Catena Media expects to post operating loss in Q4

18 February 2020

Affiliate giant Catena Media has revealed it is set to post an operating loss for the fourth quarter due to the impact of intangible assets, the adoption of IFRS 9 accounting assumptions and an exceptional revenue adjustment in the US.

Catena estimated that total operating revenue for the three months through to 31 December 2019 will amount to €27.1m (£22.6m/$29.3m), which would be down marginally from €27.3m in the same period last year.

According to Catena, revenue in Q4 was impacted by an exceptional adjustment of €500,000 related to previous periods, and as a result, reported revenue for the quarter is estimated at €26.6m.

The was related to a single operator in Pennsylvania in the US that had adjusted historical numbers of qualified online leads due to customers already existing in the online registered database from previous land-based gaming activities.

Catena said that with redirected traffic towards other operators, as there are now being more operators live in the state, the risk of this happening again is “very limited”.

Catena did not present any information about its spending at the time – with the affiliate giant due to publish its full quarter results on 20 February – but did state that it is likely to post an operating loss of €27.3m, compared to a profit of €9.4m last year.

This, according to Catena, is due to a non-cash effect from impairment testing of intangible assets, resulting in a write-down of €32.1m for assets acquired in the period 2016 to 2018.

This includes a write-down of €17.9m related to intangible financial assets that are primarily focused on the European Union. Since these assets were acquired in 2017–18, trading opportunities in the EU were limited due to binary options being banned, the European Securities and Markets Authority implementing new regulations on contracts for difference leverage and the cryptocurrency market being more volatile.

Catena also noted a write-down of €13.2m related to intangible casino assets it acquired in 2016. These assets, mainly consisting of revenue-share accounts, have been reclassified as inactive products, where no further investments will be made, as part of Catena’s strategic review.

In addition, there was a write-down of €900,000 in reference to intangible assets in the sports market. Again, the assets in question primarily related to revenue-share accounts and have now been reclassified as inactive products through the strategic review.

“The write-downs are related to earlier acquired assets that are not performing in line with the rest of our portfolio, as well as to past contractual decisions,” chief executive Per Hellberg said. “Excluding the non-recurring items, our underlying business developed much like we expected for the fourth quarter.”

Aside from this, Catena said that it expects adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the period to fall slightly to €11.8m, where as EBITDA is likely to fall 29.2% to 8.5m.

Catena said EBITDA was affected by IFRS 9 requirements and the recognition of impairment losses, adding that its board had decided to take a conservative approach to the assessment of bad debts. This, it said, results in an exceptional adjustment when implementing a prudent assessment model in Q4.

Based on assumptions and judgments regarding relevant data points, and their impact on future expected receivables, this had a negative impact of €2.7m on reported EBITDA for the quarter.