Catena Media plc

Good morning, everyone. Welcome to Catena Media's Q3 Interim Report. I am Manuel Stan, and today I am joined by our Chief Financial Officer, Mike Giroux. Today, we will be speaking to our Q3 Interim Report, related financials, and our strategy and outlook. For the first part of the presentation, participants will be in listen-only mode, and during the questions and answer session, participants will be able to ask questions by dialing in. We will start today's presentation with a high level summary of the most important developments in the quarter. During the quarter into October, we have finalized the work on our new organizational structure. This included implementing a flatter content production function that creates a solid foundation for future growth led by a lean product focused organization. The streamlining of the content vertical involved a difficult decision to part ways with 29 employees. This will generate an annual cost saving of around 2.2 million euros starting in Q4. We have also completed a brand new executive management team with the recruitment of Liv Bizemans as chief legal and compliance officer. With Liv's appointment, we will have an entirely brand new executive team with all five members being appointed in 2024. After the successful launch in Q2 of the Spanish version of our flagship casino brand, Donus.com, we have continued the development of the site and also launched in Mexico during Q3, as well as the Portuguese version in Brazil earlier this week. We have also taken steps to clean up the balance sheet, including a non-cash impairment charge of 40 million euros, which was related to a write-down in the book value of certain sports and casino assets. This balance sheet adjustment will help provide a stable and realistic financial basis as we move forward. Moving on to the financial summary. Q3 revenue from continued operations was €10.7 million, down 33% from the previous year , staying in line with our preliminary numbers included in our October 22 press release. Adjusted EBITDA was €1.3 million, down 58% from the previous year. However, adjusted EBITDA improved 97% quarter on quarter, with the margin improving from 5% in Q2 to 13% for the full quarter, Q3, peaking at 18% at the end of the quarter. North America contributed 89% of the group revenue, up from 84% same period last year. From segment perspective, sports remains challenging with continued underperformance in Q3. North American casino revenue decreased 12% year on year, but rose 3% when excluding 1.3 million euro revenue from previous quarter that was recognized in Q3 2023. Mike will go into further details regarding the geographical and segment results later in the presentation. In our Q2 report, we started showcasing our average ranking score for the 70 plus most important keywords across Catena Media's owned and operated products. The core of the keywords will remain mostly unchanged, but factors like seasonality, new segments or new markets may result in minor changes to the list. During Q3, we have seen higher daily volatility than usual as a result of the continuous algorithmic changes. But overall, our rankings have stayed relatively flat with a small improvement throughout the quarter. At the end of the period, our average score was 4.05, which was marginally better than 4.13 at the end of Q2. I will now hand off to Mike to give an in-depth update on our financial performance.

Thank you Manu and good morning. Moving into our financial analysis from a geographical split perspective, we concluded the quarter at 9.5 million euros in revenue in North America, down from 13.3 million for the corresponding quarter last year. Adjusted EBITDA in North America decreased to 4.4 million, 24% lower than last year, corresponding to a margin of 47%. This is, however, a 400,000 euro increase on the Q2 2024 adjusted EBITDA, despite lower revenues in Q3. North America amounted to 89% of group revenue from continuing operations in the quarter, an increase of 5 percentage points from last year. Looking at our North American segments, sports was down 60% versus last year. This poor performance was driven by increased competition and, to a lesser extent, the lack of a comparable state launch as September 2023 included the start of the Kentucky sports betting launch. As covered in our recent press release, we've continued to reduce costs within our sports business to align costs with revenues. Our North America casino business decreased by 12% versus Q3 2023. We had an adjustment in Q3 2023 of 1.3 million euros associated with previous periods. When adjusting for the 2023 comparable, we saw small year-on-year growth in the North America casino of 3%. Looking at the rest of the world, this geographical segment accounted for 11% of revenue and contains our esports, APAC, and Latin America businesses. We saw revenue of 1.2 million euros, which is a decrease of 53% versus last year. Adjusted EBITDA, however, increased by 36%, mostly due to the full-year effect of cost reductions made in our APAC business in Q4 2023. As Manu mentioned, we recently launched local versions of Bonus.com targeting Mexico and Brazil. We are not yet expecting to see material results from these yet. Continuing into our full company segment performance, we saw a very large decline in our sports revenue to €2.5 million versus €5.7 million for Q3 2023. NDCs also decreased by 57%. This was driven by underperformance at several brands and challenging comparables from the Kentucky launch in Q3 2023. Our casino revenue decreased by 19% versus the previous year, while NDCs decreased by 5%. As previously mentioned, North America saw slight like-for-like casino growth of 3% when factoring in the one-time adjustment from previous periods in Q3 2023. Continuing on to our cost development, we've significantly improved our cost base by rolling out the new operating model and terminating unfavorable media partnerships. Our adjusted cost base has decreased by 26% versus Q3 2023 and 23% versus Q2 2024. After the quarter ended, we continued to streamline content production and marketing teams and are expected to generate an additional cost savings of approximately 2.2 million euros annually. The organizational changes included a reduction of 29 positions coming to the severance cost of 400,000 euros that will be realized in Q4. We'll be seeing the effects of this cost reduction in our Q4 report as well. Items affecting comparability were 2.7 million euros in the quarter. It is important to note that not all of these were cash affecting items. 500,000 were related to restructuring costs, while 2.2 million of the costs that were recognized against a multi-year capitalized sports data contract remaining to be paid over the next 18 months. We instead negotiated a one-time lump payment of 1.4 million euros to exit this contract instead of the total 2.8 million euros remaining in it. Going forward, we will continue to focus on cost efficiency through a product-led structure. Onto our financial position. Despite another quarter of minimal cash flows from operations, the receipts from proceeds of our divested assets through the strategic review continue to put us in a healthy financial position. Net interest debt decreased year over year by 43% to 14.6 million euro. We still have a strong net cash position, including our future proceeds from divested assets. We will continue to focus on debt reduction over any potential share buybacks. Looking at our capital structure, our cash balance at the end of the quarter was €11.7 million. We reported a net debt of €14.6 million at the end of September. If we include future proceeds from divested assets, we have a net cash position of 7.4 million euros. It is important to note that future proceeds from past divestments do not have any conditions to performance targets and all payments to date have been received according to plan. We currently have no outstanding financial commitments relating to prior acquisitions. I will now hand back over to Manu to give us an update on the strategy and outlook.

Thank you, Mike. We will now have a look into our strategy and outlook for the next quarters. As discussed in the previous quarter, the speed of regulation and launches in North America has decreased significantly since 2022. So only six states regulated and launched mobile sports betting during the last two years. More importantly, we did not have any major online casino launches in North America since Ontario in Q2 2022. On a positive note, this week, Missouri took the first step towards sports betting regulation, and Market Go Live is expected in early 2025. The market penetration in the US is 50% for sports betting, while online casino currently sits at only 16%. Catena's strategy has historically been reliant on new state launches, and the regulation slowdown has had a negative impact on its performance over the last few quarters. As mentioned in the previous quarterly update, we have shifted our strategy to be less reliant on state launches and diversify the product portfolio and revenue streams. In practice, during the quarter, we have amplified our effort to build our brands, databases, and CRM capabilities to better serve and monetize our customers, position ourselves for future casino market launches by building our brands and databases in the social sweepstakes casino vertical and reach new demographics such as the spanish-speaking segment by doing this we will create a sustainable revenue model independent of new state launches as presented in q2 report our current strategy is focused on three key pillars people product and profitability We finalized implementing the product-led organizational structure, which included rightsizing parts of the organization and appointing key roles in leadership functions. We have both promoted internally and recruited externally across all areas of the organization, ensuring the continuation of institutional knowledge and fresh external perspective. From a product view, the focus is twofold. Optimize our owned and operated products for improved search rankings and develop new tactics to diversify our revenue streams. During the quarter, we have made good progress in areas such as CRM and sub-affiliation, as well as launch our bonus product in Mexico and, as mentioned, more recently in Brazil. Lastly, from a profitability perspective, we continue the work to build a strong cashflow and lower our debt position. We will continue to focus on efficiency and terminate agreements that do not present the right ROI. Lastly, let's recap the key takeaways from our Q3 report. We have now completed our organizational structure, which included right-sizing parts of the organization, better alignment, flatter structure in key appointments, The top line continued the negative trend from the previous quarters, impacted mainly by sports underperformance as well as the discontinuation of certain media partnerships. Reversing this trend is obviously a top priority for us. We have made significant efforts to improve profitability and we are pleased to see positive steps in the right direction with quarter-on-quarter growth for adjusted EBITDA. Thank you very much for listening. I will now hand over to Mike to move on to the Q&A session of our report and open up for questions.