Catena Media, a prominent affiliate in the iGaming and sports betting industry, has publicly acknowledged its less than stellar performance for the fiscal year 2023. Michael Daly, CEO of Catena Media, did not mince his words when describing the year as “disappointing,” marking a stark contrast to the company’s initial positive outlook.
The year had begun with promise for Catena Media as it reported a return to net profits driven by a 24% year-over-year revenue surge from its North American operations. With the expansion into various U.S. states such as New York, Louisiana, Ontario, Kansas, and Maryland, 2023 was poised to be a year of growth, especially with the strategic emphasis on North America and the prospects of unlocking high-margin opportunities.
Daly, expressing optimism at the outset of 2023, highlighted the importance of fully capitalizing on the lucrative North American market, which inspired confidence in stakeholders about the upcoming year. However, this hopeful sentiment would gradually dissipate as the reality of the business’s trajectory unfolded.
North America, a region that contributes over 80% of Catena’s revenue, experienced a significant 21% decline, decreasing to €67.1 million. This downturn was reflected in the year’s final quarter, with a precipitous 43% fall in revenues, escalating from gradual declines witnessed in earlier quarters.
Shareholders have felt the impact of these results, with the company’s share price plummeting by over 75% compared to the previous year. Both the quarterly and annual figures painted a concerning picture, as new depositing customer numbers and adjusted EBITDA experienced sharp declines.
A 41% revenue drop in continuing operations during the fourth quarter and a 43% decrease in new depositing customers became troubling statistics. Adjusted EBITDA during this period took a massive hit, dropping by 88% to €1.5 million, translating to a 10% adjusted EBITDA margin. Consequently, earnings per share also suffered, resulting in a negative €0.47 per share before dilution, and the market reflected the grim sentiment with an immediate 10% drop in Catena’s stock price upon the announcement of these results.
The full-year financials provided a broader perspective of the situation, with total revenue down by 22% at €76.7 million, highlighting the company’s reliance on a singular market strategy is now seen as a liability. Daly’s summarized analysis of the situation pointed to “market headwinds” in Q4 as a primary cause without providing detail. He acknowledged the impact of reduced cost-per-acquisition (CPA) rates and increased competition as central contributors.
Despite the setbacks, Daly remains optimistic about the company’s future. He underpins this optimism on Catena’s strategic decisions made after a thorough review in 2022, which includes a transition towards a technology-centric approach offering new, innovative products with immersive user experiences. Savings from recent divestments and moves toward more sustainable revenue models, such as the prioritization of revenue-share agreements over CPAs, are hoped to bring about greater stability.
However, there are external factors at play, such as the competition from Better Collective, which has acquired a 6.23% stake in Catena. Erik Edeen, interim CFO at Catena, attributes much of the subpar performance to rising competitive pressures in the U.S., a domain where rivals like Better Collective seem to flourish, contradicting Catena’s recent experiences.
In response to these challenges, Catena has set ambitious financial targets for 2024-2026, aiming for double-digit organic growth at the group level. Additionally, the company has embarked on significant tech and data investments, including an overhaul of its platform to leverage artificial intelligence (AI). This technological pivot is designed to revitalize the company’s online affiliate marketing presence and support scalable product development.
Despite Daly’s renewed call for patience, stating the strategic reboot is a considerable undertaking that will require time, the proof will be in the coming quarters as investors and stakeholders closely watch for signs of the promised turnaround.
As Catena Media grapples with these formidable challenges, the company stakes its future on a new foundation of AI-powered innovation and technical agility. With plans in motion for a new platform roll-out and further tech investments, Catena Media aspires to not only counteract its current downward spiral but to redefine its industry position and accelerate towards sustainable growth in its core regulated markets.
