The top line
As prefigured in early April, Q1 revenues soared 53% to €40.7m while adjusted EBITDA nearly doubled to €25.1m. Operating cash flow increased by 85% to €20.8m.
Revenue derived from casino rose 54% to €25.3m (62% of total) while sports revenue was up 64% to €14.4m (35% of total). Financial trading revenue fell 27% to €1.1m (3% of total).
NDCs rose to 157,546, up 31.8% to a new all-time quarterly record. However, casino NDCs were down 1% YoY to just over 76k while sports NDCs rose 91% YoY to over 80k.
Revenue from the US rose 200% to €22.4m or 55% of Q1 total helped by state launches in Michigan and Virginia. Post-quarter end Catena announced the $39.6m acquisition of US-facing Lineups.com. Pro-forma it would have been worth circa €2.2m in Q1.
Post-quarter revenue growth was 15% up YoY, 24% ex-Germany. Management noted this was against a very strong comparable.
Giant steps: CEO Michael Daly spoke about three types of markets for Catena: growth markets (US, Japan, Italy), mature markets (Sweden, UK, Germany) and then the incubation phase markets which includes Latin America, Asia and the US and Canada. He spoke about the potential from the “giant states” including New York and Florida. “We already operate in all these states because it is a matter of when not if they regulate and we will be the leader there. We see great potential and that is just looking at the sports-betting landscape. Consider that many of these states will also add casino.”
One-hit wonders: Asked about the one-time hit that comes from the opening of new states (as evidenced by the rising CPA percentage of revenues), Daly admitted that “you do see an influx”.
“But it also means that post-that influx, there is also a higher run rate,” Daly added. “It is difficult to project what that run-rate looks like now we have entered the off season (for US sports). Until we reach the start of the football season, we expect a higher base run rate but it might be early to say how much higher that is.”
Daly reiterated the importance of seeing growth in existing states in order to organically fund expansion into new states.
Dog eat dog: Against the backdrop of large-scale M&A in the US market – Better Collective’s $240m acquisition of the Action Network springs to mind – Daly said the multiples were “quite high.” As regards further M&A involvement, he added that “as you would expect for pretty much any strong product in North America, we wouldn’t be the only ones looking at it.”
“The best competitors are often the small competitors. We are seeing (existing) competitors also buying other competitors. We’re not seeing a lot of new entries.” However, Daly was mindful of the low barriers to entry in the affiliate world. “There isn’t a deep moat between different affiliates; it’s how you execute and we think we are the best at that.”
Old world problems: Daly said revenues derived from Germany were down by more than 50%, a trend which has clearly continued into the second quarter. A question that will remain unanswered for now is whether the market post-July 1 is any different in revenue terms for the affiliate sector. Daly only said that the outcome later in Q3 and Q4 was still “unclear”.
Debt reduction: Catena Media is on a “significant debt reduction journey,” said CFO Peter Messner. That includes a refinancing. As a result of strong cash generation, the debt leverage has been reduced. He said the company was now in a “much better position” and it is now exploring refinancing opportunities on the bond repayment that would otherwise be due in May 2022.
