Catena Media looks for North American optimism amid Q2 struggles

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Catena Media has once again opened up on its North American vision, where the group expects to reach revenue of $125m through 2025 driven by a fast past of state launches across both online casino and sports betting from late next year.

Following a recent €6m sale of its UK and Australian online sports betting brands to OneTwenty amid an ongoing focus on the aforementioned region, Catena is also targeting a full-year 50 per cent adjusted EBITDA margin in two years time.

To achieve this, Michael Daly utilised his CEO address within the group’s latest financial breakdown to discuss a multifaceted approach that will be deployed by the company to achieve these ambitions. This, he said, includes to:

• Aggressively defend and advance core, high-ranking positions in organic search. 

• Accelerate ongoing expansion in paid media in North America.

• Seek strategic, revenue-enhancing media partnerships with external players that broaden its audience.

• Leverage new state launches in North America and the favourable regulation trend in Latin America to drive revenue higher. 

• Rigorously control costs to ensure high profitability and a rightsized, agile organisation. 

• Use a solid financial position to create scope for future share and bond buybacks, dividends, and potential acquisitions in the Americas.  

This comes as Daly cited a “historically slow” second quarter of the year, driven by no significant new market launch and lack of a “large summer sports tournament”, as a series of struggles were reported through the period.

“This market-wide tightening temporarily dampened search volume and levels of new depositing customers, particularly in sports.”

Revenue through Q2 dropped 16 percentage points to €16.85m (2022: €20m), with the company’s North American operations dipping by the same figure to close the period at €12.5m (2022: €14.9m) – this equates to 74 per cent of the total.

Total operating expenses, including items affecting comparability, came in at €16.8m (2022: €18m), while new depositing customers decreased 31 per cent to 49,770 (2022: 72,060).

Adjusted EBITDA from continuing operations closed at €2.59m (2022: €6.46m), with the company’s margin down 17 per cent to a figure of 15 per cent through the April to June period. 

“Operational performance in Q2 reflected the backdrop of reduced marketing spend by betting operators in North America,” Daly commented.

“This market-wide tightening temporarily dampened search volume and levels of new depositing customers, particularly in sports. In casino, I was encouraged to see an appetite for higher marketing activity among some online casino partners. Revenue in sports is historically slow in Q2 due to seasonal factors.”

Adding: “In North America, stiffer competition from non-traditional affiliates and the entry of established media organisations into the online sports betting and casino gaming space pushed revenue lower.”

Looking at Catena’s reporting segment, casino revenue and adjusted EBITDA tracked downfalls of 20 per cent and 28 per cent to close the quarter at €10.46m (2022: €13.11m) and €4.11m (2022: €5.7m), respectively.

A drop in North America, where revenue reached €8m (2022: €9.7m), is aligned to stronger competition from offshore, grey market entities, while Japan reported a decrease due to a tech platform transition. Italy is cited as showing “good progress” once again.

“We are confident that our step-by-step approach … will deliver meaningful value over the medium to long term”

Furthermore, the firm’s sports segment saw revenue and AEBITDA decline nine per cent and 300 per cent to €6.39m (2022: €6.99m) and -€1.51m (2022: €759,000), respectively. NDCs fell 78 per cent.

However, Daly noted an expectation of witnessing “far stronger” margins through the current quarter of beyond, with it said that Q4 in particular will be “when sports betting activity will be higher”.

For the year-to-date, revenue dropped nine per cent to €50.6m (2022: €55.9m), NDCs are down 19 per cent to 147,115 (2022: 180,686) and AEBITDA closed at €22.7m (2022: €28.4m). Operating expenses ended the YTD at €34m (2022: €35.2m).

“Currently, our teams are preparing for the launch of licensed sports betting in Kentucky at the end of September,” Daly noted in a conclusion that looked at what lies ahead. 

“With an adult population of 3.5 million, Kentucky is a relatively small state that we expect to deliver a moderate revenue boost this fall. 

“Elsewhere, we are anticipating healthy inflows from Ohio and Massachusetts in particular, as both states will be entering their first full NFL season post-regulation. 

“In esports and Latin America, the trends were broadly similar. We saw further strong increases in traffic in Q2 as we continue to build our audience in these emerging market segments. 

“In contrast to the ‘buy and try’ approach favoured by some market actors, our methodology involves growing organically with the market through highly focused internal teams as we gradually build player engagement prior to full monetisation. 

“We are confident that our step-by-step approach of nurturing the audience through targeted, high-quality products will deliver meaningful value over the medium to long term.”