Michael Daly stands by North America as growth child of Catena Media

Following a difficult trading period for Catena Media CEO, Michael Daly, remained optimistic in the group’s ability to reach an ‘achievable but challenging in goal’ in North America.

Following a series of transformations, North America, particularly in the last year, has been the main cash cow for the Stockholm-listed media publisher. Yet, momentum was interrupted during Q2, with the firm’s trading update for the quarter published yesterday detailing group-wide revenue losses of 16% to €16m (€20m).

Of direct concern, the group’s specific revenue from the North American market also fell by 16% from €15m to €12.5m. In the face of this stall in Catena’s US journey, Daly emphasized to investors: “This doesn’t mean the cycle is ending, rather it is at a low point of a continuing launch cycle with a growing series of waves ahead. 

“We have two more upcoming launches in 2023, Kentucky and Maine, albeit both are smaller, adding only another 4.5 million or so in adult population. Next year has the significant states of North Carolina and Vermont, for an additional nine million adult population anticipated in Q1, or about 2x what we have seen being added in Q3/Q4 this year.

“After this, the launch cycle is going to ramp up in the 2025 time frame, as the US moves beyond election chaos and focuses on the state budget. More states than ever are talking about sports and casino bills. Sports betting remains a very viable growth area for around half the US, which sits at 52% of US states set to regulate online sportsbooks, and it will likely get as high as 80%.”

Analysts Probing Catena Strategy 

Investors and analysts didn’t quite see it the same way, however. In a Q&A during the group’s webcast on Q2 2023 results, the CEO, alongside interim Chief Financial Officer Erik Edeem, faced challenging questions from sceptical observers.

Catena has made no secret that North America is the focal point of growth and value for its business, with the group notably offloading its UK and Australian assets, Squawka.com and GG.co.uk, for a €6m fee.

One analyst noted that Catena’s decision to focus primarily on North America could be viewed as ‘shrinking the business’. Daly, however, was adamant that this is anything but the case.

“This focus is to make the maximum return on investment and yes, there are cycles, there are waves, there is more competition than there has been,” he said.

“It is still an extremely high margin business compared to anything else we were doing anywhere else in the world, and so it is our primary focus of this business at the moment. 

“Obviously we are still very happy and working with our Italian teams in Europe, where they do a strong business in casino and sports as well. So there are still other elements to our business but the North American focus is the focus for now. LatAm is probably behind that. I expect strong things ahead from the Americas and from Catena Media and I would not define that as shrinking the business.”

Catena navigates a complex US Media landscape 

From Daly’s perspective  it appears that Catena’s main trouble with the US is that the gold rush in the country has led to an over proliferation of various media, affiliate and supplier companies, all competing for a bigger slice of the American pie.

The CEO noted that competition has increased, but he again remained defiant when an investor questioned whether this meant the group’s North American financial targets are realistic.

Catena cites confidence in achieving its 2025 revenue target of $125m – as ‘achievable but challenging goal’ that Daly referred to earlier – but developments this quarter showed that there are significant barriers to the stated ambitions that must be overcome… and not just in the form of competition.

Daly acknowledged that prioritizing revenue share deals will ‘weigh on the top line’, although the firm has ‘not gone all in’ on ‘revshare arrangements’ – which are limited by regulatory conditions in some states such as Massachusetts. 

He also noted that paid media operations and media partnerships bring in additional costs due to a requirement to distribute to partners such as Google.

Perhaps the ultimate question on many people’s minds, however, was this – with the various costs and competitors Catena must go up against, can the North American business it has made its key area of focus turn around?

In Daly’s view, absolutely. Catena, in his mind, retains strong North American assets which have been proven by the four aforementioned state launches. 

Showing further optimism, he anticipated that launch of igaming in New York by 2025 alongside regulation in other ‘mid sized states for sports and at least one significant player for casino’ would help Catena reach its $125m by ‘25 goal.

Keeping the Faith

The situation with some prominent states, California and Texas being the biggest elephants in the room, is bleak from a sports betting perspective. 

However, in the face of challenges, Daly remained bullish in his attitude towards Catena’s US situation. “We’re ready to compete, we can compete and we will meet our goals in a competitive marketplace,” he emphasized.

Confidence is required as Catena enters a critical H2 trading period, in which investors and analysts will monitor the media group’s developments closely with regards to its North American cost control and management of long-term debt.

Catena remains under strategic review of all units, including the outright sale of its business. Daly’s leadership on strategic affairs will see whether Catena secures a favorable outcome for investors… a man very much in the industry’s spotlight.