Catena Media has lowered its financial outlook for the current quarter and withdrawn its 2024 forecast following Google's overhaul of its organic search policy.
In a trading update, Catena said Google's proposed changes, introduced in May, would reduce the effectiveness of some strategic media alliances. The struggling affiliate marketing group said the changes would negatively impact the rankings of sports betting and casino content published on many major news media websites.
Catena said Google's updates would reduce revenue and direct costs generated from some of the group's media partnerships. In more positive news, there was an offsetting effect of increased traffic and organic search rankings for some of the company's owned and operated brands. The potential negative impact of Google's changes was highlighted by Steve Ruddock in early May.
Catena said it expects second-quarter 2024 revenue to be in the range of 12.5 million to 13.5 million euros as a result of Google's changes, while adjusted EBITDA is expected to be in the range of 500,000 to 1.5 million euros.
The group reiterated its forecast of a return to revenue growth in the second half of 2024, but deemed last year's full-year adjusted EBITDA forecast “no longer applicable.” Catena added that due to the changes at Google announced last month and its own transition to a new business model, it would not be issuing new guidance at this time.
Reduce some direct costs
The Group announced that some of its lower-margin media partnerships will be terminated by the end of the third quarter. These partnerships include minimum guarantees of more than €1.4 million per quarter and are treated as direct expenses in the Group's financial statements. In addition, in-house and outsourced content costs will be reduced by up to €1 million per year as these contracts will not be renewed.
“Moving away from these high-cost minimum guarantees is one of the elements that will put Catena on track for improved margins and earnings growth in the second half of 2024,” the group added.
“Catena Media is embedding a new product-focused operating model as part of our efforts to rebuild the company as a healthy business,” said Pierre Cadena, interim CEO of Catena Media. “We believe this is the right move within our strategy and we forecast a return to sustainable growth from high-margin businesses from the second half of 2024.”
These changes, combined with the proceeds from Catena's recent sale, will leave the company with a much healthier balance sheet, Cadena explained.
“This provides us with additional financial flexibility and enhances our ability to repay our senior notes next year and confidently manage our operating debt load.”
“We see media partnerships as an important source of added value in a rapidly changing market. We are ready to invest in mutually beneficial partnerships and will explore attractive collaborations in this field as we intensify our focus on organic products.”
Catena's transformation continues
In May 2024, Catena revealed that its first-quarter revenue had almost halved year-on-year to €16 million, after which it said it would implement an “organisational and leadership” change programme to address continued poor performance.
This weak start to the year came after revenues for 2023 fell 22% to €76.7 million. Revenues in the United States fell 21.0%, with the decline being less steep in the first two quarters, mitigating the sharp decline in the second half of the year. Adjusted EBITDA from continuing operations decreased 47.0% to €25.4 million, with an adjusted EBITDA margin of 33.0%.
Catena's first-quarter 2024 revenue fell 49.2%, with declines reported across all areas of its business: North American revenue fell by half, mainly due to lower sports betting revenue, while rest of the world revenue fell 34.6%.
On the personnel front, it was announced that Manuel Stan would take over as CEO in March, after Michael Daly stepped down in February and Cadena took over on an interim basis. Stan is due to take up the role on July 1.
Catena also appointed Michael Gerow as group chief financial officer, effective mid-April, and promoted Edward Midlo, who has been with Catena for six years, to chief technology officer.
In terms of strategy, Catena says it is “reinventing” its core technology focus by developing new products that prioritize technology, innovation and user experience.
Key goals here include strengthening our core organic search business and improving existing products, expanding our paid media division, securing new strategic media partnerships and investing in new technologies such as artificial intelligence paid media and sub-affiliates.
