Catena Media is to end some of its media partnerships due to the combined impact of Google’s recent search algorithm update and the company’s transition to a “new operating model.”
The affiliate confirmed that the Google update, which has been in the spotlight over its effect on casino and sports betting content, has “reduced the effectiveness of some strategic media partnerships,” which are not being renewed at their expiry.
It added, however, that some of its owned and operated brands are seeing higher traffic and organic search rankings as a by-product of the update, which now sees Google favour “high-quality, relevant content.”
Subsequent revenue forecasts for Q2 are for revenue of between €12.5m and €13.5m, and for adjusted EBITDA of between €0.5m and €1.5m.
“The financial impact related to media partnerships cannot be fully quantified at the present time but could become material over future periods subject to the group’s organic traffic offset,” Catena said.
“In the light of this and the current organisational transformation and transition to a new operating model, the new board of directors and the new executive management team concludes that the previous full-year adjusted EBITDA forecast is no longer applicable and deems it prudent not to issue new guidance at this time.”
The group insisted that it is forecasting a return to revenue growth in the second half of 2024.
For now, though, certain “lower-margin” media partnerships which expire in Q2 and Q3 are not being renewed, Catena confirmed, and these contain more than €1.4m per quarter in minimum guarantees treated as direct costs in the company’s financial statements.
“In addition, internal and outsourced content costs will decrease by €0.7m to €1m annually due to the non-renewal of these agreements,” it said.
“Exiting these high-cost minimum guarantees is one of the components for setting Catena on a path to improved margins and revenue growth in the second half of 2024.”
Catena interim CEO Pierre Cadena insisted, though, that media partnerships will remain an “important source” of added income. He said the company will look to “invest in partnerships that generate profit for both parties” and explore “attractive collaborations in this space while redoubling our focus on our organic products.”
“Catena Media is embedding a new product-focused operating model as part of our efforts to re-establish the company as a healthy business,” Cadena said.
“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.
“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.”