In a recent trading update, Catena Media announced significant changes to its 2024 financial forecast due to adjustments in Google’s search algorithms introduced in May 2023. The affiliate marketing group revealed that these modifications would diminish the effectiveness of several strategic media partnerships. This drop in efficacy is predicted to adversely influence the rankings of sports betting and casino-related content hosted by major news websites.
Catena Media stated that the changes implemented by Google are expected to lead to a reduction in both revenues and direct costs associated with some of its media partnerships. However, the company also noted a compensatory effect in the form of increased traffic and improved organic search rankings for a number of its owned and operated brands. Steve Ruddock had highlighted the potential negative ramifications of Google’s alterations at the beginning of May.
According to Catena Media, projected revenue for the second quarter of 2024 is now anticipated to range between €12.5 million and €13.5 million. Meanwhile, adjusted EBITDA is expected to fall between €0.5 million and €1.5 million. Despite these adjustments, the group remains optimistic, reiterating its forecast of returning to revenue growth in the latter half of 2024. However, it deemed the previously issued full-year adjusted EBITDA forecast as “no longer applicable.” Due to these changes and its transition to a new operating model that was announced recently, Catena Media has decided not to issue new guidance at this moment.
The company also mentioned the impending expiration of some lower-margin media partnerships by the end of the third quarter. These partnerships account for over €1.4 million per quarter in minimum guarantees, which are recorded as direct costs in the financial statements. Additionally, internal and outsourced content expenses are projected to decrease by up to €1 million annually due to the non-renewal of these agreements.
“Exiting these high-cost minimum guarantees is one of the steps towards placing Catena Media on a path to improved margins and revenue growth in the second half of 2024,” the company stated.
Pierre Cadena, Catena Media’s interim chief executive, emphasized the strategic importance of these changes: “Catena Media is embedding a new product-focused operating model as part of our efforts to reestablish the company as a healthy business. We believe that this is the right action in our strategy and we still forecast a return to sustainable growth with high-margin operations from the second half of 2024.”
Cadena further explained that combining these changes with the proceeds from Catena’s recent divestments would result in a much healthier balance sheet for the company. “This provides us with further financial flexibility and strengthens our ability to repay our senior bond next year and confidently manage the business debt load,” he said.
.
Despite these upheavals, Catena Media continues to view media partnerships as a crucial source of added value in a rapidly evolving market. Cadena stressed the company’s readiness to invest in partnerships that promise mutual profitability while also focusing heavily on organic product growth. “We are ready to explore attractive collaborations in this space while redoubling our focus on our organic products,” he added.
In May 2024, Catena Media announced a programme of “organisational and leadership” changes to address its continued dismal performance. The first quarter of 2024 saw revenue nearly halve year-on-year to €16.0 million, a poor start compared to the previous year, where revenue dropped by 22% to €76.7 million. The steep decline in the U.S. revenue, which fell by 21.0%, was somewhat cushioned later in the year by less significant drops in the first two quarters. Adjusted EBITDA from ongoing operations decreased by 47.0% to €25.4 million, corresponding to an adjusted EBITDA margin of 33.0%.
The first quarter of 2024 saw a 49.2% reduction in revenue at Catena across all business areas. Notably, North American revenue halved, largely due to a decline in sports betting revenue, while revenue from other parts of the world fell by 34.6%.
In terms of leadership, Manuel Stan was announced as the new CEO in March, with Michael Daly stepping down in February, and Pierre Cadena serving as interim CEO until Stan assumes the role on July 1. Michael Gerrow was appointed as group chief financial officer in mid-April, and Edward Midolo was promoted to chief technology officer after six years with the company.
Strategically, Catena Media is “re-inventing” its core technology focus by developing new product offerings that prioritize technology, innovation, and user experience. The company aims to bolster its core organic search business, improve existing products, grow its paid media division, secure new strategic media partnerships, and commit to new technology investments, such as artificial intelligence for paid media and sub-affiliation.
By aligning its operational and financial strategies with these emerging market trends and changes, Catena Media hopes to navigate through current challenges and move towards a more profitable and sustainable future.
