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In the wake of weak Q2 results, Catena Media CEO Michael Daly has underscored the intensifying competition in the North American market but said his firm is “ready to compete”.

Topline numbers

In Q2 2023, Catena Media revenue decreased by 16% year-on-year to €16.9m.

Adjusted EBITDA amounted to €2.6m, marking a 60% decrease compared to Q2 2022.

The adjusted EBITDA margin sharply declined to 15%, a notable drop from the 32% recorded in Q2 2022.

In H1 2023, revenue from ongoing operations reached €50.6m,reflecting a 9% decrease from H1 2022.

Adjusted EBITDA from continuing operations experienced a 20% drop to €22.7m, with an associated adjusted EBITDA margin of 45%.

News nugget

During the Q2 earnings call, scrutiny intensified over Catena Media’s choice to prioritise operations in the US over other global markets.

In Q2, revenue in North America decreased by 16% to €12.5m, equivalent to 74% of group revenue from continuing operations, amid a “temporary slowdown” in state openings.

Catena Media CEO Michael Daly, however, insisted that a significant growth cycle is still ahead in North America as more states look to regulate iGaming and sports betting.

He highlighted the upcoming launch of online sports betting in Kentucky in September 2023, with Maine expected to follow later in the year.

“We are optimising the business for that,” Daly stated.

He added that Latam, and particularly Brazil, also shows great potential as it regulates.

“We see opportunities there, starting with organic growth and then growing through other channels including media partnerships,” Daly said.

However, Daly also admitted the firm’s operations were impacted by “stronger competition”, particularly from non-traditional affiliates and the entry of established media organisations into online sports betting.

This, Daly said, was not unexpected in a lucrative market like North America. “Does that keep us from meeting our financial goals? Absolutely not.”

He explained that some competitors benefit from domain strength due to their established positions.

“Our margin will change as we have some more on the direct spend side for influencers but we are ready to compete,” Daly said.

On a positive note, Catena Media revealed favourable developments in its debt status.

Interim CFO Erik Edeen expressed the group’s anticipation of achieving a net cash position by year-end.

“We are actively focused on reducing our debt levels as a top priority, while also considering an additional share buyback programme.

“We will certainly look into how we can optimise its use going forward, as well as potentially exploring acquisitions in the Americas,” he stated.

Best quote

“Yes, there are cycles, and yes, there is more competition than before, but it still remains an extremely high-margin business compared to our operations elsewhere. Therefore, it is our primary focus at the moment.”
CEO Michael Daly on Catena Media’s US operations

Best question

Oscar Rönnkvist from ABG Sundal questioned Daly about Catena Media’s ambitious 2025 financial target of reaching $125m in revenue, adding: “It’s a pretty long way to get there from the current growth rates.”

He enquired about the assumptions behind the 2025 revenue projection.

Daly responded: “We’ve set a target that’s both achievable and challenging because that’s our belief at Catena Media.”

He added that the figure includes additional state launches, like North Carolina in 2024, for example.

It does also involve a number of other state launches across sports and casino, based on market expectations from Eilers & Krejcik Gaming (EKG).

While Catena Media considered New York for iGaming in 2025, California’s launch isn’t factored in due to uncertainty, although “it would be a boon to the industry”.

Additionally, Daly mentioned new media partnerships, expanding into profitable paid media segments, and optimising high-margin aspects of its business as essential to future strategy.

Current trading and outlook

In July, total revenue from continuing operations declined by 3% in comparison to the same month last year.

Daly anticipates notably improved EBITDA margins for Q3 and particularly Q4, attributed to heightened sports betting activity.

Simultaneously, he acknowledged that competition in the US will intensify, underscored by newcomers such as Fanatics and ESPN Bet.

Amidst these dynamics, investors perceive Catena Media’s forthcoming performance with significant uncertainty, as evidenced by the stock’s sharp drop of more than 20%.

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