Date: 21.06.2024

by Adam Dworak

Catena Media Issues Profit Warning. Q2 Revenue Expected to Drop Significantly

Catena Media has issued a profit warning, projecting a substantial decline in revenue for the second quarter of 2024. The affiliate business expects Q2 revenue to range between €12.5 million and €13.5 million, reflecting a decrease of at least 20% compared to the same period in the prior year. Even at the upper end of the forecast, this represents a 20.12% decline from Q2 2023.

Catena Media Reports H1 2023 Performance Amid Shifting Markets

Adjusted EBITDA Set to Plummet

The company’s adjusted EBITDA is anticipated to drop significantly, ranging from €0.5 million to €1.5 million, down from €2.6 million in Q2 2023. This stark reduction underscores the financial challenges Catena Media is currently facing.

Impact of Google’s Policy Changes

Catena Media attributes part of its revenue decline to recent changes in Google’s organic search policies. These changes, which took effect in May, have reduced the effectiveness of certain strategic media partnerships. Specifically, the updated policies negatively impact the rankings of sports betting and casino content published by major news media websites.

Despite these challenges, Catena Media has noted an increase in traffic and improved organic search rankings for some of its owned and operated brands. This shift is attributed to evolving search patterns that favor high-quality, relevant content.

However, the company acknowledged that the financial impact related to media partnerships could become significant in future periods, depending on the offset from organic traffic growth.

Strategic Adjustments and Cost Reductions

In light of these developments, Catena Media has decided not to issue new full-year adjusted EBITDA guidance at this time. The decision comes amid ongoing organizational transformation and the implementation of a new operating model under the leadership of a new board of directors and executive management team.

Several lower-margin media partnerships, set to expire in Q2 and Q3 2024, will not be renewed. These partnerships account for over €1.4 million per quarter in minimum guarantees, which are classified as direct costs in the company’s financial statements.

Additionally, the non-renewal of these agreements is expected to reduce internal and outsourced content costs by €0.7-1 million annually.

Exiting these high-cost minimum guarantees is part of Catena Media’s broader strategy to improve margins and drive revenue growth in the second half of 2024. Interim CEO Pierre Cadena stated, “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.”

Improving Financial Health

These strategic changes, combined with proceeds from recent divestments, are expected to result in a healthier balance sheet for Catena Media. According to interim CEO Pierre Cadena, this financial flexibility will enhance the company’s ability to repay its senior bond next year and confidently manage its debt load.

Cadena emphasized the ongoing importance of media partnerships, stating, “We continue to see media partnerships as an important source of added value in a fast-moving marketplace. We are ready to invest in partnerships that generate profit for both parties and will explore attractive collaborations in this space while redoubling our focus on our organic products.”

Investors reacted negatively to the profit warning, causing Catena Media shares to drop by 5% in the early hours of trading. This decline reflects investor concern over the company’s short-term financial performance and the impact of Google’s policy changes on its strategic media partnerships.