In a decisive move to streamline operations and refocus on key markets, Catena Media has confirmed the completion of two separate agreements, amounting to €19.8 million ($21.7 million/£17.3 million), to sell its Italian operations to undisclosed buyers. The company has announced that one sale has already concluded and the other is expected to finalize before the end of 2023. These actions signify Catena Media’s strategic withdrawal from the Italian market, concluding the comprehensive review process that began in May 2022.
The company has now divested a total of €76.0 million worth of assets following this strategic review, including the notable sale of AskGamblers to GiG for €45.0 million in December 2022. The primary objective of these divestments is to sharpen Catena Media’s operational focus on stable and regulated markets, notably in the Americas. Moreover, the proceeds from these sales are set primarily to be applied toward debt reduction to improve the company’s leverage ratio.
Before the sale, Catena Media’s Italian operations reported revenue of €7.8 million and an EBITDA of €3.4 million over 12 months leading to September 2023. The sale encompasses major brands such as Superscommesse and will lead to an impairment charge of €2.7 million.
This declaration of the Italian sector sale coincides with the news of a significant 28% drop in the group’s year-on-year revenue, which the company attributes to a strategic shift in some North American contracts from Cost Per Acquisition (CPA) to revenue share. As of September 30, Catena Media reported a net debt of €25.4 million. However, after adjusting for a scheduled influx of €46.6 million in divestment proceeds projected between 2023 and 2025, the group possesses a net cash position of €21.2 million.
Michael Daly, CEO of Catena Media, commented on the sale, expressing optimism for the Italian brands’ future under their new ownership and their potential for growth and prosperity.
The purchase price for these divestitures will be dispersed across three payments, with an initial €12.8 million due in October and November of 2023, followed by €3.5 million in the fourth quarter of 2024, and a final €3.5 million in the second quarter of 2025.
Since the announcement of the strategic review in May 2022, the group has successfully concluded several transactions, including the sale of assets in the UK and Australia for €6.0 million and other assets valued at €5.2 million. Furthermore, Catena Media’s recent expansion into Kentucky has broadened its reach to 27 US states and Canadian provinces.
Additional corporate initiatives have included the commencement of a SEK100 million share buyback program and the issuance of new shares. Measures implemented ensuring cost savings estimated between €3.8 million and €4.2 million, predominantly by optimizing support functions within European operations.
In its positioning statement, Catena Media emphasized its belief in the importance of stable, regulated markets for sustainable long-term growth, identifying North America as a key focal point for the company’s future growth strategy.
The third-quarter results highlighted an earnings impact in the short term, seen as a necessary step towards achieving a stronger financial position and facilitating a shift to a more sustainable revenue model. The group’s revenue from continuing operations fell by 28%, with revenue from North America decreasing by 29% to €13.3 million, constituting 84% of the total group revenue from continuing operations.
The competitive landscape, with operators reducing marketing budgets in favor of profitability, has impacted revenue negatively. In sports betting, pressures were somewhat eased by operators aiming to protect margins by cutting CPA rates, some by as much as 25% compared to the previous year.
During this transitional quarter, Catena Media began altering some of its North American CPA-based contracts to a revenue share model. Approximately 17% of new depositing customers in North America were acquired under this new model. This strategic rebalancing is expected to secure a more consistent and sustainable flow of revenue over time.
Despite these transitions, adjusted EBITDA from continuing operations dropped by 65% to €3.1 million, rendering an adjusted EBITDA margin of 19%.
In conclusion, Catena Media recognizes the inevitability of increased competition as new players join the market, driven by legalization processes and solid industry fundamentals. This assessment underlines the company’s ongoing commitment to adapt and succeed amidst the dynamic landscape of digital marketing and affiliate businesses.
