Member Info for tommy15

Right, unless it turns out they have to hand back £5m from the whopper of a funded case last year (plus however much from the last 6 years).

OK interesting, thanks FOMO. I expect we'll get an update soon.

Wait, I think I misread the articles. I don't see anything about funders having to pay back any revenues they made on cases settled before this decision. The articles all say that for cases that are still ongoing but have already had work done, there may be significant writedowns on that work. But again, MANO has relatively a few such cases.

I think the funded whale settled just in time!

Obviously not good, but may not be too catastrophic.

According to their report, 96% of their new cases last FY were purchased, not funded. So the fundamental business model shouldn't be too badly affected.

But in 2023 a whale of a funded case settled, accounting for £4.9m in realised revenue. I have no idea what kind of "clawback" will be possible here, but all the articles state that this is a definite concern. Presumably MANO is trying to figure out their exposure here before they update the market.

Does anyone know whether the cartel cases are funded? Seems like this supreme court case was based on the cartel cases, so I assume they are.

Unusual to have this much activity with no news. Not complaining though!

As "excuses" go, the government artificially shutting down your industry is a pretty good one! But the underlying need for these services didn't go anywhere, and that pent-up demand is exactly what we're seeing now.

This share does require patience because there is a significant time lag between an insolvency happening and Mano actually seeing any cash

1. some kind of alleged shenanigans occur

2. people attempt to resolve the dispute without resorting to law. Lots of emails and phone calls back and forth, waiting around for money that has been promised to actually appear, etc

3. the case will go to some independent insolvency practitioner who will review the case before bringing it to mano

4. mano then re-reviews the case to confirm it meets their criteria

5. mano actually litigates the case (or funds the litigation, or some combination)

6. many eventually gets paid

Each of these steps can take many months, so it's inevitable that there is a long lag after rebooting the industry.

So to say that Mano "should have been killing it" shows a misunderstanding of the business. And their latest update shows that they _were_ killing it in H2!

For me the big question is valuation. It seems like the market isn't sure how to value this company and it's relatively unusual business model. In 2019 the price averaged ~450 with revenues of ~14m, and a whopping net margin of ~33%. This put them on a PE of ~40, suggesting a huge amount of optimism - possibly justified by 2020's results, where revenue grew ~35%, and the net margin grew to an amazing 40%.

...and then the wheels came off during COVID, revenue growth went into reverse, and incomes went negative - not helped by the double whammy of the adverse decision plus the writedown based on how much they thought people could actually pay up given the state of the economy. So where does that leave us? If Mano is profitable this half / FY (which I strongly believe they will be), I suspect that multiple of 40 is long gone. What's a reasonable multiple? Is PE the right way to think about valuing this stock? That's why I was interested in the PBV argument that the OP started this thread with - shame they haven't followed up!

What would be a fair multiple in your opinion?

That was brief! I guess a lot of people are desperate to unload here...

And just the 1 today. Why even bother??

Could it be as simple as the announcement of the full results on 22 June reminded people that this share exists? Could that really be how the stock market works?!

Thanks Terry, this has confirmed that you have no genuine knowledge of or interest in XLM, and are just trying to cause trouble. Good to know!

There is a bull case worth making here too. XLM generated a ton of cash last year (£16M!). Half of that went on deferred considerations, which are mostly paid off now; the other half on R&D (websites). Over time these deferred considerations, plus the writedowns of the old business, will be flushed out of the system. More of the revenue will hit the bottom line as profit, and more of the cash will be available to.... pay as dividends?? XLM could be run as a fairly low lift dividend play. There will be good years, when States legalise and we get a spike, and/or the wider industry decides to push on the promotions for new customers, and leaner years, which 2023 is shaping up to be.

Another factor that could be big for XLM is AI. XLM is (mostly) in the business of generating quality sports-related content that also encourages users to place a bet. The key to its success is producing quality content that users actually engage with, under a brand that the users trust and keep coming back to. XLM already owns those brands; maybe it could use AI to generate the content at lower costs? To be fair I don't know how much of XLMs costs related to paying content creators, but "staff costs" account for 28% of revenue; any reduction would go straight to the bottom line.

Overall I do think XLM looks oversold. Even if it doesn't turn out to be a huge growth play (that feels unlikely at this point) it could be a meaningful dividend play, and I suspect it takes the market some time to switch from one mindset to the other.

Then again, I would love to know what bad new the market was already pricing in, given that today's announcement apparently wasn't already priced in!

I have a large holding in XLM, so please don't accuse me of "deramping", but I think it's important to see things realistically here.

First: this is not "MM manipulation". This share is a minnow, and doesn't trade high volumes, and simply isn't worth the MM's time to manipulate.

Second: £109M of XLM's assets - thats over 83% of the total - are intangible/goodwill, the majority of this coming from the websites they have bought. If it turns out that the business model is not as profitable as we all hoped, then those assets are worth far less than they are carrying for on the balance sheet today.

Third: while I agree that the "spikiness" was a known factor, the fact that the entire market seems to be in a slump is also very relevant, and is unrelated to the spikes.

What surprises / worries me is that the contents of this announcement weren't already priced in. As discussed, the spikiness should have been well understood, and a slump in the wider gambling sector seems like something that anyone watching the industry closely would know about - and would explain the steady downward trickle over the last few months. So why is this announcement a surprise?

Honestly, I'm feeling more and more on the fence about XLM. Here's a brief summary of the pros and cons, please add any I've missed!

Pros:

- many more states - including some whoppers - have yet to allow gambling -> room for growth

- company has almost finished it's turnaround & writedowns; almost entirely focused on new strategy

- generally in good financial health

- potential takeover target?

- a slump in the wider market should be temporary. Also things like MA not spiking like NY did seems reasonable given the timing (i.e. after the superbowl) - presumably all the would-be bettors will just join early next year instead.

Cons:

- the regulatory environment pendulum already seems to be swinging the other way - e.g. states adding laws banning revenue-share models

- there is no guarantee that the other States will follow suit. Many times States don't all adopt the same laws - that's kind of the entire point of having States!

- still yet to be seen what the "steady state" revenue will end up looking like, when there are no more spikes.

- presumably the market will reach saturation at some point? I.e., when there are no more people out there who want to place a sports bet, then what does XLM do? Just wait for the next crop of punters to turn 18/21/whatever-the-legal-age-to-gamble is? Or focus on convincing existing punters to sign up to multiple betting sites, each one paying a fee?

Good debate here.

Unhooked, I think this share 100% would have been counter cyclical, except that this cycle happens to be driven by COVID, and that came with an artificial cessation of insolvencies.

In many ways the strong recent results show that is _is_ counter cyclical! It will just take a while for both the bottom line and the share price to catch up.

Yeah it's pretty tough to watch.

My best explanation is that in the current market, merely the promise of an impending turnaround isn't enough. Investors are so cagey (and interest rates are so high) that only actual profits _today_ are worth investing in (and, ideally, dividends).

So it's just a waiting game. Either we wait until MANO publishes some profits or announces a divi (unfortunately another 6 months minimum), or until the market changes mood (who knows!). But the fundamentals are still there.

Thanks Oldboy, appreciate it!

Also worth pointing out that most of their US revenue is currently CPA (according to their own reports), so all the growth & progress we’ve seen so far is based on CPA, and it hasn’t been to shabby!

Pinging this back to the top, because I think it’s important

Haven’t seen it mentioned on this board, but it seems clear that the recent price movements are due to the decision by New York State to ban revenue sharing deals for sports book marketing. Massachusetts has done something similar.

I’m trying to gauge exactly how bad this is for XLM. They clearly state in their recent report that they are looking to make revenue sharing deals “where possible”, and these types of deals definitely lead to more revenue over the long term, albeit less predictable.

I have also read come commentary suggesting that ultimately it doesn’t make all that much difference - marketers will simply charge a higher CPA and claw back any losses from not sharing revenue long-term.

Does anyone have any affiliate marketing experience? Can you shed some light on this?

Yeah this feels like a massively positive update.

The appeal not going our way is a shame, of course, but it's the nature of the beast and to be expected. Credit to MANO for publishing the TU the day after the judgement - presumably they were waiting on that to give the update. And at least the uncertainty is over.

Truck cartel update - "materially correct" sounds slightly weasily to me, but it does imply a low upper bound on the amount by which the carrying value of those cases could be reduced. So really that removes another large chunk of uncertainty around MANO's prospects. Which is huge, actually.

BBL stuff - as they say still early days, but obviously everything reported here is very promising.

Pipeline - for me this is the big one. It wouldn't matter if MANO had won the appeal if their pipeline was still in tatters. But the extremely strong growth here is exactly what I needed to see. Very very positive!

Not sure what it's gonna take to get a true re-rating here - we may have to wait until an actual unadjusted profit, or reinstatement of dividends. But it's surely just a matter of time now, a lot of uncertainty has been removed!

I do agree… but on the other hand, the pandemic is well in the rear view mirror by now and there has been no concrete evidence of the expected uptick in business for Mano.

For me it all comes down to the next update. The narrative for a long time has been that the pandemic left a big backlog of zombie companies that would be insolvent if not for the government help, and I’m hoping (expecting!) to finally see some reflection of this in the numbers. If that doesn’t happen it may be time to reconsider.