CTTMF (CTTMF) Q2 2026 Earnings Report, Transcript and Summary

Good afternoon, good evening, everyone. Welcome to Catena Media's Q2 interim report. I am Manuel Stan, and today I am joined by our Chief Financial Officer, Mike Gerrow. Today, we will be speaking to our Q2 interim report, related financials, and our strategy and outlook going forward. We will start today's presentation with a high-level summary of the most important developments in the quarter. Q2 was a difficult quarter, which marked a pause from recent quarters of solid growth. Q2 reflected the structural challenges that traditional affiliation is facing relating to the shifting dynamics of organic search. Q2 revenue amounted to EUR 9.5 million. This represents a decrease of 1% versus the same quarter previous year and 23% down versus last quarter. Q2 revenue saw a 4% year-on-year increase when adjusted for currency rate changes. The adjusted EBITDA was EUR 1.2 million, down 11% from EUR 1.4 million the corresponding quarter last year. This meant a margin of 13% versus 14% the same period last year. The disciplined cost management continued with a total cost base flat year-on-year at EUR 8.2 million, but down 15% from Q1 2026. The New Depositing Customers increased 23% year-on-year, up to 24,781. From geographical perspective, the share of revenue coming from North America remained stable quarter-on-quarter at 97%, reflecting our focus on this geography. These challenges led the board and management teams to explore avenues for reshaping the business beyond traditional SEO affiliation. Moving on to operational developments. The quarterly revenue decline underlines the structural changes that traditional affiliates face in relation to shifting dynamics in organic search. This impact extends beyond Catena Media and the industry we are part of to every other industry reliant on organic search. Earlier this year, the board and management began exploring avenues for reshaping the business beyond traditional SEO affiliation. This will see Catena evolving beyond affiliation and lead generation into a technical infrastructure and intelligence platform provider. We have started developing this ecosystem as a next-generation, fully automated marketplace that connects advertisers and publishers across a wider set of verticals with deep analytics and intelligence at its core. The investment in this area began in Q2 and is reflected in the increase in capital expenditure. The thesis was validated through our successful marketplace program, which now contributes more than a third of group revenue. Moving on to organic search score. In Q2 of this year, organic search performance showed high volatility but was relatively flat year-on-year as our teams worked diligently to optimize rankings. The shift in user behavior essentially means the same rankings now convert into fewer clicks and less traffic than before. SEO will continue to remain a core part of the business, and we will continue to invest in and develop our core organic brands. We will continue to focus on brand loyalty and returning users and building traffic that is less exposed to search volatility. I will now hand over to Mike for an in-depth update on our financial performance.

Thank you, Manuel, and good day. Looking into our Q2 financials, revenue was broadly flat compared with last year and a disappointing 23% decline from Q1 2026. Adjusting for constant currency, revenue increased 4% versus Q2 2025. North America contributed 97% of group revenue during the quarter. Adjusted EBITDA was EUR 1.2 million during the quarter. This was an 11% decrease versus Q2 2025 and a 54% decrease versus Q1 2026, equal to a margin of 13% compared with 14% last year and 22% in Q1 2026. Operating cash flow was negligible during the quarter. New depositing customers increased 23% year-on-year. Compared to Q1 2026, NDCs decreased by 28%, in line with our fluctuating revenue. Overall, the quarter's performance was challenging and reflects the challenging market that SEO-based affiliates are facing. Moving on to our segment performance. In Q2 2026, our Casino segment contributed 90% of revenue, with the Sports segment contributing 10%. Casino revenues grew 8% versus Q2 2025 to EUR 8.5 million, but decreased by 22% versus Q1 2026. Regulated casino and sweepstakes casinos both grew despite the impact of the California ban that took place in January. Casino NDCs increased by 35% versus Q2 2025 and decreased by 28% versus Q1 2026. Adjusted EBITDA in the Casino segment decreased by 18% versus Q2 2025 to EUR 1.1 million and by 50% versus Q1 2026, equal to a margin of 13%. This reflects the year-on-year growth of MRKTPLYS offsetting the headwinds faced in our core SEO products. The Sports segment revenues decreased 43% versus last year to EUR 1.0 million and were down 32% versus Q1 2026. This reflects continued underperformance and the divestment of our esports business in late Q2 2025. New depositing customers decreased by 13% versus Q2 2025 and by 30% versus Q1 2026, which is seasonally to be expected. Adjusted EBITDA in Sports increased to EUR 100,000 from EUR 20,000 last year, equal to a margin of 11%, but decreased by EUR 100,000 versus Q1 2026. Continuing on to our cost development. The total cost base, excluding depreciation and amortization, was flat year-on-year at EUR 8.2 million. This represents a quarter-on-quarter decrease of 15%. Direct costs increased by 25% versus Q2 2025 to EUR 3.0 million. This reflects our progress in diversifying revenue to include a larger mix of performance marketing channels, including paid media, CRM, and MRKTPLYS versus last year. Our direct costs decreased by 16% versus Q1 2026 due to seasonal variances in the MRKTPLYS business. Adjusted personnel and other operating expenses, excluding the revenue-driven direct costs, decreased by 11% year-on-year. Personnel expenses decreased 9% versus Q2 2025 to EUR 3.6 million, and by 18% versus Q1 2026. It is important to note that there was no short-term incentive accrual in Q2 due to the subpar performance, whereas Q1 2026 included EUR 750,000. Normalizing to exclude that accrual, underlying personnel expenses were broadly flat versus Q1 2026 at EUR 3.6 million. We have included a gray section in the chart to separate the incentive program accruals versus the continued decrease of fixed cost personnel expenses over the quarters. Other operating expenses decreased by 14% versus Q2 2025 to EUR 1.6 million and by 7% versus Q1 2026. During the quarter, we continued implementing an administrative streamlining program that will yield a simplification of our legal structures and the liquidation of entities outside of Malta and the U.S. We recognized approximately EUR 45,000 of items affecting comparability, which were primarily related to this program. Moving on to our financial position. Total operating cash flow from continuing operations was EUR 0.03 million during the quarter, compared to EUR 1 million in Q2 2025. In Q1 2026, operating cash flow is EUR 4.4 million, which included a EUR 2.3 million working capital inflow. For the first six months of the year, operating cash flow was EUR 4.4 million, up 5% year-on-year and EUR 7.9 million over the last 12 months. We have also increased our capital expenditure by over 100% versus Q2 2025. This was driven by mentioned investments in product diversification and building our new infrastructure and intelligence platform. Our resulting cash and cash equivalents balance at the end of June was EUR 13 million. We do not have any remaining debt instruments after the repayment of our senior bond in Q2 2025. The Q2 financial report included a letter from our chairman that clarifies our outlook for the hybrid capital securities, which I would like to take the time now to reiterate. The hybrid capital securities are an equity instrument. They are not a debt instrument. Therefore, hybrid holders do not possess the standard rights associated with traditional bonds, including the ability to demand repayment or declare the issuer in default. The hybrid capital securities can be seen similar to a form of non-voting preferred equity. Where the preferred component gives the holders a priority claim ahead of the shareholders up to the nominal amount, plus accrued and unpaid interest. The hybrid capital securities have a nominal value of EUR 43.7 million and accrued interest of EUR 7.0 million as of July 10th, 2026. However, since they have no maturity date and no fixed payment obligation, the value is instead determined on how the market prices the highly uncertain potential future cash flows. We expect to continue deferring interest payments on the hybrid capital securities to maximize flexibility for effective capital allocation. Due to the lack of liquidity in this instrument and numerous inquiries from investors, we announced earlier today our intention to voluntarily offer to buy back the hybrid capital securities at 20% of the nominal value. More information regarding this voluntary offer will be made available on our website. I will now hand back over to Manu to give us an update on the strategy and outlook.

Thank you, Mike. We will now have a look into the strategy and outlook for the next quarters. With the start of the second half of the year, we have added a fourth pillar to our strategic focus areas, a performance pillar designed to emphasize the focus on automation and efficiency. From people perspective, the most important developments in the recent period included the Employee Net Promoter Score, which remains strong across Q2 as we recorded a 50-point year-on-year net increase. After the quarter, we have consolidated our squads to sharpen the focus on core products and improve cross-functional alignment and enabling faster decision-making and clear ownership. From product perspective, some of the key developments included continued improvement to our Play Perks loyalty program with imminent rollout to other brands. Launched PlayPicks, our prediction market product in beta mode, fully agentic build. Continued building the pipeline for MRKTPLYS+ and PlayCanada.com passed to a strategic partner to unlock additional value in this market. Our third strategic pillar is profit. The adjusted EBITDA reached its lowest level since Q1 2025, signaling the challenges of the SEO-focused affiliation model. Disciplined cost management continued with a total cost base flat at EUR 8.2 million. The direct costs show the contraction as the indirect impact of organic search, new traffic, is also affecting the other performance marketing verticals. Capital expenditure increased as we scale the investment in the new technical infrastructure and intelligence platform. The last and newly introduced strategic pillar, performance. New strategic pillar with focus on automation. Agentic development initiatives continued in the quarter with promising results. Content and SEO automation workflows delivered during the quarter. Automation initiatives across all areas of the business are currently in flight, forming a key part of our OKR framework. Moving on to North America market status. After the period, Alberta launched online casino and sports on July 13th. The first combined products launched as such since Ontario in 2022. This represents an attractive opportunity for the affiliate segment. The initial results recorded in the first month since launch are satisfactory. Prediction markets emerged as a strong alternative in the sports vertical, accessible nationwide. We have launched our first dedicated initiative in this space, fully agentic build PlayPicks, which is now live in beta mode. Lastly, let us recap the key takeaways from our report. Revenue remained broadly in line with the same quarter last year, recording a marginal drop of 1% to EUR 9.5 million, down from EUR 9.6 million. When adjusted for currency rate exchange, the revenue increased 4% year-on-year. The adjusted EBITDA saw a decline of 11% to EUR 1.2 million, down from EUR 1.4 million, the lowest level since Q1 2025. These results reflect the structural challenges that traditional affiliation is facing relating to the shift in dynamics of organic search. Earlier this year, the board and management teams began exploring avenues for reshaping the business beyond traditional SEO affiliation. This will see Catena Media evolving beyond affiliation and lead generation into a technical infrastructure and intelligence platform. We will share more details about this area in the following quarters as we approach a full commercial launch in the first half of 2027. We expect to continue deferring interest payments on the hybrid capital securities in order to maximize flexibility for effective capital allocation. We intend to launch a voluntary tender offer as detailed earlier and in the correspondent press release. The share buyback program of up to 5.98% approved to meet the company's commitments to its employee long-term incentive plan. Thank you very much for listening. I will now hand over to Mike to move on to the Q&A section of our call and open up for questions.

Thank you, Manu. I'll now open it up for questions.

If you wish to ask a question, please dial pound five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound six on your telephone keypad.

We'll just give it a minute here to see if there's any callers who want to ask a question. All right. I guess we'll proceed to some questions that we had submitted earlier on through the written procedures. The first question that's coming to Manu is, revenue fell 1% and adjusted EBITDA declined. How would you characterize Q2? Is the recovery over?

Thank you, Mike. Q2 was obviously a softer quarter after several strong ones and below the standard we have set for ourselves. While revenue was broadly in line with last year, and this was down 23%, and the EBITDA margin was down year-on-year. This is obviously, as we said, the main cause is the headwinds in organic search. As we announced, we are making some shifts in order to address that and position the business for a more sustainable future. Today's report sets out the measures, including, as we said, about the new infrastructure intelligence platform. I'm excited to talk about that in the next quarters.

All right. Thank you. The next question is, what exactly is the new platform that you're building, and is there more information about it?

Thank you. As I said, we're excited to talk about that more in the next few quarters. However, at this stage, for competitive reasons, we are disclosing few operational details. We will share more in the next coming quarters as we complete the final testing and we get closer to the full commercial launch in the first half of 2027. All we can say at this point is that we're developing a next-generation, fully automated marketplace that connects publishers and advertisers across a wider set of verticals with analytics and intelligence at its core, and that we build on what we have already done with MRKTPLYS. Again, excited to talk more about this in the next quarters as we're approaching the 2027 launch.

All right. Thank you. The final question I think that's for you is, are you saying that the traditional SEO affiliation model is broken?

No, I think we're saying that the industry is changing and the user behavior, the way that users discover content is shifting, and revenue from organic search is more volatile than it used to be. I think this is likely to continue, so we need to adapt to that. We remain committed to our organic brands. We continue to see these as important revenue contributors, and we keep investing in them, but we need to reduce the dependency on SEO. MRKTPLYS, as we said, already contributes more than a third of group revenues, which shows that we can actually provide a connected infrastructure between publishers and operators today, and this is the platform that we want to build on.

All right. Thank you. There's a couple questions that we have about the hybrid capital security, so I'll answer those. The first question was, why are you continuing to defer the interest payments in the hybrid capital securities? Overall, any resumption on the timing is solely at our discretion, at the company's discretion. We do not intend to initiate interest payments anytime for the foreseeable future, as mentioned in our report. The purpose behind that is to maximize flexibility for capital allocation, including creating scope for investments that support the strategic opportunities and can deliver us revenue growth. Then a question about why are you offering to buy back the hybrid and how was the price set? Overall, over the past number of months, especially since we deferred the hybrid payments first about a year ago, we've had a number of inquiries from holders looking for a way to exit, and there's very little liquidity in the instrument. So the offer simply opens a window for those who prefer to have cash today. The price reflects characteristics of the instrument. It is perpetual. It has no maturity date, and there's no fixed payment obligation on the company. Interest payments are also deferred at the company's discretion. There's no market where the hybrid holder can really sell in size if we look at the recent trading volumes. So the offer is completely voluntary and the full terms of the offer will be on our website with further documentation. Then we have another related question, which is, why are you doing the capital securities tender offer and the share buyback at the same time? Overall, these are separate initiatives. I just want to make sure that's understood. After the past year's operational and strategic turnaround, we have generated a decent amount of cash, and the board of directors has finalized an updated long-term capital allocation plan that reflects our dual focus on growth and on shareholder value. The focus remains the reinvestment of cash flows into growth-oriented initiatives. In line with authorizations granted at our recent annual and extraordinary general meetings, the company will initiate a very limited share buyback program to support our long-term incentive plans. Further, as part of the updated capital allocation plan, the board has evaluated the company's outstanding capital securities. That's why we've issued the offer for those who are interested. The share buyback and the capital securities tender offer are made separately, and they're not conditional on each other. Then I have one final question, which is, what happens if I do not accept the hybrid offer? Quite a simple answer, which is that nothing changes. You keep the securities and the nominal amount, and you keep your claim to accrued and unpaid interest, which ranks ahead of the ordinary shareholders. If there's any more questions on the hybrid capital security. I just got one that was written in. So this one came from Frederick, sorry. "Is it really a good idea to budget for hybrid offers at 20% when it seems unlikely that anyone would accept that amount? Where did the 20% come from, and has anyone actually accepted the 20% offer pre-offer?" I'm not quite sure what the 20% offer pre-offer means. But the 20%, as we were saying, came from the fact that we are offering a significant amount of liquidity versus the very small amount that is available presently on the exchanges. From that perspective, we feel that it is a fair offer for something that does have a very undetermined future for certainty now. Then we have another question from Tony that says, "Can you confirm that PlayCanada.com was divested and no meaningful impact from that?" I will actually hand that one over to Manu.

Sure. Thanks, Mike. Yes, we can confirm that we have divested PlayCanada.com to one of our strategic partners in that market. That was the rationale behind that movement. No meaningful impact in terms of the divestment, but future positive impact from generating revenues from that market.

I think I have already answered the other question that just came in, which was the hybrid capital securities are trading at 60. This is not a fair offer, please comment. I have already provided a response to that. I think from that, I will shut down the questions for today and hand back over to Manu, for closing remarks.

Great. Thank you, Mike. As we said, overall, the revenue remained broadly in line with the same quarter last year, recording a marginal drop of 1% down to EUR 9.5 million. When adjusted for currency rate exchange, the revenue increased 4% year-on-year. The adjusted EBITDA saw a decline of 11%, down to EUR 1.2 million from EUR 1.4 million last year. These results do reflect the structural challenges that traditional SEO affiliation is facing related to the shifting dynamics of organic search. Based on that, earlier this year, the board and management began exploring avenues for reshaping the business beyond traditional SEO affiliation, and this will see Catena Media evolving beyond affiliation and lead generation into a technical infrastructure and intelligence platform. We will share more details about this area in the following quarters as we approach a full commercial launch in the first half of 2027. We expect to continue deferring interest payments on the hybrid capital securities in order to maximize flexibility for effective capital allocation. As we just discussed, we intend to launch a voluntary tender offer as detailed in this presentation. A share buyback program of up to 5.98% shares approved to meet the company commitment to its employee long-term incentive plans. With that, I'd like to thank you all for joining today's call, and looking forward to hosting you to our Q3 report on November 10, 2026. Thank you very much.