Welcome to the Catena Media Q4 Report 2019. For the first part of this call, all participants will be in listen-only mode. Afterwards, there'll be a question and answer session. I'll now hand the floor to Interim Group CFO, Erik Edeen. Please begin your meeting.
Good morning. We have from Stockholm live transmitting, Erik Edeen, the CFO, and Per Hellberg, CEO. I'd like to welcome you to the Q4 record of 2019 and also the full year report. We will, as always, take you through the agenda as follows. We will start with the quarterly highlights, followed by a business update for the fourth quarter, followed by the detailed financial handed over by our CFO, and then we'll look a bit forward by once again putting some focus on our strategy, more long-term, but also short-term initiatives, and then what outlooks that could bring us. We finish with a Q&A. If we then continue into the quarterly highlights as such, I think that we are happy to announce that our work of rebuilding this business back to growth is working.
The first slide we have in the presentation is about our continued improvements of revenue growth quarter to quarter. As we all remember, we had a rough start to the year where we had not only regulations impacting us, but also issues with certain products internally that actually reduced in revenue cost of reducing traffic. We indicated that quite quickly in the year that we needed to do something about it. We adjusted the work. About mid-year, we started then to show positive signs and start to grow back. We ended the second quarter better than it started, then grow the business in the third quarter. Yet again, the operational revenues that we generate is increased towards the right direction. Still not full in power last year, getting very close. However, in this result, we have a one-time adjustment of EUR 0.6 million. Sorry, EUR 0.5.
That relates to a historical adjustment we need to do in U.S., and I want to cover that off just to start with because I might think it is interesting for people to understand. In all our agreements with affiliates, we have with operators, we have the possibility then to deduct the customers they already have in the database. When we're setting customers, they have some time afterwards to adjust according to our agreements to deduct customers already existing. In U.S., the systems compared with the rest of the world is quite mature. They're not really in place yet, meaning that it takes time to do this. This specific operator that we had in the state of Pennsylvania came back with these adjustments far after the third quarter and second quarter was confirmed. That inwards the result, but in the end, we had to reduce it.
It's a value we've had for quite some time, and at that time, that operator was also the only one available in the state. They came in in that state with a big database of land-based casino customers. That was where they had the database from. Now, that is not an ongoing problem we see as very few of these state-based operators, land-based operators have online business, but also we now have more operators in place in Pennsylvania, so we can send our traffic to other ones. We don't see this being an issue going forward. All in all, growth in both EBITDA and revenue compared with the previous quarter. We need to look at last compared to the same period last year, where we're still not in powering growth, but we're getting very close.
For those who remember, the beginning of the year started fairly good last year, only to start to decline in the second quarter onwards. We believe that we should soon be back and start to build on these numbers positive again compared with the previous year. If we continue more into detailed business updates, we went into this quarter by giving a guidance back when the Q3 report happened. What we then said in order for you to follow what has happened since then, to give you clarity on that a lot of these things actually happened as it should. We see a positive, nice growing trend for our flagship brand AskGamblers. Achieved yet again all-time high, grow their numbers nicely.
The Italian business, as we said in the end of Q3, started to come back to previous levels, and they did now in the fourth quarter, delivering both in casino and sports very positive numbers. No real signs of the impact of the ban, marketing ban in Italy, so we're growing that nicely back. The European casino side, after the work we have done, has started also to continue to show positive trends in terms of traffic generation and the revenue coming out of that. I think for U.S., important questions, we grow compared with the third quarter. In combination of, as also explained by that no month basically in Q4 was as high as September in Q3.
All of those months together, because of normally it's September being the driving month in the third quarter, this quarter together ended up above because three months with stable revenues will outperform one good month in the third quarter. We're happy announcing that we had a good fourth quarter as well. Also, as some of you probably have heard, this industry in the last quarter have had, and also beginning of this year, have had significant impact of recent Google updates, where both operators and the affiliation business in general, not only this segment, has had some quite tough situation where Google changed their algorithms, and that impacted traffic negatively. I'm happy to inform that that does not apply to us.
Our sites remain positive, stable, and are growing currently. If we now look at the things that we don't see as positive then, of course, the impairment of the intangible assets. It's never a good thing that you need to write down the assets that you once paid for. In this stage, a big part of that revenue related to the fact of investments into Financial Services. Erik will come back with more details there, but basically, with a big change on the market conditions and those sites focusing on Europe, we could simply not protect the value in those and just very close to this presentation, we concluded with our auditors that that was the thing we need to do and immediately after that to the market. We also had some casino assets that we had to write down, which was also quite considerable amount.
Predominantly for assets that today business model do not apply for. Typically sites where we have a lot of historical income coming from pay-per-click advertising that today margin is gone. We cannot protect the value and hence we have to deduct that as well. Not the best thing to do, but we need to turn page, move on and focus on the future, and as we don't believe those assets are worth investing in anymore, we need to focus on the one that can produce future value for us, big ones, and therefore we need to take the disposition. If you look at Germany, and U.K., I think Germany, both of them, we had, as the industry in general, had a little bit less revenue share coming out, impacting our revenues negatively.
We also had some operators in Germany who, in the very end, hold back their spend a bit, but they're now back on track again for this in the first quarter. Japan actually ended up as forecasted, but I put it as a negative here as it actually was forecasted to decline a bit compared with Q3, due to seasonality. In the end, the sports in France, we have said that we're rebuilding those as we continue to do that. We are doing continued massive rework and we've not launched this yet, therefore we could not grow the business in Q4 either. In the end, as I mentioned, this extraordinary adjustments in U.S. which we don't foresee being an issue going forward.
All in all, in a tough quarter with quite tough margins in sports, with massive Google updates, we're quite happy to see that the operational revenues are growing and therefore also the operational profit. With that, we need to see and hand over to Erik for more financial details.
Morning. Looking into our revenue development here in the fourth quarter, we did EUR 23.4 million in search revenue. We had our paid revenue at EUR 2.8 million and subscription revenue at EUR 3.4 million, looking on the quarterly organic growth, we increased by 2%. The number you can see here is deducted then by the 7.5 account-wide that we mentioned previously. Yep. If we dig down into our revenue streams, we increased our fixed fees here during the fourth quarter. That is primarily driven to an increased demand for branding on our side, from the operator side, where they find it very valuable. From that perspective, we get more requests and fixed fees has gone up here during the fourth quarter.
Cost per acquisition and revenue share are quite in line with each other. The primary reason then for a decline in revenue share is related to the low performance within German sports that I mentioned as well as sports U.K. If we look it down into our development in terms of EBITDA and costs, we ended the fourth quarter with a margin of 44% in parallel with the third quarter. We used a lower amount of pay-per-click in general during the quarter. Direct costs hence affected the margin positively. Personnel expenses margin wise in line with last quarter, also continuing on the same level margin wise. If we look into our operating expenses, those increased somewhat here during the fourth quarter, primarily related to increased marketing and content related activities during the quarter, where most of it is related to the investment in the U.S. market.
We look at our segment performance, we had 59% of our revenues in the fourth quarter in the casino segment, with revenues at EUR 16.7 million. Our sports revenue came out at 36% of our revenues at EUR 9.6 million. Our Financial Services segment represented 5% of our total revenues in the quarter, ending at EUR 1.3 million. We then go down into the details and the financial net and the effects below EBITDA, we had some non-recurring items, exceptional items here during the fourth quarter. We have pre-announced some of them. These are primarily relating to the IFRS 9 implementation, and the assessment model and the reassessment model we have implemented in that regard. I will come back to that and elaborate a little bit more on the changes we have done there.
It also primarily relates to this adjustment we had in the U.S., relating to previous periods. We also had, as Per mentioned earlier here, an impairment. I will also come back to that one a little bit more into details, but as you can see, it gives quite some effect here below the EBITDA in the fourth quarter. As we normally have and what we're getting used to see is the fluctuation on the bond, where the value on the bond has gone up on the market. It impacts our fair value assessment negatively in the P&L as we do a fair value on a quarterly basis in relation to the development on the underlying bond part.
To look into a little bit more in the specifics when it comes to the impairment of intangible assets here during the fourth quarter, as we pre-announced here in the third quarter, we were to do a strategic review. We have done that review where we looked into our segments and our assets in particular where we've done an assessment and as the accounting regulation states we have to do that divided into our cash generating units. We currently have three cash generating units within Catena, that is the Financial Services unit, it is the Sports unit, and the Casino unit. The Sports unit and Casino unit cover their values as cash generating units in the impairment test, hence the Financial Services segment were not able to defend its value.
We had to do an impairment related to the segment or the cash generating unit Financial Services in the quarter. We also did an individual assessment, a useful life assessment, as it's called here. Four products were classified as infinite or with a finite useful life, in this case, not an infinite useful life. As we mentioned here at the start of the presentation, it was primarily within iGaming in this case, but also we had assets within the casino segment with very low revenue numbers or a declining trend. They are all products where we aren't putting any further focus and also a smaller product within the sports segment. For the same reason, they're primarily related to PPC investment and rev share accounts. Other than that gives a total effect here in the quarter of EUR 32.1 million.
The products with low revenue, as I mentioned, has been reclassified as inactive in our strategic review. We see, as we also mentioned, a positive development in the underlying business, and we are comfortable with the current levels here in terms of where we are with our assessments in this regard. When it comes to the recognition of impairment loss that is related to the IFRS 9 assessment, where we here in the fourth quarter took a reassessment according to the new models. Those were implemented in the regulations implemented in 2018. We are still a quite young company, meaning we use a lot of data points and assessment when doing these types of adjustments.
We comply with the accounting regulations, and the board has decided to take a conservative approach in terms of assessing the future default in this case, the default risks, which is related to a lot of data points and also including market data, et cetera, to conclude on a default risk level that is applied on the future expectations in this regard. A conservative approach and a shift in underlying models in the accounting is giving the impact. If we continue to look at our New Depositing Customers here in the quarter, we increased NDCs from 100,000 up to 113,000 in the quarter. That is primarily driven by the legacy business in Europe, where we saw an increase in NDCs in the quarter.
If we look at the graph on the left side where we have the value Europe per NDC, we see a decline, and that decline is partly related to the negative effect we had from the U.S. adjustment. When we calculate this and with this graph, we use the posted reported numbers. If you look into our statement of financial position and balance sheet, it is the latest update where we have the assets end of December here at EUR 332.5 million. As you can see, our assets committed to an acquisition is continuing to decrease here during the quarter. I will get back a little bit more on that here on the next page.
As you can see over the year and ending Q4 2018 at EUR 81.9 million in asset purchase commitments, now down to EUR 18.1 of which we have announced here in December and January that the majority of that remaining value has been settled now related to the U.S. acquisition where 70% was paid in shares here during January. The remainder of the payment in that regard for the U.S. assets will be done in April 2023. There is a small acquisition to be paid as well in this valuation, another asset called BonusSeeker that also will fall on you here during the second quarter. If we continue to look into our statement of cash flows, we ended the year with a cash conversion of 106% and an underlying operating cash flow of EUR 9 million.
That corresponds to a total net cash generated from operating activities in 2019 of EUR 38 million compared to approximately EUR 14 million in 2018. Some updates then on our refinancing activities, and for those of you who follow us, you are aware, but we have an unsecured 10-year bond with a framework of EUR 250 million, where we utilize the EUR 150 million currently, which matures in March 2021, as well as a revolving credit facility with Swedbank. We are in the process of refinancing, and we have looked at several options and worked with this for quite some time now and evaluated a lot of different options during the past year. We are having a very good momentum in this regard and positive dialogues with banks and financing institutions, and we will get back as soon as we have further information to give in this regard.
We have also now during the quarter, just recently updated our financial targets due to the changed marketing condition here over the last year. The financial targets has been reviewed by the board and the new financial targets that we are implementing is, one, to have a sustainable double-digit growth on a yearly basis, organic, as one of our long-term financial targets. The other one is that we are changing the phrasing a little bit on our leverage target, to operate below a net interest-bearing debt adjusted EBITDA of 1.75 times long term. We are decreasing that compared to the previous amount as we are soon to be settled with the earn-outs we have, and in combination with a positive cash generated in the company, we expect it to be good long-term targets.
All right. Thank you, Erik. Let's now move into a bit towards the strategic part of this presentation and how we foresee the short, but also a bit of the long-term growth. It's been no secret that we leave a very tough year behind us. We went into this with severe changed market conditions, but also with our own legacy that was actually creating a decline in our business. To sort that, we needed to apply a big turnaround project to the business. The way how we did that was, A., to stabilize those assets that were in decline, then started the cleanup, meaning that stop focusing on certain assets that we don't believe can build value, hence also writing them off. When things were stabilized and we have a clean sheet to move on, we can then start to build.
That project is going a little bit different depending on the segments we're in and where we are in the world. The standards that we have applied is what you see in front of you now. It's basically all the core parts, meaning that we focus on organic growth because that is what we believe is showing the strength in the company. During this whole, you also need to adapt to local regulatory changes, which have been many this year and will be over the course of the years proceeding in a lot of markets. You need to be good at that, and you need to be able to adapt accordingly. Geographical expansion of existing products, also invest into new ones, but this also at the time where we was trying to improve efficiency in the company in terms of costs.
We mentioned some of these points already in the last presentation. To summarize is that in the mature markets where we don't foresee as fast growth pace as other parts of the world, the key thing is to improve efficiency. Rework the structure, focus on less products, take out costs. We can increase margin by doing so. I will come back a bit more detail about these projects. It's also then to in areas where we can grow, which is in many places around the world that already exist business, it is U.S. where we have states on board, that is still in a very early stage, but also elsewhere where we have business like in Asia, various parts in Europe, et cetera. We believe that we can grow that business not only in the pace of the market, but outgrow it.
In some cases, we need to invest, but in some cases, we can then probably also take out some further costs. Fast growth and a good margin from there as well. There's a day tomorrow as well, and there are a lot of things happening. One example is new states to come in U.S. that we as historically have worked very good for us, want to have sites up and running when the state goes live, so we from day one can send traffic. We invest a lot in those sites and the people to manage them and the product supporting investments that have to have in order to be successful also in the future. We know that also things are happening fast in Latin America, various places in Asia.
We want to be on the starting grid there fully geared to move on very fast there, and that's why we want to invest in that. I think the most important thing here is that we want to grow very fast. We want to grow more, and we want to do so very efficiently. The work is not finished yet. We managed to conclude in a way that we stopped the decline and started to rebuild, but of course, we want to accelerate quicker. Therefore, we need to look into a couple things more. If you look at Sports Europe, which predominantly a lot of revenues that from the nearest market, like Sweden, U.K., et cetera, we have started a business revision. Same thing, same strategy. The less products focus on Betting Hero.
We are now going to start focusing on Hero brand for sports like, for example, AskGamblers for Casino. We prioritize organic growth rather than acquired revenue as it brings better margin to us. I think the most important thing here is also that we're doing cost efficiency improvements here. We turn costs around, and take out costs, and all investors really believe we have a good ROI going forward. Casino, we've already been through many times, but it's continued focus on quality improvements. We are rebuilding a big site now that we couldn't simply repair from the past, but what is JohnSlots is the only product that is not driving more traffic a lot these days, but we want to do that. That's on the rebuild and will be launched here as soon as we're ready with that.
Important thing is we're also looking into the entire marketing and commercial functions within the company to get more efficiency there and be able to support our operators in the more efficient ways we help them grow their business. This we do by also using the tools they have available for us to do a lot of improvement projects in the company to do that. Other than that, of course, we continue to focus on AskGamblers, which is our core casino brand. We will launch and are targeting to launch three new languages within 2020. We will do this in a certain interval to make sure that when the site updates that it's in full control and that we gain both short-term and long-term traffic increase from that.
That's why we're spreading out over the year, and it will be languages that are in not just one continent. We will expand the horizon of this for us in the new markets. Other than that, U.S., of course, we mentioned that we're doing a lot of investments, and we also continue our cost efficiency projects. To do this, we need a lot of hard work. We also need different experience in, and therefore, I'm happy to announce that we have two new executives in the management team that have recently started. One is Hamish Brown, who is our Vice President of the casino. Hamish joins from iGaming experience a lot within product management, turnarounds, geographical expansion, is very good in this and is a very good suitable candidate for the casino products.
We also have Chris Welch, who, for those of you in the industry, also knows very well. He comes in from a long experience, also in iGaming, where you have various roles, anything from sports casino poker, both in marketing and CEO, et cetera. Chris also brings, together with Hamish, a good commercial knowledge in here that we mean that we can improve not only the product but also our complete offering of those products to the world of operators. We're very happy to welcome them on board. Now, U.S. Exciting things there as of course. I think it's important to understand that there are things happening all the time, and we have, and you saw, and we recognize these pages now in our presentation where we tried to summarize. Rest assured, in a couple of days, this will have changed again.
To summarize in Q4, the good thing was that in Pennsylvania, more operators came on board, meaning that we could then start to send traffic to more operators there, meaning that not only we can kind of channel the traffic to all the things we previously discussed before, but also sadly, of course, with all the payment we can get for those traffic. CPA rates, cost per acquisition rates, starts to increase in the very end of the quarter, which was positive. Indiana, who came out that they want to launch quite late, just rushed the launch and actually launched 6 months ahead of schedule, which was very good. They unfortunately missed NFL kickoff, but another state is good, and now they're starting to build up also their operator presence for us to benefit from going forward.
Because of this quite fast movement and people and states wants to benefit from the taxation and legislation of this, we could also see that Colorado passes the betting referendum, who legally then said that in the late 2020. As you will see below, they are going to move ahead quickly on that. We decided then to start to continue and invest into states to be live in the future. Since then, Q1, we can see that a lot of states after New Jersey continue to add operators. We have more coming in in West Virginia. We have casino operators coming in Pennsylvania, which is very good. Indiana is also launching more operators for sports. All very good because we have a larger demand, both not only in sports but also in casino. New Jersey, why not there?
Well, there's already a lot of operators there, adding more would actually not benefit our business greatly there. In the other ones is where we need more, we are happy to see that happening. Also, even though very small state and initially very small investments, we are live with affiliations together DraftKings in New Hampshire. Another interesting thing is that because casinos going to launch in more states, social casinos is a very big thing, if the operators on such can maintain a large volume on their side when the state regulates, they can have a good business. Therefore, they're very easy to get traffic. We send also that to them in states not yet regulated. Even though not as high costs that we can charge, it's still an incremental volume, which is very good.
As mentioned, Colorado, they decided to move this faster. Now we look at the May, June online launch, which is great because that means that they would have been live before the NFL kickoff, so another boost there. Another thing we're doing because of the online development, we also have a lot of states where you only have land-based today, and because of the massive traffic on the sites, we have contacted us and said, "Do you think by any means that this state is not yet online ready? Can you help us to try to switch customers?" We do that as a trial as well to see if we can sort that. We also decided to intensify our investments into new markets as more of them are estimated to launch earlier. On the next slide, you recognize this slide.
There are things being moved up to this timing all the time with more states passing the bill. I think the interesting part with that one is that there is a lot of states about to launch where a bill is passed. We don't know whether that will happen, if it will be mid this year, end this year or 2021. Just to give you an idea, if you take one of these states here that are inserted here, that are estimated to launch at some part, population-wise, they represent an increase of about 80% compared to today. Once again, it means that timing is yet to be defined, but we know that we have a potential revenue uplift of about 80% most likely compared to what we can see today in the States.
Bear that in mind that the states we're in today are very, very low penetrated so far by this industry. This looks positive, but of course, it's not only there we need to go. We need to go in many places. If we then start to look at the ongoing thing, we have done not only work in the U.S., but we're doing a lot of reviews. Happily, we can announce today that the year has started good. Even though January last year was not impacted that much yet by our internal legacy progress going down, even though it was impacted by the Swedish regulation, we still had a rather good deal still going on, and we are happy to announce that our preliminary numbers, for January is showing a 9% revenue increase compared to last year.
The quarter has started good, but of course, it's just one month. We also know that certain areas will actually decline a bit later in the quarter, which I would like now to go through here, and then conclude what we believe in the short term thing here. If you look at U.S., nice start of the year. Obviously, Super Bowl coming up and March Madness in basketball. After that, we have to understand that the sports business in U.S. more or less dies. There are very little events to be on. Good start, but it'll end the quarter quite slow. That's important. AskGamblers continue to show good traffic performance, and we don't foresee any decline going there. As for Italy, France, once again, we're planning that to be slow for known reasons.
Germany, we believe will be tracked, according to seasonality, meaning first part, maybe of the month, a bit slow because very little Bundesliga, but then it starts and picks up our casino stable. Japan, positive compared with Q4, as Q4 is a low seasonality. European casino, of course, continue a nice trend, compared with last year, still below as last year around this time was the peak before the big decline started. Still, we believe that traffic continues to grow. The key thing in this one is that we are generating more traffic, but we also know that because of seasonality in general, there's a little bit less revenue in some markets generated by customers. As we have a big part of revenue share coming into us, we could see, of course, a big decline in terms of seasonality in Q1, which is quite normal.
We also see that we have some positive momentum in this. As I mentioned here, we have U.S. start, we have AskGamblers, we have some other products. Our view is that we don't foresee the company should be negatively impacted by traditional seasonality in the quarter as such. Yet again, early indications only, we have two months to conclude, and we have to come back to that on reporting date on next slide. If we look at the more forward-looking for the full year, of course, it's very difficult to be super detailed here, but if you summarize what we have been working on now for quite some time and how we foresee that, if you just look at revenue, we know that second half will be much more active and aggressive than first half. Why?
You have the entire U.S. NFL football season started. We know since historically that at that time from August, September onwards, it's a big boom. We will have some states like Pennsylvania probably having a bit hangover because they launched this year and we see the second year always being a bit lower. On the other hand, New York is growing nicely. We have Indiana, we have new states coming on board, Colorado, et cetera. It's actually very nice. We are working very hard now, that for a long time now really rebuild the sports business, manage all the U.K., the U.K. markets, Sweden, other places. We will have benefit of that in the second half. It's working on and potentially also in the first half, but definitely in the second half, and also seasonality is in favor.
We know that we see the traffic is continuing well, and we know that in general, we have a seasonality that is stronger in second half than first half. After that, the championships in the summer, which will help us to build a good thing. That ended quite fast growth in the end of the year projected. In order then to benefit from that and send that to the bottom line, we need to be in control of our cost. Obviously, we've been reworking the cost structure over the year. If you look at then the cost we book for the fourth quarter and analyze that, how did we foresee then the cost development in the company? First of all, we don't foresee any total increase on cost compared to our fourth quarter last year.
When it comes to direct cost, we don't expect to increase it, meaning pay-per-click and performance-based marketing. We are conducting a big review to understand the ROI efficiency here. If that doesn't turn out well, we have potentially cut it. If we can find other ways of doing it and securing acceptable margin, we will maintain those levels in the same level. Otherwise, we'll go down. We are currently taking out costs both in other OpEx and personnel. We are doing that. We did it sort of during Q4, also continued this in the first half. The most important thing here, as I mentioned, that we also have a day tomorrow. We're planning then to reinvest those savings into new markets and into existing markets.
To give you an idea about what those investments represent is that about 7%-10% of the runway is what's going to be invested in the new markets this year. Obviously, therefore, cost also taking out from a legacy business. All in all, to conclude, we are compared with the bottom in the summer here, continue to grow both operational revenue and profits. We had to do some adjustments, obviously, meaning that we had some short-term negative impact on that, which we have explained. We are continuing our cost control activities and will continue to focus that a lot. We're not done yet. We're trying to find efficiencies every day. As soon as we can, we will continue to cut costs. A lot of those will be reinvested, so there's a nice future growth because we want to grow fast and profitable.
Hence we uplifted our financial targets. As Erik mentioned, we are having positive discussions with refinance activities and plan to communicate that to market very soon if we want to do. All in all, that concludes the presentation, and I guess we'll now open up for questions.
Thank you. If you wish to ask a question, please dial zero one on your telephone keypad now to enter the queue. Once your name is announced, you can ask your question. If you find your questions answered before it's your turn to speak, you can dial zero two to cancel. Once again, that's zero one to ask a question or zero two if you need to cancel. Our first question comes from the line of Hjalmar Ahlberg of Kepler Cheuvreux. Please go ahead. Your line is open.
Thank you. First, just a question about the write-downs. Historically, you viewed your assets as a single unit, and then that whole revenue stream should be considered when they're valued assets. Yes, I'm wondering what changed in that and how you view the assets going forward. If you still view it as a whole or if you'll view it as a single asset going forward.
How it works in terms of the regulations is that you're right that you look at the impairments from a cash generating unit perspective. That is one way of looking at it. If you have assets where you're taking a decision and are not going to do any further investments or if they can't or significantly off their value, you should do a useful life assessment. That's what we've done in this case for certain products that we have reclassified as inactive, and that we will not do any further investment in. It's products that have been declining revenue-wise, and that we won't do any further investment in. We've done a recent assessment and a very careful assessment in this case. We do not expect going to do any further adjustment in that regard.
Okay. A question on the start of January. You discussed a bit on how 2019 Q1 last year looked. It sounded like January was not the weakest month, but rather January, February, March were all a bit weak maybe. Can you say something more about how last year looked? We understand, if January was a very weak month compared to the full quarter of last year.
I think we need to split that down a bit because obviously we all knew what happened and what happened in Sweden, for example, with the revenues there the first month, which was extremely low. Being at the levels we are today, of course, that helps. Casino European products in general is one we were working on. They did better last year than they do now because that's supposed to peak. Even though we're growing now them back, they're not really work all the way back, but we expect them to do so quite. Other than that, obviously U.S. did better this year because we have more states on board. We have the other casino products we have AskGamblers doing better, Japan doing better, et cetera.
I think it's pretty much what we try to guide here as well, is that there are some problematic things that we have adjusted in the year that are going back, but some of them are not yet back to full potential, while the other ones are continuing strong growth quarter on quarter. That's what gives optimized potential revenue here start of the year.
Okay, thanks. Looking on your sports betting asset now with the Euro 2020 Championship, you mentioned France is still not full up running, and you're working on some improvements on your Hero sports betting sites. Do you think that will be up and running to the Euro 2020 Championship?
Yeah, I think first of all, the Hero product is a new product, so that is just incremental to whatever we do. The key thing is, of course, in sports and this work we're doing now is to take the existing assets we have and improve them and taking out cost and then make them more efficient. That is, of course, a targeted benefit from that, from the championships. I think in general, we foresee a positive impact of the championships, but we also have to remember that the championships also replace traditional leagues being on and the championship is great, there's a lot of investment, but also the result is depending on less events. You can have big swings of revenue share. That's why we need to know in the end how good it will be.
Definitely we have all the works we're doing is to benefit as much as possible for those improvements to use these events to grow furthermore.
Got it. A question on you, as you just discussed this a bit. I mean, New Jersey was very strong in 2018 when the market launched. Now Pennsylvania was very strong when that launched online in 2019. Where do you see New Jersey now in 2020? I mean, is it declining or more get steady?
Well, they're in different cycles.
Yeah.
That's what we see in the U.S. because it's quite different. Pennsylvania is very different from New Jersey. What we typically see is the second year, NFL, you have a bit of a hangover because you get a lot of push when it opens up, if it's opened up around NFL kickoff. Then typically in the same market year after, you get a bit decline in sports because there was so much focus. It's still generating all the new customers, you get a hangover. How that will play for Pennsylvania this year, we'll have to see, because also have to remember the time for NFL kickoff this year, you had a very limited amount of operators, meaning that the marketing of the public was low, and there was not a lot of activities in that sense.
That could compensate a bit from that hangover while you have other states coming on board. I think that's why we believe that going forward here, we foresee a nice growth trend, even if new states wouldn't come on board. Adding that on top, we see a very positive outlook on that. Timing remains to be defined.
Thanks. Just last question on the retention business, which you talked a bit about before, and that sounds quite interesting. Is that generating any revenue yet, or is it more in the making?
Basically still, we decided that we had quite some substantial other things to look at, as you can surely could see in the numbers of what happened, and so did the operators. This was business predominantly focused on areas like U.K., et cetera, and as we utilize this business, we have potentially not focused super lot for that. That's why it's still here. We believe it has a good thing. I cannot mention to who we are in discussion with now and who we are implementing it with, but it will be implemented at some time. It's not a major revenue generator for us yet.
Okay. That's all from me. Thank you.
Okay. Thank you.
Thank you. Our next question comes from the line of Christian Hellman of Nordea. Please go ahead, your line is open.
Hi. Thanks. Just first a question on the cash flow for the first two quarters of this year, just to help us project it a bit better. You have some earn-outs that are due to be paid for the U.S. assets. Could you just be a bit more specific, when will you pay these earn-outs, and what are the amounts?
I will pick up on that question. We have already, and what we announced here in January is the amount that will be paid in cash for the U.S. assets, that is in U.S. dollars. The exact number can be found in the press release that we put out now in January, and that payment will be due during April, that cash payment. It can be found there. We have the smaller one left, and for that one, we have not announced yet how that will be settled. That is for BonusSeeker, the remaining part of that EUR 18.1 million, but it's a small part.
Right. That is due in Q2 as well?
Correct. Yes.
Okay. Just on the U.S., I came in a bit late in the conference call here, but you spoke a bit about the U.S. in the beginning, and I think it also mentions in the report that you saw growth versus Q3, but in the report you state that the U.S. declined a bit from versus Q3. Can you just comment a bit on that again, please?
Okay. If you build up U.S., you need to see a couple of different things. In general, the business in U.S. grew, but we had to do that adjustments as well, of course. The operating business was growing, and casino is more or less flat. Sports started the quarter quite good and only to reduce a bit in the end. I think it's the operational income we have, and then you need to deduct the adjustments. That means that the actual final reported net revenue numbers there are misleading a bit if you compare quarter-to-quarter.
Taking that adjustment into account, you grew versus Q3, but not including it. Just on the trading update, if you could speak a little bit about, you have made some comments on the U.S., but just in general, the growth in January of 9%, how does that look in Europe, U.K., Sweden, Germany? Could you elaborate a bit on that please?
The first thing here is that, in this case, we have a nice growth spread. I think the U.S. is not the exceptional growth driver here quarter to quarter. We see that AskGamblers, the punters are growing. We also see that our l egacy business that we're working hard with is also growing. It's basically performing nicely from most segments. As I mentioned, legacy casino business still below last year since was after this month it started to go down. In general, this is not a particular thing that is U.S. holding this up. It helps, it's also good performance from several other areas.
Okay.
Again, it is still preliminary numbers, but we are quite content about this.
Just my final question on the bond refinancing. When is the last day when you need to go out and make some sort of comment on how you should refinance it? It's in the coming month, I guess, when estimate to say?
There are no latest date in that model, or preferably before it will be due to payment in 2021. We will be communicating something much sooner than that.
Okay, thanks.
Thank you. Once again, if there are any further questions, please dial zero one on your telephone keypads now. The next question comes from the line of Mikael Lassén of Carnegie. Please go ahead. Your line is open.
Yes, hi, good morning. Two questions. First of all, regarding the rebuild of the sports site in Europe, when did you start this, and what is the situation right now? How long do you expect it to take?
A couple of different phases here. We started, as we know, that if you look back to the history for last year, we had already at that time started to rethink about reducing the pay-per-click cost because it was an efficiency. Remember that we could not have the revenues we could have. That was the first step. What we're doing now is very much similar to what we've done in casino, meaning going in and rebuilding this to be more stronger organic growth avenues and very little dependency on paid revenue or paid advertising in that sense to our revenue. There's a reason why we did the shift in management, because we wanted this to be taking on much more faster and brutal in some sense. We initiated that we want to do this when we reported also Q3.
It's something we initiated by then. We've been doing some things, and the work started now in full swing here in the beginning of February, and it's in full swing now. We have said this in Q3 that anything between four to six months, from we started this. The idea is to do a lot of improvements that will benefit from U.S. NFL 2020. The core things should be ready, like a half year from now. This is to do the basic thing, meaning the sandblast clean up and build a platform to grow. From that on is really also when the hard work starts really to grow that, like we do with casino now. We don't foresee any short-term negative impact on this. We only see positive impact on this work.
Okay. I guess you have seen already negative development of this old sites that are not working.
Oh, yes.
You expect that.
You can summarize that to 2019.
Yeah. Okay.
Yeah.
Great. Just curious here. You mentioned that you focus on fewer sites.
Continue to do so. The write-down was partly due to that reason that you focus on fewer sites and some of them are not relevant anymore. Do you see any risk here that your work going forward would lead to any additional risks in terms of intangible impairments, or is that.
No, we don't foresee that. I think the way how we can look at that is that we could not find a strategy that protected value in the assets we wrote down. For the remaining assets, we believe we can do that. The way how we do it and the way how we structure them and group them into other pools and whatever we do is one thing. At this stage, if we would have not seen any future value in these on these new strategic thing, we would have to add write-downs there as well. Hence we don't foresee any major write-downs going forward.
Okay. What you're saying about fewer sites are already implemented and those sites are in focus and relevant, right?
Yes.
Okay. Excellent. Good. Just also wanted to know the U.S. revenue situation, if you can comment on the mix so we can understand that part better. Sports versus casino, for example. Search, any paid there, PPC?
We haven't so far commented on that because it's such a swing each month and each quarter depending on how it goes. That's why And also how the stage builds up. It's quite hard to give a guidance on that, to be honest, because next month it will look completely different. What you can say, and this is not a direct answer to your question, but casino is continued to perform very stable. It's a stable sport been online for a while. No big swings in casino. Unless I mentioned sports now, after the Super Bowl, it more or less goes down a lot. We have some, we run a March Madness basket, but by then it basically dies off completely. Therefore, you have these swings in the U.S. revenue back and forth.
Yet again, you have another very positive, and it all starts again in the summer. That's why we don't have the comment, because it's a very difficult build up to understand depending where the states are, when the state launch, et cetera.
Okay. If you look at the run rate in the second half, maybe three months rolling, something like that. How much is casino today and how much is?
We haven't commented on exactly how much it is.
Okay. Also another thing regarding the refinancing strategy and how you're thinking around that. How years of If you can say something about the timing. It sounds like that you are very close at concluding this and finding a refinancing alternative. Can you say what you are looking at, what you're focusing on, what you would like to have in place?
One can say that we agree with your conclusion. We will not comment any further in that regard until we are ready to inform about further.
Okay. What type of resources do you think is relevant here? Do you also consider a rights issue? Could that be relevant or completely off the table?
From a shareholder's perspective and based on where we are at the moment, that is not the preferred option.
Okay. That's it from me. Thanks.
Thank you once again. If there are any further questions on the phones, please dial zero one on your telephone keypads now. There seems to be no further questions from the phones at this time. I'll hand back to our speakers.
Okay. Thank you very much for taking the time listening to our report today. We're looking forward now to work hard to continue to grow this business to future greatness. We'll come back to you again in May with the updates of the quarter.