Continued strength in North America amid tougher trading conditions in several markets

Catena Media plc: Interim Report January – June 2022

Highlights

• Revenue dropped 5 percent in Q2 amid sports calendar seasonality and macroeconomic impacts on player spend in multiple markets.
• Revenue growth of 21 percent in the fast-developing North American market despite the seasonal lull in sports. Slower than expected initial revenue gains in Ontario after the launch of licensed online sports betting and casino in April due to unforeseen regulatory constraints on marketing.
• Altered market launch timetables are likely to delay attainment of the group’s 12-month USD 100m revenue goal in North America until the first half of 2023.
• High inflation and energy prices and weaker economic conditions affected consumer spending in European markets in both sports betting and casino.
• Revenue decreased in Japan due to a weak yen and a political controversy surrounding an online gaming player, though the victory of gaming-friendly parties in July’s parliamentary elections is expected to benefit the market going forward.
• A strategic review was initiated in May amid interest from third parties in acquiring certain assets. In August the review was extended to seek annualised operational and capital expenditure savings of at least EUR 5m in the European casino and sports business.
• In August, the company announced its first major US media deal, a content partnership with Advance Local’s NJ.com website in New Jersey.
   

April–June 2022        

• Revenue was EUR 28.9m (30.4), a decrease of 5 percent.
• Revenue in North America increased by 21 percent to EUR 14.9m (12.4), equivalent to 52 percent (41) of group revenue.
• Organic growth was -12 percent, or -9 percent excluding the German sports betting and casino market.
• New depositing customers (NDCs) totalled 135,812 (140,025), a decrease of 3 percent.
• Adjusted EBITDA decreased by 40 percent to EUR 9.1m (15.1), corresponding to an adjusted EBITDA margin of 31 percent (50).
• EBITDA, including items affecting comparability of EUR 1.7m (2.5), decreased by 42 percent and totalled EUR 7.3m (12.7), equal to an EBITDA margin of 25 percent (42).
• Earnings per share totalled EUR 0.01 (0.09) before dilution and EUR 0.004 (0.06) after dilution.
• Cash and cash equivalents were EUR 23.5m (29.1) on 30 June.
• Catena Media repurchased 620,000 of its ordinary shares for EUR 2.8m and held 5.6 percent of all total outstanding shares on 30 June.
• The number of all outstanding shares was 76,321,964 and the number of all outstanding warrants was 33,769,908 on 30 June.

January–June 2022   

• Revenue was EUR 74.1m (71.1), an increase of 4 percent.
• Revenue in North America increased by 28 percent to EUR 44.4m (34.6), equivalent to 60 percent (49) of group revenue.
• Organic growth was -10 percent, or -7 percent excluding the German sports betting and casino market. 
• New depositing customers (NDCs) totalled 307,730 (297,571), an increase of 3 percent.
• Adjusted EBITDA decreased by 14 percent to EUR 34.7m (40.2), corresponding to an adjusted EBITDA margin of 47 percent (56).
• EBITDA, including items affecting comparability of EUR 2.1m (4.2), decreased by 10 percent and totalled EUR 32.5m (36.0), equal to an EBITDA margin of 44 percent (51).
• Earnings per share were EUR 0.29 (0.34) before dilution and EUR 0.20 (0.23) after dilution.
• Cash and cash equivalents totalled EUR 23.5m (29.1) on 30 June.
• Catena Media repurchased 1,973,000 of its ordinary shares for EUR 8.6m and held 5.6 percent of all total outstanding shares on 30 June.
• The number of all outstanding shares was 76,321,964 and the number of all outstanding warrants was 33,769,908 on 30 June.
   

Significant events after the period

• In July, total revenue increased by 8 percent, or 10 percent excluding the German sports betting and casino market, compared to July 2021. Revenue from North American sports betting and casino rose by 33 percent.
• In August, the company announced its first major US media deal, a content partnership with Advance Local’s NJ.com website in New Jersey.
• On 10 August, an extraordinary general meeting authorised the company to continue acquiring its own shares, up to 10 percent of its total issued share capital, or 7,618,012 shares, until the 2023 AGM. The board intends to cancel all of its currently owned 4,295,510 shares to be able to make full use of the share buyback authorisation.
• On 10 August, the group announced its intention to expand the ongoing strategic review to the entire European online sports betting and casino affiliation business and seek annual operational and capital expenditure savings of at least EUR 5m. in the European casino and sports business.

CEO Michael Daly’s comments

Q2 proved a challenging quarter for Catena Media as largely external factors led to a disappointing 5 percent dip in group revenue and a margin squeeze in parts of the business that caused adjusted EBITDA to decrease by 40 percent. A sharp deterioration in global economic conditions affected trading in multiple markets, denting performance in parts of our online sports betting and casino portfolio just as we had taken on extra cost to support new market launches and product upgrades.

During the quarter we took steps to reduce expenditures in response to the changing landscape and scaled back strategic investments from planned levels. Although we saw an initial effect of these measures in Q2, it was insufficient to compensate for the full impact of lower margins, particularly under our revenue share agreements with operators outside North America.

I nevertheless remain optimistic about the forward outlook. Catena Media is an agile business with global reach in markets where the fundamentals for online sports betting and casino remain strong. The changed economic environment will likely reduce user spending on entertainment in coming quarters, and we are pivoting aggressively to this new reality. Our priority is to continue to remove costs where we can and to adapt the business to lower margins in key markets while continuing to develop the many attractive growth opportunities ahead of us. People will still be betting and we will be finding those new bettors and bringing them to the table for our partners. Volumes will likely reduce in some markets but increase in others.

In our large North American business, our cost-per-acquisition revenue model partly insulated us from the margin pressures elsewhere. Sportsbook revenue rose despite Q2 being the closed season for North American sports. I was pleased to see a strong contribution from Lineups.com, the national sports website we acquired in May last year.

The legalisation of online sports betting and casino in Ontario at the start of Q2 proved uninspiring due to unexpectedly strict marketing restrictions imposed by regulators shortly before launch. The impact on Catena Media was amplified by our strong prior investments into Ontario as a large new market. That said, we expect Ontario to perform well when the NFL football season kicks off in September and to be a solid source of casino revenue over time. We are also hopeful that regulators may look to ease some of the current hurdles for operators and affiliates. Furthermore, we anticipate strong fall contributions from New York and Louisiana, which legalised sports betting in Q1.

Revenue in North American casino was up, primarily reflecting strong growth in social and sweepstakes casino, the addition of Ontario and a strong contribution from the i15 Media assets acquired in Q3 last year. Player revenue trended lower in some established markets, reflecting increased competition along with the impact of higher living costs. Our strategy for these core markets is to expand our business model into content partnerships with large publishing groups as a route to broadening our audience and reaching more casual bettors who might not actively seek information on our sites. We signed our first such partnership, with Advance Local, owner of the NJ.com news website, and I see this as an exciting area for us as we move forward. We are currently also in negotiations to sign our first US revenue share deal.

Several North American states are preparing to legalise online sports betting, including Massachusetts, Kansas and Maryland. Their timelines have slipped slightly behind earlier expectations while Ohio, which was expected to launch legal online sports betting in late 2022, will now not do so until 1 January 2023. Operationally, this simply shifts a highly promising outlook marginally farther forward. But when combined with the economic headwinds now affecting North American households, the slower calendar will most likely prevent us from achieving our 12-month USD 100m revenue goal in North America in 2022. We will instead reach that landmark in the first half of 2023.

In Europe and our global brands, the squeeze on revenue share deals with operators put pressure on margins. Sports revenue was predictably slower due to the lack of a major summer sporting event compared to Q2 last year. Player engagement in casino was also lower, reflecting cost of living constraints as well as overlap with the summer holiday season. Post-Covid, a more sluggish betting cycle is expected at this time as people spend more time offline.

I was encouraged to see the first online casino operator licences granted in Germany after the shift to a regulated market on July 1 last year. We foresee growth in Germany in coming periods, albeit from a low base. In sports, we anticipate uplift in Q3 when the soccer season resumes. During the quarter we also saw further progress in our fast-evolving esports business, where we continue to invest in content and technology to build our audience for the long haul.

Revenue in Japan declined unexpectedly due to multiple factors including a weak yen and a political controversy centred on online gaming. The political storm temporarily jolted player sentiment and depressed revenue, and we anticipate it will take a quarter or so for the impact to abate. This process will benefit from the victory of pro-gaming parties in July’s parliamentary elections. The parties’ initial focus will be on legalising land-based casinos, but their engagement should also improve the preconditions for online casino and be positive for Catena Media.

I was delighted to note a quarter of stellar growth in Latin America, a very exciting region where we see high potential for expansion through our own teams and also via acquisition.

In May, we announced a strategic review of specific parts of the business in response to third-party interest in some of our brands. The announcement attracted strong interest from additional players, extending the process beyond our expected time frame. On 10 August we expanded the review to the entire European business, where we will be seeking cost reductions. In fast-changing economic conditions we are working diligently to obtain the best outcomes for Catena Media and our shareholders.

Presentation of Catena Media’s first quarter results

A combined audiocast and phone conference with the opportunity to ask questions will be held at 10:00 CEST today, at which CEO Michael Daly and Group CFO Peter Messner will present the report.

The audiocast will be accessible via the following link:

https://tv.streamfabriken.com/catena-media-q2-2022

The presentation will also be available on the company’s website:

https://www.catenamedia.com/investors/reports/quarterly

To participate via phone, please call any of the following numbers:

SE: +46 8 505 163 86
UK: +44 20 319 84884
US: +1 412 317 6300

Pin code: 8138328#

Contact details for further information:

Michael Daly, CEO
E-mail: [email protected]

Peter Messner, Group CFO
Phone: +46 768 95 26 93, E-mail: [email protected]

Investor Relations
E-mail: [email protected]

This information is information that Catena Media plc is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Market Act. The information was submitted for publication, through the agency of the contact persons, on 18 August 2022 at 07:00 CEST.

About Catena Media

Catena Media is a global leader in generating high-value leads for operators in online casino, sports betting and financial trading. The group’s large portfolio of web-based affiliation brands guides online users to customer websites and enriches the experience of players worldwide. Headquartered in Malta, the group employs over 450 people in Europe, North America, Asia-Pacific and Oceania. The share (CTM) is listed on Nasdaq Stockholm Mid Cap. For further information see catenamedia.com.