Release Date: May 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Catena Media PLC (LTS:0RUE) has implemented significant cost-cutting measures, including the elimination of over 50 roles, expected to generate annual savings of 5 to 6 million. The company is seeing improved performance in diversifying revenue streams, particularly in sub-affiliation and CRM segments. Despite a challenging quarter, North American casino revenue recorded a marginal 2% quarter-on-quarter increase. The company has achieved greater data granularity, allowing for more accurate allocation of geographic costs. Catena Media PLC (LTS:0RUE) plans to use proceeds from past divestments to repay senior bonds, improving its financial position.

Negative Points

Q1 revenue from continued operations declined by 39% year-on-year and 3% quarter-on-quarter, indicating ongoing challenges. The adjusted EBITDA margin fell to 9%, a disappointing step down after previous improvements. North American sports revenue decreased by 69% year-on-year, driven by lack of new state launches and increased competition. The company's average organic search score was 6.22, the worst since they started measuring, due to Google algorithm updates. Catena Media PLC (LTS:0RUE) plans to defer interest payments on hybrid capital securities, indicating financial strain.

Q & A Highlights

Warning! GuruFocus has detected 6 Warning Signs with LTS:0RUE.

Q: Can you provide some color on the margin difference between the publishing business and sub-affiliation, and how much sub-affiliation contributed to the quarter? A: (Unidentified_2) Generally, SEO has a higher margin than other areas like PPC or sub-affiliation, which typically range from 15% to 25%. While I can't disclose our exact margins, industry averages are a good reference. The increase in direct costs mainly came from our sub-affiliation business, but specific revenue figures are not disclosed in the report.

Q: When can we expect the cost savings from your current measures to take effect? A: (Unidentified_2) We've started implementing the savings, so there will be a partial impact in Q2, with a fuller impact expected in Q3. Costs associated with severance will be treated as items affecting comparability.

Q: How are market dynamics affecting your top line, and are operators focusing more on customer retention? A: (Unidentified_1) We've seen some pressure on CPA levels, but Katina Media remains strong. The sports book segment faces more competition than the casino segment. Operators are focusing more on retention, and we aim to support this by adding value in the customer journey, which should positively impact CPA rates.

Story Continues

Q: What is your stance on the regulatory movements regarding sweepstakes and prediction markets? A: (Unidentified_1) We support regulation in the casino segment for long-term sustainability. We operate only in states where sweepstakes are legal. As for prediction markets, we are embracing this new vertical and aim to monetize it effectively.

Q: Can you explain the underperformance in Q1? A: (Unidentified_1) The North American casino performance is stable, but the rest of the world and sports segments are challenging. Google algorithm changes have impacted us, but we're investing in diversifying revenue streams like sub-affiliation and CRM. Recent cost-cutting measures aim to improve profitability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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