Catena Loses Almost Half of Revenue, Now Tries to Rebuild Itself

Catena Media PLC, a leading affiliate marketing company, has revised its long-term financial targets for the period of 2024-2026. The company's CEO, Michael Daly, candidly acknowledged the disappointment in their 2023 performance during a review. Despite a promising start with a return to net profit and a significant increase in revenue from their North American operations, the year ultimately fell short of expectations, bringing the company a 41% fall.

Catena, which controls a number of websites for gamblers and betters, made a bold move by expanding into multiple US states, including New York, Louisiana, Kansas, and Maryland, as well as Canada’s Ontario, at a rapid pace. This strategic focus on North America seemed promising at the beginning of 2023, with Daly emphasising the pursuit of high-margin opportunities in this market.

However, the media giant's heavy dependence on the US backfired. Catena's North American revenue dropped by 21% to €67.1m (£57.1m/$71.9m) when announcing the end-of-year results, leading to a significant decline in their share price of over 75% compared to the previous year.

The decline in revenue was particularly evident in the fourth quarter, with a staggering 43% drop to €12.3m. This downward trend had already begun earlier in the year, with a 29% decrease in the third quarter and a 16% decrease in the second quarter.

Catena now finds itself in a precarious position, as more than 80% of its revenue relies on the North American market. Urgent measures are needed to reverse this accelerating decline, especially considering the 75% decline in share price.

While the company aims to rebound, it faces challenges in its core North American market. Lower cost-per-acquisition rates and intense competition have impacted revenue. Daly acknowledged the headwinds faced in the fourth quarter but did not provide further details. The company had high hopes for North America in 2023, even preparing for the launch of sports betting in North Carolina in 2024.

In an effort to stabilise and grow, Catena plans to invest in technology and innovation, with a focus on artificial intelligence. These investments aim to reshape the company's core technological focus and deliver new products that prioritise technology, innovation, and immersive user experiences. Additionally, cost reduction initiatives are underway to optimise operations following recent divestments.

Despite the challenging circumstances, the CEO remains optimistic, urging patience as the company undergoes a strategic reboot. He believes that Catena will emerge as a leaner, nimbler, and multi-channel organisation with the ability to thrive in regulated markets and achieve growth in the second half of 2024.

However, the company faces obstacles, including the involvement of Better Collective, which holds a 6.23% stake in Catena Media. This ownership requires the approval of their competitor for any future plans, potentially hindering their ability to turn revenue around swiftly.

Catena's strategic review, completed in November 2023, is expected to pave the way for a more sustainable revenue model. The company aims to resume organic growth in the second half of 2024 and then make it double-digit in revenue and achieve adjusted EBITDA for 2025 and 2026. Recruitment of more players through revenue-share agreements with operators is announced as part of their strategy.

Furthermore, Catena plans to invest in tech and data innovation, with the introduction of a new platform in the first and second quarters of 2024. AI will play a crucial role in the company's transformation, enabling the integration of AI joint ventures and language models to improve its products and expand its reach.

The company announced a platform that will enhance the implementation of novel tools aimed at enhancing its proficiency in "organic search". This is expected to enhance the ability to effectively utilise data and advancements in product development.

Designed with scalability in mind, the new platform will facilitate the prompt implementation of upcoming innovations in various domains, such as AI and sub-affiliation. It is highly probable that this will resemble the style of content seen being gradually introduced in media outlets, like ChatGPT. This would enable Catena to expedite the expansion of their content, surpassing the limitations of human-authored writing.

The company aims to regain its position as a leader in the online affiliate marketing industry, leveraging AI and a focus on regulated markets. The success of these investments remains to be seen.