Future focus for Catena Media as Q2 reports downturn in revenues
In the CEO’s statement on Catena Media’s performance for the second quarter 2023, Michael Daly, (pictured above), highlighted several significant developments. This period marked a pivotal step in the company’s ongoing transformation into a net cash positive business, he said. With a primary focus on regulated markets in North America, the quarter allowed the company to streamline its operations and financial structure, positioning it for the upcoming NFL season next month
Repercussions of Q2 results
Catena Media’s shares took a sharp nosedive, plunging nearly 19 percent in response to the company’s recent revelation of a significant 16 percent decline in its revenue for the second quarter of 2023.
For this quarter, the affiliate group reported total revenue of €16.9 million. Simultaneously, the adjusted EBITDA witnessed a stark year-over-year decline of 60%, settling at €2.6 million. This substantial downturn had a notable impact on the adjusted EBITDA margin, which plummeted from 32 percent in the second quarter of 2022 to a mere 15 percent in the corresponding period of 2023.
Furthermore, Catena Media experienced a substantial reduction in its count of new depositing customers (NDCs), witnessing a significant 31 percent drop, resulting in a total of 49,770 NDCs.
The North American segment of Catena Media’s revenue also faced a notable setback, declining to €12.5 million. This represents a substantial 16 percent decrease when compared to the revenue generated during the second quarter of 2022. It’s worth noting that the United States has now emerged as the dominant contributor, accounting for a significant 74 percent share of the group’s overall revenue from continuing operations.
Capital Optimization
Daly pointed out that the company has accelerated its efforts to enhance shareholder value and optimize its capital structure through share buybacks and bond repurchases. These actions align with the company’s target to achieve a net cash positive position in the latter half of this year, reinforcing its commitment to reducing financial risk and fostering long-term financial flexibility.
Post the reporting period, a new share buyback programme was announced and the UK and Australian businesses were divested. Additionally, a cost reduction drive in the European organization was initiated, with an expected annual savings range of EUR 3.8-4.2 million, in addition to the EUR 2.8 million decrease in annual costs directly attributable to the sale of the UK-Australia businesses. Daly believes that these initiatives are shaping a lean and focused team, well-equipped to drive sustainable growth in the core North American market.
Operational Performance
Daly noted that in Q2, the company’s operational performance was influenced by reduced marketing spend by betting operators in North America, temporarily affecting search volume and new depositing customers, particularly in sports. However, the casino segment displayed encouraging signs with increased marketing activity among some online casino partners.
As expected, Q2 historically witnesses slower revenue in sports due to seasonal factors. This year, the impact was magnified by the absence of a market launch similar to Ontario in 2022 or a major summer sports tournament like the Euros in 2021. The CEO anticipates stronger EBITDA margins in Q3 and Q4, coinciding with higher sports betting activity.
In North America, increased competition from non-traditional affiliates and established media organizations entering the online sports betting and casino gaming space impacted revenue. However, the company experienced success in the New Jersey market, thanks to its media partnership with the NJ.com news website. These partnerships present growth opportunities alongside the company’s organic search-based affiliation business, expanding its reach into the online sports bettor and casino gamer audience.
Strategic partnerships and future focus
Daly also highlighted the company’s excitement at having entered into a long-term partnership to provide online sports betting and casino content to Lee Enterprises Inc, a prominent US newspaper publisher. Additionally, the collaboration with The Sporting News, a leading US-based sports media content publisher, reinforces the company’s commitment to strategic partnerships that diversify its market footprint and deliver mutual benefits.
Looking ahead, Daly said that the company’s top priorities, including achieving a net cash positive position by year-end and increasing annual North American revenue to USD 125 million in 2025, with an adjusted EBITDA margin exceeding 50 percent. To achieve these goals, the company is adopting a multifaceted approach:
- Defending and advancing its core, high-ranking positions in organic search.
- Accelerating its expansion in paid media in North America.
- Seeking strategic media partnerships to broaden its audience.
- Leveraging new state launches and favorable regulation trends.
- Vigilantly controlling costs for high profitability and agility.
- Utilizing its solid financial position for share and bond buybacks, dividends, and potential acquisitions.
Currently, the company is gearing up for the launch of licensed sports betting in Kentucky at the end of September, with expectations of moderate revenue growth. Moreover, healthy inflows are anticipated from Ohio and Massachusetts as they enter their first full NFL season post-regulation.
Esports and Latin America
Daly said that the company’s efforts in esports and Latin America, which have yielded strong increases in traffic, reflecting its commitment to building its audience in these emerging market segments. The company’s organic growth strategy, characterized by focused internal teams and gradual player engagement, positions it for long-term value creation.
Daly expressed gratitude to the dedicated teams for their contributions as the company pivots towards North America and a more streamlined financial position. He added that the entire company eagerly anticipates the new sports season in September and look forward to continued progress in the coming quarters.
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