The rally was a bright spot in what has been a difficult year.
Catena Media (CTM.ST) saw its stock price surge some 23% on Tuesday after the company released its second quarter earnings update.
The gambling information and content marketer, which provides leads for its online casino and sports betting partners, has had a brutal past few years.
Even after today’s surge, the stock is down some 35% year-to-date and has been trading in penny stock territory at $2.43 per share, as of August 12. Over the past 12 months, the stock has tanked some 62%.
The current woes have been the continuation of a long slide for Catena Media, which had been trading at more than $75 per share in June of 2021.
But investors were enticed to buy at a rock-bottom price on Tuesday following improving earnings. Is the resurgence a blip or can it be sustained?
Improved profitability
On the sales side, the second quarter results were not great, as revenue for the Malta-based firm dropped 25% to €9.6 million. It was also down from €9.8 million in the previous quarter.
The rally was no doubt related to its improved profitability, as Catena Media saw a massive 104% increase in adjusted EBITDA to €1.4 million, with the adjusted EBITDA margin rising to 14% from 5% the same quarter a year ago.
The improvement was almost entirely driven by the company’s recently announced cost optimization plan, which resulted in the elimination of one layer of management and some 50 positions – an overall staff reduction of 25%. The reduced headcount is targeted to reduce expenses by €4.5 million to €5.0 million this year.
The firm also sold its eSports-related assets, which will result in a €1.4 million gain on disposal. The divestments will also allow the company to focus more on its core assets.
“In Q2, we continued to work actively to optimize the operational structure. Measures taken included unifying our tech stack into a more scalable platform and simplifying operations across teams. We also adjusted headcount to reflect the size of the business we are today. As previously stated, these changes will reduce annual costs by EUR 5.3-5.8 million and further embed our leaner, more agile organization,” Catena CEO Manuel Stan said.
No guidance
The company did not offer any guidance for the upcoming quarter or the rest of the fiscal year. Last year in Q2 it scratched its previous full-year guidance as it underwent organizational changes and re-evaluated its media partnerships. Officials, at the time, also said they would not be issuing new guidance for the foreseeable future.
“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. In the light of this and the current organizational 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,” officials wrote in the Q2 2024 earnings update.
It is hard to gain any visibility into where the firm is headed without any guidance amid this time of major changes. Investors likely saw an opportunity to get a decent bump on improved profitability at a rock bottom price. But as far as long-term viability goes, that remains to be seen.
