Catena Media plc (STO:CTM)

CMD 2018 Day 2

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Nov 21, 2018

I hope you can hear me okay. Warm welcome to today's Capital Markets Day presentation by Catena Media here in London. We were in Stockholm yesterday. I'm happy to see that there's a lot of people here today as well, and also a lot of people tuning in from the web. What we're going to do today is we have this agenda, where we're going to run through. I'm going to start with a general overview of the company and why we're doing this event today, followed by Johannes, who is our COO, who will do the operational talks and talk about why we do things and how we do them, and the benefit of doing it that way. Of course, as you all know, there's a lot of things happening in our industry over in U.S. We'll have Michael Daly here, our General Manager for iGaming in the U.S. market, to bring you into the details of that market, which is a very interesting piece of presentation. All of this, of course, generates some numbers, and therefore, we have Pia-Lena Olofsson here, our CFO, who'll bring you through about the financing, about this company, how we look on that today and how we look on it going forward. In the end, we have some closing comments from myself. The idea is that we do each piece about 30, 35 minutes maybe, and then we do some Q&A after each session. If you have some questions, please kindly bring them up in the end, and then we will have a final Q&A in the end if you come up with something that you forgot to tell or ask during the presentation as such. First, an introduction of what we are and how Catena Media has developed during the years. That's a bit of us. We're, of course, not just a movie, we're also a lot of text, and that's what we create every day to make a presence out there. This is a summary about what we have done. It's in your handouts. The idea is today to put a lot of details around this text. I will not read this for you now, but you will really remember yourself in the presentations we have had today when you go through it after this one. I'm Per. I'm the CEO. I joined in June to take this business further to the exciting growth journey they have had. What you will see today is for us trying to explain this by having the Capital Markets Day, what our growth trends are and how we see the future, and why we established ourselves to the company we're currently being. Why would you have this Capital Markets Day? One more question. You've probably been to many. They are a bit different compared what kind of phase you are as a company. Either you're very established, you go through a lot of financial data and prognosis for the future, or in our case, we tend to use this to explain a bit more what we really do because that's the question I get. What do you do? How can you make money on that? We see that you're quite a lot of businesses. What happen if you stop? Will you be bankrupt? How long will this stay? What is lead generation? Those are the questions we get, which for me, is understandable because this industry and this company has not been very good historically educating the market. Let me try to make a small attempt to explain a bit better to you what it is that we do and how it works. Before that, I want to present to you who the management team is, the executive management team in the company that do these wonderful things with the company that make us grow all day. We have Pia-Lena, who is here. We have Johannes, that is here. We have Åsa, who you'll see later, who is here as well. On top of that, we have Louise, who's a fantastic legal counsel. We have also Andreas, who's doing all our acquisitions. We couldn't survive unless we had a fantastic management team beneath us, and they're fantastic people of another 344 pictures that should be added below here, but we cannot do that today for space issues. We're running this business every day and doing it in the right way. It's important. I think this is something that we tend to forget, especially in this industry we're in. Running a business, you need to make sure to run it on a sustainable way for the future. That also includes how you run, how you treat your staff, how you build teams to make them very explosive in terms of their entrepreneurial skills. We put very hard efforts in trying to grow this business to be how a business should look in the future. One thing is about gender equality. We were listed now recently in the Stockholm Stock Exchange on this called the AllBright list, which lists the companies, and surprisingly, it's only 47 companies listed on the Stockholm Stock Exchange that have an equal balance of male and females in their management team. We are one of them. We joined this year. We are now at middle of that, 23rd place, we're planning to be on top position like we always do in everything we attempt. Doing this doesn't end by me saying this here in the office to you today or in this room today. It's about doing that in all locations we have around the world, twenty-four seven. The locations we currently operate are the following. All of them, except maybe the first one in Sweden and then Malta, were a result of the acquisitions we have made during the years. We run business where Michael is present over in Las Vegas to where our team in Australia are and the team in Japan, then a lot of other ones. This is how we try to run the business and spread it globally. Talking about business model then. Some of you are very much into this area of business, and some of you are very new to it. We typically use this slide, which is a slide with a lot of information. If I should try to attempt this, I will make three attempts today to try to explain what we do, and I hope when I'm done with that, you will be crystal clear. If you look at this one, typically, we start to the left, where is the potential customer out there doing something, searching for something on a search engine like Google, for example, or they watch a YouTube channel, or they do something. They want to have some information about something. We try to sniff up with that what they want to know, and then we present content to them that we believe answer the questions, the query. If we're successful on that side, we can also then promote offers that relate to the things they want to search for. If we're successful, they will actually go and buy things from those business partners of ours. When they have done, we charge the business partner for our service. Not before. It's only when they spend money at the business partner. Sitting as a marketeer at a company trying to get new customers, there's nothing better than just paying for the paying customers. All the other ones you don't have to pay for. Of course, we are really in the end of the funnels. You need to pay a lot of money for that rather than spending money on unnecessary, inefficient business on the web. In the end, some of these people, they go back and want to have new things. They go back to some of the sites, or they do a new search for something. Maybe there we tap into them again. The way you have a charge for our service is a bit different. Either it's on a revenue share base, where we say, "Of all the revenue that customer will generate or net winnings or net earnings over a lifetime, we should take a percentage of that," quite high percentage. If you want to come up with a little bit less amount, you can pay us upfront. Then we take nothing after that. We do in hybrid, a little bit less upfront, a little bit less revenue share, but there. We do also something we call fixed fees that are pure advertising because today on our websites, we have an enormous amount of traffic and companies just want to show the logo there, like pure advertising. That we charge for as well. In the end, we do subscriptions. Typically came into our business model when we acquired businesses in the professional finance industry, where it's quite common to maybe subscribe to stock tips and trading tips, et cetera, which we have a very interesting business in. We also do it for sports news, for example, in France, where you can pay a dedicated amount per month to get really, really good tip about football, et cetera. This slide, I guess you still don't understand what I'm talking about. Why don't we do like this? As digital solutions have developed, our consumer behavior has changed. As connected digital citizens, we have been transformed from passive receivers into seekers, searching for information and guidance in reaching a buying decision. We will do anything to find the optimal alternative, whether we're looking for the best flight to Tokyo or a luxury hotel room at a bargain price. For businesses to remain a credible option, they need to maintain a high rating in search engines and know more about their customers' online behavior than the customers themselves. That's where Catena Media comes into the picture. We at Catena Media are experts at aggregating information for the very best base per decision to create websites with qualitative content through carefully selected data, all based on our invaluable knowledge on everything from the many search engines' complicated algorithms to how humans behave online. This allows us to create content that cuts through the noise and connects product brands with their ideal consumer. We own thousands of sites that consistently rank highly in search engine listings. Once there, we introduce the consumer to our operator through high-quality, relevant content in a credible environment, and whatever else it takes to satisfy their demands for personalization and interaction. As a result of this, we can send the consumer to the most suitable operator, creating a lead. It's when the consumer converts that we receive payment. This means that our customers, the operators, only pay for quantifiable results, nothing more. Since the match is the most compatible, it is of course very beneficial to the consumer. We are adding real value. We started to apply our flexible business model in online iGaming and the financial services industry, as these were established digital categories with large numbers of mature users. However, the fact is our business model can easily be applied within other online industries such as health and education, and perhaps even to evaluate the best choice of your next planned spaceflight. Since we have the experience, knowledge, technical expertise, digital platform, and highly skilled staff organization. Our ambition is set to become the very best provider of high-value online leads. Online buying behavior is changing industries one by one. You're invited to join our ambitious journey of growth right in the front of online evolution. All right. If you look into a bit more details than how we do this, Johannes will then tell you a bit more about these details later, it all starts to the left here, where it's about identify lead. It starts with what kind of vertical. Is it gambling, trading, dating, education, traveling, whatever? In that vertical, what specifically do we want to try to reach? In that specific thing, what kind of questions to be answered or problem to be solved do we think the customer is looking for? That's how it start today. People want to get helped with information when you search for something. You don't have time to create entire internet before you make a choice. You want somebody doing that for you. I think that's exactly what we do at next thing. Once you have put in the search word there to want to have something, we have a site picking up the search word we want to hit, or the customer is putting in the search word that we want to hit. By doing so, we create a lot of interesting content that is valuable to them, that help them to solve the question or the problem, or answer the questions. By doing that, we can then also at that time promote offers from business partners that are in that field that we believe are attractive to the customer at that point. Maybe you want to click to open a casino account or to start a new university or to buy a Forex trading tool. Can be whatever. Once you've done that, obviously, it's then our job to make sure that the offer is there, and then we need convert the customers to click on the offer. We need to take the customer, then send it to the best business partner we think we have for that specific lead to make sure that they do a job, they convert it, and the customer starts paying money. When they do, we get our commission. There's a lot of things in here we need to do to make sure that it start with somebody thinking on the Google that, "I need to know this," until we have that customer as a paying lead at an operator of ours. That journey between is what we do. That's what make us special, and we do it very good. We have a lot of people every day doing this around the world and just sitting and just thinking of this thing. It's not that easy as building a website. That's the simplest part. The thing is to make it work and work very well. What is then our overall strategy at moving forward? We are in a good position today. We're just a bit north of six years old as a company. We have, what I believe, done remarkable things. We're going to book a very high revenue for this year with a remarkable profit, and we still feel ourselves as just being newborn. What do we want to do to really continue with this business and make sure that we continue to grow very fast and generate a lot of revenues for our shareholders and profits? Well, what we do is that we focus on running this business and growing it organically, and we do that by geographical expansion and good selected acquisitions. I want to go through this for you and tell you a bit about what our general strategy is around this. The question first that I get most of everything is: how do you grow a business organically? It's simple to say, difficult to do. As you know, you hear a lot of things about market regulations and bringing down revenues and stuff. Wouldn't that make it more difficult for us to grow organically? Well, in some cases, yes. We like challenges. If you look at those challenges well, you will come out very good. The first external factor we can have that impact our organic growth is, of course, the market growth trends. Since the last decades, of course, online gambling has increasing year-on-year. Some markets more than others, and we foresee them also to grow in the future. Even though regulation kicks in, they're still there, most likely to grow. That we cannot do that much about. That's the market itself. What we can do something about is pay-per-click advertising, mean that we pay for additional positions on Google where people click, and then we get that customer. You know the first four advertising things you always find on Google when you put before the real sites are ranking, that's what you can pay yourself ahead. Extremely expensive, though, and with more focus coming in on performance-based acquisitions from any business, everyday cost for these goes up because you're bidding for the search word. If there's a lot of interest for search words, price goes up and becomes very expensive. That's why just a small part of our business is that. It's much better, therefore, to rank the sites by ourself of being good sites because then we don't have to pay Google anything. We can, of course, advertise, like you done in the travel industry, create super brands like Hotels.com or Expedia or something like this, booking.com. That's a way forward. Less margin, but can still grow your business. We can also do land grabbing by increased market share, something we actually see quite often when we walk into a regulated market, because when a market regulates, it puts up a lot of laws and regulations what you can and can't do. We have become an expert on actually operating within regulated markets. A lot of affiliates will have very much difficulties because you need a lot of people, compliance, lawyers, and stuff. You need to have a lot of very good people understanding what you can and can't do, which increase your cost base, meaning that you are having profitability problems. You need to invest a lot to grow your business. We have done that a long time ago. When the market regulates, we tend to get more traffic because the operators know that we can handle their business in a compliant way. The last thing is, of course, geographic expansion, which we can do because that really, of course, tells you itself. If you have these brands and expand into more markets, we can do more business. That's what we can do to kind of widen the funneling opening for this business. We're looking at funnel, so what are we then doing within it? We're pouring in customers or clicks, search words in here, and we can expand that by the thing I said before. The key thing is how much we can load the funnel with. You have three different stages. The first is the onboarding. Here, what you need to do is to make sure that from that search word, you may need to make them click on the link to come into our site. How do you do that? Well, you make sure that the site ranks top on Google because the top sites get the most of the traffic. What is it that say, Johannes, the five, six first ones get 80% of the traffic, and the other two billion sites have to share the remaining 20%. If you're up there, you get a lot of traffic. That you do by so-called SEO, which stands for search engine optimization. A set of people that sit there and are extremely good on what to do and analyzing, trying, testing, and not just doing that, but also think about how to write the content, how to design the site to make it perform very well on Google. To do that, you need a lot of data, of course, because we are a data-driven company. Once you get them into the site, the next step is then to try to convert them into lead. That's what we call the internal conversion. What we need to do is that we need to make sure that we have a very good product. It's hard to sell a bad product. You need to have a good product. We have a lot of domains. Two years ago, I think we had 14,000 domains in our books, but maybe today we run 1,200 brands out there, of which 30 are doing 80% of the business. We bought a lot of products. We've chosen the ones we want to do, and we're growing them and put attention to them. Johannes will tell later about how we do that. Once you do, you get a good product. To build a good product, you need to listen to consumer needs and understand what they want. If you have maps there, people will like what you sell. Then we place our customers' offers there because that's also one thing. If we have a great site but bad offers, no traffic. The operators of ours must also see what we do and that we have a good product. Otherwise, they won't give us the offers. Obviously, based on our growth, we're doing a fairly good job there. We have a lot of offers to be sent out there. Starts the next thing. That is external conversion. Now we send the lead to someone, we believe that that operator should have this lead because we believe, A, they can convert it to a paying customer, B, they can make a lot of money from it. If they can make a lot of money from it, they want us to send lead next month as well. If you send a bad lead, not good for us, not good for them. I will come back to that. Historically, this business has talked a lot about how many New Depositing Customer get each month. What about 50% of those are not good? We charge a little for it, we get a little bit of money, but then they die. Volume is not the key. Quality is the key. We need to make sure that every single lead we do maximize the business for us and our business partners. In our reports, we talked a lot about NDCs before, New Depositing Customers. We will talk less about that because to be quite honest, we never talk about that internally. It's not the KPI we follow. We're following about how much the different leads we send generate. That's what is important. We transfer them into paying customers, that means that relationships are super important because if we cannot have a good relationship, we won't have a business together. We measure on data to make sure that we upgrade this efficiency all the time together with our business partners to make everybody happy campers in this funnel. We do that for a lot of brands. The thing is, as I mentioned, if you have 1,200 brands and need to apply doing all that to them every day, you need a very big operations. You can do it, but you need thousands of people, I would say. That means a big cost. You choose someone that you believe you can make a global brand of. Some of them you see here. We have chosen about 30 brands we're going to use for our global domination. This is where we apply P. We put dedicated teams to just work with this brand, nothing else. That's how we grow a business, because obviously, the more time you spend on one product, the more focus it gets. If you do your job right, it will grow. Geographical expansion. What is our take here? Far, we've been doing, and in Q3, we reported that 75% of our business are coming from regulated and/or tax business or markets. Why is that important? Obviously, if there's a law regulation in place telling what you can and can't do, if you follow that law regulations, you will not be harmed by anything. You're okay to operate. If you breach the law or if you act illegally, you're putting your business at risk and your shareholders and your shareholders' holding in the company risk. We could do fantastic business tomorrow in a completely legal affiliation in China, you will see nice profit grow, but it could go away quicker than we generated if we're unlucky. That's not how we want to operate. We want to build long-term value by doing a lot of profits from markets that are regulated. On the other hand, there are also some markets out there that are seemed as very, very little risk to operate in. Like we're having a business in Tokyo. It's not regulated, it's not illegal. We checked with the Japanese government before actually acquiring that business if it was okay to operate that way, and they gave us approval. Therefore, we can operate that. We'll always have markets in our portfolio that are not regulated, maybe not will be, but we'll deem them as very low risk because we and our business partners are operating there. We will also have gray markets, the idea is to have the vast majority of our business from regulated to mitigate or minimize the risk there. So geographic expansion is one thing, very important. We have a lot of tools how to do that. Acquisitions has been the name of the game so far. We have done 34 acquisitions live to date. Actually, it's one brand, more or less, that we've built from the start. All other brands we bought. Why? You can always create a brand, you can work with it, you need to increase it in ranking in Google, sometimes we felt that there's a lot of brands ahead of us, why don't we acquire them instead? That we have done. That's how we created a very dominant presence in this space. We built a lot of acquisitions, we've chosen some of them, as I mentioned, the super brand. The thing with this one is that if you do a lot of acquisitions, yes, you grow large, you grow quickly. You remember last year we did 11 acquisitions, I guess. This year we're looking at 10 or something. You use that to grow very quickly, to get nice revenue, also improve your profit, it also increases your debt in the company because we need to pay for those, obviously, over time. We tend to pay a lot with shares to increase dilution, that also means that even though we're increasing a lot of revenue and profits, we don't really increase EPS very much. In the long run, that tends to be important thing for an investor. That's why we need to change the way going forward. We've done a lot of acquisitions. We don't need more brands. We have more brands than we need. The thing is, which of those we should choose for. To be frank, today, there are very few objects out there that we would like to acquire because we acquired the good things out of the candy bag already. There's a lot of things out there that wants to sell, but nothing really that fits our portfolio anymore because they're too small or they're built in a way where we cannot run them efficiently, et cetera. We put attention there on our 30 brands, making sure that they become 80 or 80% plus of our business going forward. That's how we believe we can not only make sure that we grow the business, but also we grow efficiently, generate more shareholder value back. Just a bit more ideas on what we do, I want to explain you this part over here, because this is how you can kind of explain the typical kind of assets or objects out there. It can either be a cluster of brands. Think of one company running 40 different sites. They might have a large revenue together, but each site has a small revenue. Each site need to have people running all these sites. It's a lot of domains, meaning that the revenue per domain is small. Maintenance efficiency is very low because you need to adapt a lot of people to all these different sites. There are very few cost synergies if you buy that because you need those people to run all that. It's really hard to grow them organically, geographically, because it's just too much of it. It's typically not the logical acquisition target for us. On the other hand, a single brand with clear focus, good systems, et cetera, in place, et cetera, has all the benefits in this case. The thing is, very few of them, large ones exist out there because we bought a lot of them when they were small and grew them to big, but there's not many assets out there. That's why we believe that we have a good position because very few will be able to acquire themselves ahead of us out there. We're looking. We look at typically 50, 60 cases per month. A, because we might find something interesting, B, because we learn a lot from it there. Obviously, we turn down a lot. The strategy going forward for us is either to do something really improving the core of the business, meaning something that the total group will benefit from. It can be a service, a product, a database, an app or whatever that we can use on the entire company and make the business better. Or we do larger assets, larger than we've done before, meaning that we can see clearly cost reduce. Two large revenues put together, scaling off the cost, we come up with better profits and larger market dominance. It can be within the sector, it can be within a new country, it can be in a new vertical. That's how we can do. Because as you see, our specialty is not gaming unique, it's lead generation. That's what I want to talk about here, new verticals. If everything on the left-hand side here is what we're good at, understanding how the search engine works, understanding the customer needs, build sites for it, convert them, and do that very well. That has nothing to do with iGaming. It has to do with understanding what's going on now in the world of marketing and the needs for consumers. If we do that, obviously, this is what we do can be applied to any industry out there. We're not an iGaming company, we are a lead generator. That's what we do. We use the knowledge we have had when we started to benefit from a perfect market for lead generation, which has been poker and casino from start, and today becoming that for also sports betting. Yes, we will launch more verticals. When? We don't know, because obviously, I will see from today, the market opportunity for having gaming and for finance is enormous. There's no reason to spread too thin yet, but we're planning to do so in the future. Coming into the last two sessions of my speech, which is the profitability management, because obviously it's a thing. You as investors want to have profits from what we do. I think that historically, we've done a lot of acquisitions, as I mentioned, and that has not done a lot of good things in terms of EPS, but it brought up a fantastic business that can deliver a lot of EPS going forward. I think that's the key. By doing this historically, we have also basically grown cost structure in the company at the same pace or even faster than revenue growth, so that during the last couple of years, margin percentage has decreased. If we're looking forward now, what we want to do more instead is that with greater attention to fewer brands, we can actually grow efficiently. We will increase the headcount, increase ratio because focusing on what we have, we don't need to employ as many people as we've done every year before. When we acquired things, we also got a lot of stuff with that sometimes. Focusing, we have taken a lot of investments already in other operational expenses, and we don't need to grow that as much either. We'll do the strategic acquisitions, which will improve profitability over time. The clear message here is that profit amount and EPS will always have the highest priority compared with profit margin percentage. If I can add business in a different way that just makes you as a shareholder and us more beneficial from that, we will. We will always also prioritize investments to get us there. About a year ago or something, we brought out a target to the market saying that from today's level, which is about EUR 50 million run right now in profitability or adjusted EBITDA, we should double that the coming two years. Quite ambitious target, you want to say. We will explain today later that we believe it's fully achievable, and I will give you a first hint now. In Q3, we grow the business organically, meaning all assets we had a year ago or before grow with 17% in one year. That was also the average growth for the full first three months. That's the pace we're at. We're quite confident that even what happened with regulations out there, but also how we can mitigate that with all the actions you saw about funding management, et cetera, we rest assured that we can grow the business by double-digit organic growth going forward. We will use these brands to go into more markets, more markets and more presence in the market. To use the strength between the markets of these brands and make them sure that we rank even better in markets we're not really strong in yet, because there are a lot of markets in Europe where we aren't in yet. We focus on cost efficiency a lot. As you saw, we will not increase our cost. Only if you put that together, means that we will have what we see higher profitability, which builds a quite nice chunk of business. The thing is U.S., what is interesting here is that we've acquired a business in U.S. because we saw a lot of opportunity in the casino business. It's been growing nicely. It's growing very nicely still. In the end of, or in the beginning of the summer, we had a big change in U.S., which Mike will talk about later, when sports betting was decided to open up. Adding that opportunity on top. Rest assured, today we only have business in New Jersey for sports. Very soon, Mike will tell later, we foresee West Virginia and Pennsylvania open up, meaning that we double the market size more or less from today. Those are the only thing we know for sure will happen. If I take what we do in our existing markets and add that opportunity with the cost efficiency, I come very close to the EUR 100 million. One year ago, we thought that we need to acquire a lot of businesses to get to EUR 100 million, which we can do. On the other hand, as I said, will not increase EPS a lot. If we hold back on acquisitions and focus on U.S. and exchange that revenue towards U.S., of course, we'll do a lot more profit and will not dilute that much. We come very close. How can we then cover up the delta? Well, A, do we believe that any more markets in U.S. will open up from the second quarter 2019 until the end of 2020? I believe so. That could cover the delta. Still, we don't need to do any acquisitions. Having money and possibilities to acquire things in two years, yes. If you do both, it looks very good. If it's just one of them, it still looks very good. We as a management team and a company are very, very, very positive about hitting that, not only by a good EBITDA, but also with a nice profitability and EPS here, a healthy growth, so to speak. We will come back to this today. You will see that every of these things what we're talking about is there in reality. I think the third quarter really showed in a good manner that we are in a good way. We grow the EPS with 50% since last year. We have a nice growth. We're focusing, which improving cost and this U.S. opportunity we're all benefiting from. That concludes my part. I just wonder now if you have some early questions or if you rather wait a bit later when you get more information to ask about. Do we have something from the webcast? Yes. First of all, I'd like to welcome the about 50 guests that we have through our webcast today. Also welcome. Do you see any risks in not reaching the 2020 goal? There's always a risk. You can also try to work yourself away from the risks. In our business, there are two risks. It's one, regulating. That more markets regulate and reduce the revenue opportunity or it close down markets you're in. I think we all took the decisions to walk away from that risk. We actually position the majority of our income from areas where they already are regulated, where we are safe to operate. That's one thing. The other thing is typically, if you make a business out of Google, what happen if Google change? There are two ways you can work on Google, a good way and a not so good way. Our way of working is the good way, where we build sites in a way that Google would like to see sites. You don't try to fool Google to get a good position. You actually build a site in a way that Google wants to see a site built, because Google only have one thing in mind, and that is to give the best possible answer to the query. If you fool yourself, the answer might not be according to the best answer to the query, and Google don't like that. If you build in a way that you think about how Google works, you serve sites that we know that they look and they want to prioritize in the ranking, we don't have a big problem there either. You could say that for them adding pay per click on top of our ranking. It's a threat. They already do that in most markets, not U.S. They do that. We're used to that. Johannes will also tell you that even they do that, how much of the business actually go our favor. At this stage, we don't see a big risk. Also, because we're doing business from one vertical and a little bit from another, there's a lot of verticals out there. We feel very confident about that target. Okay. What about acquisitions? They're supposed to pay with the shares. Tell me about dilution. Yeah. When we do deals, we always have the opportunity to pay with shares, which is good if the valuation is high, not so interesting if the valuation is low. Now, also going in that we are going down acquisition phase, we have a very good cash conversion, which Pia-Lena will talk about later, meaning that when we don't do acquisitions, we improve our debt level quite considerably. The target we have is where we can pay in cash, we will. That also means that we'll not dilute as much as we can, if we would to. We will always prefer to do it settlements with cash where we can. Yes. Yeah. Do you have any plans for the Spanish-speaking world? Oh, I get that question often. I don't speak Spanish, but we have people that do. It's an interesting market. They're doing a lot of activities down there now, and more licenses opening up, reduced tax, a couple of things. We have business already. We have brands ranking there, and definitely, we see Spanish as a good potential for further expansion. Okay. Thank you. Yeah. Thank you. Anything else? If not, we swap. Yeah. Thank you. Thank you. Good afternoon. This is the way I'm normally looking like. Now it's Movember campaign, that's why I'm growing this thing in my face. Since this is an investor meeting and everybody could donate to Men's Health, I included the link here in the presentation. You can click, you end up on the Movember Foundation campaign site, and there you can donate to me and the rest of the Catena Media team that actually do this. Last year, we managed to get $2,500, and this year we're aiming higher. Why am I talking about this? Well, first of all, it's a way of engaging staff. Last month, it was the pink ribbon, we did the same thing for the other part of our staff. We made pink cupcakes, pink cappuccinos, this is Tokyo office over to the left, that's Belgrade office and Malta office, everybody was engaged, we rallied around this. This is key. When I'm going to present to you today, I'm going to talk a lot about engagement. Most of all, I'm here to talk about what we do and how we do it. That's operations. Figuring out what needs to be done then be really, really relentless in figuring out to get that done better. I'm a person who come from a lot of innovation. If you don't have an efficient operations, innovation fails because somewhere in your organization, you actually need to execute what you innovate. I think as Jeff Bezos says that it doesn't matter how many ideas you have, it's what you can actually execute. That's why getting figuring out how to do things and always try to do them better is important. This is a question I like to give to you might not be a good answer to it, but what I'm thinking is the industry we are in is where users are used to that everything is supposed to be free. Facebook is for free. YouTube is for free. Everything is for free. If you want to improve your business, you want to improve your efficiency, you sell something that people are expecting not to pay for, that's quite of a challenge. For us, we're a technology company, I hear that a lot. We are a people company because at least I check, there is no AI that actually can build technology yet. That day is hopefully way over there. It's still people who build technology. It's people who make the code. If we want to have the best code, we need to make sure that we have the best people. One of the key success factors for Catena Media is that we're really focusing on building people. I'm going to talk about that a bit. Innovation, I think is a worn-out word. Everybody talks about innovation this, innovation that. To me, it's more a matter of how you approach innovation. We do this everywhere in the company because when people start thinking about new ideas and actually thinking out how to make them happen, because that's the challenge. Thinking out a good idea, pretty easy, you can do that in your shower, in your way to job, but actually making them happen is the tough part. That's why it's so important to have it everywhere in the organization. The old cliché that culture eats strategy for breakfast, that's totally true because if it's a company that people are supposed to build what creates value, then we need to figure out how to do that. If you have diversified teams, we know that we have more efficient teams instead of just having one type of people in the company. We also know that diversified teams are much, much more difficult to manage. That's why we need to invest in our leaders. Also, something that every company has is viruses, people who are not engaged in the business, and they're contagious. We don't want those. Also, politics is something that kills businesses. We're very blunt about that. We kill viruses and we kill politics at first sight, because it's not helping the business moving forward. The final part is how do you scale? How do you scale people? As Per said, we're focusing on growing organically, but we need to stand on something, and that's what I'm going to talk a bit about later. What we do and how we do is, we condense that down to four strategic pillars. One is a little bit obscure, some people say, create kickass products. Steve Jobs unfortunately stole insanely great, but it's basically the same thing. We want to put the best product out on the market. Why is that kickass word so important? Because it's a moving target. If you set a fixed target on your product development, you will die. Because what's good today will definitely not be good, maybe tomorrow, but not next month and the months after that. Just by having a mindset that we're working for against a moving target helps us. Kickass products means strong global brands. Focus. That gives us also an understanding what kind of content we need to produce for those different brands. That also gives us a big understanding that we need to have a technology platform that we can stand on. We cannot have multiple technology platforms. I'm going to talk about user experience and design later on. The other two is very related to people. The first one, build outstanding relationships, I actually started off with, in general, affiliate companies don't care about the customers. Because what you need to do with your two guys in the garage is you go to bet365, you click Join Affiliate Program, boom, you have your customer. You don't need to talk to the customer. You might need to send some Skype or emails, but you don't meet the customer. In a world where compliance and everything is getting so much more complex, we as a company, we can sit down with a customer and actually be a part of their growth, and that's needed a relationship. You don't get the relationship with click Join Affiliate Program. However, this outstanding relationship is equally important internally. I'm going to talk about our organizational design, but that organizational design depends on relations. We have the Catena Media culture, spoke about that. Finally, we have innovation. I'm not going to spend time today talking about innovation because you will never be allowed to leave this room, because that's one of my most keen topics. We build people build technology. That means that relationships in our culture is key. I'm going to focus on those two strategic pillars for the next 10 minutes. I don't know how many of you Google and search for engagement at work. I do that. This is a very interesting report. It's made of a company called Steelcase that actually make furniture. They surveyed about 147,000 people in 27-something countries. You can find it on internet. What they found out was very annoying, to be honest. You have these people at work that are highly dissatisfied and highly disengaged. You can call them a virus. I know you have someone in your organization that you definitely will put on that spot. On the other side, you have those people who are highly engaged and super satisfied at work. You can instantly figure out who that is in your organization. You have a big bulk in the middle. You can compare it to politics. What do companies tend to do? They tend to focus on these people down there, the whiners and the people who they want to make happy at work. If you're doing politics and you're a left wing, you don't try to convince the right wings. You try to convince the guys in the middle who haven't taken sides yet. If you make the math up here, 27 plus 13 is 34, 26 plus 11 is 37. That's a negative productivity in this, if engagement and productivity is related. Engagement at work is super important. People build technology. We need to build people. This report also gives you the stereotypes you have. Countries we think have super high productivity, yes, they're up there. Countries where you think they are super low productivity, yes, they're down there. We're a data-driven company. Talking about engagement and don't have the metrics to back it up wouldn't make sense. We use a system called Officevibe. It pings five questions a week to every employee in the company. Pretty easy, fun to answer. It's a little graphics and so on. It gives us an engagement metrics. It measures on 10 key sub-categories as well. What I found over the two years I've been here is that there is a 100% correlation between engagement and profitability. If engagement level in our U.K. office is high, we make more money. If our engagement levels in our Serbian office is low, we make less money there. By just looking into these 10 sub-categories, we can actually see where is the fault, and we can fix that, so we get engagement up, and then we get profitability up. What we're working on right now is to figure out if you don't have a revenue number connected to your business, if you're HR, or if you're finance, or if you're tech, or if you're legal. Could engagement metrics have something to do with productivity? Because we measure engagement on these levels as well. We haven't figured out to measure productivity yet, but we will. If engagement is key and we know we have revenues here, and we can see that engagement and revenues are correlated, then our job is to figure out how can we get people engaged. Right? Skin in the Game" is a book by Nicholas Taleb, but I don't know how many of you have read his book "Black Swan" after the financial crisis in 2008 or "Beat the Dealer." Someone should read that book, it's really, really funny. Anyhow, this is his latest book, and he talked about skin in the game. The principle of skin in the game is if you don't have any skin in the game, meaning you're taking all the upsides and you transfer all the downsides. That's where you have bureaucrats and consultants. I can give you good advice as a consultant. If you make money, it's good. If you lose money, sorry, I wasn't affected. An entrepreneur, though, he takes the risks, and he takes the downside. You can have people, I say, soul in the game, people who take all the downside of everybody, like saints and these really passionate innovators. What we figured out is that if we can make people in our organization act like entrepreneurs, they will have a skin in the game. That's not related to bonus schemes or anything like that, because that's a reward because you're doing something good. It's a consequence. We need to make them a point where they actually have a skin in the game. This thing comes with only one thing, ownership. If you have ownership of what you do, you will be engaged. You will take risk. You will take credit for when you're doing good things, but you also will be responsible for what's not working because you have the skin in the game. What we did when I came here two years ago, we didn't really have a superior organizational structure. We had an organizational chart, but we couldn't really see what was productive and what's producing what. Then we had this idea in the operational management team, since a few of us is coming from really, really big companies, and we know it's pretty boring to work in a big company because you don't have the creativity and the energy of what you get when you meet the startup guys. But we're super efficient. We get things done. Then you move over to this startup, which is this little circle thing here. You have all that energy you want to have in the big corporation. We said, "Can we get the best parts from two different worlds and combine that?" We started looking into that, and we realized that each of our products, AskGamblers, JohnSlots, Bettingpro, and so on, it could be seen like a little business in the business. We define that as a pod. The pod has a revenue, and it has a cost. It has the amount of staff you need to produce that value. If I'm in legal team or if I'm in HR, where do I fit in this organization? You're a root because you need to give nutrition to the pod, and the pod needs to give you nutrition. If the pod is successful, we will have money to invest in HR. If HR is successful helping the pod finding the right people, the pod will grow. That's how we interlink everything. It ended up in a very modular organization design that we call pods and roots. Basically, if you look at it from a financial reporting perspective, it's profit centers and cost centers. If I'm HR and I'm working at a cost center, that's not really super engaging. The idea for the HR team or all the roots is that they actually drive a business. The better the HR business is, the better the pods will be off. I would say that's very scalable, because if you need to have HR, finance, and tech in each of these pods, that's a lot of people. If they can get nutrition from one big root, we don't need to add a full team to each of those pods. That's organizational design. I'm going to look into the part someone needs to make this happen. That's leaders. I hear a lot of this. I think it's a really interesting question. What happens if we invest in people and they leave? That's pretty crappy ROI. The counter side of that is if we don't invest in them, they will probably not leave because no one will try to steal them from us because they're stupid. If we don't invest in our people that's supposed to build technology, we'll end up with a company with the dumbest people on Earth. That's not a good company. We invest in leaders. We want diversified teams. We have 32 nationalities in Malta. It's quite a diversified working environment. What we decided to do, we need to have on-the-job training program. Each of these leaders, we have 42 in this program, needs to be better as a leader by every day. That's what we call our BLACK. It's spelled wrong on purpose because it's Bitesize Leadership Assessment and Coaching. It's on-the-job training. Before summer, we had this idea. What if we can identify the future leaders in the company? Finding someone like Michael took us nine months. There's a big risk when you find someone that they actually will not be successful in onboarding and leave, and then we're back to square one. But if we can identify the future leaders in the company who are not in leadership positions today, and we invest a little bit in them, and they grow, and we can put them in leadership roles in the company, that's awesome because they will stay. A few of these will leave as well. That's why we have two programs. One is for the present, and one is for the future. Since I'm a data-driven idiot, before we started to do this, I took two cases where we had perfect metrics for bad leadership. I had the cost of recruiting, relocation, hiring, and all that. I had the productivity measurement from the team. Guess what? The cost of the leader was one. The full impact of the company was 25. That was horrifying. That's the truth, and that's why we want to invest in people, because it will be people who build technology. People, technology. Moving on to technology. Strategy. What's our strategy? Per talked about our growth strategy. To me, strategy is figuring out where do we play and how do we win. When I listen to a lot of questions, there is hard to put Catena Media where we actually are. I'm trying to give you a little bit of flavor of that. First of all, the reason why we can exist at all is because there is a lot of companies who want new customers, and that is nothing new. Today, you get your new customers through TV campaigns or dailies or whatever. We do this in a digital world. As long as that opportunity exists, Catena Media has a reason to exist. This opportunity is in every business segment you can think of. The question is, how do we do that? We do not do TV. We don't produce TV shows, whatever. We have figured out that the most challenging thing. Actually, I'm going to revert. Google, that's the biggest lead generator in the world. No question about it. We can never beat Google. What do you do on Google? You search for something, and you find an answer. Okay. The second biggest lead generator in the world is probably Expedia with travel and booking and all those things. That's transactional. I want to go from London to Malta tomorrow. Book Air Malta, 9:30 A.M. Boom. Done. Our space is where you want to find out something so you can make a decision. The amount of time for you to Google on each single casino operator will take forever. We get that all information at one spot. It saves you a lot of time because you want to make a decision. On top of that, if you have a problem, we can help you sort that problem. That's our space. Pretty simple. When you take that customer's constant need for new customers and what we can give, and you start thinking of every business segment there is where there is a need for aggregated information and problem-solving, you can see our opportunities for business is endless. The first question I asked you, users do not want to pay for the service we give them on internet. Facebook is for free. Everything we do is for free. Yeah, nice flash. We have a twofold business model. We have the users, where we decided we want to have a very product leadership focus. That's where we talk about kickass products. Since we don't get money from them, apart from the subscription models, we always need to think of increase the willingness to use our products. If we can increase that, we will be good off. That's where kickass products come into. You have customer intimacy, where we have the relationships. If we can build them super strong, it will be much more difficult for one operator to give up Catena Media because we care for them. We want them to be successful. If we don't care for our operators, bye-bye, Catena Media. If we have a twofold business model, I just want to go through this because Per said he wanted users three times, he want to describe what we do, this is the fourth time. I want to add some data points to it. This is Per. He's googling for an online casino he can trust. Google gives him a few different options to choose from, and in this case, he goes to AskGamblers. AskGamblers gives him the information he needs so he can make the decision, he says, "I want to try out Mr Green." He goes to Mr Green and starts playing. If you convert this little exercise into numbers, this is what's happening. This is fake numbers, but the principle is the same. AskGamblers this month had 607,000 visitors. 607,000 Per googling for online casinos I can trust. Of those 607,000, 75,000 actually found an online casino they could trust. They moved on to that online casino they can trust, and 39,000 of those registered. Of those 39,000, 5,600 actually deposit, started to play. Makes sense? You see the funnel? Where can we control things here? We cannot control things in the NDC part because that's the operators. They own the customer. We can control things in the beginning. We can increase or decrease the amount of traffic we get to our sites. We can see if the conversion is pretty crap. If it's only one of the 607,000 that actually converts, something is wrong with the site. If 75,000 actually registers or clicks out, but only one of those registers, there is something wrong with the registration process at the operator. If of those, not so many actually start to deposit, there is something wrong with the operator. We have a lot of opportunity to figure out where we can improve all the time. I got a lot of questions like, "Oh, JohnSlots is down. The traffic is down." Yes, it's because it's ranking on keywords we don't care for right now. The best example actually is free spins. We were super strong in free spin ranking. Free spin is not compliant in U.K., why would you start focusing on that? We dropped that. What happened? Boom, we lose traffic. People come in losing traffic. Yes, we're losing traffic. That's a good thing because we don't want to have that kind of customer going on. Crystal clear? Good. This is the other question I get a lot. Anyone who's Googled something, most of the times there are four ads in the beginning, then you have the rest. This is where Google makes all their tons and tons of money on the PPC. It says ad in the beginning, so it's paid advertising. It's nothing strange with that. The difference here between the placement in a newspaper and Google is that you bid on the keyword. When your budget is out, sometimes you're actually lucky and you don't see these four ads. That means no one actually paid for those keywords, then you only have ranking. Why don't we just focus on owning those four keywords so you can pay for them? It's because the click-through is different. The click-through for PPC, according to our data, is 29%. The rest is what you see on the long list. If you think of it, if you Google an online casino I can trust, the first thing you see is an ad, would you click that ad? No, probably not. You will go down the list and see if there's something else. This is how people behave on the internet. For us, it's more of the mix. Where do we invest in PPC, where do we skip it because it doesn't make sense? 71% goes through SEO, the other list, that's for free, you can say, because you don't pay Google to do that. Google crawls internet and decides where you should rank. This is interesting. The first three positions in that list gets about 60% of all clicks. 4-10 get another 20. If you want to be forgotten, make sure you end up on page number 2 on Google. No one will ever find you. Back to the key idea of having fewer brands. If we can rank 1, 2, 3, 4, we cover most things. The additional value of the long tail is not worth the effort. I'm going to explain to you why. No one knows how Google's algorithm is working. That's a secret. It's their secret sauce, but they tell us what they look for. When you start looking at what they actually value in how to rank pages, first of all, it's content. Well, that's pretty easy. It should be relevant content. It could be deep content or not, but your type of content. They look into the user signals, meaning does the user stay on this site or does he just drop it? Because I searched for an online casino I could trust and ended up at a car dealer. I will move out from that. They look to see how much I click, if I click away from that. They actually look into technical aspects. Is it built on a secure web server? How's the mobile friendliness? Google actually released their own mobile code called AMP. They look at the user experience. How easy is it to navigate that site? They look at the social signals from the user. Do I share this with someone on Facebook or LinkedIn or wherever I share things? They look into what other sites are referring to this site. In the beginning of Google, they was thinking if there's a lot of sites referring to these sites, it's a strong site. Now they're looking into what kind of referrals are there. Is it relevance in them? If there's not relevance, you get punished. If there's high relevance, you get better ranking. I would say there's six overarching things you need to be doing with each of your websites every day. When you listen to our competitors that brags about them having thousand and thousand of websites, which we did long time ago, and then you think of, could I do this on thousand and thousand and thousand of websites? Just figuring out the search word matrix on thousand and thousand and thousand websites. No, you can't. It's impossible. The only thing I know about Google, they want you to get the right answer on what you're searching for. They iterate this all the time. I'm going to give you an example of making decision and solving problems. This is one of our top sites, AskGamblers. You have searched for the online casino you can trust. You find the top list of the popular ones. There is a little different jackpots, and you see there is a support, and there is a community, and there's a lot of things going on here. You can educate yourself. AskGamblers has 5,000 sub-sites. Back to the slide previous this, and you take that times 5,000. You start to realize the challenge we have. Anyhow, you find your casino, you go, you play. What about the problem thing? This is a week ago, we actually get about EUR 19,300,000 back to players that had a problem with their casino. It could be different kinds of problems. It could be just regular complaints about the casino or payment issues, or they could be bonus issues, or they could be deposit issues, or they could be something else. We help them sort that problem. Then you could ask, why on earth would the casinos want us to do that for them? Because we become their complaint central. We can help them improve their business. Back to the relationship thing. If we do this good, we give the data to the casino, they can make sure it doesn't happen again, they get better ranking when Google wants to rank them, or users are talking about them because they're good. Make decisions, solve problems. That's why this whole product-centric approach is key for us in growing. Repetition, focus on global brands, make sure we have the right content, technology infrastructure, user experience, and design. I think we covered everything about the technology infrastructure. That is related to this. Most of you are probably super familiar with the network effect, I would say the best way to describe the network effect is, if it was only me and Per on Facebook would be pretty boring place. That's the same for our products as well. The more users we have on AskGamblers, the more operators want to be on AskGamblers. The more operators we can get on AskGamblers, the more data we can give to the users so they actually can make a decision. That's the network effect. Hopefully, at some point, if you go through the whole theory about network effects, at some point it creates a tipping point. That's what happened with Facebook. You reach some kind of critical mass, so you actually win. This we see in any lead generation industry we look into, Booking.com, Airbnb. I have only Swedish examples, but in Sweden we see that all the time. When you get to that critical mass, you get the fans. No one wants to go anywhere else. That's why this focus strategy is key. If we've been having an idea we want to focus, why on earth we bought 34 different things? Everything is built on different modular platforms, or content management systems, as you call, and this is quite of a challenge, but it's a really fun challenge. I describe it as we building bypass.com. It's an infrastructural problem we need to fix. We get lot of criticism because we increasing costs. Of course, we increase cost, because if you want to build Stockholm Bypass, you need to dig in. It's not going to be built by itself. Once it's done, the cost will go away. It will just get back to maintenance. You need to build it from the beginning. This is, I say we're halfway there. We started with 34 different, but I think we're almost halfway to get it to our own platform so we can drive everything from one platform. I'm not going to dig into this because I have five more minutes. I want to share this because this is the key of this. If we have 34 different platforms and we want to publish or deploy a chatbot, we need to develop 34 different codes of chatbots, and then we need to maintain those 34 different on these systems. If we have one, we build one chatbot, we publish that, deploy that chatbot, and we just maintain and develop that chatbot. It's a massive difference. We need to build the Stockholm Bypass first, and we're halfway there. The other thing with this modular thinking is that if we have a technology that's working in finance and gaming and we want to go to another business segment, we don't need to invent that because code you can actually copy and paste. This is how we can scale our business. I'm not going to go into details of these brands, but I think it's very likable if we have a capital market day in a year from now, we will not have 30 focus brands. We maybe have fewer, but we will definitely have stronger brands. We want to make sure that we take each of these brands to different markets. On the scalability thing here, casino is pretty generic. It's not a difference how to play casino in Sweden from Italy, from France, from U.S., and from Japan. It's only the language. You need to understand what it is on the site. Sport is different. If you're in Italy, you're not super interested in Swedish football. If you're in U.S., you're probably super addicted to NFL, but you're not that in Sweden. Here, content needs to be much more localized. The full scalability will be on the platform and the brand, but we need to be very localized in the sport segment. In casino, I say we have a very high scalability. Same goes for finance, because you do business the same way. You trade the same way in Singapore as in London, as in Frankfurt, as in New York. It's not a big difference. It could be a difference of kind of operators, banks, or other parties. The principles are the same. We have two areas where you see we have really, really super high scalability, and one area where a medium scalability, but that area is the biggest segment. That's why we need to focus on that one. Then you need to think of this. I've been in this company for about a third of the lifetime, and that's only two years. We're only six years old. That's a pretty young company. We are mid-cap, and we're doing all these things, and we're giving you pretty amazing numbers the way I see it. Give us another six years and we'll see what can actually happen. That's it for me before I move into regulations, which is a separate topic. I think we could pause here and have some, if there is any questions. No questions? Yes, please. Sorry, sir. Please. Sure. To the webcast room here as well. You're only six years old. Can you explain to me when each of these three segments started? Do they all start on year one? No. Presumably not. No. We started off in iGaming, casino basically. We didn't have any sport. In 2016, we bought the first sport thing in U.K. When did we acquire you, Joshua? Was that 2017 in November? Yeah. Then we went into finance in 2017 in November. A quick follow-up question. If there are two leads which look attractive to sorry, if there is one lead that looks attractive to two or more of your customers, what happens? Does it go to the highest payer or how do you do that? It's the user who decide. What we do, we give the user data, the data can decide. Probably what they do is they click through to bet365, and they might didn't really find what they wanted, then they go back to AskGamblers, and then they click through to William Hill. The customer who's paying, doesn't he feel like he should get access to the- He's- Isn't there more of a pull from the customer who's paying? He will only get paid when they deposit. That's- Okay they can pull as much as they want. What we also see when Per talked about our fixed fees, is that because our brands are getting bigger, operators just want to be exposed in our environment, which is pretty awesome, I would say. That wouldn't unthinkable a few years ago. Any other questions? Good. We move on to Oh, sorry. Mike. Thank you. Specifically on the pay-per-click. To what extent are you or do you end up competing with your customers? Uh- If you're bidding on keywords and also some of your customers are as well. We don't want to compete with our customers. When we have the dialogue with them, we try to figure out what they search for and what they want to pay for, and it's no use for us to competing with them on the same keywords. Did you ever see yourselves, though, competing with customers when you're doing that? Accidentally might happen because you start to understand the difficulty of building this search word matrix. If it happens, they will notify us and say, "Hey guys, what are you doing?" "Oh, sorry. Yeah. Not on purpose. It's totally useless because there is a bidding war on that keyword. Sure. We would bid against each other. At some point, what they would pay us for that deposit or for that customer is less than we pay for the keyword. It's crap to do that. Google might want us to do that, however, but that's another thing. Okay. In theory it could happen, but it's sort of managed. Yeah You avoid. Okay. Yes. There you go. Thank you. You gave an example of Bet365 there earlier on, and if I'm a user and I'm searching for something on Bet365, what might that be? Is it an offer or something that they might be offering? A sign-up offer or something? It could be anything you search for, but, most users don't search for specific brands. They want to figure out maybe, odds comparison if we talk about that. They want to have some information about the game between Arsenal and Liverpool before they actually start thinking out where to place the bet. They might search in that direction first. Most direct search for bet365, you don't need to do because you just type it in the URL. It's not related to offers as such that would drive New Depositing Customers or something like that. Is it other information that they're searching for? Both. It's like any industry. You have people who just want the offer. Yeah You have someone who actually want to find the best betting partner, and they stay there for a long time. That's why this is very complex with figuring out what keywords you actually to own, and that makes a big difference. The final question is just on the operators. If offers were to dry up, if I'm a casino or, let's say Bet365, could that be a risk to the business at all? I didn't get the question really. Sorry. If I'm a user and I'm searching for, let's say, casino offers or betting offers with a bookmaker, for example. If those offers were to dry up, could that be a risk to the business at all? Yes, for those who are just searching for offers or just want to jump on and then drop off. Most bookies don't want that type of customer. What we also see is that there is a very increased competition in some markets, and the operators spend a lot in media. What we give them is actually customers. When you do a TV campaign, you can calculate ROI on that, but it's not for sure. When you do business with us, you only pay if you get something. Talking about Skin in the Game, we take risk. We take risk on the behalf of our customers, and we want a premium for that, of course. TV channels don't do that. They don't take risks. They get the money. If you didn't get the customers, well, welcome back. Pay again. Mm-hmm. Okay. Thank you. Cool. To a very exciting topic, regulations. In the slides, and in the deck you got, we have packaged the highlights, the questions we get most of the time, and I think since we're in U.K., it might be very interesting to just look into the U.K. Or we have a question from you? No? Okay. In U.K., there's been a lot of things going on here. I think it's really good because the purpose is to protect the players, not to be driven from house and home and so on. What happened was this spring, they increased the pressure on compliance in your marketing. That was a tough one because we got, like, 48 hours from one of our clients to make sure that all our sites are compliant. All our offers need to be compliant. We managed to do that. What happened at the same time was that another big operator said, "We're only going to work with five affiliates. We're going to kick everyone else out." Luckily, we were one of those. Why do they say that? Because they get penalized if they being associated with non-compliant marketing. That's why we need to be compliant. What happened at the same time is that all the small two guys in the garage who have a hard time understanding what compliance is, got shut off. We got tons of calls from small companies that wanted to sell because they were out of business, basically. In this case, yes, it's tougher for everybody in the U.K. market, and now we have a new tax coming on. For us, it's actually better because we compete with the small guys. That's the main competitor we have, and they can't do business. We win. Even if the market would decrease a bit because of the tax, we will win because of something else in the other direction. That's the U.K. market. I'm not going to talk about U.S. because that's Michael's show. We were in Sweden yesterday, and the Swedes are very interested in what's happening in Sweden because that market is finally regulated from the 1st of January, and there is a little tax on that as well. With U.K. experience in mind, we think that's very likable scenario in Sweden as well. There will be some small companies, two guys in a garage, that can't do business anymore, and that will increase for us. If the tax will decrease a little bit, I think that will even out. That's the major regulatory issues we have in Europe right now going on if we don't have anything from the web or if there's something you want to ask. Yes. Yeah. Hi. Just quickly on the regulations. In Italy, they've got the advertising ban coming in next year. Yeah. Sometime then. It's not quite clear. It's during the first half, I think. You may have spoken about this perhaps publicly, what is the impact on your business? Italy is confusing, to be honest. What they did, they opened up for 60 new more operators, which is good, regulating the market, then a few weeks after said, "Hey, by the way, you're not allowed to do any marketing, you can't get any customers." That's completely, like, in two directions. The reason why they opened up for more operators was they want to get rid of the whole mafia and the black money and all that things. If you don't allow them to do marketing, who will win? The mafia and the black blah, blah. It's not good at all. I think we have a very unstable parliamentary situation in Italy, I don't know what will happen. Right now, we do business as usual. It's a very good market. We have a very good product in there that we acquired. We'll see. If it happens that we're not allowed to do anything, that's where the pod and route design is really good because we can just allocate people to other places where we see growth. For us, if they sober up, to be honest, and allow it to happen, it would be good. If it don't, yeah, we have other uses of those resources. Okay. Thank you. Then just a quick follow-up. Are you afraid these things could happen in other markets, other key markets, in terms of advertising, banning of adverts, and so on? I mean. Well, you can say that happens to some extent here in U.K., it's more of compliance. It's not completely banning advertising. We are not in the advertising industry, to be honest. You search, and we give you an answer. Frankly, I might be favoring a little bit more ban because I think there is too much advertising in TV and on the online page, the TV, the newspapers you read. It's just a lot of advertising. The good thing with search advertising is that you have actually wanted to find information about that. It's not me being in my face all the time, play here or do this. It's a much more user-friendly way of getting customers and telling the market what you want to say. Yeah, well exactly that, because in the U.K. they're talking about television advertising after certain times in the evening, maybe 9:00 P.M. or something. Yeah. That could actually play in your favor is what you're saying in terms of the online side. I think it will do, because if I were an operator where I can't invest here, then I need to invest over here. Okay, thank you. Cool. Thank you. We have a question here as well. Oh, sorry. Thank you. I'm just reading the last part of the potentials in legislation on Sweden. You say limited impact from Sweden or none at all. Can you quantify limited impact? Have you already renegotiated all of your revenue share contracts? How much of that is coming from Sweden? Which specific contracts will de facto be impacted by the regulation? Maybe a little bit too much information that I disclose. I say that where we are at right now, I don't think we will be impacted because what the offset in terms of revenue will be. First of all, the market is regulated. The competition about white players will increase. That will be good for us. If there's a setback on tax, it's 6% for those of you who don't know, I think the market competition and what's happening will level out. What about your competitors on the Swedish market? Are you by far the largest one? That's the challenge we have because to figure out exactly the market sizes of our competitors and ourselves is difficult. There is no external data source that does that because this industry is so new. Okay. Thank you. Okay. Thank you. I think we covered the questions that we had in terms of U.K. tax coming up. We'll take a 15-minute break, and thank you. Thank you. Good afternoon. I'm Mike Daly. I'm the GM of the U.S. for Catena Media. I have been with Catena since this last spring. I've been in the U.S. iGaming space since about 2010, helping some of the U.S. vendors come to Europe, and then as the U.S. started to take off, helping grow businesses there. Prior to that, I'd been about 15 years in the U.S. gambling space, in the land-based side. Know the U.S. pretty well, learning the affiliate business and really helping with Catena's grow out our team there and explore what is going to come, which is what we'll talk about today. Catena came to the U.S. in December of 2016 with our first acquisition of i15 Media. At that time, they were doing about 1 million EUR per quarter, mostly out of New Jersey, which at that point was about a 214 million EUR business. From there, we started to grow that business out, and its series of sites, PlayUSA, PlayNJ. That acquisition also had some secondary assets in sports and other states that we recently announced that we had finalized on that transaction for those secondary assets to become fully ours over the course of the next year. Now we could have finally put a value on sports and everything else, or an estimation on what that market might look like since there's been changes in the legalization thereof. Our second U.S. asset was PokerScout in November of 2017, which was at the same time that Pennsylvania passed a bill to become the second iGaming casino, at that point, state in the U.S. Right now, that looks like it'll probably launch in Q1 of 2019 for online casino. Catena's third acquisition was actually our largest competitor in New Jersey, Bonus Seeker, which we rolled into the fold earlier this year. The idea was to get sort of the beginnings of the business going with a team picked up from i15 Media and then grow it out organically from there. That's what we have been doing in New Jersey for the last few years. In New Jersey, New Jersey has been a great market for Catena. It's been a good iGaming start for the U.S. and the first to landfall. It's been growing at about 20% per year, as a business, that's not including sports, which just started there as well, which we'll talk about later. Catena's revenues in New Jersey have been growing at a faster rate than that 20% per year that the market's been growing. It's been a very strong business for us. We are in the casino side, probably make up from what we understand from our operators and our statistics, because again, this is nothing that's published out there really. We make up, we believe, about 70% of the affiliate business in New Jersey for casino. With the launch of sports, we are now, from what we can gather with our operators, we are now the largest affiliate in sports in New Jersey as well. DraftKings launched there in August of 2018, one of the partners of ours, followed by FanDuel and SugarHouse, and about five or six other operators in September. Catena has been driving literally thousands of customers to those businesses or helping them find them, as Johannes points out that we do, and those are on very healthy CPAs. Less so than what we see probably in the casino side, but still very healthy in these early days of the business. That could increase New Jersey itself to two times the revenues of this year for next year from the sports going a full year, the 20% growth that we've already seen per year or so in New Jersey. That's just New Jersey. In New Jersey, we are the top-ranked affiliate. If you look at page one of Google in the results for New Jersey online casino, everything in the red box here is a Catena site. We are the dominant player on the first page of casino, and many other search terms similar. The same is now true on top ranking in New Jersey sports betting. Everything in a red box is a Catena site. Yeah, we can't compete with Forbes, they're not an affiliate. I'd say we're doing pretty well in the search terms for New Jersey sports. Search terms are very important in the U.S. as we noted, SEO is a much more efficient business, because of Google restrictions on pay per click in the gambling space in the U.S., it is pretty much the only game today. You have to be on top of the SEO, and you have to be in key ranked position in order to be a top affiliate or a top business there. The same holds true going into 2019 in the states that Per talked about, West Virginia and Pennsylvania. In order to be ready for those, you have to start working ahead of the time of the markets. We have the advantage as an affiliate, unlike an operator. The operators cannot put their site up and go live and start advertising, marketing until they pass and get their license for approval. We can't do the business and send them customers until that happens, we can start to build up years before, in some cases, a business, a site ranking, customer base, email lists of people who are interested in these type of products, so that when the markets do open, just like we did in New Jersey in August, when we sent customers to DraftKings and others, we can do the same thing day one for our customers in West Virginia and Pennsylvania. In those states, we've been building sites, playwestvirginia.com or playwv.com, wvonlinesportsbetting.com, wvsportsbooks.com. Pennsylvania, here's three of the seven sites that we've built out there, some again for years, where we have rankings. On top of that, we have many national brands, PlayPicks, The Lines, Sports Sites, Legal Sports Report, PlayUSA, BonusSeeker, focused with Pennsylvania more than West Virginia. Strong national brands and strong state brands that are ready ahead of the markets regulating or going live. A little harder to see here, I apologize, but again, this is page one of Google for PA Online Casino, we're three of the top five primary spots. In between us, one of the casinos in Pennsylvania, Parx, which will be a partner of ours, we expect, when they go live. They've been running social casinos, they've been working on their own SEO ranking over the years. Same thing holds true in PA Online Sports Betting. Three of the top five spots. One of those in the other spots is somebody who's offshore. They won't be competing in the market when it does go live. We're in very good position, we believe, for the states we know are coming next year. Those are just what we absolutely know is coming. Let's talk about the future of the U.S. sports and casino. With just what we talked about, the U.S. iGaming market will expand to at least two times the current size next year. Pennsylvania, West Virginia, for both sports, and Pennsylvania for iGaming, casino poker as well, plus New Jersey adding sports for the full year, and plus New Jersey's growth. Easy to see that it's at least double the market size of this year for Catena and everybody else involved in the business. You had the Supreme Court strike down this last spring, PASPA, the Professional and Amateur Sports Protection Act. That opened up the opportunity. It didn't make it legal for sports everywhere, sports betting. It made it so that the states could manage their own decision on these things. States like New Jersey and Pennsylvania already had bills in place that if the Supreme Court struck it down, it would become legal in those states. Both have it legal. One's live, one will go live. I should point out Pennsylvania's live with land-based. Land-based will move at a different speed from online, be wary in what you read when you read about, oh, this state or that state's gone live. Make sure you understand whether it's land-based or online. They will run at different speeds because one is a little easier for the state to get up and running. It just involves setting a kiosk in the casino that already exists versus getting up and running with a new platform and new operators for sports betting. We'll be going state by state, these states will be going. Online casino and poker, which has been slow since the start of the market in New Jersey. Pennsylvania was expected to start to help that move along because Pennsylvania, unlike New Jersey, isn't viewed in the U.S. as a gambling state. New Jersey with Atlantic City and Nevada with Las Vegas and the rest of Nevada are viewed as gambling entities, gambling-run states. Pennsylvania was viewed as a model that if they can make it work there, it could probably work in other states. With sports betting happening, that's going to put pressure on other states to move ahead faster even on casino and poker, we believe, because it's going to show that they're going to have to set up their regulation bodies, et cetera, to do online sports betting. Online sports is not going to be as nice a tax revenue driver as casino, maybe, just because of the actual margins in the businesses. We believe that we will see casino and poker also start to move at a faster rate over the next few years. That's not just us. Many analysts say the same thing. Let's start with casino and poker, which may be the less interesting of the two, but I think it's still a very interesting looking business for the next few years. This is today in the U.S. in online casino poker. New Jersey, where we are and we're the dominant affiliate, and Delaware, which is pretty much a one operator business, so not great for affiliate trafficking, and it's a tiny population. This business, which has been healthy for Catena and has justified our acquisitions there and given us good return on those investments, is just 3% of the U.S. population. About 13 million people. There's also Nevada, which is a poker market. We do business there, but again, only one operator left running poker in Nevada, online poker. Again, not the best affiliate business, but been very good for Catena overall. By the end of next year, this is what we know will be. Pennsylvania goes live with iGaming. Fifth largest state. More than doubles the size of the population that can touch iGaming in the U.S. If Catena can maintain our position, and we showed you where we stand on the slides in Pennsylvania on our ranking, we should see, hopefully, something along those lines in terms of our own growth. There'll be more competition. Catena knows how to work with competition. We do that around the world, we have lots of things to leverage and lean on and learn from. There will be more competition and that may impact our market share, but we don't believe significantly, especially since it is an SEO game and you have to have already been playing in order to win in the way the U.S. is running right now. 2020-2022, casino and online poker could be very interesting in the U.S. These are all states that over the last few years have thrown up some sort of iGaming legislation or bill that didn't make it through. These are the most likely to see something come up and pass in the next few years. You get New York, which is almost double the size of the Pennsylvania, New Jersey market. You've got Illinois, the same size as Pennsylvania, effectively. Michigan, same size as New Jersey. A number of other states in there. If any few of them pass each year, we could see, again, a doubling of the market over the next couple of years after 2019, going up to almost 25% of the U.S. population. That's just 25% of the U.S. population. There's still lots of other states that are now talking about sports betting, et cetera, that could tack on casino and poker, probably after that. I'm a pessimist when I say anything getting through a political structure is all intact if they put up the bill with everything. Maybe one gets through, but one is good for a start because it gives us other verticals to go on. That means the next couple of years for Catena, where you see New Jersey continuing to grow at least 15%. Maybe it slows a little because of Pennsylvania. Maybe it continues above the 20%, but the online portion of that business has been growing very healthily for five years and has not shown an end in sight. Growth in 2019 from Pennsylvania coming on in Q1. New New Jersey entrants. We've got companies like bet365, Playtech, talking about how they're going to enter the U.S. We've got Golden Nugget in New Jersey, which has yet to launch their online sportsbook. They've been a dominant player in the online casino side. We've got a number of other players that will be coming in. More players mean more marketing. They have to capture new players from these other sites. The other sites have to defend that. More marketing means more lead generation focus. That's good for Catena. Pennsylvania 2020, we'll see New Jersey grow at the historic rates, 10%-20%. Pennsylvania grows probably at least 30% because they're not going to be live most of Q1 next year we're projecting. That means they pick up another quarter. That's 25% more growth. Plus there's growth on top of that as more entrants come up to speed and more entrants enter. Again, very good times for Catena, who are at the front of the revenue curve, where we get paid when those customers make a deposit, we get our CPA rates. We don't do rev share so much in the U.S. today. We analyze that all the time, but at the moment, especially in new launch markets, it seems very favorable for us. 2021, if half of those casino states that I listed on the other slide go live, or by 2022, we could be looking at two times the population of 2019 or four times what it is in 2018. That's not the most interesting thing about the United States. Sports betting. It's been talked about by everyone. It is the most interesting thing I believe ever to happen in U.S. casino. It may be the most interesting thing in the world right now in the gambling front, but that could just be my American take on things because we're a little self-centered. Here's today. Sports betting. New Jersey. Catena is there. We're doing very well as an affiliate for the players. I don't know what percentage of the market we make up yet. It's all very early days, so it's hard to tell what's going on. We know the market's growing and growing well. Handle was up 40% in October from September. It's doing a quarter of a billion USD, I think was the handle in October. Good start. Been a good start for Catena and our partners. More partners still coming live. More partners joining Catena as they recognize the need for affiliates because some of the big players here in Europe have not been the big players yet in the U.S., and I think some of them are going to want to correct that, and that means more marketing spend. New Jersey is live. Pennsylvania and West Virginia have passed bills for online sports betting. Have not gone live yet. Again, Pennsylvania went live a few weeks ago, as did West Virginia, with land-based. Technically, they should be in orange like these other states. I just didn't update the slide yet. These states have land-based. I've been asked, how does the land-based impact the online? I think sports betting getting approved land-based is a good thing for Catena in two ways. One, if I'm Mississippi, which is now live with land-based, and I look at my revenues compared to New Jersey, where upward of 60%, I think it was 70% in October of the revenues of the handle was coming through mobile. If it's not in Mississippi because they don't have mobile, Mississippi is going to start to look at how they restructure that to add those things. Same things with New Mexico or Oregon or Nevada as they go. Also, if they don't, there may be opportunities for Catena as a lead generator to help with the land-based businesses. It's not something we've traditionally been in, but it's something worth exploring, especially now that many of the land-based casinos have better ways to track patrons. We might be able to actually determine what an NDC is in a land-based casino, which has been historically the challenge with being an affiliate to something land-based. Some opportunities. By 2019, end of 2019, West Virginia and Pennsylvania will be live with sports betting, taking the market from 2.75% of the population to about 8.14% of the population, Pennsylvania, West Virginia, Nevada. West Virginia is not a very big state, but it sits next to a very wealthy county in Virginia and not too far from Washington, D.C., for one of its casinos, at least. Nevada will go from a quasi land-based business, where you have to go into the casinos to register and then can use a mobile device, to most likely go to a full online. Again, not a bunch of people in Nevada, 3 million, about a third the size of the New Jersey business. If you look at the New Jersey numbers, you might think that Nevada might be a third of that over time. Again, these are all good ads to a business that, for Catena, isn't going to take us a lot more structure to do this. We've already built for this team for next year. We are ready to go. If some states, we may pick up another writer or two for sports writing in various locations. For the most part, the 19 people we have in the U.S. are the team for 2019. Upside revenues should go more to the bottom line and less to people. 2020 to 2022 is just the U.S. potentially going gangbusters. Everything in yellow is a state that has put up in the last 12 months, some sort of sports betting regulation, a political bill. Most of them didn't make it through in 2018. I'm not shocked, and no one should be. That's how the U.S. politics work. We've got states like Michigan and New York. They've been close for a while. Michigan still may make it by the end of the year. They've gotten their lame duck session going on. Probably not. Probably get through next year. They've got to figure out some things on how the tribes work with the state in places that have both and who's going to get the revenues. Sometimes we make the poor decisions of saying, "Oh, we're going to give up 90% of the revenues because somebody else might get 10% of it." We'll get over that, especially as West Virginia, Pennsylvania, and New Jersey show to these states that these are businesses that can be done outside of the gambling locations of the U.S., and that there's money to be made here, and that it was acceptable to the U.S. population. It's not nearly the same vice as casino is viewed. Lots of states. A couple each year doubles the effective size of the market each year, bringing us to what could be, and I'll say pessimistically, I don't know that it will get to that number, but it will at some point. 43% of the U.S. population could have accessible online sports betting by 2022, going from a little under 3% today. New Jersey started middle of Q3 this year and growing well. CPAs are lower than casino. We expected that. That's what happens in the rest of the world as well. It's a larger target audience, so it's a volume play with sports. Extremely high volumes initiated a pent-up demand, and Catena helped with that because we had lists and emails of people who've been waiting for this for literally years. We will now see some seasonality. There'll be the seasonality of the sports betting in the U.S., New Jersey launched at the prime time, the beginning of the NFL season. That from everything we understand from working with operators who've been in some of the offshore markets or gray markets, that's the peak of the U.S. sports betting season. Everything from there goes down a little bit, picks up again in Q1 with the NFL playoffs and the Super Bowl, slows down a little in Q2, picks up again for Q3. Acquisitions may follow a slightly different flow because we're, like I said, at the front end of the revenue stream. We do very well in September. That means the customer should do very well in October because we've brought them more customers who then get some portion of them get a full month in October. Good times, though. 2019, market expansion, Pennsylvania, West Virginia. New Jersey entrance, more people coming in. Full year of sports betting. 2020, as I said, could double the size of 2019. 2021 could double again, could more than double by some people's estimates. Conservatively, we're happy to see it double. This is from Eilers & Krejcik, who are analysts of the U.S. Their estimations are 57% of the U.S. population will have access to sports betting by the end of 2022. Our slide showed you that we were projecting about up to 43% could have online sports. Now, this is land-based and online, but 43% means there's still a lot of percentage to go, or 57% means the same thing. There is this years and years of a growth market in the U.S. ahead. Where is Catena in relation to being ready for all of this? We talked to New Jersey and Pennsylvania and West Virginia, but we believe we are in pole position for most of the United States. This is Catena's business in the U.S. today. These are our monetized sites in New Jersey and Nevada, where we are actively working with operators and driving CPA deals to them for casino poker and sports. We have the pre-monetized sites where we have, as we showed for West Virginia and Pennsylvania, potentially numerous sites that are live and running and driving traffic and gaining SEO ranking. They just can't deliver customers yet because we can't do contracts yet because they're not legal markets to do so. We're ready for them. In states like Pennsylvania and Michigan, we're actually doing some things like iLottery, where it is legal with the state's lottery groups. That's not something I'm going to even delve into this whole presentation on. Lottery is a whole another vertical of the gaming space that could go across the United States in its own way. Catena will be involved in that as an affiliate for that business as well. We have the build-out sites. These are all the states that are not as close to the bone or as close to launch in our belief and our understanding. We have domains there. We have site frameworks. We have things that are underway that I wouldn't want people to be spending a lot of time looking at. What we do is when we have cycles that are downtime, for example, New Jersey's launched now, Pennsylvania is behind schedule for online, we've been ready. We use those same launch teams to work on Illinois, Ohio sites so that those sites are being built up and ready, so we don't have to have a whole new group of people work on them when those states do come. If we can plan ahead of this, and we are, because it's not a matter of if, it's a matter of when these states happen, Catena can build our teams out such that we don't have to scale our own teams by two to three times if revenues are doubling or tripling. Yes, we will add some people here and there for sports, for BI, for other things that are important, SEO, for things that matter and are critical, part of the root structure where we can't maybe rely on Malta because we're growing too fast. Those will be small numbers compared to the revenue growth. People will not eat into the margins of the U.S. is what we're projecting. It should be higher margin as we go along. We have the national brands. This slide is all about state brands, Play Michigan, Play Ohio, michonlinesportsbetting.com, et cetera. We have national brands as well. If you look up in the U.S. legal online sports betting, online gambling, sports gambling, or any other series of other generic terms, you'll find Play USA is the top ranked on Google in the U.S. for those searches. If you look up PA sports betting, Illinois sports betting, others, Legal Sports Report, number one ranked in the U.S. These are Catena sites. Below those on those front pages, you'll also find some of our other U.S.-wide national brands. Even though we might not have a site live today in Colorado, we have sites live today in Colorado gaining traffic and interest, sites that we can then use the link juice from essentially to help our new brands as they grow out there as the local brands. High-performance brands in the U.S. that we're going to be continuing to spread. Then as we've talked about, we have these 30 or so global brands that Catena recognizes as good to invest and focus on worldwide, which we'll be bringing to the U.S. AskGamblers, about 20% of their traffic is announced yesterday, said yesterday during this presentation comes from the U.S., not a lot of that from New Jersey, but we've launched them now in New Jersey. The team in Serbia has been working with us and getting that brand out and going. We'll do the same with some of these other brands. It'll take time to germinate in the U.S., but they will because we know they're good brands. Yes, we're growing more brands in the U.S. than we say at Catena that we're going to focus down, but we're in a different phase right now in the U.S. We want to be number 1 through 6 on the front page on Google on every search term that you can do for sports or casino or poker. We have to have a lot of brands because we don't know what's going to stick in New Jersey versus Pennsylvania versus Michigan. There are different sports. There are different teams. There's different lingos, dialects in the U.S. We have to appeal to all of those. Then as the markets mature a little bit, we'll start to slow it down, reduce the number of sites, 301 of some of them over to one to the other, move traffic, do what is necessary to make it work best for our operators and our customers being able to find through us what they need. What are we doing in the U.S. to be ready? We're focusing on the sports betting preferences. Again, got to find out how does a person in Pennsylvania talk about sports when they search for it online. These are new things in the U.S. because people don't really search sports betting in the U.S. online. It's been illegal. Most people go to their bookies on the corner. They are now trying to figure out what keywords mean. We're all over this. We're analyzing our products to the markets. Like I said, we don't need a lot more for 2019, but we are looking at what can we be doing better, more media into our sites. Google has been prioritizing video, we're doing more video. We've added video content people, in this last year or so. We're doing production of picks on playpicks.com. We do videos about five times a week. There will be more of that across all the channels, video reviews for casinos, products, and continue SEO work. That's the game in the U.S. Google at some point will change its policy in the U.S. Not next year, I don't expect, a couple of years. We'll be ready for that. Again, we do PPC in the world today. Catena understands how to do that. We know how to balance that. We'll be doing the same things in the U.S. and having a strong position starting with SEO gives us a leg up on all of it. Market analysis for niches we can serve. Things we found very important in New Jersey we believe will be important in other states. Education, training, advice. That's what we do at Catena. We help people learn how to gamble online. What does it mean for a money line in sports betting? Most consumers don't know that in the U.S. when they go to a site online. What are these odds? What am I looking at? Odds comparisons tools, those sorts of things. It's not rocket science. We just do it well and will continue to. There are strategic acquisitions that are possible. We don't know clearly who our number twos are in the U.S. yet. We have not seen other large affiliates enter. There are number twos or threes or fours or sixes or whatever they are in various states, and they may be worth looking at. There's also technologies, programmatic media, other things that others might be doing better, that might fold well into our portfolio to help us improve ourselves. That is the U.S. in a nutshell. We're obviously very excited about the U.S., as everyone is. Even taking a pessimistic or a conservative view, it's very hard to see how the U.S. does not take off as a major business for Catena and just the iGaming business in general. Catena believe we are very well-positioned. We've built out a strong team. We've put ourselves in great shape with state domains, et cetera, and we're looking forward to the road ahead. I will, at this point, open it up to questions. Yes. Start here. Yeah. Hi. Thanks, Michael. That was great. Just two for me quickly. On CPA levels, can you give us a sort of a range in terms of CPA on sports? What sort of range are you seeing in terms of an absolute number? I don't know that I can give you absolute numbers, but I think Catena at previous things has set out a range on our CPA on casino. Yeah. We're seeing about half of that effectively on CPAs for sports in New Jersey. Each state's going to be different. Tax rates for Pennsylvania for casino are higher, so it may see 30%-40% lesser CPAs than we see on casino, which is the EUR 700-EUR 1,200 range, say, in New Jersey for a casino. We put that on our Q3, so we can say that here. In Pennsylvania, though, sports betting taxes look similar to New Jersey, so you'll probably see similar CPAs there, is our understanding. Those deals are not all struck yet because many of the operators are themselves waiting to get their final licenses to go online before we can. We have to get our licenses finalized before we can all strike deals together legally. Yeah. Thanks. In fact, that was my follow-on question just on some states with the betting taxes being higher, i.e., CPA. Are the casinos or the potential online operators there, are they pushing back in terms of CPA? You're saying they're lower. They will be lower. Yeah. Not as low as you might expect from the tax rate, is our belief. Initially, if a casino in Pennsylvania had to pay $10 million for their online casino license, and they had to pay $10 million additional for their sports betting license. They already know they're not going to make money year one, probably from those businesses. What they need to do, because they have shareholders and investors as well, is they need to make these businesses that are going to be good for the long term. That means getting customers in and building your user base. That means marketing. That means marketing spend will be out of proportion with the tax rates, we believe, compared to how it might be a couple of years down the line. More marketing spend means they will focus on affiliates as well, we will probably see higher CPAs than we might expect otherwise, given the tax rates. Yeah, they'll come down over time, but we've said the same thing in New Jersey. In New Jersey, for the last five years since the market opened, CPAs have gone up year-over-year. More operators entering, more competition, more marketing, better CPAs for Catena. When they do start to slow down, I did show you in a series of other states that will be in their early days. Again, the road ahead looks pretty healthy. Great. Thank you. Yeah. What's the intuition behind using the CPA model in the U.S. versus a revenue sharing model? This is something we analyze. We do have a temporary license in New Jersey able to offer rev share. A lot of our customers at this point have not preferred it, and we try to work with our operators on such things. On the sports side, there's the unknowns of what is the expected lifetime value of a sports bettor? What is the average revenue going to be? Maybe CPA, maybe revenue's better. In New Jersey, October, handle went up 40%, but operators' revenues went down. Being on a CPA deal, we were not impacted by that as much as the operators. Though I do make it very clear that I want the operators to succeed as well. Okay. Charisse. My first question is why is the CPA lower for sportsbook versus casino? Is this because of the volatility in the sportsbook margin? Yes. That's exactly why. If a casino hold on a slot pull is 85%-95% return, it's a 15%, say, hold, net effective, that becomes a lot larger. Sports bettings are 10% margins at best, it's just the operator is a lot tougher business even with the taxes on top of that, CPAs have to be lower in order to make it a business that will sustain. That becomes a volume play then. We 16 times more sports bettors in the world than we do online casino players. Do you estimate or predict the CPA contracts eventually moving into revenue share contracts once the market is more set in New Jersey, for instance? It's not gone that way in five years in New Jersey. We're still all CPA there, though we could have been doing revenue share. It is something that we spend a lot of time, and Catena has a good and growing analytics and BI group, and that is something we spend a lot of time looking at, is what makes the most sense. We're going to be studying this heavily as the new markets of Pennsylvania and West Virginia go live because it maybe make the most sense if you're going to do rev share to do it from day one of an opening market. That may be where you find the best cohorts or the longest lasting. Not 100% sure yet. Nobody's really spent a lot of time studying that for new markets because they don't open that often. We're looking at it, and maybe by this time next year, we'll be doing rev share for some of the markets that open in 2019. Okay, one last question, I guess. The entire U.S. case, we have this wave of seven first states coming in. It's not a question of if it's going to happen, it's rather a question of when it's going to happen. I guess there must be some bigger risks in terms of timing of the regulation or nature of the regulation that could hamper- Absolutely case slightly. What are those risks? There are lots of risks. It's a business with risks. The good side of the U.S. is those risks are diversified across numerous states. Each state is, in effect, a small European country. Each one may regulate and do things differently or at different timings, but as a group, that means that you've offset some of that risk by having multiple of them in play. The risks are states moving at slower speeds. Pennsylvania, they passed online casino in November of 2017. It'll be a year and a half probably before they have online casino live in the state. That's much slower than New Jersey that did it in nine months. Maybe Pennsylvania is more the true case than New Jersey, given some political pressures in one versus the other in timing. Pennsylvania could still slide further, but it will go live. Some of these other states will bump around. One state you may see pass a bill and you think they're going to go live, and then all of a sudden, there's a legal challenge from a casino group, a tribal nation, because they're not getting their right share. It's happened like that for the U.S. for years. We have always been one or two states doing this at a time, so you could lose one or two. If we had 14 states put up bills last year and 18 are going to put them up, at least 18 next year, the numbers just get better and better on the percentage chance of something moving forward. Is there still a chance that the federal government steps in and does something federal government-wise stupid, whatever? Yes. Would we do a Supreme Court challenge by the states that are live today? There are states live today, our business would continue to thrive there. The last time we saw the Supreme Court step in, maybe they grandfather the current states, and you might see more states rush to pass it. Most likely at this point, it's past the point where the federal government can really do something, and it is going to be state by state. Thank you. That's it. Okay. Anyone more from the audience? One question. Pre-monetized sites. Are you in discussions or negotiations with operators already in states that are not regulated? In pre-monetized states, while we may be talking to operators, we have discussions with everybody of who might be entering the state, who might be getting licensed. They're not licensed to do a deal yet, nor are we, depending on what the states come up with regulations. We cannot strike any deals yet because we work only in regulated environments. However, there are things we do in pre-monetized states, like I said, with lottery, which it is legal to do, and it's pre-monetized. Yes, technically, I guess it is monetized in just a different channel. There is also social casino and other types of businesses that are not regulated. DFS, daily fantasy sports, which was DraftKings and FanDuel's big business before. Regulated in some states, other states have said it's not a regulated business. We do business there on those pre-monetized sites. Okay. Thank you, Michael. Sure. Okay, any more questions from the audience? I thank everybody for your time. Thank you, Michael. Pia-Lena, please. Financials. My name is Pia-Lena Olofsson, and I'm Catena Media CFO since the 8th of January this year. Prior to that, I have more than 20 years experience of fast-growing entrepreneurial digital listed companies. Catena Media has an outstanding financial track record. The last three years, our compounded annual growth rate in total revenues was 113% per year. We grow really fast. Even if Catena doesn't give forecast, I just want to point out that our run rate in the third quarter is very high. Total revenues on an annual basis for the third quarter would be EUR 110.8 million. We've been able to grow with high profits. Our annual compounded rate on adjusted EBITDA was 87% for the last three years. Once again, looking at our run rate for the third quarter, we would be at EUR 54.4 million. Yeah. Catena Media's total growth was 60% in the third quarter. Our total revenues was EUR 27.7 million. We have been growing every quarter, our total revenues, except the second quarter 2017. That was the year there were no major sports events. That's why we did very little pay per click, and thus got very little paid revenues. As you can see from our search revenues, they have been growing every quarter since 2014, also in the second quarter. We've been able to grow with a combination of high organic growth in conjunction with acquired growth. In the third quarter, and also for the first nine months, our organic growth solely generated in Catena Media was 17%. Solely generated in Catena is assets that we had for at least 12 months. How much have they been growing within Catena? As I said, 17%, both for the third quarter and the first nine months. We will focus more on organic growth going forward, but do still make strategic acquisitions. Not just to build volume, but also fewer, but larger and more strategic acquisitions going forward. Catena Media's platforms continue to generate a vast amount of new depositing customers to the operators. In the third quarter, we delivered more than 138,000 new depositing customers. It was slightly lower than second quarter. The second quarter was spiked by the FIFA World Cup. As Per was saying before, it's not only the number of NDCs that is important, but the value of the lead. As you can see here on the graph, the amount in EUR that we get per NDCs has been increasing since 2017. This is due to, of course, the last spike is a part of the U.S. where we get about twice as much per NDC as we do in the European market. Also we have a little larger port on CPAs, but also when it comes to revenue share, that we have longer lifetime values per NDC, especially in sports betting in the financial service segment. We have a very diversified and healthy mix of our revenue stream. 50% in the third quarter of our revenues came from revenue share. That is when we get up to 50% of the net winnings of the customers from the operators. We could close down Catena, and we would still have revenues for months and even years to come through these contracts that we have. 39% came from cost of acquisitions. That is when we get one-time payment up front. 10% came from flat fees. Flat fees is just marketing on our website. We have a lot of traffic, so it is very attractive for the operators just to market, to show themselves on our websites. 1% came from our fairly new revenue stream subscriptions. That came from our financial service segment, where we have subscriptions. We also have subscriptions now in ParisSportifs.com when it comes to tips on football. We also diversified when it comes to our verticals and our segments. Take the iGaming segment, for example. Sports betting is taking a larger part of the total revenue. Now 37% of total revenues came from sports betting and 57% from casinos. We have our fairly new segment, finance, that stood for 6% of total revenues in the third quarter. We prefer to be on regulated markets. We are not here to make short-term profits on black markets. We are here for the long term to secure our revenues in the long run. In the third quarter, 75% of our total revenues came from regulated or taxed markets. As you know, Sweden will regulate next year, and the portion will be even larger. We have one of the highest adjusted EBITDA margins on the Stockholm Stock Exchange. In the third quarter, we had adjusted EBITDA margin of 49.1%. We have invested quite heavily in the U.S. market and also for the financial segment. Even if we take that into account, we have a little bit lower margin than we had in 2016 and 2017. If you look at the EPS, the earnings per share development, it was not that high, even if we had high margins. In the third quarter, we had an EPS growth of 50%, and that is what we are going to focus on more going forward. We always aim to have high margins, but we will focus even more to have good growth in our earnings per share. Catena Media has a really strong cash flow in the underlying operations. In the first nine months, we generated more than EUR 29 million. That is our main source of funding, of course. Also in the third quarter, we secured a multicurrency revolving bank facility with Swedbank. It is a EUR 30 million facility, and it runs with a floating rate of EURIBOR plus 2.5%, and it matures the 15th of January 2021. Also we have the senior unsecured bond, where we have issued EUR 150 million, but we have a total framework of EUR 250 million we could tap more out of. We have total assets of EUR 354 million at the end of September. Our biggest asset is our intangible assets that we have acquired, all the assets that we have acquired. On the liability side, we have equity of EUR 126.8 million, and we have amounts committed to acquisitions that were valued to EUR 65.8 million, of which up to 50% can be paid in shares. That is our decision, how much we will pay in shares and how much we will pay in cash. We will be more restricted going forward, paying in shares. We will pay more in cash going forward to secure our earnings per share development. The borrowings is the EUR 150 million senior unsecured bond that we have on the market at fair value. The Swedbank credit facility we have not used yet in the third quarter. Questions? Yeah. Hi. Sorry, me again. Just two quick questions. On the regs, the 75%, if you include Sweden, where does that go to? What sort of percentage? We haven't disclosed how big each market is, but we have said that our three largest markets is Germany, U.K., and Sweden, that we aim not to have a market larger than 10%. Of course, the U.S. will probably be higher than that, we will not be sad then. Just so you know about what figure we are talking about, around that figure is Sweden. Okay, thank you. That's helpful. On the M&A, in terms of you are saying you are going to look at more focused targets. Can you just give us a guide as to size you're thinking? Are we talking EUR 20 million? Are we talking EUR 50, EUR 100? What's the sort of range? Give us a range of size you would consider. We won't go in and say what size we are considering. We want to have a really good match. We're going to make acquisitions if we go into a new market or if they have some technology or something that we're after, or if we choose to go into a completely new segment. We'll not do as we perhaps have done before to just gain volume. That's the difference. We will not comment on how large size-wise this will be. Thank you. Thanks. Yeah, there are some questions from the webcast as well, the first one is about revenue streams. From Q3. The first question is if you would like to talk more about the fees of 10% of revenue stream in the Q3. Yeah, let's have the first question first. Okay. What about the revenue streams? How they will evolve or- Yes, if you can talk more about this revenue fee of 10%. Okay, the flat fees? Yes. The flat fees is pure advertising. We have so much traffic on our sites. We have so many millions coming into our sites that the operators just want to market. Take when it was FIFA World Cup, for example. It was very difficult getting marketing on other channels. They wanted to pay a fee to be present on our websites to show their brands. Then it's when we get paid without actually delivering a lead, it's just showing their brands on our websites. The second question is about the subscriptions that are 1% of Q3's revenue streams. Could you please elaborate more on the new French subscriptions model? You also mentioned briefly yesterday in your presentation about this. Yes. We have subscriptions from Paris Sportifs. Here is where they specialize and give really, really strong tips regarding the football and go into detail what they think about different games and things like that, and that we take a fee for. They subscribe on these newsletters that we send out, that is what is in the sports segment. There's another question on the same topic, it's if we're looking into other revenue streams or anything else that you would talk about in this sense? Not at this point. We're, of course, very interested in revenue streams and looking at how we can get paid in different ways. At this point, we don't have any new revenue streams that we are thinking about. No new subscription models? Subscription is a part of our revenue stream, that we could elaborate more around, but no completely new streams that we see at this point. Okay. Thank you. Thank you. I'll just shortly brief you about our sustainability report. Yes, this is me. I've been with the company since January, I have a 15 years background as of Berlina, working in communications for about 15 years. Today, Catena Media doesn't have a report in the sustainability sense, but we will, and we are planning to have that delivered in the beginning of second quarter as of next year. Obviously, a lot of different activities are done already, and one example is that there is a cleanup or Earth Day cleanup day in Malta each year. As you know, the Mediterranean, as well as all other oceans, are polluted with different plastics. Actually, the employees made a terrific job going out and picking up plastics, about 20 tons of them to be picked up in one day. That one will be a focus for us, of course, and also do our share of social responsibility as a company. Therefore, obviously, we will instead of giving out merchandise today, we will donate EUR 100 a person to actually into a project that's actually making new boats for kids out of picked up litter and plastics. Yes, it's in line with our sustainability efforts. Well, thank you, and Per will give you the key takeaways for today. Sure. Thank you very much. I think sustainability is, of course, is a way of a modern world, but of course, is a very important one. Johannes thought about engaging people. If you have a cause and you have a mission, it's quite easy to get people engaged. I think looking after things like Åsa mentioned about, it's not just the fact that it's the right thing to do, but it also an event to do to get people together. As I said yesterday, in this case, plastic isn't fantastic. I think that we have a lot to learn from these activities, and we will do more because there are more and more requirements from this going forward now also from investors. When they invest in businesses, we need to make sure that CSR is high on our agenda. Now, the takeaway from today, we've been through all these points, but what we want to say is that we have a very, very unique and specified competence on understanding what people look for and transform that into business for us and for our business partners. We have utilized the iGaming sector, which is a perfect match for this to grow a very good business, but we'll also utilize this in much more verticals going forward. Obviously, it's a very scalable business model, because as I said, this can be done for the products we have in more markets, but it also can be done in more verticals. By doing the model platform that Johannes was talking about, we know that we can do it quite simple because we can use the same control tower we have in Malta and other locations to drive business basically anywhere on the planet, which gives efficiency and also fast growth, and we can run into new business and new directions very quickly by utilizing that. It has been in some of the painstaking thing to do because trying to transform hundreds and hundreds of sites into one model system, it's a lot of work. It put pressure on your profitability, but once you're through it, not only the fact that you can increase efficiency, but it can also grow very, very quick. To do that, and of course, to put us through that, to create those synergies and create those efficiencies, we need to have the highly engaged staff, which we're working very hard to, and it's a work that you can never let go because the soon you stop working on it, you will lose. It's something that need to be all the time, and I think we're doing a very, very good job there so far, and we will continue to do that good. If we're doing that, we also come up to good opportunities. We have people finding good acquisitions, coming up with good opportunities worldwide, et cetera. One of those opportunities that we came up to in the end of 2016, where we found a company in U.S., and we thought that it would be great to do U.S. because poker is probably going to increase a bit, but especially casino. Look where it took us now when we have the fantastic opportunity with sports betting as well. It's only by people of interest to find new things and try to do better, we will find these things. Then yet again, with all the other changes we have made, we are quite sure that we can benefit not only from an opportunity, but do it more efficient than anybody else. I guess that puts us to the last point here before the conclusion line there, and that is the financial plan, how to hit EUR 100 million. Normally, it's quite unusual to go out and say that in three years we will reach EUR 100 million because three years is a lifetime in doing business and many things can happen. This company did, but luckily now in this case, where we are is that we have an opportunity to show us how to build ourselves up EUR 100 million. We can continue to do acquisitions, which will put us there, but also we will then spend a lot of cash, and we spend and probably dilute the shareholders. U.S. opportunity come up. We know as we saw, we're planning a business on what we know, which is the states that are up and running today, plus West Virginia and Pennsylvania, and maybe also that Nevada is going normal in terms of what you can do there. As I mentioned, that will not lead us all the way, you saw the opportunity that is not quantified yet, but most likely going to happen. That itself will put us to EUR 100 million, meaning that theoretically, we don't, in that case, have to do any acquisitions at all. Will we do acquisitions? Yes, because we think we can benefit from that as well. We have a puzzle ahead of us that we can build, and making it right, the profitability of this company will definitely hit those numbers for sure. Obviously, as you can see from today, I hope we have been able to transform to you a message that we are a young company. We have done a lot of good stuff so far, but we're going through phases. The next phase now is what we prepared, how to go to the next level in this, which is global dominance in more verticals. I hope you want to join that train and see you in a year from now. Thank you very much

Data Source: Quartr Last updated: Nov 21, 2018

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