Catena Media expects to post operating loss in Q4

Catena Media expects to post operating loss in Q4

Affiliate giant Catena Media is expecting to post an operating loss for the fourth quarter of 2019 due to the impact of intangible assets, the adoption of IFRS 9 accounting assumptions and an exceptional revenue adjustment in the US.

Published 19th February 2020

Catena estimated that total operating revenue for the three months through to 31 December 2019 will amount to €27.1m (£22.6m/$29.3m), down from €27.3m in the same period last year.

Revenue in Q4 was hit by an exceptional adjustment of €500,000 related to previous periods, and as a result, reported revenue for the quarter is estimated at €26.6m.

The adjustment was related to a single operator in Pennsylvania in the US that had adjusted historical numbers of qualified online leads due to customers already existing in the online registered database from previous land-based gaming activities.

Catena will publish its full quarter results on 20 February, but did reveal it is set to post an operating loss of €27.3m, compared to a profit of €9.4m last year.

This is due to a non-cash effect from impairment testing of intangible assets, resulting in a write-down of €32.1m for assets acquired in the period 2016 to 2018.

These write-downs include €17.9m related to intangible financial assets that are primarily focused on the European Union. Since being acquired in 2017–18, trading opportunities in the EU were limited due to binary options being banned, the European Securities and Markets Authority implementing new regulations on contracts for difference leverage and volatility in the cryptocurrency market.

There was also write-down of €13.2m for intangible casino assets it acquired in 2016. These mainly consisted of revenue-share accounts and have since been reclassified as inactive products, where no further investments will be made.

In addition, there was a write-down of €900,000 in reference to intangible assets in the sports market, with the assets again mainly related to revenue-share accounts and have now been reclassified as inactive products.

“The write-downs are related to earlier acquired assets that are not performing in line with the rest of our portfolio, as well as to past contractual decisions,” chief executive Per Hellberg said. “Excluding the non-recurring items, our underlying business developed much like we expected for the fourth quarter.”

Aside from this, Catena said that it expects adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the period to fall slightly to €11.8m, where as EBITDA is likely to fall 29.2% to 8.5m.

Catena said EBITDA was affected by IFRS 9 requirements and the recognition of impairment losses, adding that its board had decided to take a conservative approach to the assessment of bad debts. This, it said, results in an exceptional adjustment when implementing a prudent assessment model in Q4.

Based on assumptions and judgments regarding relevant data points, and their impact on future expected receivables, this had a negative impact of €2.7m on reported EBITDA for the quarter.