Online lead generation company Catena Media registered a five per cent decrease in revenue during the second quarter (Q2) of 2022, largely due to challenging economic conditions that have impacted trading in several markets, it revealed on Thursday.
Headquartered in Malta, Catena Media is a global leader in generating high value leads for operators in online casino, sports betting, and financial trading. The group has a large portfolio of web-based affiliation brands that guide users to customer websites and enrich the experience of players worldwide. It employs over 450 people in Europe, North America, Asia-Pacific and Oceania.
Apart from macroeconomic impacts on player spend across multiple markets, the drop to €28.9 million in revenue also comes as a result of “sports calendar seasonality”.
However, the “seasonal lull in sports” did not have a significant effect on the North American market, which is developing rapidly, recording a 21 per cent increase in revenue during the period, equivalent to 52 per cent of group revenue. This also follows “slower than expected” initial revenue gains in Ontario after the launch of licenced online sports betting and casino in April due to unforeseen regulatory constraints on marketing. The impact this had on the group was amplified due to its strong prior investments in Ontario as a large new market.
As a result of altered market launch timetables, the attainment of the group’s 12-month $100 million (€98.37 million) revenue goal in North America is set to be delayed until the first half of 2023. However, Catena Media’s performance in North America is set to continue thriving as it announced its first major United States media deal in August, a content partnership with Advance Local’s NJ.com website in New Jersey.
High inflation and energy prices, along with weaker economic conditions, had an effect on consumer spending in European markets in both sports betting and casino. Similarly, revenue dropped in Japan due to a weak yen and political controversy surrounding an online gaming player, yet the group remains optimistic as the victory of gaming-friendly parties in July’s parliamentary elections is set to benefit the market in the future.
Commenting on the group’s overall performance, CEO Michael Daly said that Q2 proved to be a challenging quarter for Catena Media, “as largely external factors led to a disappointing five per cent dip in group revenue”.
CEO Michael Daly / Catena Media / Website
“A sharp deterioration in global economic conditions affected trading in multiple markets, denting performance in parts of our online sports betting and casino portfolio just as we had taken on extra costs to support new market launches and product upgrades,” he added.
Steps were taken during the quarter to reduce expenditures amid “the changing landscape and scaled back strategic investments from planned levels”. While the initial effect of these measures was seen in Q2, it proved “insufficient” to compensate for the full impact of lower margins, particularly through the group’s revenue share agreements with operators outside North America.
Despite these challenges, Mr Daly remains “optimistic about the forward outlook,” since Catena Media is “an agile business with global reach in markets where the fundamentals for online sports betting and casino remain strong”.
“The changed economic environment will likely reduce user spending on entertainment in coming quarters, and we are pivoting aggressively to this new reality. Our priority is to continue to remove costs where we can and to adapt the business to lower margins in key markets while continuing to develop the many attractive growth opportunities ahead of us,” he continued.
While market conditions remain testing, “people will still be betting and will be finding those new bettors and bringing them to the table for our partners,” likely leading to a reduction in volumes in some markets, while increasing in others.
Mr Daly remarked that while the legalisation of online sports betting and casino in Ontario proved “uninspiring” due to unexpectedly strict market restrictions, Catena Media still expects its operations in Ontario to “perform well when the NFL football season kicks off in September,” for it to be a “solid source of casino revenue over time”. He also hopes regulators will look to ease some of the current “hurdles” for operators and affiliates.
Increased competition and higher living costs led to player revenue trending lower in some established casino markets in North America, yet the rise in revenue still reflected “strong growth in social and sweepstakes casino”, as well as the addition of Ontario and a significant contribution from the i15 Media assets acquired in Q3 last year. Following the agreement with Advance Local, the group is also in negotiations to sign its first United States revenue share deal, Mr Daly confirmed. This also comes as a number of North American states are preparing to legalise online sports betting.
“In Europe and our global brands, the squeeze on revenue share deals with operators put pressure on margins. Sports revenue was predictably slower due to the lack of a major summer sporting event compared to Q2 last year,” he said. This was coupled with lower player engagement in casino, reflecting cost of living constraints and an overlap with the summer holiday season. “Post-Covid, a more sluggish betting cycle is expected at this time as people spend more time offline,” Mr Daly added.
However, Mr Daly was “encouraged” by the news that the first online casino operator licences were granted in Germany after the shift to a regulated market in July of 2021. Additionally, the group foresees growth in Germany in the future, which will be boosted with an uplift in Q3 when the football season resumes.
“I was delighted to note a quarter of stellar growth in Latin America, a very exciting region where we see high potential for expansion through our own teams and also via acquisition,” he added.
A strategic review of specific parts of the business was announced in May in response to third-party interest from some of Catena Media’s brands, which also attracted strong interest from additional players. This review was expanded to its entire European operations this month, where the group will be seeking cost reductions.
“In fast-changing economic conditions we are working diligently to obtain the best outcomes for Catena Media and our shareholders,” Mr Daly concluded.