Catena Media
Short-term earnings impact as stronger financial position enables transition to more sustainable revenue model
Catena Media plc Interim Report January – September 2023
Highlights
- Group revenue decreased by 28 percent in Q3, primarily reflecting a strategic transition of some contracts in North America from CPA to revenue share.
- In North America, 17 percent of new depositing customers (NDCs) were recruited under revenue share deals in Q3. In September, this number increased to 24 percent.
- The North American EBITDA margin of 44 percent (56) in Q3 remained strong despite the revenue share transition and stronger competition.
- The sale of the group’s Italian online sports betting and casino gaming business for EUR 19.8m on 21 November completed the strategic review announced in 2022. These assets are treated as discontinued in this report.
- Following the strategic review, 90 percent of group revenue derives from regulated markets.
- Reported net debt stood at EUR 25.4m on 30 September. After adjustment for a scheduled inflow of EUR 46.6m in divestment proceeds from 2023 to 2025, the group had a net cash position of EUR 21.2m.
- After the quarter, the group invested in an artificial intelligence joint venture to develop an AI-based affiliation platform for Catena Media as part of plans to drive future growth.
- In October, total revenue from continuing operations decreased by 37 percent compared to last year, reflecting the shift to revenue share. Of NDCs, in October 23 percent were recruited on revenue share in North America.
July–September 2023
- Revenue from continuing operations was EUR 15.9m (21.9), a decrease of 28 percent.
- Revenue in North America decreased by 29 percent to EUR 13.3m (18.6), equivalent to 84 percent (85) of group revenue from continuing operations.
- New depositing customers (NDCs) from continuing operations totalled 44,986 (68,174), a decrease of 34 percent.
- Adjusted EBITDA from continuing operations decreased by 65 percent to EUR 3.1m (8.8), corresponding to an adjusted EBITDA margin of 19 percent (40).
- EBITDA from continuing operations, including items affecting comparability of EUR 0.3m (-0.02), totalled EUR 2.8m (8.8) corresponding to an EBITDA margin of 18 percent (40).
- Earnings per share from continuing operations totalled EUR -0.02 (0.08) before dilution and EUR -0.02 (0.06) after dilution.
- Cash and cash equivalents were EUR 33.5m (28.3) on 30 September.
- Outstanding shares totalled 78,773,274 and outstanding warrants totalled 27,023,088 on 30 September.
- The sale of the group’s Italian sports betting and casino assets, treated as discontinued in this report, gave rise to an impairment charge of EUR 2.7m.
January–September 2023
- Revenue from continuing operations was EUR 62.3m (74.1), a decrease of 16 percent.
- Revenue in North America decreased by 13 percent to EUR 54.8m (63.0), equivalent to 88 percent (85) of group revenue from continuing operations.
- New depositing customers (NDCs) from continuing operations totalled 186,129 (243,431), a decrease of 24 percent.
- Adjusted EBITDA from continuing operations decreased by 34 percent to EUR 23.7m (36.1), corresponding to an adjusted EBITDA margin of 38 percent (49).
- EBITDA from continuing operations, including items affecting comparability, totalled EUR 22.8m (33.9) corresponding to an EBITDA margin of 37 percent (46).
- Earnings per share from continuing operations totalled EUR 0.09 (0.31) before dilution and EUR 0.06 (0.21) after dilution.
- Cash and cash equivalents were EUR 33.5m (28.3) on 30 September.
- Outstanding shares totalled 78,773,274 and outstanding warrants totalled 27,023,088 on 30 September.
Significant events during Q3 2023
- On 17 July the group launched a new programme to buy back up to SEK 55m of Catena Media shares.
- On 3 August the group agreed to sell its UK and Australian online sports betting brands for EUR 6.0m to Moneta Communications Ltd.
- On 7 August Catena Media announced the departure of Per Widerström from the board of directors.
- On 8 August, the group launched a programme to reduce annual costs by EUR 3.8-4.2m by streamlining support functions.
- On 10 August Catena Media announced a media partnership with leading US-based sports publisher The Sporting News covering sports betting, casino gaming and fantasy sports in the Americas.
- On 28 September the group launched online sports betting affiliation in Kentucky, with an adult population of 3.5m.
- The group repurchased 2,197,516 ordinary shares from 1 July to 30 September 2023.
Significant events after the period
- On 24 October Catena Media announced the appointment of Pierre Cadena as Vice President Corporate Strategy.
- On 7 November Catena Media announced the completion of its share buyback programme. From 17 July to 31 October 2023, the group purchased 2,510,116 Catena Media shares for SEK 54,970,745. As of 7 November 2023, Catena Media held 3,124,309 of its own ordinary shares. The total number of shares in Catena Media plc is 78,773,274.
- On 3 November the group launched online sports betting affiliation in Maine, with an adult population of 1.1m.
- On 21 November the group announced agreements to sell its Italian online sports betting and casino assets for EUR 19.8m. The sale completed the strategic review announced by the board of directors in May 2022.
CEO Michael Daly’s comments
It is 18 months since we announced our strategic review of the business and embarked on a journey that would streamline Catena Media and equip us for the next chapter in our story. That journey, during which we sold assets for EUR 76m, repaid debt and refocused the organisation, has come full circle. The divestiture of our Italian businesses completed the review process and finalised our strategic reset. Today, we stand strong as a lean and robust organisation that is net cash positive and geared to invest in future technologies to drive expansion in our core North American market.
We believe stable, regulated markets offer the best platform to drive sustainable growth in our business over the long term. Predictable regulatory frameworks provide stability for operators and affiliates alike. They create a structure that allows Catena Media to respond effectively to market needs and to confront the operating challenges and opportunities we face in North America and beyond.
Shift initiated from CPA to revenue share
The proceeds from the asset sales implemented under the strategic review have allowed us to repay debt and created the financial scope to commence a strategic shift to a more balanced mix of revenue sources.
In Q3, we took our first major step to shift some cost-per-acquisition (CPA) contracts to a revenue share model. In the quarter around 17 percent of our new depositing customers in North America were recruited under revenue share – and more than 24 percent in September.
This rebalancing will secure a more sustainable revenue inflow over time but creates a negative short-term revenue impact as the volume of upfront CPA payments is reduced. This may require a potential review of our financial targets, but we expect the shift to contribute to higher total revenue per new depositing customer. And over the longer term, the greater stability of incoming payments under revenue-share arrangements will enhance our ability to plan investments in the organisation and growth-oriented projects. It will also offset some of the volatility inherent in a CPA-only model, especially in the context of new state launches.
Stronger competition and lower marketing spend by operators
In the quarter, we encountered intensified competition which adversely impacted revenue and also squeezed EBITDA. For Catena Media as a well-established affiliation leader in the North American market, greater competitive pressure is inevitable as new players enter the arena, attracted by state legalisation processes and solid sector fundamentals.
Competition was particularly strong in sports betting, where pressures were compounded by operators moving to protect margins by reducing the CPA rates they pay to affiliates. In some cases, CPA rates were as much as 25 percent lower compared to the same period last year. This shift in CPA rates presents us with a greater opportunity to transition more contracts towards stronger revenue share agreements.
Concurrently, an increased focus on profitability among operators led them to reduce marketing spend. When overall marketing expenditure falls, user activity decreases across the market and results in lower organic search levels. We saw this effect in Q3 with a reduction in new depositing customers across the group, a decrease that was for the most part attributable to North America.
After a phase of consolidation, we see encouraging signs that competition is increasing again on the operator side. New players are entering the market, which will challenge the status quo and should encourage operators to allocate more funds to marketing as they defend their market positions.
Enduring promise in casino
CPA rates in North American casino increased slightly during Q3, underlining operators’ continued appetite for recruiting new players in this high-margin market. Overall, casino revenue decreased due to a drop in the social and sweepstake segment, but performance in our mature regulated casino markets was rather resilient. In New Jersey, where we have been active for 10 years now, our media partnership with NJ.com helped drive a solid revenue increase.
Mirroring the trend in sports, competition is also increasing in casino. To counter this, we are focusing on using our strength in search engine optimisation and product development to defend our positions in large casino states such as Michigan and Pennsylvania.
Competitive edge through AI leadership as we invest for the future
Artificial intelligence (AI) is going to transform the affiliation business. Many tasks we do today will be augmented or even replaced by AI functions. We have been planning for this new landscape for some time and are determined to be the leader in AI-based affiliation.
Post-quarter, we invested in an AI joint venture with leading experts in this field that will lead to the development of an AI affiliation platform for Catena Media. This is an exciting future-focused project with the potential to enable content personalisation and scaling for our target audiences in a way never seen before. I expect AI applications to provide a significant addition to our armoury as we compete for new customers in a more competitive and dynamic marketplace.
With the strategic review behind us, we are ready and focused to invest in our teams to maintain our edge in organic search. We are deepening our work with media partners, an important revenue driver, and growing our paid and social media marketing. Greater foreseeability over future revenue will also give us added assurance when we invest in long-term technology-facing research and development projects. With these strategic initiatives, we expect organic revenue growth to resume in the second half of 2024.
Presentation of Catena Media’s results
CEO Michael Daly and Interim Group CFO Erik Edeen will present the Q3 2023 report in a combined webcast and teleconference on 21 November 2023 at 09:00 CET.
Webcast
Via the webcast you are able to ask written questions. If you wish to participate via webcast, please use the following link:
https://ir.financialhearings.com/catena-media-q3-2023
Teleconference
Via teleconference you are able to ask questions verbally. If you wish to participate via teleconference, please register on the link below. After registration you will be provided phone numbers and a conference ID to access the conference:
https://conference.financialhearings.com/teleconference/?id=5007782
The presentation will be available on the website:
https://www.catenamedia.com/investors/financial-reports-and-presentations
Contact details for further information:
Investor Relations
Email: ir@catenamedia.com
Michael Daly, CEO
Email: michael.daly@catenamedia.com
Erik Edeen, Interim Group CFO
Email: erik.edeen@catenamedia.com
This information is information that Catena Media plc is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons, on 21 November 2023 at 07:00 CET.
About Catena Media
Catena Media is a global leader in generating high-value leads for operators of online casino and sports betting platforms. The group’s large portfolio of web-based affiliation brands guides users to customer websites and enriches the experience of players worldwide. Headquartered in Malta, the group employs over 350 across the globe. The share (CTM) is listed on Nasdaq Stockholm Mid Cap. For further information see catenamedia.com.
Datum | 2023-11-21, kl 07:00 |
Källa | Cision |
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