With Malcolm and Ladislao
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