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Catena Media has issued a profit warning and expects Q2 2024 revenue to be at least 20% lower than in the prior year period.

The affiliate business projects second-quarter 2024 revenue to range between €12.5m and €13.5m.

At the upper end, this still reflects a decrease of 20.12% compared to Q2 2023.

Adjusted EBITDA is anticipated to be between €0.5m and €1.5m, down from €2.6m in Q2 2023.

The business said recent changes to Google’s organic search policies have diminished the effectiveness of certain strategic media partnerships, impacting Catena Media’s revenue and direct costs.

The policy update, effective since May, negatively affects the rankings of sports betting and casino content published by major news media websites.

Despite this, Catena Media has observed higher traffic and improved organic search rankings for some of its owned and operated brands, as search patterns shift towards high-quality, relevant content.

Impact could “become material”

The company noted that the financial impact related to media partnerships cannot be fully quantified at this time but “could become material over future periods” subject to the group’s organic traffic offset.

Nonetheless, the group reiterated its forecast of a return to revenue growth in the second half of 2024.

However, due to ongoing organisational transformation and a new operating model, the new board of directors and executive management team have decided not to issue new full-year adjusted EBITDA guidance at this time.

Certain lower-margin media partnerships, which will expire in Q2 and Q3 2024, will not be renewed.

These partnerships involve over €1.4m per quarter in minimum guarantees, which are treated as direct costs in the group’s financial statements.

Additionally, internal and outsourced content costs will decrease by €0.7-1m annually due to the non-renewal of these agreements.

Exiting these high-cost minimum guarantees is part of Catena Media’s strategy to improve margins and revenue growth in H2 2024.

Return to a ‘healthy business’

“Catena Media is embedding a new product-focused operating model as part of our efforts to reestablish the company as a healthy business,” said interim CEO Pierre Cadena.

“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.

These changes, combined with proceeds from recent divestments, are expected to result in a healthier balance sheet for Catena Media, according to the interim CEO.

This financial flexibility is also expected to enhance the company’s ability to repay its senior bond next year and manage its debt load confidently.

“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,” Cadena concluded.

Investors reacted negatively to the update, causing Catena Media shares to drop by 5% in the early hours of trading.

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