Lower revenue while accelerating progress to rightsize the business for financial strength and long-term value creation

Catena Media plc Interim Report January – June 2023

Highlights

• Revenue decreased by 16 percent in North America amid a temporary slowdown in state openings. Total group revenue from continuing operations decreased by 16 percent.
• North American EBITDA margin of 41 percent, despite negative revenue impact of reduced marketing spend by operators.
• A media partnership was signed with Lee Enterprises Inc, a major US newspaper publisher.
• The group estimates, based on current net debt on 30 June, a notional net cash position of EUR 10.6m when including expected future proceeds from divested assets.
• The group repurchased 1,189,814 ordinary shares in July and a further 468,522 shares from 1-18 August.
• An agreement to sell the UK and Australia businesses for EUR 6.0m, signed in early August, will reduce the group’s annual cost base by an estimated EUR 2.8m.
• On 8 August a programme was launched to reduce costs by EUR 3.8-4.2m following the UK-Australia divestment.
• In August an agreement was signed with The Sporting News to produce sports and casino gaming content for North and South American markets.
• In July, total revenue from continuing operations decreased by 3 percent compared to July last year.
   

April–June 2023

• Revenue from continuing operations was EUR 16.9m (20.1), a decrease of 16 percent.
• Revenue in North America decreased by 16 percent to EUR 12.5m (14.9), equivalent to 74 percent (74) of group revenue from continuing operations.
• Organic growth in continuing operations was -16 percent.
• New depositing customers (NDCs) from continuing operations totalled 49,770 (72,060), a decrease of 31 percent.
• Adjusted EBITDA from continuing operations decreased by 60 percent to EUR 2.6m (6.5), corresponding to an adjusted EBITDA margin of 15 percent (32).
• EBITDA from continuing operations, including items affecting comparability of EUR -0.2m (1.7), totalled EUR 2.8m (4.7) corresponding to an EBITDA margin of 17 percent (23).
• Earnings per share from continuing operations totalled EUR -0.03 (-0.01) before dilution and EUR -0.02 (-0.01) after dilution.
• Cash and cash equivalents were EUR 38.0m (23.5) on 30 June.
• Outstanding shares totalled 78,769,812 and outstanding warrants totalled 27,026,550 on 30 June.

January–June 2023

• Revenue from continuing operations was EUR 50.6m (55.9), a decrease of 9 percent.
• Revenue in North America decreased by 7 percent to EUR 41.5m (44.4), equivalent to 82 percent (79) of group revenue from continuing operations.
• Organic growth in continuing operations was -9 percent.
• New depositing customers (NDCs) from continuing operations totalled 147,115 (180,686), a decrease of 19 percent.
• Adjusted EBITDA from continuing operations decreased by 20 percent to EUR 22.7m (28.4), corresponding to an adjusted EBITDA margin of 45 percent (51).
• EBITDA from continuing operations, including items affecting comparability of EUR 1.4m (2.1), totalled EUR 22.1m (26.2) corresponding to an EBITDA margin of 44 percent (47).
• Earnings per share from continuing operations totalled EUR 0.13 (0.23) before dilution and EUR 0.10 (0.16) after dilution.
• Cash and cash equivalents were EUR 38.0m (23.5) on 30 June.
• Outstanding shares totalled 78,769,812 and outstanding warrants totalled 27,026,550 on 30 June.

Significant events during Q2 2023

• On 17 April the group announced a long-term partnership to provide online sports betting and casino content to Lee Enterprises Inc, one of the largest online newspaper publishers in the US.
• On 22 May Erik Edeen joined Catena Media as interim group CFO.
• On 16 May the group published new financial targets for 2023-2025.
• On 14 June the group announced a repurchase of Catena Media bonds.

Significant events after the period

• 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 signed an agreement to sell its UK and Australian online sports betting brands for EUR 6.0 million to Moneta Communications Ltd.
• On 7 August Catena Media announced that Per Widerström is to leave the board of directors following his appointment as CEO of 888 Holdings.
• 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 8 August, the group launched a programme to reduce annual costs by EUR 3.8-4.2m by streamlining support functions.
• The group repurchased 1,189,814 ordinary shares in July and a further 468,522 shares from 1-18 August. Catena Media as of 18 August holds 2,272,529 of its own ordinary shares, representing 2.9 percent of the total amount of shares.
• In July, total revenue from continuing operations decreased by 3 percent compared to July last year.

CEO Michael Daly’s comments

Q2 was a quarter of further evolution for Catena Media as we continued to transition towards a net cash positive business focused on regulated markets in North America. The group capitalised on the annual interlude in the North American sports calendar to undertake significant operational and financial streamlining measures ahead of the NFL resumption in early September.

The implementation of further share buybacks and a bond repurchase accelerated the ongoing programme to increase shareholder value and optimise the capital structure. The steps taken align with our target to become net cash positive during the second half of this year as we reduce financial risk and promote long-term flexibility in our financial planning.

A new share buyback programme was announced after the end of the period, during which time we also divested our UK and Australian businesses. In addition, we launched a cost reduction drive in our European organisation that is expected to achieve annual savings of EUR 3.8-4.2 million over and above the EUR 2.8 million decrease in annual costs directly attributable to the UK-Australia sale.

Together, these efforts are forging a lean and focused team with the skills, mindset and agility to spearhead sustainable growth in our core North American market.

Operational performance in Q2 reflected the backdrop of reduced marketing spend by betting operators in North America. 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. This year, the cyclical impact was amplified by the absence of a market launch similar to Ontario in 2022 or a large summer sports tournament like the Euros in 2021. I expect our EBITDA margins to be far stronger in Q3, and especially in Q4, when sports betting activity will be higher.

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. We bucked this trend in the large New Jersey market thanks to revenue generated by our successful media partnership with the NJ.com news website. Media partnerships on the lines of the NJ.com deal offer considerable growth potential alongside our organic search-based affiliation business. They diversify our market footprint by allowing us to reach farther and deeper into the online sports bettor and casino gamer audience and will form an important part of our toolbox going forward. The shared revenue component means these collaborations come with a lower operating margin than traditional affiliation, which makes it important that we pursue appropriate deals that offer favourable terms and conditions for both parties.

During the quarter we were pleased to agree a long-term partnership to provide online sports betting and casino content to Lee Enterprises Inc, one of the largest US newspaper publishers. In August we announced a similar collaboration with The Sporting News, a leading US-based publisher of sports media content.

As we move forward, my priority is to ensure we maintain momentum towards delivering on our financial targets: achieving a net cash positive position by the end of this year, and increasing annual North American revenue to USD 125m in 2025 along with an adjusted EBITDA margin exceeding 50 percent. We are deploying a multifaceted approach to achieve these goals under which we will:

• Aggressively defend and advance our core, high-ranking positions in organic search.
• Accelerate our ongoing expansion in paid media in North America.
• Seek strategic, revenue-enhancing media partnerships with
  external players that broaden our 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 our solid financial position to create scope for future share and bond buybacks, dividends, and potential acquisitions in the Americas.

Currently, our teams are preparing for the launch of licensed sports betting in Kentucky at the end of September. 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.

In conclusion, I would like to thank all our teams for their efforts as we continued to pivot the organisation towards North America and a more streamlined financial position. We look forward together to the new sports season in September and further progress over the coming quarters.

Presentation of Catena Media’s results

CEO Michael Daly and Interim Group CFO Erik Edeen will present the Q2 2023 report in a combined audiocast and telephone conference on 22 August 2023 at 09:00 CEST.

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-q2-2023

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=200928

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: [email protected]

Michael Daly, CEO
Email: [email protected]

Erik Edeen, Interim Group CFO
Email: [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 22 August 2023 at 07:00 CEST.

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.