In response to Google’s new organic search policies, Catena Media has reduced its forecast for this quarter. It also canceled its projections up until 2024.
Catena stated in a recent trading update that Google’s May amendments will decrease the effectiveness of certain strategic media partnerships. According to the affiliate marketing company, these changes will negatively affect rankings for sports betting content and casino material published on many news websites.
Catena has said that the Google updates will result in a reduction of revenues and costs from certain media partnerships. Positively, the Google update has had a positive effect on some owned and operated brand’s traffic and rankings in organic searches. Steve Ruddock highlighted the potential negative effects of Google’s new changes at the beginning of May.
Catena stated that due to Google’s recent changes, it expects revenues for the second quarter of 2024 in the EUR12.5m-13.5m range. The adjusted EBITDA is expected to be between EUR0.5m and EUR1.5m.
The group reiterated that it expects a return of revenue growth to occur in the second-half of 2024. However, the adjusted EBITDA for the full year is “nolonger applicable”. Catena said that due to the recent changes announced by Google, as well as its transition into a new model of operation, it would not be providing any new guidance.
Some direct costs reduced
Some lower-margin partnerships with media will end by Q3 according to the group. The group treats these as direct costs. They contain minimum guarantees of more than EUR1.4m each quarter. The non-renewal will also result in a reduction of up to EUR1m per year for internal and external content costs.
Group added that “Exiting high-cost, minimum guarantee contracts is a key component for Catena to achieve improved margins in 2024.”
Catena Media has implemented a product-focused model of operation as part our efforts to restore the company’s health,” said Pierre Cadena. We believe this is a good step in the direction of our strategy, and we continue to forecast that sustainable growth will be achieved with high-margin business operations by the second half 2024.
Cadena said that these changes combined with Catena’s recent divestments will result in a healthier balance sheet for the company.
This gives us more financial flexibility, and improves our ability repay our senior bonds next year.
We continue to view media partnerships as a source of value added in an ever-changing marketplace. We will invest in partnership that creates profit for both sides and explore exciting collaborations while increasing our focus on organic products.
Catena continues to change
Catena announced in May 2024 that it will implement a program of “organisational changes and leadership” to improve its poor performance. This follows the announcement by Catena, which revealed revenue had almost been halved from Q1 to EUR16.0m.
This poor start came as revenue in 2023 dropped 22%, to EUR76.7m. US revenues were down 21.0%, cushioning a faster decline in later years by the less abrupt drop during the first two quarterly periods. The adjusted EBITDA for continuing operations fell by 47.0%, to EUR25.4m. This corresponds to a margin of EBITDA that is 33.0%.
Catena’s revenue was down 49.2% in Q1 2024. This decline occurred across the board. North America’s revenue was halved largely due to the decline in sports betting revenues, and rest of world revenue dropped by 34.6%.
Manuel Stan, the new CEO was appointed in March. Michael Daly, who had been the CEO on a temporarily basis since February, resigned. Stan will take the reins on July 1.
Michael Gerrow was also named as the group’s chief financial officer by Catena, effective mid-April. Catena promoted Edward Midolo, who has been with the company for six years, to chief technology officer.
Catena’s strategy is to “reinvent” the core technology by creating new products that prioritize technology, innovation, and user experience.
The company’s main goals are to improve its organic search and grow its paid-media division. It also wants to secure new media strategic partnerships, and invest in new technologies, including artificial intelligence and paid media.
