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Catena’s “disappointing” FY2023 results: Can it bounce back?

| By Nick Brown | Reading Time: 9 minutes
Affiliate and media giant Catena Media plc registered a 41% decrease in revenue in its full-year 2023 results – but can it return to its former glory?

Catena Media has updated its long-term financial targets for 2024-2026. In reviewing their performance Catena CEO Michael Daly didn’t sugarcoat his assessment of the affiliate’s 2023 performance.

Contrasted with their optimism at the start of 2023, the year was ultimately “disappointing”, Daly said.

Looking back, Catena started the year on a high. The company began the year with a return to net profit, following a 24% year-on-year increase in revenue from its North American operations.

Indeed, its US rollout happened at breakneck speed. In 2023, it launched in multiple US states, including New York, Louisiana, Ontario, Kansas and Maryland.

With big plans afoot tied in with the group’s new strategic focus, tied in with a major emphasis on North America, 2023 looked bright.

“Fully exploiting the high-margin opportunities on offer in this market will be our core operational focus going forward,” Daly said at the start of 2023.

It seemed that the company was betting it all on red, white and blue. Hopes were certainly high for the American Dream™.

catena bet its fortunes on the us in 2023

Betting big on the US

Unfortunately that was then and this is now. The company is heavily dependent on the US for revenue at this point, accounting for more than 80% of all income.

However, in announcing its end of year results, North American revenue dropped 21% to €67.1m (£57.1m/$71.9m). In total, its share price is now down more than 75% year-on-year.

Breaking that down into quarters, its Q4 results highlighted a fast-accelerating decline for North America, with revenue plummeting 43.0% to €12.3m.

This trend is now compounding further and, looking back, we can see this started more gradually, with a 29% decrease in Q3 and a 16% decrease in Q2.

So, despite betting big on its 27 active North American jurisdictions, as well as being in a position where more than 80% of its revenue is on the other side of the Atlantic, Catena has now put their eggs in one basket. And that basket is straining.

Clearly, something needs to be done to stop this accelerating decline. A 75% decline in share price year-on-year certainly calls for panic stations.

Before we look at solutions however, let’s take a glance at the company’s key figures. We’ll start with Q4 and then go onto the financial year as a whole.

Q4 2023: Accelerating decline

Reflecting its poor US performance, revenue from continuing operations was €14.5m, a decrease of 41%.

This was largely attributable to new depositing customers (NDCs) from continuing operations decreasing 43%, totalling 32,032; down from 56,040 in the previous quarter.


Adjusted EBITDA from continuing operations also cratered by 88% to €1.5m, corresponding to an adjusted EBITDA margin of 10%.

In what will probably make for grim reading for investors unfortunate enough to be holding stock, earnings per share from continuing operations totalled -€0.47 before dilution.

FY2023: Grim reading

Unsurprisingly, at the time of writing, Catena’s market price is down more than 10% on the Swedish stock exchange.

This suggests the market has not been overjoyed by this year’s news, to put it mildly. Especially when that compounds into a 75% drop year-on-year.

In short, if we look at the annual financials, we can get a bigger perspective on how big this drop is.

In total, revenue for the year is down 22%, at €76.7m, US revenue is down by 21.0% – cushioning the faster decline later in the year by a less precipitous drop in the first two quarters.

New depositing customers from continuing operations totalled 184,257, a decrease of 19% – again cushioned by (less bad) performance in Q1 and Q2.

EBITDA is where it starts to get grim, with adjusted EBITDA from continuing operations decreasing by 47.0% to €25.4m – corresponding to an adjusted EBITDA margin of 33.0%.

Earnings per share from continuing operations were slightly better than the Q4 drop, with only a €0.37 loss before dilution, compared to Q4’s -€0.47 – again reflecting a curve that is quickly getting steeper.

Disappointing or disastrous?

Heading over to CEO Daly, and his choice of “disappointing” starts to seem more of an understatement. “Disastrous” might be more the word we’re looking for, again looking at the 75% drop in share price.

STS founder Mateusz Juroszek, perhaps put it more succinctly than we ever could. “I think Catena Media management should resign today and assets should be sold on the market,” he stated via a LinkedIn post. “What a story in how to destroy a business.”

That may be an extreme response, especially considering its executives are running a business that keeps changing size and shape amid a series of divestments.

But what’s the explanation for this decline? Daly’s headline comment focused on performance highlights the Q4 “market headwinds”, which he didn’t elaborate on further. The result – a revenue drop and EBITDA decline in its core North American market.

“Lower cost-per-acquisition (CPA) rates paid by operators again impacted revenue, as did stiffer competition directed against us as the established market leader,” he continued.

This was despite Catena’s high hopes for North America in 2023, which saw the company announce that it was preparing for the 2024 North Carolina sports betting launch. In January, it revealed that it saw record revenue from the launch of sports betting in Ohio.

Technology, innovation and immersive experiences

Ever the optimist, he highlights that Catena’s latest series of investments, planned as a result of the strategic review launched in 2022, will reinvent the group’s core technological focus.

This, he says, will see it offer new products that prioritise technology, innovation and immersive user experiences.

Drawing attention to its cost reduction programme of around €4.0m to “optimise group operations” following recent divestments, which included the offloading of UK and Australian online sports brands to Moneta Communications for €6.0m in August 2023, and he hopes to see greater stability.

However, divestment of brands will likely improve underlying margin than revenue. Nevertheless, it is hoped that the rebalancing will bring greater stability and sustainability over time.

Daly also highlights that the short-term drawback is that foregoing CPA in favour of revenue share reduces upfront income. However, this hasn’t developed at pace.

In Catena’s analysts call this morning, Daly highlighted that we can expect a “potential” spike as they go live in North Carolina. However, the risk is that this feels like a return to the company’s manifesto at the start of 2023.

Bouncing back

The key message, as per Daly, is patience. “A strategic reboot on the scale that we have undertaken can take time and test the patience of employees and shareholders.

“Q4 was a difficult quarter, but I believe we are now turning the corner. My message today is that our goal is in sight – a leaner, nimbler, multi-channel Catena Media with the knowledge and technical infrastructure to thrive in our core regulated markets and to deliver a return to growth in the second half of this year.”

The primary initiatives include investments in artificial intelligence (AI), paid media, subaffiliation and further strategic media partners. This, it expects, will broaden its audience reach and deliver greater value to partners. In short, making it the data and tech leader in its space.

A Better Collective?

The hidden hand we also need to consider is the 6.23% Better Collective holds in Catena Media stock. This shareholding was purchased at the start of 2023 – almost at the same time our tale of misfortune began.

As per today’s earnings call, Erik Edeen, interim CFO at Catena, puts much of this year’s disappointing performance down to increasing competition in the US.

So what is the competition? Let’s start with Better Collective. Curiously, the ones who also hold their stock. Aside from their losses on buying Catena at peak value, they couldn’t be in better health.

Unlike Catena, they’ve surpassed their full-year revenue expectations three times in 12 months – the most recent being in February 2024. Better Collective also increased its guidance twice previously in 2023.

In addition, its recent buying spree saw it acquire US-based sports content creator Playmaker HQ in July 2023 for $54m. 

Not to be confused between the two, at the start of February, Better Collective also closed its acquisition of Toronto-based digital sports media business Playmaker Capital. The group struck the deal to acquire the business in November 2023, valued at €176m.

So, what does that mean for Catena? In short, it’s all about shareholder approval. Anything that Catena wants to do now will need their competitor’s blessing, given their 6.23% stake.

As well as that, they’ll be giving their main competition prior warning on anything they plan to do. With that in mind, suddenly that picture becomes far bleaker, especially with such a pressing need to turn revenue around.

Refloating the Titanic

So, let’s return back to our company in peril. As per Catena’s announcement, we’ll first examine its aim to transition towards a more sustainable revenue model.

In short, they hope that the completion of the strategic review will be their knight in shining armour. The review ended in November last year.

The group expects a resumption of organic growth in the second half of 2024. It is also aiming for a full-year adjusted EBITDA in the range of €20m-€30m.

The new targets are double-digit organic growth in both revenue and adjusted EBITDA for 2025 and 2026 at group level. The shift towards a more sustainable revenue model also involves recruiting more players via revenue-share agreements with operators.

As we covered above, this replaces its previous cost-per-acquisition (CPA) contracts, but again we’re yet to see anything concrete on whether this is working.

The second, and as we’ll cover next, is how it will also implement a wide-ranging programme of investment in tech and data innovation.

Its plans are to roll-out a new look platform in Q1 and Q2 2024 – in short, betting big on AI.

Rolling out the AI buzzword

Catena hopes that by channelling its resources into AI, it will be able to change its fortunes.

“Rapid technological developments and the emergence of artificial intelligence (AI) are reshaping the media industry,” Daly said.

“For the online sports betting and casino gaming sector, the changes will be huge. At Catena Media we are determined to be a leading force in this new landscape.”

Catena is currently implementing a wide-ranging internal investment programme, including large investments in both tech and AI, with a minimum viable product (MVP) already in motion.

So what is it and what does it do? In outlining the company’s plans, Daly says his aim is “to fast-track our ambition to be the data and technology-driven leader of online affiliate marketing”.

catena is set to bet big on ai IN 2024

“These projects are significant in the context of our Q4 figures, which were disappointing and with which I am not satisfied. Planned and initiated earlier in 2023, the investments have since been accelerated. They are designed to position us for the future and also to restore the group to a sustainable long-term growth trajectory.”

It is understood that the new platform will facilitate the introduction of new tools to improve its “organic search competence”. This is set to “better enable us to leverage data and product development innovations”.

Built for scalability, the new platform will enable “fast” rollouts of coming innovations in multiple areas, including AI and sub-affiliation. Most likely, this will be similar to ChatGPT style content that we’re already seeing rolled out across media outlets. This would enable them to scale their content faster than what would be possible with any human writing the content.

As per today, we understand the new platform is expected to launch in Q1 2024. Once fully rolled out in Q2, this will be the first time Catena Media focuses affiliation activities on a single, coherent tech infrastructure.

Can it work?

While Catena is not the first company to pin its hopes on AI, it certainly has big plans to usher in big changes.

“We see AI as a positive force that will empower our teams and leverage their knowledge, leading to better and more attractive products and higher revenue over time,” Daly said.

“Thanks to the new technical platform, we will be able to integrate the AI joint venture and other large language models rapidly in the business.

“The same applies to paid media, a largely new vertical that will expand our reach and market exposure and reduce our dependence on state launches, especially in sports betting.”

Again however, patience will be key. It is not until these investments take off, that the market can expect to see the company reverse its current trajectory. So the big question is: What will the automation generate?

A leaner, “nimbler” multi-channel Catena Media could return to its winning ways. But given that we had a similar message at the start of 2023, we’re going to need to see more before we can definitively say they’ll arrest this decline.

Close to one year on, the message is that we’re going to see core, regulated markets being the focus. With the addition of AI, of course.

How that growth will come about remains to be seen. Or, using the latest industry buzzword, we will see whether the solution actually works.

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