Affiliate business Catena posted record revenue and earnings in the first quarter of its 2021 financial year after what it described as an “exceptional” performance in North America and other key global markets.
Revenue for the three months to 31 March amounted to €40.7m (£35.1m/$49.8m), which was 52.4% higher than the €26.7m generated in the opening quarter of last year.
Search revenue in Q1 totalled €38.4m, up 60.7% on last year, though paid revenue was down 3.0% to €2.3m, while Catena did not generate any revenue from subscriptions in Q1 of 2021.
In terms of business segment, casino remained by far the primary source of income for Catena in Q1, accounting for 62% of all revenue, ahead of sports betting on 35% and financial trading at 3%.
Revenue from casino operations climbed 53.7% year-on-year to €25.2m, helped by positive developments in the US, Italy and Japan. In the US in particular, the opening of Michigan’s legal online casino market contributed to revenue growth, while new operator launches in Pennsylvania during Q4 of 2020 also drove growth.
Catena said it also performed well in Italy in Q1, though operations in Germany continued to face performance issues due to ongoing regulation issues. Meanwhile, in Japan, Catena said its business showed strong double-digit revenue growth, driven by a strong product offering that performed well organically and via social channels.
Turning to sports betting, revenue was up 65.5% to €14.4m in Q1. Catena again put this down to growth in the US market, helped by the launch of legal sports wagering in Michigan and Virginia, as well as the easing of the novel coronavirus (Covid-19) pandemic, with the sports calendar returning to normal.
Outside of the US, revenue in Italy reached a new quarterly record high, though revenue in Germany continued to decline due to product restrictions, regulatory uncertainty and changes in player behaviour.
Sweden revenue fell as a result of continued bonus and deposit limits – introduced as part of the country’s gambling harm protection methods during Covid-19 – while the UK market developed favourably, helped by the Cheltenham Festival horse racing event.
Meanwhile, financial trading revenue declined 26.7% to €1.1m, though on a like-for-like basis, and excluding the sale of Catena Media Financials US Inc. in Q4 of 2020, revenue was only down 2.0% year-on-year.
Catena said it experienced a strong start to the year, helped by increased client appetite for crypto-related trading, while organic traffic was stable across its portfolio. Performance marketing conversions dropped in response to a move by Google to reduce paid revenue possibilities for unlicensed content providers, of which Catena, as an affiliate, is one.
Geographically, Europe remained Catena’s primary market for this segment, while South-East Asia continued to emerge as a market of interest for the affiliate.
“The excellent performance reflects our teams’ focus on driving our global portfolio of affiliation brands,” Catena chief executive Michael Daly said. “Special credit goes to North America, where year-on-year revenue jumped more than 200%, supported by the successful launch of operations in Michigan and Virginia during January.
“Several other US states are moving towards opening their markets and we see potential for one or more of these to go live later this year. Likewise, the Canadian market is opening up and Ontario is projected to come online later this year or at the start of 2022.”
Looking at spending and operating costs for Q1 reached €19.8m, up 12.5% year-on-year. Direct costs increased 37.5% to €3.3m due to higher spend on pay-per-click costs, while expansion in the US saw personnel expenses climb 15.2% to €7.6m.
Operating profit for the quarter amounted to €21.0m, up 130.8% on last year, while Catena also said that adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rocketed 94.6% to €25.1m.
After taking into account €1.1m in interest on borrowings, €1.2m in financial liability losses and €707,000 in other finance income, profit before tax was 104.2% higher at €19.4m. The affiliate paid €1.4m in tax, leaving a profit of €18.0m, up 93.6% year-on-year.
Catena also noted €1.1m in further costs, primarily from interest payable on hybrid capital securities, which meant it ended the quarter with a comprehensive profit of €17.0m, up 84.8% on last year.
“From an internal perspective, we continue to optimise our ability to maximise growth through onward expansion in our North America while also making inroads into frontier markets in Latin America, Asia and Africa,” Daly said.
“Change can easily disrupt an organisation, so I was especially cheered to see our teams deliver an exceptional performance in Q1 in spite of transformation-related distractions.”
Daly also provided an update of Catena’s Q2 performance, with organic growth in April reaching 15.0%, or 24.0% when excluding Germany, compared to average monthly revenue in Q2 last year.
“We still have a way to go to realise our full potential, but the outlook is bright and I see clear promise for a prolonged upward trajectory for Catena Media in the next five to 10 years and beyond,” Daly said.
