Catena Media scraps 2024 earnings forecast amid Google search changes
Catena Media has lowered its financial estimates for the current quarter and scrapped its 2024 forecast in the wake of Googleâs organic search policy overhaul.
In a trading update, Catena said Googleâs amendments, introduced in May, will reduce the effectiveness of some strategic media partnerships. The changes, the struggling affiliate marketing group said, will adversely affect the rankings of sports betting and casino content published by many major news media websites.
Catena said the Google update will reduce revenues and direct costs arising from some of the groupâs media partnerships. In more positive news, there has been an offsetting effect in the form of higher traffic and organic search rankings for some of its owned and operated brands. The potential negative impact of Googleâs changes was highlighted by Steve Ruddock at the start of May.
Catena said that as a result of Googleâs changes it now expects revenue for the second quarter 2024 to be in the range of âŹ12.5m-âŹ13.5m. Meanwhile, adjusted EBITDA will be in the range of âŹ0.5m-âŹ1.5m.
The group reiterated its forecast of a return to revenue growth in the second half of 2024, however it has deemed the previous full-year adjusted EBITDA forecast âno longer applicableâ. Catena added that the changes at Google and its own transition to a new operating model, announced last month, mean it will not be issuing new guidance at this time.
Some direct costs reduced
The group said some lower-margin media partnerships will expire by the end of Q3. These contain more than âŹ1.4m per quarter in minimum guarantees, which are treated as direct costs in the groupâs financial statements. In addition, internal and outsourced content costs will decrease by up to âŹ1m annually due to the non-renewal of these agreements.
The group added: âExiting these high-cost minimum guarantees is one of the components for setting Catena on a path to improved margins and revenue growth in the second half of 2024.â
âCatena Media is embedding a new product-focused operating model as part of our efforts to reestablish the company as a healthy business,â Pierre Cadena, Catena Mediaâs interim chief executive, said. âWe believe that this is the right action in our strategy and we still forecast a return to sustainable growth with high-margin operations from the second half of 2024.â
These changes, combined with the proceeds from Catenaâs recent divestments, will leave the company with a much healthier balance sheet, Cadena explained.
âThis provides us with further financial flexibility and strengthens our ability to repay our senior bond next year and to confidently manage the business debt load.
âWe continue to see media partnerships as an important source of added value in a fast-moving marketplace. We are ready to invest in partnerships that generate profit for both parties and will explore attractive collaborations in this space while redoubling our focus on our organic products.â
Changes continue at Catena
In May 2024, Catena said it is implementing a programme of âorganisational and leadershipâ changes to address its ongoing poor performance after revealing that revenue almost halved year-on-year to âŹ16.0m in Q1.
That poor start to the year came after revenue for 2023 fell 22% to âŹ76.7m. US revenue was down by 21.0% â cushioning the faster decline later in the year by a less precipitous drop in the first two quarters. Adjusted EBITDA from continuing operations decreased by 47.0% to âŹ25.4m â corresponding to an adjusted EBITDA margin of 33.0%.
Revenue was 49.2% lower at Catena during Q1 2024, with declines reported across all areas of the business. North America revenue halved, mainly due to a drop in sports betting revenue, while rest of world revenue fell 34.6%.
In terms of personnel, Manuel Stan was announced as new CEO in March. Michael Daly stepped down in February, having been at the helm on a temporary basis. Stan is due to take over on 1 July.
Catena also appointed Michael Gerrow as group chief financial officer from mid-April. Catena also promoted Edward Midolo to the role of chief technology officer after six years with the business.
In terms of strategy, Catena says it is âre-inventingâ its core technology focus by developing new product offerings that prioritise technology, innovation and user experience.
Its key goals here include bolstering its core organic search business and improving existing products, growing its paid media division, securing new strategic media partnerships and committing to new technology investments, such as artificial intelligence paid media and sub-affiliation.
