Catena sees revenue and profit fall in “challenging” Q3

Overall revenue for the three months to September 30 amounted to €24.9m (£22.3m/$29.5m), down 5.7% from €26.4m in the same period last year.

Catena reported year-on-year declines across all of its core business areas, with search revenue down 2.6% to €22.5m. Paid revenue fell 28.6% to €2.0m, and subscription revenue slipped 20.0% to €400,000.

Revenue derived through revenue-sharing arrangements comprised 46% of all revenue in the quarter, ahead of cost per acquisition (38%), fixed fees (15%) and subscription revenue 1%.

In terms of operating segments, casino represented 64.0%, or €16.0m, of overall revenue in the period. Catena said the AskGamblers brand was able to maintain revenue levels, though traffic volume was slightly down.

Catena also noted its Japanese business performed in line with expectations in terms of casino, while US social casino surpassed expectations, but the Google update in May led to European casino revenue falling short of forecasts.

The sports segment accounted for 30.0%, or €7.5m, of all revenue, with this area having been significantly impacted by Covid-19. Traditional sporting schedules were changed due to the postponement of events earlier the year as a result of the pandemic.

New depositing customers in this segment increased 29.0% year-on-year, but revenue growth was slower, impacted in part by increased operator bonuses to new and current customers as the leagues restarted in mid-September.

Financial services revenue reached €1.4m, accounting for 6.0% of all revenue. Catena said this was expected when factoring in the usual summer seasonal drop in activity, and return to normal pre-lockdown trading volumes.

Organic traffic for the AskTraders brand more than doubled, driven largely by the success of the news section approved by Google.

“Following the onset of the Covid-19 pandemic, several markets are still not showing the same levels of search volumes and traffic quality as last year,” Catena chief executive Per Hellberg said. “Improvements were however seen toward the end of the quarter.

“In our case, European sports and casino saw year-on-year declines, but these were compensated by positive results in the US and Japan. “In Europe, while Germany had its challenges, Italy as well as AskGamblers performed strongly.”

Looking at spending for the quarter, total operating expenses fell 17.1% to €15.5m, as savings were made across direct costs related to paid revenue and other operating costs.

Operating profit reached €9.4m, up 20.5% on last year, while adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) also increased by 4.0% to €12.0m.

However, Catena also reported higher non-operating expenses for Q3, including a €2.3m loss on financial liability at fair value, as well as €1.4m in finance costs. This left a €4.1m profit before tax, down 68.0% on last year.

Catena paid €757,000 in tax, which resulted in a profit after tax of €3.3m, down 72.3% year-on-year. After also including a €64,000 negative impact of currency translation, net profit for Q3 was €3.3m, a decline of 72.5% from €12.0m in 2019.

“Given the current Covid-19 situation, we foresee an unpredictable market unfolding for quite some time,” Hellberg said. “The upcoming German legislations taking effect in July 2021 is another issue, and we have already taken actions to mitigate it.

“Our focus, however, remains unchanged: short-term disruptions do not impact our long-term strategy and growth potential.”

In terms of the year to date, revenue was 4.1% higher at €79.4m over the nine months to 30 September.

Some €72.3m came from search revenue, €5.9m paid revenue and €1.2m subscription revenue. Revenue derived through revenue share arrangements comprised 44% of all revenue, 41% cost per acquisition, 14% fixed fees and 1% subscriptions.

Spending in the nine months to the end of September was €50.9m, down 7.0% on the same period in 2019. Operating profit was 31.9% higher at €28.5m, while adjusted EBITDA climbed 23.4% to €39.7m.

However, profit before tax fell 71.25 to €6.3m, primarily due to higher losses on financial liability at fair value, while profit after tax also slipped 76.7% to €4.8m.

After including a €163,000 negative impact of currency translation, this left a comprehensive profit of €4.7m for the period, down 77.2% from €20.6m at the same point last year.

“Through our strategic review, we foresee significant mid-term and long-term growth opportunities, but the journey is likely going to be challenging, as the past eight months have already demonstrated,” Hellberg said.

“But we have also learned to adapt and adjust very rapidly to new market circumstances, which is exactly why we see great potential ahead of us. Because when change has become the new normal, adaptability is the key.”