Catena Media CEO Michael Daly expects the developments in technology and the emergence of artificial intelligence will be influential in the progression of its casino and online sports betting verticals following a challenging fourth quarter and full year 2023.
The company has also updated its 2024 financial targets as it transitions into a more sustainable revenue model following its strategic review in November.
While Catena has accepted that this transition will cause short-term hindrances, it is confident that core regulated markets will “thrive” and growth will return in the second half of the year.
Catena Media revenue drop
Publishing its financial results, Catena Media declared a Q4 revenue from continuing operations of €14.5m, down 41 per cent in comparison to the previous year’s €24.5m. For the full year, revenue stood at €76.7m, a 22 per cent decline year-over-year (2022: €98.6m).
Regarding North America, market headwinds caused revenue to fall by 43 per cent during Q4 to €12.3m, while for the full year, revenue fell by 21 per cent to €67.1m (2022: €84.5m). 85 per cent of Catena’s total group revenue came from North America.
Looking at where Q4 revenue has come from, 80 per cent of the total amount came from cost per acquisition agreements, followed by 17 per cent from revenue share deals and three per cent from fixed agreements
Following a reduction in marketing spend by operators and “stiffer competition”, new depositing customers from continuing operations during the quarter fell by 43 per cent YoY to 32,032 (Q4 2022: 56,040). 84 per cent of NDCs came from CPA deals, followed by 16 per cent from revenue share agreements.
For the full year, NDCs declined by 19 per cent to 184,257 (2022: 228,601).
Q4’s adjusted EBITDA from continuing operations decreased by 88 per cent to €1.5m (Q4 2022: €11.8m), resulting in a margin of 10 per cent (Q4 2022: 48 per cent). Full year adjusted EBITDA came in at €25.4m, down 47 per cent (2022: €48.4m), resulting in a margin of 33 per cent (2022: 49 per cent).
Catena noted that during Q4, an impairment charge of €34m was recognised on intangible assets relating to the European business following the completion of the strategic review.
As of December 31, 2023, cash and cash equivalents were €38.5m (2022: €24.6m).
2024 primary initiatives
Catena’s primary initiatives moving into 2024 are strengthening its organic search business and developing existing products, growing its paid media division, more focus on strategic media partnerships to broaden its audience and deliver more value, as well as the aforementioned emphasis on technology, AI, paid media and subaffiliation.
Investments into AI include a joint venture with a specialist AI partner to develop a “generative AI application” dedicated exclusively to online betting and casino gaming affiliation content production, launching its first minimum viable product in February 2024.
Daly commented: “Rapid technological developments and the emergence of artificial intelligence are reshaping the media industry. For the online sports betting and casino gaming sector, the changes will be huge.
“At Catena Media, we are determined to be a leading force in this new landscape.”
Per vertical, sports revenue fell by 55 per cent YoY to €5.4m (Q4 2022: €12m) with 17,538 NDCs (Q4 2022: 33,882). For 2023, revenue dropped by 25 per cent to €35.5m (2022: €47.4m) with 107,364 NDCs (2022: 129,080).
The vertical’s adjusted EBITDA in Q4 came in at a €1.9m loss, down 138 per cent YoY (Q4 2022: €5m) with a margin of negative 35 per cent (Q4 2022: 42 per cent). For the full year, adjusted EBITDA stood at €4.9m (2022: €21.9m) with a margin of 14 per cent (2022: 46 per cent).
Casino revenue decreased by 28 per cent YoY during Q4 to €9.02m (Q4 2022: €12.5m) with 14,494 NDCs (Q4 2022: 22,158). For the full year, revenue is down 19 per cent to €41.2m (2022: €51.2m) with 78,893 NDCs (2022: 99,541).
Adjusted EBITDA in Q4 for the vertical stood at €3.4m (Q4 2022: €6.8m) with a margin of 37 per cent (Q4 2022: 55 per cent). For the full year, adjusted EBITDA came in at €20.5m (2022: €26.5m) with a margin of 50 per cent (2022: 52 per cent).
“We are currently implementing a wide-ranging internal investment programme – including large investments in both tech and AI – to fast-track our ambition to be the data- and technology-driven leader of online affiliate marketing in the sports betting and casino gaming space.”Catena Media CEO Michael Daly
To bolster its operations, Catena has made several technical improvements to provide more value and enhanced user experience through stronger product offerings, improved brand function, positioning and impact, producing a “new level of content personalisation”.
This work is expected to create a “solid platform” and be “revenue-enhancing” from Q2 2024.
In addition, Catena believes that cost optimisation measures will bring high profitability and enable focused debt reduction and strategic investments.
The company will also lower its presence in markets that are unregulated and those with unclear frameworks, as well as transition to more revenue share deals, which it believes will produce higher and more sustainable revenue.
“We are currently implementing a wide-ranging internal investment programme – including large investments in both tech and AI – to fast-track our ambition to be the data- and technology-driven leader of online affiliate marketing in the sports betting and casino gaming space,” noted Daly.
“These projects are significant in the context of our Q4 figures, which were disappointing and with which I am not satisfied. Planned and initiated earlier in 2023, the investments have since been accelerated. They are designed to position us for the future and also to restore the group to a sustainable long-term growth trajectory.
“As a first step, we expect a resumption of organic growth in the second half of 2024 and to generate full-year adjusted EBITDA in the range of €20m-€30m.
Daly continued: “The cornerstone of our transformation is a new technical platform that will launch in Q1. Once fully rolled out in Q2, this will be the first time Catena Media focuses affiliation activities on a single, coherent tech infrastructure.
“Creating this new backbone is a step change that will make us technically far more robust across all products and make it easier to deploy new verticals.”
During Q4, Catena appointed Pierre Cadena as Vice President of Corporate Strategy, repurchased 312,600 ordinary shares during October 2023 and completed its share buyback programme (2,510,116 shares for SEK 54,970,745).
In addition, the group also launched an online sports betting affiliation in Maine and agreed to sell its Italian online sports betting and casino assets for €19.8m, completing its strategic review which began in May 2022.
Following the end of the quarter, Catena received consent from bondholders regarding the written procedure for its outstanding bond loan 2021/2024, as well as launched an online sports betting affiliation in Vermont.
Following its Q4 and 2023 results, Catena has updated its long-term financial targets for 2024-2026 to reflect the revenue model change.
As previously mentioned, the group expects organic growth in the second half of 2024, and full-year adjusted EBITDA in the €20m to €30m range.
In addition, double-digit organic growth at the group level is expected in both revenue and adjusted EBITDA for 2025 and 2026, while also anticipating a net interest-bearing debt to adjusted EBITDA ratio of 0-1.75.
“A strategic reboot on the scale that we have undertaken can take time and test the patience of employees and shareholders. Q4 was a difficult quarter, but I believe we are now turning the corner.”Catena Media CEO Michael Daly
Daly is confident that as more deals transfer from CPA to revenue share, “greater stability and sustainability” to revenue will be achieved. However, while that takes place, there will be an impact on revenue.
The introduction of online sports betting in North Carolina in March is expected to provide a boost to revenue, in addition to the launch of the regulated Brazilian market.
While issues have been seen in Japan as operations were streamlined and business adapted to “align with regulatory developments”, strong player interest means the group is confident that “the fundamentals in place to expand the Japanese business from its low post-covid starting point”.
The CEO concluded: “A strategic reboot on the scale that we have undertaken can take time and test the patience of employees and shareholders. Q4 was a difficult quarter, but I believe we are now turning the corner.
“My message today is that our goal is in sight: a leaner, nimbler multichannel Catena Media with the knowledge and technical infrastructure to thrive in our core regulated markets and to deliver a return to growth in the second half of this year.”