Morning everybody, welcome to Catena Media's Q1 presentation for 2019. My name is Christian Hellman, and I'm an Equity Analyst with Nordea Markets. I'll be hosting the Q&A session after today's presentation. With those words, I'll hand the word over to Per Hellberg, CEO of Catena Media.
Thank you so much. Once again, warm welcome here for those who are here on site here in Stockholm, but also for those calling in and also joining from the webcast. We are today going to present, it's me, and it's also our Interim CFO, Erik Edén, who is joining to run the financials through a bit later. The agenda for today is the following. We start with the quarterly highlights, followed by a quick business update, followed by financials, but then also taking a look for the future because exciting things are happening both nearby but also oceans far away, and we want to go through that. Followed up by a Q&A session so you can get answer on the questions you might have. If you look at the quarterly highlights, we delivered a result which was EUR 26.1 million in revenue, 9% growth from last year.
We did EUR 11.2 million in EBITDA, this represents an organic growth of 8%. For those of you who've been with us for a while, you know that the organic growth, we have adjusted the way how we look at that last year. This is the organic growth without any acquisitions included that are active within the period. This is the pure organic growth from assets we had exactly 12 months ago. Some of you that have been on board know that we used to have higher growth rates than this, obviously we're going to today address in this call what has brought down the revenues for this quarter compared with maybe real expectation. Also we mention what we have done good in this part of the quarter, but also for the future.
For those of you new calling in today about Catena Media, what we do is a lead generation company. We have acquired ourself into a very nice position, what we're doing now is to utilize those assets in order to grow organically in existing markets and new ones. Also we are here to grow today additional verticals, but also for the future while we see so being a good thing to do. We are headquartered in Malta. We have a lot of offices around the world, we are listed on the Stockholm Nasdaq stock exchange Mid Cap. Founded in 2012 and had a very good growth journey so far. Business model simplified because you can make this model very advanced, or you can make it simple. What we do is to make business of people search on Google.
You search because you want to have answer of something. You are, to be honest, a bit too lazy to find everything by yourself. You go in and search, I want a hotel in London. You get the site supplying all the information, you book. This is what we do for a living as well, but we do it for the iGaming industry and for the professional finance. You search that you want to find a good sport betting site or for a casino you can trust, you come into our domains. We today run about 1,200 brands out there or products as we call.
We guide you to make a decision, once you make a decision and you go to one of our business partners and spend some money there, whatever it can be, it can be doing a sports betting on Barcelona winning after a fantastic free kick yesterday, or it can be that you want to learn how to trade CFDs, whatever it can be. You start to get a commercial agreement with our business partners, we get paid. The way we get paid are different. Either we share a part of the lifetime revenue of the customer, what the net revenue they generate to our operators, or we take an upfront charge for delivering such traffic.
We do a mix between those two, we do fixed fees, which is kind of regular advertising on the site where we'll say, "If you stay here for a certain time, it costs you this." We also do subscriptions, either on very detailed football or sports tips or on very interesting professional finance-related stock trading information. That's the economic kind of business model that we operate within. We live by search, every one of you know that the search volume worldwide goes up all the time because there's an information overflow and you need to get helped to get an answer, and being within that field is not only good today, but even better for the future. If you look at the business update fast when it comes to the revenue generation, et cetera, we have put together this slide.
We have some things that we think are very positive. We have some things that are not very good and some are really not very good. If we start with the positive thing. U.S., we've been on board here since a long time, especially New Jersey, which is the key state that generates revenue today. It continue to generate revenues, we have a good team up there. We see more operators joining, which is not only good for the short-term revenue, but also when it comes to the big sports seasons coming up this end of summer. More operators means more activities on the market, means more customer generation. We continue to do good business there even today. U.K., you remember that in Q4, we mentioned that we had a short-term decrease there due to several reasons.
I'm happy to announce that all those have been arranged, and we're actually growing nicely again in the U.K. Efficient, not only the fact that we can make our sites rank better and create better business, we have also managed to still get some nice or decent margin from the pay-per-click advertising, which was a key thing in Q4, but still we're not up to the same spending level because we want to keep that in control. We have also launched our first retention deal, not only generating new customers, but also helping operators to maintain their customers for a long time. We help them to resend the traffic in for which we have a financial solution in place that we gain money from that as well, which is good. Japan is growing nicely.
Small market, still very nice growth trend by doing all-time high basically every month now going forward. Nice trend. That was in terms of organic growth what we're looking at. Another key thing we have been focusing on is the cost structure of the company, where we have increased costs dramatically the last couple of years, quarter-over-quarter. I'm happy to announce that the costs are actually down in Q1 compared with Q4. It has to do with IFRS adjustments for rent of offices, et cetera. You can see that even by netting that away, you can see that we have a much more efficient business going now than we have ever had in that sense compared with the revenue. That is something that will continue, and we'll come back to that a bit later.
That was a key part of our short-term strategy, and we're on to it now. If you look at the things that are impacting the quarter and not supposed to weigh down, typically Q1 is, in this industry, lower than Q4. It has been that for a long time, and we have not seen that before because every quarter since start, we are more or less injected revenue by acquisitions. If you don't acquire anymore, obviously your business will turn more to the normal market logics, and therefore we will see, and then also forecasted, some seasonality adjustments in this quarter. On top of that, we had extra movements bringing the result down a bit, and hence, Sweden.
I think for those who are active in this part of the world, and you've seen what the regulation in Sweden has caused for most of the operators up here, I don't think it comes as a surprise that also we're being affected by this. In general, regulations are good. We see historically that when you regulate after time, we increase our market share because it's more difficult for an affiliate to run business in a regulated market. There are more laws, regulation, and compliance required. Hence, operators tend to turn to us because they know that we can handle the traffic in a way that plays along with the regulation. When we stood here some months ago, I think nobody in this industry could really realize what will happen in Sweden. We see now a very shaky market.
That impacted us. As you know, we communicated before that Sweden is more than 10% of our revenue. We obviously will have a hit of this as well. We still remain positive about Sweden in the future, but we don't know really from when we will see a stabilization in the market here. Casino, in general, we have a very good casino business, but there are some casino assets that we're not happy with, and those are the ones that actually have not been maintained resource-wide properly because we have spent so many resources on onboarding a lot of acquisitions we have made. This means that we have maintained them, but not maybe as much as we would have liked, meaning that they have lost a bit in ranking, meaning that there are less traffic.
Those has been the key thing now in this quarter to address and also continue to do in the second quarter to do that, we see a positive outcome of that. I'm coming back a bit later what we do there, they had the impact here. I think the last point is that for those following the professional finance, which I know a lot of you do, you know that in the business we're in, you see some very low volatility in the kind of trading instruments we work with. We see a giant out there went down with a 80% reduction of the revenues in Q1 due to this happening. Feeding them with new players then if there's not big volatility in trading in this, of course, has an impact about how many customers we can do.
Based on that, we have restructured, I come back to what we do about that going forward and how we see a positive outcome from that. We also have to remember that even in this, we see a quarter that goes down from Q4, we're also doing a lot of good things, I think that's the key thing of this presentation, that we know what is impacting the result, we also know what we need to do to really make it grow, we see a lot of growth already in parts of the company. I think rewards like this, that we still have some of the best affiliate sites out there on the planet, good rewards.
I will also show you later that we're also being rewarded once again the Affiliate of the Year in North America, shows that we're doing the right things where it should be done. I'm coming back about that a bit later. Before that, I think it's time for some details in terms of the numbers.
Good morning. Great. I will guide you through some of our financials for the first quarter, starting off with our revenue. Looking into our revenue, breaking it down a little bit further, we had our search revenue rose to EUR 21.7 million in the first quarter, our paid revenue at EUR 3.5 million, and our subscription revenue at EUR 0.9 million for the first quarter, adding up to a total of EUR 26.1 million. The growth year-over-year is 9%. Breaking that further down, we had our revenue share at 44%, our cost per acquisition at 39%, fixed fees at 13% of our total revenue, and our subscription revenue up to 4% of total revenue. The increase in subscription revenue is mainly driven by the investments we've done in the sports vertical, as well as our financial services segment.
The decrease we see in revenue share is mainly impacted by the regulations and legislations on the Swedish market in the first quarter. Looking at the graph, you can see our LTM is increasing next to our revenue here, and we are up to EUR 107.2 million rolling 12. If we look into our regulated and taxed markets, Per mentioned that we prioritize, we are good at acting in those markets as we are very good at following and tracking the regulations. That percentage of our total business rose to 78% for the first quarter, and organically, we grew by 8%. I'll guide you through some of our costs in the first quarter, as well as the margin development. You can see here in the graph that we have a trend shift looking at our cost development.
This graph includes personnel expenses, it includes other operating expenses, and it includes our direct costs as well. You can see here that we have a trend shift. We have focused quite some on cost control and cost efficiency in the past quarter. That is, however, impacted by IFRS 16 adjustments. Taking that out, we can still see that we are on track when it comes to following our cost development and a slowdown when it comes to the cost development trend. When we look into our margin, we ended at a margin with 43% in the first quarter, compared to 44% in the fourth quarter. That was impacted by our direct costs in absolute numbers increased. Looking at our personnel expenses, we had a little bit of a decrease in absolute terms. In comparison to revenue, as in this bridge, we are quite flat.
Looking into our operating expenses, as you can see here, 1.9% impact positively on the margin. However, that is impacted by the IFRS 16 adjustment in the quarter. If we continue to look into our segment performance in the first quarter, our iGaming segment, consisting of sports and casino, stood for 94% of our total revenue in the first quarter, and our financial services segment up to 6%, quite similar to the fourth quarter last year. If we look into those different segments and the underlying performance, our revenue in the casino and sports betting business was EUR 24.6 million, and at the margin at 46%, ending with an EBITDA at EUR 11.3 million. Our financial services segment had a revenue of EUR 1.5 million and an EBITDA slightly below zero, ending at EUR -0.1 million, and an EBITDA margin of -5%.
In this quarter, we have put quite some focus at fine-tuning our cost allocation key, and that impacts the financial service segment a little bit more here in the first quarter than before, as we have focused at being even better at allocating our overhead costs to the right segments. Looking into our financial cost structure, if we go below EBITDA, as you can see here, we've increased our depreciation and amortization in the first quarter, mainly due as well to the IFRS 16 adjustments due to leases. Continuing further down, we had a fair value loss on our bond valuation when we did that. In the fourth quarter, we had quite a big increase. Now we see a decrease based on the fair value affecting the EPS in this quarter negatively. We did not have any non-recurring items in the first quarter this year.
If we continue to look at our NDC development, and as you can see here in the graph, our indicator, we are pretty much at the same level as we were in Q4 and maintains that, so quite flat. Looking at the NDCs in total numbers, we saw a slight decrease in the first quarter, mainly driven by the legislation in Sweden, as we mentioned before, but as well as some non-performing casino products decreasing the NDC level a little bit. However, we are happy with continuing and maintaining high levels when we look at revenue per NDC. If we look into our balance sheet and statement of financial position, that mainly consists of intangible assets on the asset side, EUR 340.1 million ending March. Looking at our cash and cash equivalent, we were up to EUR 9.3 million.
On the liability side, the financing and borrowings rose to EUR 148.5 million, and our amount that is committed to in acquisition, EUR 68.5 million. Of those, EUR 3 million is related to non-current commitments. I will also give you a slight view on our statement of cash flows. We are continuing to have a strong underlying operating cash flow in the company. We had a cash flow of EUR 9.1 million in operational cash flow in the first quarter, ending at a cash conversion rate of 81%. We continue to have a strong underlying cash flow in the company, and the first quarter continued to show that as well.
On the financing side, as we've said before, but for those of you who are new here, we have the revolving credit line facility, and we also have a senior unsecured bond with a total framework of EUR 250 million, currently utilizing EUR 150 million of that framework. Back to you, Per. Strategy and outlook.
Thank you. My half face is happy, my half face is sad. I think that's how we look at it, because, of course, we never like to report decreased revenues. As you can see, we're following the strategy of what we want to do by focusing on the assets we want to grow and make sure that they start to grow. We're keeping cost in control, by then adding revenue, we should see a trend shift in margin trend by accelerating the margin later on. I thought I should spend some time with you now for talking about the future. The strategy has been that we should focus on organic growth, and we want to do double digits. We didn't hit all the way to that this quarter. It should be obviously 10% or more.
Pretty close, obviously brought down by Sweden. We mentioned we have some websites we're not really happy with, especially in the casino segment. We have worked a lot, and we're starting to see a trend shift there as well. Of course, the geographical expansion. We have a lot of interesting sites or products that we want to perform in more markets than we are in today. To do so, we want to use less brands. We don't want to bring all 1,200 all over the planet because that would be impossible to do in an efficient manner. I think it would be quite confusing for the consumer. I'd rather build a few very strong brands, well-known, because that increases efficiency. If we do that right, we can actually operate more revenue with less cost percentage, that's exactly what we're trying to do.
The cost control today has been focusing on continuing to be very active on other OPEX to make that not rise much, if any. Personal expenses, to keep that in control. We, however, have figures like direct cost that actually moves with the revenue. If you go up a lot in revenue, that will increase, I think that is a positive momentum in the cost structure in that case. This is how we look at things. I thought I wanted to be a bit detailed here because I think this tells you a bit what we're working on. Sweden, how do we see that? That's the question I get. Will it remain this? Will it increase? From when? We don't know. I think we need to follow the market trend.
The market needs to stabilize, what we think is that it will repair itself and come back. Do we forecast with a lot of revenue for that going forward? No, we don't, because we thought it's better to focus elsewhere and build revenue there, and if Sweden comes back early, it's a bonus for everyone rather than being dependent on it. We are doing what we can. Of course, the market is also changing because we have a changed market condition. Operators changed in their way of working, so do we. When that is done, we see potentially regain from that market. Italy, news late last week that the marketing ban that's been there for a long time, news came out about that, it seems today that it will not have a dramatic impact on the industry part we are in, meaning affiliation.
There will be impacts and there'll be regulations, but nothing new to us. It will not close down our business opportunity. That was good news. The weekend was spent talking future plans with operators. It's already ongoing. I think we can see a good potential in Italy moving forward, but needs to be 100% clarified, but it feels very positive about that one. Those are the two kind of regulatory things that we wanted to mention here. When it comes to other organic growth opportunities, I think those sites that we're not happy with, what happens is that if you don't resource them, you cannot maintain the content quality as good as you want to have. When you do that, after a while, you start losing ranking. You need to do a lot of work.
What we've been doing lately is that we have been adding a lot of resources to work with the optimization of the site to improve ranking, to build more content, and to also work a lot with our different operators to revisit the offer structure here to make sure that we maximize, but also improve tech. That's something that our CEO, Johannes, that is sitting here in the room, is also very much involved in and doing a good job with. Therefore, we should see during Q2 a trend change in this and walking into second half very strong in that case. A lot of work going on there.
Also not only that, we're looking at what brands we can bring globally, and just recently we launched a site we have that is very successful, NewCasinos.com, into Germany, and more things are being rolled out just to make sure that we make use of the assets we have to grow them. The most successful brand we have, AskGamblers, one of the strongest affiliation sites for casino on the planet, has gone through a major technical makeover, we can say. Something that is not visible to customer, but it helps us to run that product in a good mode, core mode, bring all the function core functionalities to any market on the planet. It was restricted. It could not scale it in that way before. We did that update now in Q1.
Going forward, what we're then doing is to bring this new updated model into the core revenue-generating areas we have, which is Germany and Sweden. That is work we're doing and will be rolled out. Also we want to launch it in the new areas we haven't been in. With the good growth rate in Japan for our existing business, we're going to launch it there during Q3. Extremely high play values in Japan, very good market trend, and we have a team there that can help us run it as well. Good market. We're also now in the planning mode of launching it out to additional markets before year-end. Some very big markets is the plan. Let me come back to you when that is coming closer.
This is to be added on top of the very good growth trend we already see from AskGamblers. You mentioned I think last quarter that we had close to 70% growth of AskGamblers last year. It's going well, and it will add some incremental value to that trend. Japan already talked about. Financial services. We're now going to focus on three brands. We have adjusted the organization likewise, and we are now also working that to scale. We're scaling into, as I mentioned before, to Italy. We're doing other market scaling, and we're making sure to use that, not by adding more cost to the model. We're starting to see some positive changes there already. That's what we're focusing on. People say, "Hey, what about U.S.?" Yeah, what about U.S.? Here's a very interesting thing.
For your information, I got a lot of questions, how big is U.S.? U.S. today is more than 10% of our revenue. U.S. today is Nevada, Delaware, and New Jersey. Nevada, Delaware, hardly no revenues. It's coming from New Jersey. It's sports and casino, New Jersey. Good thing there, as I mentioned, operators are increasing, meaning that more marketing is hitting the market. The awareness of that you can do this is increasing. Hence, we also project a nice growth from existing markets in U.S. going forward, especially when the core season starts here during end summer. We today have 27 full-time employees in the U.S. market focusing on existing products, but also on the products that all the states that's going to roll out. As I also mentioned before, we have a higher margin than average in U.S. compared with any other market.
Every EUR we get there helps us to improve our total margin going forward. Also last week, last week was a good week when it comes to news, I guess, because last week it was also announced that Pennsylvania, or the week before, will roll out finally. It was set to happen on the beginning of this year. It was delayed, but now they're saying that casinos should start in July 15th and sports before that. Rumors already that some will launch already this week or next week, but within May is what we look at for sports, which is very good because, A, we have a lot of good websites there. We have a very good ranking position over there since long time. B, we have the team in place. We have all the dealer structure in place with the operators that are there.
Luckily, there are more than one operators. There's already a bunch of operators there who wants to start from when it kicks off. Putting that in together and with the low incremental cost we have, we believe that based on the population and based on what they do there, that this has the potential to double our revenue compared with today. If 10% is coming from there, well, quite simple what this will represent when it's up and running. Let's remember, with very minor incremental cost, this is transferred majority of that to bottom line immediately. Obviously, we're very thrilled about Pennsylvania coming up. Is that the only movement we see? Well, before that, just to mention about the ranking we have, we are somewhat dominating a lot of ranking sites now and words in Pennsylvania. We are prepared.
When people start searching for this, a lot of traffic will hit our sites. I thought I should put this together as well, and that is telling you a bit what is going on and the states that are being discussed. Actually, this page is wrong because last night we also heard that Montana should be added by two new bills that are launched for the governor's design. It's happening fast. The difficult thing is that from its pass, the timeline until they launch. New Jersey, it was a couple of weeks. Pennsylvania signed their casino bill in November 2017, which is 18 months ago. It's a different timeline.
What we see now with the business built up in U.S. is that more states want to push through because they want to utilize this opportunity to stop the illegal offshore betting, control it under local legislations to protect the player, and make tax income from this from the state. In total, there are now 16 states that are pushing to take a movement into this. I think the most there are more likely a bit advanced than the other ones, as you see here, that are listed here and what to do. They tend to start with sports, and then after that, add casino. Some go for both at the same time. I should have said, you should add Montana to this. How many will pass? Nobody knows. All happen.
We say typically with historically, two, three, maybe four can pass within 12 to 18 months, but it can be all of them. That's the tricky part. It can also only be one, depending what's happening. In terms of our planning when this will happen, it's extremely tough, but we know what happens when they launch. With our positioning in these states, we also know that it will be an incremental business for us that is very high. If you put this just population-wise, it's some six times more than New Jersey. It's a huge opportunity for us out there. Then we need to see about the timing. As I mentioned, we're well-positioned. We're already the preferred affiliate according to the market in U.S., and we're planning to maintain that position. Rollout, this is what I said is hard.
I need to do like this. Compare with last quarter, you can see movements in Pennsylvania, especially for casino and sports betting. You can say Indiana is moving forward. It's hard to say when, but it's coming closer there because it's good movement. It could happen already mid this year, end this year, but can also happen in 2020. The other states, we don't know. I thought of them, but I put them there because they're pushing very hard to make this happen. Then we need to see about the timing. Then you have a bunch of other states down there that are also pushing a lot. You can see this list is coming longer and longer every month, meaning that things are going to happen. Originally, one thought that 2022, 2024 was when the big bang should happen.
People talking more about 2021, end 2020, mid 2020 to 2021, that it should really happen things. That is positive, extremely positive, and we are happy to have our very strong position over here. If you put all this together, what we can see about going forward, when we did 26.1, if you take that start, what can happen? We don't see a big return on Sweden. I hope we are wrong, but we don't plan with it. In other ways to bring it up, we continue to grow nice in Japan, we mentioned that. Italy, we mentioned. Pennsylvania sport, good momentum to increase. Let's hope it starts now this or next week or whenever here in May. Of course, we are launching more markets and seeing benefits of the markets we have launched into the new markets to start to do.
In the meantime, we keep cost control. I mentioned about casino, the speed up of the products we have that should give nice income from that coming later in the year. AskGamblers, casino we talked about, and existing markets as well. Also remember that second half especially is always much larger in the traditional industry than the first. We also have a seasonality impact. With this, we want to say that we are not planning to stay in these revenue levels. We see that the market itself historically has the potential to increase, that we are doing a lot of things with existing assets to improve it, and some new things, welcome things like from U.S. is added on top. How about costs then? This is a picture of the development.
You see a trend down for cost in Q1, you see coming up with that we are trying to maintain a rather flat level, you still see that it is increasing. I need to explain that. Other operational expenses, we are planning to be rather flat on. Personal expenses, typically, we always have a small salary increase, also the better result, the more we accrue for incentive bonuses. If we plan to increase the result, we need to put more money away. The big change here is that if we expect revenues to increase, we also need to book more costs away for direct cost, meaning revenue-generating activities. If we will net that out, we have more or less a flat curve here is what we believe. We are not planning to increase costs at all in the same level that we historically have had.
If you put revenue ideas on top of cost control, we can start building a picture like that. Don't trust the scale on this one, please. It is up to the analyst to decide where we will happen here. If you can see the cost development here, what we are trying to say, you take all these activities we are planning to do, only if Pennsylvania start to launch, how much that could generate, plus other states, plus everything else we do, we look forward to a very bright future in this coming quarters, especially second half. We believe that you will see a nice trend in margin development, and we will continue to do that and send this company also into a very nice trend into the next year. Also, as we mentioned, this will therefore remain at EUR 100 million EBITDA target.
To be honest, that target was based on the fact on U.S. states rollout timing and potential acquisitions. I think I definitely believe we can hit it, but I'm not sure if we can hit it in mid-2020, end 2020, beginning 2021, mid 2021. It all depends on when the states roll out. What I'm sure of is that excluding U.S., we will see a very still good growth curve with controlled cost. Adding this on top, we'll definitely hit it, but I cannot commit that it will be done by 31st of December 2020. If we're lucky, I committed before and confirmed before, if market delays a bit due to some reason, we will celebrate a bit later. That's what I want to say. We're not walking away from the target, just we're unsure about the timing. To summarize, important key takeaways.
The problems we occurred in U.K. in Q4 are sorted and we're growing U.K. nice again. Nice trends from U.S. and very good things in insight. We are focusing on organic growth and especially repairing the things we're not happy with, but also launching new sites across the world to benefit going forward. Sweden had an impact. We're not sure when it comes back, but as you see, we still have a belief that we can do a fantastic journey going forward, even if Sweden wouldn't come back on former levels soon. All by not growing costs. It's programmed for a bright future. Except the weather here today, we feel that we live in a sun environment going forward. Thank you very much. Now we go into the Q&A session.
Great. Thank you for that, Per and Erik. Let's begin with U.S.
Could you elaborate a bit on, you have 27 full-time employees-
in the U.S. right now. Can you elaborate a bit on the scalability there?
With Pennsylvania now going live, hopefully in a couple of weeks, and then a few more states after that, perhaps next year.
How many people will you need to be in the U.S., let's say in a year's time?
I think amount depends about how quick it rolls out. Just to give you an idea of what we do, there's a core amount of people there needed to do whatever we do with any product in place, which is maintain the site performance. As more states open up, typically in sports, we need to add more local information. That is content creation. That's normally not the most expensive part. You can find a lot of people writing about sports. Also we want to make sure that the sites continue their kind of competitiveness. Therefore, we add functionality. We're now building up where we want to do more video content on the sites and building up teams about that for states where. We're adding these kind of things into it to make sure that we can maintain a very high market share.
Also we have some central functions. With 27 people, you need somebody looking after these from an HR perspective, et cetera. For example, if Montana will go up, what do we need predominantly? You will need content creators. As mentioned before, you might need one if it's far away in a country for local, in the beginning, key account management. What we see from all states is that there's a couple of local players, while the national ones coming in. From key account activities, don't need much. I would say that without being able to answer the amount, because that depends on the rollout, we don't foresee a big cost increase once it rolls out. We see a basic margin improvement for the total business if rollout starts or from when it starts.
Great. You mentioned that your assets rank very well in the U.S. on different keywords. Could you elaborate a bit on that, how that differs between different states, if it does in New Jersey, Pennsylvania, and the other states that you listed in the presentation?
I think our team over there has spent a lot of time trying to predict which states they will open when. If you have a state like Utah that's likely to maybe never open, we don't spend a lot of resources there. We're trying to predict all the time what to do and start to build sites and ranking there. Typically, we have had a strategy that if the new states open up, we use brand names that can include that state name, PlayPennsylvania, PlayNJ. Which is a good thing, because when people search, they understand that that site is related to that. Over time, when more states open up, we don't need these local adaptations, then we can do only the Play brand. We have focused not only bringing up local sites, but also having national brands there.
Plus that we're bringing in sites, we already have a very good traffic of mass gamblers coming in from the U.S. Most of the traffic we cannot use because it comes from states that are not regulated yet. When it opens up, we do that. It's a big mixture of what we do, I think that for the states we have on the list here, that's exactly what we're working on to make sure that they are ready from when they launch. Typically, we are ready much before they launch because of the uncertainty. I think that for any of those states, we are well-positioned today. Some of them are very early, and therefore, we haven't focused a lot to get the traffic going there yet.
Okay. There are not any particular states that you want to highlight that in these states we are very well-positioned versus others, perhaps?
I think where our focus is in the state where we're not very well-positioned, and at this stage, they're not any place where we are dissatisfied where we are today according to the plan to execute.
All right. Moving back to Europe.
Yeah.
Sweden. Could you elaborate a bit perhaps on the developments in Q1 to give us some sort of impression on how it started, how it ended, just paint the picture of the development in Sweden.
I think it'll be quite a blurry picture. For those following the market, you can see operators that from the eye of the spectator looks extremely the same, had dramatic change in the quarter, even in months between each other. Of course, with us doing business with both of them, it also blurs our picture to make a good decision from it. We obviously saw a lot of decline in January immediately. Reason for that, A, the regulations come in, there are self-exclusion limitation, but also the fact that a lot of operators have pushed a lot in Q4 to let a lot of customers in before the regulation starts.
Also we saw some other operators having big problem in February, while some of them regained some things in March. Because of that picture, it's quite hard to predict the future. What we're doing now is to, based on that knowledge, trying to refine our partnership with our operators, so we both can find a way through to find the right kind of customer at the right time moving forward. It's unfortunately too early to give any clear answer, this is exactly how it worked and what's happened.
Okay. Regarding this, there's been some news in the media about the potential ad ban in Sweden or some sort of restriction perhaps coming into force. How would that perhaps impact you? Of course, we don't know yet how exactly how it will pan out, but looking at what's happened in Italy, perhaps as a guide.
Yeah, it's like a year ago that one happened, I think it is time for advertising ban discussion again, this time from the north part of Europe. What we see generally is that no country has been very successful in completely manage to ban advertising. I think in this country specifically it'll be tough because the government is actually making a lot of business from this kind of industry as well. What it's more about is to restrict the volume of it and what kind of marketing message you can have. That we see from a lot of parts of the world. Typically, when that happens, we have not lost out on that because the opportunity for operators to use the media channels in full mode is restricted, but they still need the business volume, therefore they tend to go more to digital, where we are active.
That's why we believe that this restrictions historically we see it actually improves our business over time. We need to look what it means and what they will do. I think what started this was the extreme exposure on television to reach people that are basically not looking for this ad. We're doing is that we only serve this information to customer who wants to see it, because they search for it. I think that's the big difference.
Potentially it could be a net positive for you in Sweden.
Yeah, I wouldn't say it will be a net negative.
Exactly.
Yeah.
That's also what you're hoping for in Italy, I suppose.
Definitely. We took the decision to maintain our business in Italy, because the upcoming ban and the chance of that being negative to our business, we took actions also to sort of launch incremental business in the like finance assets, etc., to maintain the value of the assets and still maintain a business there. Obviously, when both things are happening, it looks promising.
Speaking of finance there, posting a loss in the quarter, perhaps due to some costs being allocated in a different manner than they have been historically. Could you elaborate a bit on the finance segment and when you expect that to turn back into positive territory again?
Exactly.
Is that in Q2 or
Yeah.
What do you see?
Our plan now is to deliver a better result in Q2 than in Q1, that's the feeling we get now when looking in first sight of the numbers, because we're going to start to execute now on the numbers. It's been a constant struggle from the time when we bought it. We mentioned that many times before with high-valued company based on crypto and binary options. We know what happened with them. Now we're also dealing with the CFDs being a bit tough one out there for time being, and that's where we've been very strong. However, now with the change strategy there and the change operations accordingly, we feel that we are able to start to turn that around now. That's the plan. We're not planning to book the same results going forward, that's for sure.
All right. Just a question, in your report you mentioned that obviously revenues for Q1 was below expectations, but you expect to see positive development from the second quarter onwards.
Could you just elaborate a bit on what positive developments mean? What do you mean by that?
I think that what we mentioned here that, A, we're not sending out as much money from the company as we used to do. Percent-wise, we came cost and control and with all these things mentioned here, that's the positive development. We see that we're repairing what we feel is broken. We take the things that are working good to other new markets, and we have U.S. coming up. I think those are the quite nice bunch of positive momentum for us to change part of it.
I understand. Is it possible to quantify it a bit? Are you saying that revenues will increase sequentially versus Q1, given that they-
In Q2, you mean?
In Q2-
In Q2.
Given that they decreased versus Q4 in Q1, now you're saying that you expect a positive development.
Well, obviously, I'm not saying that we're going to go down in Q2, that's for sure. We have a plan what we probably in the business for is to grow in Q2, of course. As you can see here, we also foresee even larger growth then coming out in the second half than first half. We're looking at a bit of a hockey stick going forward.
All right. Any questions from the room here? Perhaps from the telephone conference operator, are there any questions?
Thank you. If you do wish to ask an audio question, please press 01 on your telephone keypad now. We have a question from Mikael Esson from Carnegie. Please go ahead. Your line is now open.
Yes, thank you. Good morning. Again, on Sweden. I missed a couple of minutes there in the beginning, but can you maybe say something more about the revenue development quarter-over-quarter for you in Sweden, and what you saw in terms of revenue mix during the quarter? How the regulatory and activity levels affected that side? That's the first one.
Okay. Morning, Mikael. I think that what we said here is that I need to look at what we have said officially and what we normally guide on. We have said that Sweden has been more than 10% of our revenue. If you look at the average impact on gaming operators in Q1, we see quite dramatic downturn for all of them. If you apply that average to our business, it will apply the same thing. Looking at quite substantial decline in business in Sweden in first quarter. The exact amount we don't guide on. What we also need to say that historically our business was created in Sweden. At some point it was 100%. Today it's much less because we've been going elsewhere and acquiring elsewhere.
It also has historically having a bit more weight of revenue share in Sweden than other markets, meaning that when player value goes down due to restriction of and limitation of spending, it hits revenue share more than it hits acquisition numbers. That's why we had a kind of double impact on that, but we don't guide on exact numbers by individual market like Sweden.
Okay. Did you see any traffic changes in the market or on your key money-generating sites during the quarter in Sweden?
Yes, we did. I think it's a combination of what's going on there. We saw that people started to search for different kind of things after regulation, which is quite logic because you cannot search for some things anymore because you cannot market them in that way. Also, as I mentioned here in the beginning, that we have some casino sites that we're not super happy with, and some of them have business in Sweden. Also, not only the fact of the regulation, but because we have not maintained them properly due to resource allocations, we also had an impact on that. That's what we're repairing now to get away from that problem.
Okay. Any thoughts on what Google is planning now for Swedish markets and how that could affect you?
Well, I think actually a positive matter. For those who doesn't know, Google has announced that they now have started with Pay-per-click advertising in Sweden, only licensed players can do it. As affiliates don't operate under license, we cannot use Google's Pay-per-click advertising. The first four ads when you search and then the normal results come below, we cannot do that as an affiliate. On the other hand, most market doesn't have that. In Sweden, I see it like this. If it's restricted only to a lot of regulated operators to fight for four spots, the price bidding, because open bidding price now will be extremely high. On that traffic, they need to convert that into a decent acquisition number. I'm sure that that fight, considering the potential then bans in TV advertising, will increase a lot.
That will be really expensive to bid for those search word, meaning that the customers they acquire from those will be quite expensive compared with the traffic we send. If it tightens up to one media channel and everybody fights for that, especially digital, price goes up. It's been the same in every kind of PPC market that's been, and it will happen in Sweden as well. Over time, we will not have a negative impact on that. I think we will gain business over time from that.
Okay. Thank you. I got it. I have also a couple of questions. One is regarding the organic growth in the quarter. It was 8%, I think.
Correct.
It totally was 9%, that means that the acquisitions added not very much. Can you explain what happened?
Yeah, I think-
You did a lot of acquisitions last year from April, May, right?
Correct. I think we need to look into this and break it down a bit for you to understand, because a very valid question. As you remember, we changed the way how we do acquisition measurement or organic growth measurements. A year ago, it was including acquisitions, we took that out. It's now the pure organic growth of assets we had 12 months ago. We don't include search revenue. Sorry, we don't include Pay-per-click advertising in organic growth, because that can goes up a lot of time. If I just want to create a nice revenue, I start to buy Pay-per-click for EUR 5 million a quarter, and you think I have a fantastic revenue, my profit will be low. We just look for the search traffic.
If you look at the percent-wise of the Pay-per-click volume quarter go versus now, you will see it was more. Therefore, we have actually a positive outcome of the organic growth. The search revenue only increased 8%. As you mentioned, what we did primarily in acquisitions in second quarter onwards were financial assets. Those assets, as you remember, has decreased due to the crypto decline and the prohibition of binary options. Those assets has been reducing, and that's the reason why you see this kind of a bit interesting development versus organic growth and revenue.
Okay. One thing that I'm thinking about is that paid revenues were flat or increased a bit, actually.
You have other things that is going on behind the scenes.
Yeah, I think.
When you're referring to search traffic.
Yeah. I think, yes, the search traffic is there. As you say, if you look at the assets we have, but then it's clear that some assets has reduced. I think we've been very clear about that, especially those financial assets has been going down compared with when we acquired them or had them there.
Okay. Got it. My final one, if I may, is regarding the contingent earn-out commitments that you have or on it also. What is the plan for that in the coming year? Can you say something about what we should expect?
Yes, just briefly what we also say and state in the report, we don't guide on the exact date when that will happen. We have current commitments, and those are up to EUR 65.5 million and additional EUR 3 million in non-current commitments. As a current commitment, that has to be settled within 12 months. That's what I say accounting-wise, and that's also what we inform about. When it comes to the payment of those earn-outs, we do always look into the possibility of using our cash and cash equivalents versus potentially other ways of financing those acquisitions.
Okay. Can you say something about what they have to deliver to get those type of payments?
Yes.
They have to deliver quite good growth. From here, if you can say something, what is really needed for that to be paid out?
Yeah. Not more than every month, we are tracking the underlying performance of those assets, and it's performance-based. The earn-outs are basically performance-based. We look at the underlying performance in the assets. It's different parameters that we assess, then we evaluate it against the contract and the commitment we have. Every month and every quarter, we reassess that based on the latest performance. That's how the process works. We cannot elaborate further on any potential changes and how those underlying assets will perform, it is an underlying evaluation every quarter and every month due to those commitments.
Okay. Thank you.
Thank you.
Thank you. We have another question from line of Jonas Lionis , a private investor. Please go ahead. Your line is now open.
Okay. Thank you. You say you focus on high-value entity customers from now on. Every customer is very accretive in this scale of business. Why focus so much on high-value customers? Especially since regulations tend to try to dampen large deposits and high-stake gamblers.
Well, I think, first of all, it's in one way quite a simple question to answer because that's what our operators demands and want to have, and the more of those you can send over, the more traffic you will have from operators. I think our view is that-How we see that Google change what happens and the kind of search volumes out there, we're always trying to build the business on trying to create the best mix of customers versus the margin we can create and the cost we apply to do it. What we see now, what we're going to go forward in the markets we do, especially focusing on U.S. where the player value is higher, focusing on Japan when the play value is higher, you will have that trend. Does that not mean that we say no to traffic?
When we build our sites, we want to go for that to try to get everyone that has come with a higher value with them is always prioritized for a large volume of those that doesn't generate a lot of revenue. Our operator is predominantly only wants to pay for the big spenders, so to speak.
Okay, thank you. One more question perhaps.
Since you now are a pretty mature company in many ways, what new verticals do you look into like loans or credit cards or even lease your platforms as white label?
Yeah, I think it's a good question. I get it often. That's definitely part of our future, to grow and become even more global. As I also said here, there's a lot of things we want to repair. What we're trying to do is an extremely efficient engine that works regardless. As soon as something comes up, we nurse it, and when it can walk by itself, we throw it into the engine, it starts to grow. This turnaround now is to make sure whether all the assets we have bought, we have a very efficient engine to run, and that it runs very efficiently. From that part onwards, we start to look at potential new verticals. As you can see, even within gaming, we're not far from done yet. There's a lot of things going on.
We focus on making sure that we focus on the low-hanging fruit to do that, and after that, we start to grow. You're right, we're going to do that, but sometimes in the future. First, we maximize where we are today.
Okay, thank you.
Thank you.
No more questions.
Okay, thank you.
All right, do we have a question in the room here?
Despite no World Cup this year coming up, you're saying that you're probably going to grow Q over Q. Sweden, we don't have any answers for when it's going to change for the positive. What's the plan for you guys to make the Q over Q growth despite no World Cup?
Well, I think I mentioned that 20 minutes ago.
We grow in U.S. We have launched new products. We're sorting the problems we have with the casino products. We're hoping Pennsylvania will go live for sports. I think there are a couple of things there that we believe we can bring the revenues up from first quarter.
AskGamblers, now you're saying that we're going to Japan in Q3.
Probably another market by the end of the year. How's the rollout plan going? Is it going to take three to six months for each country, or is it different from every different?
No, I think it all depends because the reason why AskGamblers is successful is that the site with massive amount of information. There are thousands of pages on that site that we operate, to do that into a new language level takes some time. When you have it, you then need to make sure that you launch in the market either where we have account management and operator knowledge, or if you bring it to another side of the world, you need to build that up as well. Now we have prepared technical. We're doing a lot of translation work now, then we need to see how soon we can roll it out. Also have to remember, once you launch it, there's some time before it starts generating traffic.
The good thing, though, with a site like AskGamblers is that Google also prioritize ranking of sites that are large in other markets. That's what we're doing. I cannot be clear about the exact dates, et cetera. The team in Belgrade, they are working long hours now.
We can expect a faster rollout going forward?
I think you can expect what we mentioned today, then I need to come back about the exact dates about going forward. We're working very hard to maximize the potential of that product, for sure.
Thanks.
Yep.
All right. If there are no further questions, I think that will sum up the Q&A session. With those words, hand over to you, Per, for some closing remarks.
Well, thanks, everyone, for logging in. I hope to see you now. Of course, remember these dates. 19 of August, we thought we shouldn't bring in in the middle of some of your holidays, so we're doing it here. November, then you have the February number as well. Please book it, and hope to see you soon again. Thank you.