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Catena Media has notified investors that changes in Google’s algorithm have impacted Q2 earnings performance.
The warning comes via a Q2 update, in which the Stockholm-listed affiliate media publisher disclosed that the “industry-wide impact of changes in Google’s organic search policies has reduced the effectiveness of some strategic media partnerships.”
The impact reflects Google’s core algorithm update, activated from March onwards to apply new spam policies tackling low quality content on its search engine rankings.
As detailed by Google, changes have been made “to improve the quality of search by showing less content that feels like it was made to attract clicks, and more content that people find useful.”
Catena cites that Google’s update has reduced revenues and direct costs arising from media partnerships as its network moves to prioritise traffic generated from properties with organic search rankings.
The impact sees Catena revise its Q2 financial forecast, expecting revenues to be between €12.5m-13.5m and adjusted EBITDA in the range of €0.5m-1.5m, as leadership stands by its forecast of returning to revenue growth in the second half of 2024.
Pierre Cadena, Catena Media Interim CEO, commented: “Catena Media is embedding a new product-focused operating model as part of our efforts to re-establish the company as a healthy business. We believe that this is the right action in our strategy and we still forecast a return to sustainable growth with high-margin operations from the second half of 2024.”
Google impacts are mitigated as Catena continues the strategic review of its business, which transitions to a new operating model prioritising revenue share deals for its media portfolio.
Further changes see Catena led by a new executive management team, which concludes that the previous full-year adjusted EBITDA forecast of €20m “is no longer applicable and deems it prudent not to issue new guidance at this time.”
Mitigating commercial impacts, Catena will not renew certain lower-margin media partnerships post-Q2 and Q3, reducing direct costs by over € 1.4m per quarter and content costs by €0.7m annually, as leadership aims to improve margins to help the company return to earnings growth.
Catena will onboard new CEO Manu Stan from 1 July, leading a new executive team with CFO Michael Gerrow.
Cadena concluded: “We continue to see media partnerships as an important source of added value in a fast-moving marketplace. We are ready to invest in partnerships that generate profit for both parties and will explore attractive collaborations in this space while redoubling our focus on our organic products.
“As a result of these changes, combined with the proceeds from our recent divestments, our balance sheet will be much healthier. This provides us with further financial flexibility and strengthens our ability to repay our senior bond next year and to confidently manage the business debt load.”
