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Despite a poor start to the year, Catena Media remains optimistic about the “North American opportunity” and is eyeing a potential US listing.

Topline numbers

In Q1, revenue from continuing operations decreased by 5% year-on-year to €35m.

The affiliate attributed this decline to the strong comparatives created by the record-breaking launch of online sports betting in New York in Q1 2022 and the go-live in Louisiana in the same quarter.

Revenue in North America decreased by 2% to €28.9m, accounting for 83% of the group’s total revenue. Organic growth from continuing operations decreased by 5%.

Adjusted EBITDA decreased by 7% year-on-year to €20.5m. This corresponds to an adjusted EBITDA margin of 59%.

New depositing customers (NDCs) from continuing operations totalled 113,294, also a year-on-year decrease of 3%.

News nugget

Ahead of its Q1 results, Catena Media revealed new financial targets with revenue from the North American market projected to reach $125m in 2025, which would represent compound annual organic growth of 12% from the current year.

In addition, AEBITDA margin is projected to exceed 50% by 2025, which is intended to be achieved through cost optimisation measures. 

“The North American market is still relatively early in its growth cycle and process, with many states and provinces yet to open for online sportsbook, and many more for online casino,” CEO Michael Daly said.

“Due to the US federal election cycle, we will see a temporary slowdown in state openings and will adjust operationally to that reality over the next 12 to 18 months.

“After that, we expect a resumption, and perhaps even an acceleration, of state launches once a new legislative cycle starts in 2025,” he added.

Catena Media projects that revenue growth will resume in 2024, albeit at somewhat lower margins than the extremely high levels of the past couple of years.

Daly described North America as a “highly attractive opportunity” for sustainable long-term growth, but said the company remains open to strategic alternatives and structural possibilities, including the prospect of a US share listing as well as the sale of the entire business.

Cost-reduction efforts

To offset the slower launch calendar, Catena Media said it will focus on achieving further efficiencies in the business in order to continue delivering high margins.

“Our ambition is to be net cash positive already during the second half of this year as we leverage the positive impact of cost-reduction efforts on cash-flow generation,” Daly explained.

“The reduced financial risk consolidates a solid financial position that will enable us to capitalise on strategic opportunities, including acquisitions, in the Americas.

“It will also create scope for future share buybacks and dividends as we seek to deliver shareholder value, but as yet, no timeline for such steps has been set,” he added.

In Q4 2022, Catena Media already disclosed that the divestment of its AskGamblers brand has provided the company with increased resources for M&A activities and organic investments, all while avoiding excessive debt burdens.

While the company emphasised that “aggressive cost management” has yielded profitability improvements in the UK and Italy, outgoing CFO Peter Messner also revealed that total costs in North America increased by 46% year-on-year, although only around 3% sequentially.

These cost dynamics stem from Catena Media’s “growth investments” as part preparations for forthcoming state openings in North America, mostly due to media and influencer partnerships.

Notably, the North American cost base presently constitutes 66% of the total group cost from continuing operations.

Best quote

“North America represents a highly attractive opportunity for sustainable long-term growth, and Catena Media is well positioned to be a leading affiliate in that market. We will continue working with Carnegie and remain open to strategic alternatives and structural options, which could potentially include a share listing in the US.”

Catena Media CEO Michael Daly

Best question

During the earnings call, Oscar Rönnkvist from ABG Sundal was the only analyst who actively posed multiple questions.

He was not satisfied with Daly’s previous comments about Catena Media’s capital allocation plans. Rönnkvist sought clarification on whether the company anticipates numerous M&A opportunities or if a buyback programme might be implemented in the near future.

However, Daly kept it general: “We consider all options mentioned at this point. There are certainly M&A opportunities in various regions, including North America, Latin America, and other parts of the world, both in terms of creative partnerships and technological advancements, which can contribute to the further development of our platforms and teams.”

Daly added that the firm needs to strike a balance and assess what best serves the interests of its shareholders, whether that will be M&A, a share buyback or dividend payments.  

“We’ll want to have all those tools in our toolbox, and at the right moment, we will deploy each of those.”

A written question focused on Catena Media’s operations in Latin America and why the firm is not interested in the region.

Daly replied: “That’s a false impression. We are absolutely interested in Latin America. It is a future growth area for us. We are investing in the teams and the products there.”

However, he said the region’s revenue contribution is still very small. “So, you don’t hear us talk a lot about it.”

Current trading & outlook

Catena Media stated that its performance in April fell short in comparison to the previous year, with a 12% decrease in revenue compared to April 2022.

This decline is primarily attributed to challenging comparisons arising from new market launches.

However, CEO Daly emphasised that April’s performance may not be indicative of the overall trajectory for the remainder of the quarter.

Investors, however, were not quite convinced, and shares in Catena media were trading more than 16% lower at the time of writing.