Record Q2 helps Catena grow first half revenue

Affiliate group Catena Media’s revenue came to €54.5m (£49.1m/$65.1m) for the first half of 2020, up 9.3%, thanks to a stellar second quarter performance in which organic search revenue grew strongly as casino mitigated the suspension of sporting events.

Of Catena’s total revenue for six months to 30 June, revenue from organic search made up the majority at €49.8m, up 19.0%. Catena chief executive Per Hellberg said organic search was impacted by an update to Google’s algorithm, which had a negative effect on some brands, but a positive effect on others, especially in the US.

Paid search revenue, meanwhile, was down 38.4% to €3.9m while subscription revenue fell 53.4% to €814,000.

This revenue growth came despite a decline in sports betting revenue due to the suspension of global sport, as casino “readily took up the slack”, according to Hellberg. In addition, the chief executive noted that Catena’s flagship AskGamblers brand had its “best month ever” in April, with May “not far behind”.

In addition, Catena’s financial services brand, AskTraders, saw three-digit revenue growth, while its Japanese business also performed well.

Despite the growth in revenue, operating expenses declined by 1.5% to €35.4m. The largest portion of this figure was personnel expenses, which grew by 10.6% to €12.4m. Direct costs from sales, meanwhile, fell 30.8% to €4.6m.

Other operating expenses declined by 13.4% to €9.8m, which left adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of €27.7m, a 33.8% year-on-year increase.

Credit facility and refinancing costs skyrocketed from a low base of €47,000 to €1.7m. Hellberg said there was a “pleasing level of interest and over-subscription” in the business’s latest round of refinancing.

Reorganisation costs also shot up, by more than 700% to €454,000, while depreciation and amortisation costs were down 3.8% to €6.5m

“Since we had already implemented stronger cost controls before the outbreak of the pandemic, we were able to navigate through that period in a way that also enabled us to further invest,” Hellberg said.

These expenses resulted in a total operating profit of €19.0m, up 37.7%.

The affiliate group paid €4.4m in interest, up 2.7%. However, Catena’s bottom line was severely impacted by fair value changes of its financial liabilities, where it recorded a €10.7m charge, compared to a €1.5m gain in the prior year. Other finance costs came to €1.7m, down 13.7%.

This meant Catena’s pre-tax profit came to €2.2m, a decline of 75.8%.

After paying taxes of €679,000, up 103.4% year-on-year, the total profit attributable to the business was €1.5m, down 87.6%. After accounting for currency translations this profit came to €1.4m, down 84.7%.

Turning to the second quarter of 2020, Catena Media made €27.8m in revenue thanks to a 27.7% growth in organic search revenue to €25.8m. Subscription revenue fell 44.3% to €400,000 while paid search revenue fell 44.6% to €1.5m.

Operating costs increased, but by just 0.7% to €17.8m. Among these costs, personnel costs grew 11.6% to €6.2m. Direct costs, however, fell by 32.4% to €2.2m. Other operating expenses were down 15.0% to €4.6m, resulting in adjusted EBITDA of €14.8m, up 56.2%.

Credit facility and refinancing costs grew more than 35 times over to €1.7m, while reorganisation costs ticked down to €55,000. Depreciation and amortisation expenses also declined, by 9.2% to €3.0m. 

This resulted in an operating profit of €10.0m, up 39.7%.

“Ordinarily, the second quarter is a weak one seasonally, and even more so this year because of the sudden lack of sports events,” Hellberg said. “And yet our company set records this quarter with an all-time high in operating profits, 17% revenue growth compared to last year and a record in organic search revenues.”

The affiliate paid €2.2m, up 1.4%, in interest. However, fair value changes in financial liabilities resulted in a loss of €14.8m, down from a profit of €3.0m in 2019. This, and other finance costs of €245,000, meant the business made a pre-tax loss of €7.4m despite the growth in revenue, compared to a profit of €6.8m in 2019.

Catena paid €411,000 in taxes, up 84.3%.

This meant Catena made a net loss of €7.8m, after having made a profit of €6.8m in 2019. After accounting for currency changes, Catena’s loss remained at €7.8m, but compared to a €6.7m profit the year before.

“While the casino business takes its customary summer holiday, we expect our sports business to continue growing again in the third quarter from the re-opening of sports, in particular European football leagues in August, to a planned peak when the NFL kicks off in September in the US,” Hellberg said.

“We are mindful, however, that there could be further impacts due to the pandemic and are closely monitoring the situation.”