How do i industry sign banking new jersey presentation mobile
welcome back everyone my name is Richard Engberg and I'm an equity research analyst here pence bank with focus on VTEC and I gaming sector with me I have Peter Messner CFO Catina media Peter a floor is yours thank you very much good afternoon for my sense I have a pleasure to be here for the first time I know that Catina media has been here in previous years as well I will guide you a little bit through our quick presentation about Katina Media quickly about myself I just recently joined the company which was on the 1st of April so I'm pretty much very fresh here within two months recently came from modern times group MTG here in Sweden helped building up as a CFO the MTG X segment which very much was the digital transformation that was driving MTG what MTG is nowadays in eSports and gaming is what we essentially built up in the last five to six years I will talk very briefly about what is Catina media I appreciate that some of you might understand what we are doing but I think for those that are new to the company in in a nutshell what are we doing what is our business model I will highlight a little bit our most recent financials and the track that we have been and then I go a bit into the strategy in the outlook what can you expect from us what is it that we are working on and what can you expect in particularly for this year 2020 and then I believe in the end we will go into a QA depending on how fast I will be but we will certainly have some questions so Catina media in brief is a company that deals with lead generation if you think of a lot of industries nowadays work in in the online space it is all about how do you get your customers how do you get the the access to to your consumers very differently than traditional media and traditional advertising so we are working with our own assets which are different websites and we'll come to that in a slide and we help our customers and that's primarily right now in the eye gaming industry to link the consumers that are interested in certain products and our customers the operators that have certain offerings we're an international company we are around for approximately eight years since 2012 we are almost 400 employees in very different locations all around the world our headquarters are in Malta it's roughly half of our staff a little bit less than that is there we have apparently an office very small one here in Sweden we have main hubs in London in Serbia Belgrade and in the u.s. so how does this business model works we're here Catina media has more than 1200 different brands we're talking about websites different domains that we use for a purpose to advertise different products and again mainly right now in the eye gaming industry and these are operators like let blokes like betsa like unit bad the the very the very common ones that are out there offering sports betting and casino with our websites we work very much with search engine optimization so what we try to achieve is a people that are interested in casino offerings in bonus offerings in free spins and all these kind of things that the people usually work with can find our sites all sites have very distinct features and and propositions and that is comparisons of different offers that is community features that is a special coverage of what is happening in the in the online gaming world in casino and in sports betting in order to help these customers to eventually find the offer that they are interested in that could be the best odds that could be specific bets and and coverages that not all the operators are are offering so soon as customers are interested in this kind of information that we provide through our brands and domains they would eventually click on some links that we offer and come to our customers to the operators as soon as they would start playing then which is registering depositing money and starting to play our business model finally comes to the conclusion by us getting a return and that is usually a revenue share so whatever that player is producing in in gaming revenues we get a certain so to cut the certain share out of that it could be a CPA a cost per acquisition where we get a fixed amount that we agreed for every new customer that we generate it could be a hybrid solution where it is both end and we also offer certain fixed fees and subscriptions which is essentially advertising space that customers can buy on our on our domains and and brands as gamblers is probably the most prominent that the company acquired a couple of years ago and that has been developing extremely well we had an all time revenue and an all time high in in our traffic very most recently and it's why is it such a cool brand well because it is a very much a community focused brand we have a complaint service in this in this domain which means that for all the for all the players and the consumers that are interested in in casino we help them to find the appropriate casino operators but sometimes it happens that if it comes to to payouts those are delayed or there certain processes when it comes to customer identification and so on so their consumers might get a little bit worried about where's my money because I have some winnings so we're gonna help them through as gamblers in order to recoup that money that they actually are entitled to have and we just recently published our 2019 report where we recouped almost nine million euros for the players so that is of course a very strong incentive for our players to revisit as gamblers and use our our website and brand and service eventually when you would like to play with casino operators and that's just one example of the more than 1,000 different brands and domains that we have so that's a bit of an introduction to what is Catina media what are we doing what is our business model how well does that business model really work what are the financials these are figures that you also find in our q1 interim report is available on our website Catina mediacom in the investors relations section as you see here the the company has since the second half of 2018 first went down into a very difficult period of time and he to explain that a little bit that difficult period of time is part a result of a certain legacy development which meant that the company through the previous years tremendously increased the growth and the revenues that came with the necessity to integrate a lot of these acquisitions we're talking about more than 40 different acquisitions that have been done on a certain period of time and in what happened in 2019 was a lot of things that simply came together it was it was a certain pressure and a certain challenge on the casino products that we had on our end simply to deal with with all that measures that have been happening before that it was regulatory changes what we mentioned previously on the markets was in the UK we had different kyc so know your customer customer identification measures where regulations changed between the first and the second quarter so that was one of the explanations why this heavily went down we are UK focus to a certain extent particularly in the sports betting area Sweden regulated last years there were certain elements here in in q1 and q2 there also fact that plus overall in sports betting we have seasonality so before the summer you usually go into a very quiet season when football leagues for example become quiet in that respect plus 2019 has also be a year where there was no major football event happening no World Championships no European Championships it turned out that this year is the same but it was a little bit unplanned since then with all the measures that have been done we eventually came back on track and this first quarter as you see is a slight increase of one percent with the previous quarter but we have to keep in mind this is despite could with 19 impact of essentially having almost no sports events since the middle of March so we're very confident that we are on a very good track record here the highlights of the first quarter and this track record is also seen in our last 12 months up side in comparison to 2019 just to see are we on the right track or not and the same can be seen in adjusted EBIT are its compared to the previous year we had a 2% growth in revenues and again this is despite cope with 19 but also to keep in mind last year as I just showed before was a very weak first and second quota in comparison however our organic search revenue which is really what we are working on primarily with the search on optimization that I mentioned so people looking for certain certain keywords on on Google and other search engines and how they eventually find our brands and through these brands are able to find the customers register deposit money and play we have a very high EBIT imagine a 48 percent which I will come back in a few slides when I talk about cash and our financing situation I already mentioned that we primarily work with the AI gaming sector that is sports betting and casino and what you see on that slide is how does that look like in the bigger picture so we have roughly 6% of the revenues now in the first quarter and it was a little bit less than that before the curve is 19 impact because there was a lot of push into the casino segment as sports was simply not available but is roughly 60 percent or 55 to 60 percent on average out of out of casino sports betting is then the remaining big chunk 30 maybe 30 to 35 percent and we have a third segment which is financial services financial services has been acquired in a company as well a couple of years ago and that essentially is it is very similar to to betting from its sports betting perspective here you simply bet on the outcome of changes in currency that's forex trading or on the outcome of certain stock developments so that is stock trading there is trading possibilities see if these contracts for differences and again we are a lead generator in that respect so we work with different customers different brokers that have these offers and we provide exactly the same services in that in that market as to the I gaming market so there's an overlap in terms of the the challenges that you have from generating deletes but it is actually a very different market in terms of the the final consumer it's not a player it's really a trader that we are addressing in that respect the abit of margin is very different as you see here the highest margin you have on the casino products sports betting naturally and you see that with operators out there like the Kindred group the bets and group and others is very much depend on what is the sports betting margin there's a little bit lower and financial services a little bit lower than that as well but again overall we have an almost 50% adjusted EPT da Marcin how do we make our revenues and I touched based on that a little bit in a few slides ago when I talked about the business model so roughly 40 now in the first quarter was a little bit more than that 44 percent but roughly 40 percent of our revenues come from revenue share deals so we are still participating on the lifetime value of our consumers that we that we generate and acquire for our customers so customers continuously play with different operators and we get a little bit of a cut a little bit of a share out of that revenue that is generated the other pic junk which is almost the same size roughly 40% is the cost per acquisition so we acquire a new customer and we simply get paid for that based on an agreement there is a combination of both a hybrid model so we get a certain cost per acquisition and then still have a revenue share that is that is up to different territories different operator categories there are fixed fees which is primarily advertising that we offer on some of our brands where operators can simply have a fixed spot on the website and buy themselves in and then whatever is happening in terms of lead generation customer acquisition through that is covered in a fixed fee we have a very tiny amount of subscription which is currently related to the financial services segment only that is 2% of the total revenues now in the first quarter that is revenues how do we actually manage to come up to a 50% adjusted EBIT our margin well if we take a look at the at the cost of development what you see here in the graph is the cost development naturally increased with the development on our revenues in the previous years when the company was growing tremendously and we had a more than 60% kegger since 2015 and 2019 naturally the staffing and all the other cost and the staff cost is the huge part of the cost has been increasing in the same way in order to keep up with that growth since 2019 as you see we reached a certain a certain level of the organization as we also changed our strategy in the last two years of not just acquiring a lot of more assets which also include a lot of a lot of effort for integration and handling that but really switching to we have enough assets we have enough brands switching to organic growth of that and by that optimizing the way how we work so we kept a fairly stable cost base for a certain period of time but we already initiated during the last two to three quarters so second half of the previous year cost efficiency measures reviewing the organization reviewing simply the way how we are working that has nothing to do really with co19 but it was in fact a very beneficial preparation for the time that we are in right now the total cost excluding depreciation and amortisation and any exceptional items is fifty two percent of revenues it has been a little bit higher last year fifty-seven percent but we are a very on a very good traction in in managing that cost base a natural question would be well if we now through the scale was going to happen with that cost base we have three main categories in our costs that is a direct cost bios's is related to driving our revenues by buying keywords for example Adwords on Google it's called pay-per-click so you buy advertising if you just really click on that and convert to your website then you are going to pay for that we've heavily reduced that since our brands actually have a very good ranking based on our search engine optimization work so this naturally has been going down and 90% of our of our efforts in that revenue respect come actually from from a dessert revenue our own optimization and not from from paid revenues personal expenses are naturally an area where we would eventually grow we're not we're not going to increase as of now tremendously during this year it depends a little bit how certain markets are developing the u.s. in particular we'll come to that in a few slides and other operating expenses pretty much everything else from our offices to our entertainment to travel expenses educational Spencer's consulting fees and and the like and that we could also heavily reduce some of these costs didn't necessarily kick in now during Corbett 19 the company pretty much has been working from home since mid of March in some of our destinations a little bit earlier than that and we continuously do so the high e beta also comes with a very high cash conversion that is fluctuating a little bit on the on the seasonality but we had a 90 percent cash conversion so this is a very high cash generating business that we are in we currently have a cash balance of roughly 20 million euros however also a net debt of roughly a hundred four hundred forty three million euros and that I wanted to talk a little bit and Rickon and I had a quick conversation just before that presentation on that item so from the past coming we we have a bank loan facility of twelve and a half million euros that we use and existing bonds of hundred and fifty million that has been that has been a case simply in order to finance the the heavy growth of the previous few years as I said we went away from this acquisition heavy strategy to the organic strategy and focusing on our core assets that we have right now in order to change the financing and the existing bond would mature in a year's time and in March next year we started a Reva refinancing project we have an extraordinary general meeting next week on a tenth of June where this rig
ts issue of hybrid bonds I will not go into detail here now you'll find that on our website as well it's going to be proposed and and resolved it is fully guaranteed so with that rights issue of hybrid bonds and and warrants we're going to get in 63 million euros and we'll use part of that in order to repay the existing bonds a third of that so forty-nine point five million of these existing bonds will be repaid and we will have some extra cash out of this rights issue and so we will immediately end up at a at a net debt situation of roughly 85 million euros which will further decline until the end of the year we currently have a leverage which is the the net debt over the the last 12 months adjusted a beta of 3.1 to 3.2 X will go below 2x and we will probably reach at a maximum I would say 1.5 X by the end of the year and eventually would go to 1x into the next year which will put the company in a very favorable position for fruit of financing and fueling the growth wells extends the maturity of the existing bond by another year which will simply buy us time for replacing that eventually strategy and outlook so I mentioned these kind of things already in a way so just as a summary we're focusing on organic growth we might do M&A if there is a good reason to expand into certain markets if there are good synergy reasons that we see in in certain existing segments or new segments that we wanted to tackle but it's not necessarily a horizon as of now we'll focus on on regulatory changes there are regulatory changes all the time we have a lot of markets here in Europe Germany is one Italy is one Sweden is another one that that go through regular changes every now and then Germany will introduce a new state treaty in July the next year so we already started to prepare for that the Netherlands may regulate during the next year as well which is all very positive news in the sense of having a certainty about how markets are dealing with online gaming the more restrictions there are in markets when it comes to acquiring customers the more challenges the operators which are our customers usually have in their own marketing ways of how to acquire customers and the more interesting partners like ourselves become as affiliate partners or lead generators to help them actually acquire these customers geographical expansion is definitely one of the keys in our in our strategy how we view world the future growth we have a heavy growth factor right now in North America in the US where new states are coming up and I have an update in a slide but they are other very interesting areas in the world Latin America is one and Asia natural is another one we already are in Asia with with a presence in Japan and products there but there are lots of other interesting markets there so the us we started with us quite a while ago and as we also mentioned in our q1 call our our contribution what we get out of the yes is is above 20% of our total revenues so this is quite significant and has been growing much more and better than our expectations have been we're currently in seven states in the US and if you think of states you need to think and compare that a little bit with it's almost like opening up a new country in Europe that's the comparison of just adding another state so the big states Pennsylvania has 13 to 14 million people that's the population size of Pennsylvania New Jersey's a little bit little bit smaller than then Sweden may be the size of Austria 9 million people what is upcoming now is is Tennessee over over the summer very likely we're in a licensing preparation for that Tennessee has a population of I think it's around 7 million people so we just add another country another state to our American presence at a very small marginal cost in terms of operating those commits 19 had a very little impact although of course sports events were pretty much put to zero in the u.s. it has been coming back now in April with in particular a who's racing NASCAR racing series has started as well but what we were able to do is to convert a lot of traffic that we anyway generate to casino products to social gaming so the casinos but also in the area of poker and also eSports a lot of land-based casinos in the US we're talking here in the hundreds have been closing down due to Kobe 19 situation and that has propelled really the increase in usage of all kinds of online products online casinos and online sports betting have been the the prominent ones sports betting not because of copy 19 but in general this this online share of total gambling just in a short term now increased and we would believe that this is going to to have a significant impact going forward so she had a trading update as the first quarter was only partly impacted by Kovac 19 essentially just about the month of March to a certain extent we've seen a very strong growth now in April with 17 percent year-over-year and also a good and healthy increase versus March which was already impacted I cannot talk about how how many now looked like but we believe that we're not that heavily impacted now at least in the short term and depending on how to see how how this current global crisis is going to continue so we're very very confident with the situation how we have managed that what can you expect 2020 a little bit as an as an outlook we already saw that a lot of sports events have been coming back the most prominent one here in Europe that has been driving most of sports betting was Bundesliga in Germany so that has been back and we already see very positive results out of that and we do as of now expect everything coming back to pretty much a certain normality in the second half of 2020 Super Bowl is the is the key thing in the US for example that would start or diety the NHL with with September and that is pretty much in in line with the expectations when it's going to happen as I just said the online penetration had a very positive impact due to covert 19 a lot of land-based moved into into the online world it's probably gonna be for a while this positive impact continuously that we have in there your states are on their way as I said Tennessee we aren't prop in in preparation Michigan might open up towards the end of the year Michigan is roughly the size of New Jersey's or a population of 9 million we just started in in Colorado I think there was around five to six million as a population now in May so there's a very positive growth trend in the US we have been continuously working on our operations we did quite some restructuring in the beginning of the year you see that in our financial results with some exceptional items in relation to to restructuring particularly in the sports segment so we're well prepared for for taking up those challenges there as well and we previously communicated financial targets the one is the the long-term leverage to be not more than one point so five X that we will reach very easily within a fairly short period of time towards the end of the year already the other one was that we want a GF sustainably a double-digit growth and we currently do not see any any reason to go away from this target so there's a good chance that we will reach that for 2020 as well and I think that's it from my end I'm very happy to take some questions now yeah sure and I have one or two questions right now and my first question is regarding the trading update because there be a bit about revenue mix it's driven by its CPA or rev-share or is this roughly the same as before well there are there are seasonal differences every now and then and that very much depends on on the different products is very hard to say given on very short term impacts that are out there on the market and that is again covered 19 that is the start of the year there's a certain seasonality that might be certain impacts on specific products like ask gamblers which is a co-product as I talked about in in casino also certain elements in the US with the states how we developed so it's very hard to say why do certain things change there's nothing to be concerned about because naturally there is a fluctuation based on the agreements with the operators that we have and whether certain agreements work in the short-term a little bit better than other but in general I think the trend is still the same you have a ref share and CPA ratio or share contribution is roughly the same continuously so I wouldn't necessarily say that the one is definitely increasing versus the other and one last question if we see in the US right now if we saw a huge drive to online casino do - basically if is focusing is being closed down now I see that physical casinos have started to open up again are you afraid that they will start taking back market share or do you believe that this is a permanent shift every use will look more like for example Nordic countries with online versus offline I don't think that the letter you have to keep in mind that whatever happened in regulation in the u.s. in sports betting in casino is a very much a very new phenomenon for the US the US has a history of having had an open market in poker that then closed down in into six but based on the wire act there was never sports betting or casino allowed so what happened now with the closing of casinos is that people to have even larger extent than before got accustomed to well there is actually casino and sports betting online they might not even have discovered that before but the crisis actually helped them to get much closer to these kind of products so one would assume and there's our assumption that this is actually creating a certain stickiness because we will identify that apart from the great things like hi-5 and being in the casino which you certainly cannot replace to the same extent people will understand and appreciate their certain advantages to also play online it's much more comfortable you can do it from everywhere you have a strong growth in mobile versus desktop exactly these kind of things that we have seen here in Sweden as well so I wouldn't be concerned about the competition between land-based and and and online in fact what we know from the market data we have globally an online penetration of currently 13% in online gaming so 13% of the total online of the total gambling market comes from online and this is this is expected to grow to above 17% so there is still a growth in in in the online share of total gambling over the next couple of years okay thank you Peter and thank you everyone for watching the other that he'll pleasant day
