Date: 22.11.2023

by Mateusz Mazur

Last update: 25.11.2023 10:39

Catena Media Navigates Transition Period with Strategic Shifts in Revenue Model

Catena Media plc, in its interim report for January to September 2023, revealed a strategic shift in its business model, impacting its short-term earnings while strengthening its financial position.

The group experienced a 28 percent revenue decrease in Q3, largely attributed to transitioning some North American contracts from a cost-per-acquisition (CPA) model to a revenue share approach.

North American Market Dynamics and Strategic Review

In North America, a significant percentage of new depositing customers (NDCs) were recruited under revenue share deals, indicating a strategic pivot.

The sale of the group’s Italian online sports betting and casino gaming business for EUR 19.8m was a key part of a strategic review initiated in 2022, leading to 90 percent of the group’s revenue now coming from regulated markets.

Financial Highlights and AI Investment

The report noted a robust EBITDA margin in North America despite the revenue share transition. The group’s net debt stood at EUR 25.4m as of September 30, with a net cash position after adjusting for divestment proceeds.

Post-quarter, Catena Media invested in an AI joint venture, aiming to develop an AI-based affiliation platform to fuel future growth.

Q3 Performance and Future Prospects

For the period July to September 2023, revenue from continuing operations dropped to EUR 15.9m, a 28 percent decrease. North America’s revenue fell by 29 percent, constituting 84 percent of the group’s revenue.

Adjusted EBITDA from continuing operations saw a 65 percent decrease, reflecting the ongoing strategic transition.

CEO Michael Daly’s Perspective

CEO Michael Daly commented on the completion of the strategic review and the divestiture of Italian businesses, marking a new chapter for Catena Media. He emphasized the focus on stable, regulated markets and the shift from CPA to revenue share. Daly acknowledged the challenges of stronger competition and lower marketing spend by operators but remained optimistic about the long-term stability and growth prospects in North America.

Addressing Market Challenges and Leveraging AI

The shift to a more sustainable revenue model may necessitate a review of financial targets. The company faced intensified competition and a reduction in CPA rates.

Despite these challenges, Daly sees potential in leveraging AI technology to gain a competitive edge in the evolving affiliation business.

Outlook and Strategic Initiatives

With the strategic review completed, Catena Media is poised to resume organic revenue growth in the second half of 2024. The company plans to invest in organic search, media partnerships, and long-term technology projects.

Daly anticipates that AI applications will significantly enhance Catena Media’s capabilities in the competitive market.

Our Comment on the Article

Catena Media’s latest financial report indicates a period of strategic transition, focusing on a more sustainable revenue model. While short-term earnings are impacted, the company’s move towards revenue share contracts and investment in AI technology suggest a forward-thinking approach.

The shift aligns with the evolving dynamics of the North American market and the broader digital marketing landscape. Catena Media’s strategic review and subsequent actions reflect a commitment to adaptability and innovation in a rapidly changing industry.