Catena implements new operating model following “underperformance” in Q1

Revenue was 49.2% lower at Catena during Q1, with declines reported across all areas of the business. North America revenue halved, mainly due to a drop in sports betting revenue, while rest of world revenue fell 34.6%.

In response to what interim CEO Pierre Cadena described as an “underperformance” during the quarter, as well as declines in 2023, Catena will now put in place a new operating model. This will be complemented by management changes.

All change at Catena

First, Catena in March announced Manuel Stan as its new CEO. Michael Daly stepped down in February, with Cadena having been at the helm on a temporary basis. Stan is due to take over on 1 July.

Last month, Catena appointed Michael Gerrow as group chief financial officer, with effect from mid-April. Catena also promoted Edward Midolo to the role of chief technology officer after six years with the business.

In addition, it has proposed bringing in Erick Flinck as new chairman. The motion will be voted on at Catena’s AGM on 15 May.

As for organisational changes, Catena says it is “re-inventing” its core technology focus by developing new product offerings that prioritise technology, innovation and user experience.

Its key goals here include bolstering its core organic search business and improving existing products, growing its paid media division, securing new strategic media partnerships and committing to new technology investments, such as artificial intelligence paid media and sub-affiliation.

Other initiatives include a “significantly lower presence in unregulated grey markets and those with unclear regulatory frameworks. In addition, it will move towards a cost-per-acquisition (CPA) dominated revenue model to a higher mix of revenue share. This, it says, will produce higher and more sustainable revenue inflow over time.

This also follows the decision to divest its Italian business late last year. The sale effectively concluded a strategic review that launched back in May 2022.

Interim CEO backs plan to move the business forward

Speaking more about these changes, Cadena says they are necessary to help the business progress.

“The initiatives have multiple focal points: technology leadership; strategic product development; enhanced operational efficiency; and a new multichannel structure to diversify our product offerings,” Cadena said.

“In Q1 we made a number of changes to equip the organisation for this leap. We began replacing the existing geography-based operating model – which was geared towards rapid market regulation – with a product-focused operating model, a strategic pivot to enhance our agility and focus on creating high-value, results-oriented products. 

“Key products within our portfolio will be managed as distinct entities, equipped with a clear mission, vision and brand purpose, all underpinned by detailed financial and operational success metrics to ensure accountability and performance. 

“Fast-response product squads are also being created to address problems as they arise and make sure we respond faster and more decisively to market dynamics than in our recent past.”

He also backed the new management team to succeed at Catena. He said: “I am confident that the new team possesses the experience and acumen to improve operating performance and drive the business forward after several recent disappointing quarters.”

Sports betting decline hits North America performance in Q1

Taking a closer look at the Q1 data, it is difficult to pick out any positives for Catena. 

Revenue in North America, its core market, was down by 50.5% at €14.3m, of 90.0% of total Q1 revenue. This is mainly due to sports betting revenue in the region dropping 71.9% to €5.5m. Catena put this down to weaker operational performance and a lacklustre Super Bowl. Q1 2023 also saw dual sports betting launches in Ohio and Massachusetts, although Catena did go live in North Carolina when the market launched in mid-March this year.

North American casino revenue also dropped 15.4% to €8.8m, which Catena describes as “unsatisfactory”. However, it was higher than Q4 of 2023, suggesting the first sign of returns from increased product focus on, and investment in, its two flagship US sites – Bonus.com and PlayUSA.com. 

“Catena Media is further investing for that trend to continue,” the group said. “This should lead to year-on-year growth in future quarters.”

Rest of world revenue drops 34.6%

As for operations in the rest of world segment, this also made for difficult reading. Revenue fell 34.6% year-on-year to €1.7m for this area of the business.

Sports betting revenue dropped 45.0% to €1.1m although casino revenue was almost level at €607,000. 

For the latter, Catena referenced operations in Japan, saying performance was impacted by a longer-than-expected overhaul of CasinoOnline.jp. However, Slotsia, also in the country, doubled its revenue in Q1 to become the largest Japanese brand. 

“Plans are in place to expand Slotsia’s user base further by widening the offering, strengthening marketing activities and offering a multichannel experience for user,” Catena said.

As for where revenue came from on a group basis, 86.0% of total Q1 revenue was derived from CPA agreements. Some 12.0% came from revenue share agreements and the other 2.0% fixed-fee revenue.

New depositing customers across the business fell 40.6% to 44,077. Of those in this group, 81.0% were classed in the CPA category and 19.0% revenue share. 

Catena slips to Q1 net loss

Moving to spending and operating costs were only marginally higher at €16.4m, compared to €16.3m last year. The main outgoing for Catena was again personnel expenses at €6.9m.

After also accounting for non-operating costs, pre-tax loss for Q1 hit €1.9m, in contrast to last year’s €12.9m profit. 

Catena paid €332,000 in tax during the quarter and saw a €222,000 loss from discontinued operations. There was also a €1.3m negative impact of interest payable on hybrid capital securities, but the group did see a €422,000 positive impact from currency translation.

As such, it ended Q1 with a net loss of €3.3m, compared to a €21.5m net profit in 2023. In addition, adjusted EBITDA slumped 89.8% from €18.7m to just €1.9m.