Profit up at Catena Media despite revenue decline in Q3

18 November 2019

Affiliate giant Catena Media has reported a year-on-year increase in profit for the third quarter, despite also experiencing a decline in revenue during the period.

Total revenue for the three months thought to 30 September came in at €26.4m (£22.5m/$29.2m), down 5% from €27.7m in the corresponding period last year. Organic growth excluding paid revenue also slowed down by 10% in Q3. However, the Q3 figure represented an 11.4% improvement on the second quarter of the year.

Catena noted year-on-year declines across all areas of the business, with search revenue, its primary source of income, slipping from €23.7m on Q3 of 2018 to €23.1m this year. Paid revenue also fell 22.2% from €3.6m to €2.8m, while subscription revenue slipped 25.0% from €400,000 to €500,000.

Revenue from revenue sharing arrangements accounted for 42% of overall revenue in the period, while revenue from cost per acquisition comprised 43%, fixed fees 13% and subscription revenue 2%.

Catena saw an increase in cost per acquisition due to the growth in the US, which involved mainly cost per acquisition deals. The business also noted that 82% of all revenue in Q3 was generated from locally regulated or taxed markets.

In terms of overall operating expenses for the quarter, spending was up 12.7% year-on-year from €16.6m to €18.7m. Personnel costs were the main outgoing for Catena, with this rising 23.9% to €5.7m, primarily as a result of investment in the US market to support growth plans.

Direct costs related to paid revenue were up 19.4% to €3.7m, due to more spend in pay-per-click (PPC) in the US market, while depreciation and amortisation costs were up 56.5% to €3.6m. However, other operating costs were down from €6.4m to €5.6m.

Despite lower revenue and higher spending in Q3, profit before tax was up by 47.1% from €8.7m to €12.8m. This rise was primarily due to higher gains on financial liability, with this amounting to €6.8m, compared to just €750,000 in Q3 of last year.

After paying €920,000 in taxes, profit after tax climbed from €8.1m to €11.9m. However, earnings before interest, tax, depreciation and amortisation (EBITDA) slipped 11% from €35.9m to €32.0m, while adjusted EBITDA excluding non-recurring costs also down 15% to €32.2m.

“After three consecutive quarters of decline, I am happy to announce a trend shift in third-quarter revenues, which increased by 11% compared to the second quarter, making it the third-best quarter in the history of the company,” Catena’s chief executive Per Hellberg said.

“Major growth came from the United States, now representing 17% of our total revenues year to date. Strong performance from our core product AskGamblers and Japan also contributed positively to this quarter's development.

“The European Casino segment, which has been in decline since the third quarter last year, levelled out this quarter and several products started to show positive growth in traffic and revenues.”

Looking ahead to Q4 and beyond, Hellberg added: “With growth supported by our products in the United States, AskGamblers and Japan, I’m confident that the efforts we have taken are pointing us towards a bright future. But first we need to close this year.

“With the current momentum, the product improvements we have made, together with the market expansion, it looks promising for the fourth quarter.”