Good afternoon. Welcome to the 2018 Capital Markets Day of Catena Media, live broadcasted here in Stockholm, Sweden. We have a lot of interesting stuff to tell you today. We have a packed agenda, just to give you an idea about how that looks like, we will spend together a bit more than four hours, I hope, maybe more, where we're going to go through a lot of exciting things. I'm going to start with you with a general picture about the company and the general directions, what we do. Followed down by Johannes, who is our CEO, who will speak a lot about how we do it and how we're getting better by every day on doing what we're really good at.
Coffee time, followed up by Michael Daly, who some of you already met from the Q3 report, who will do a deeper digging into the U.S. opportunity we have to give you a lot of interesting ideas and opportunities there. That should somehow consolidate into some nice financial numbers and ideas how we do that and how we drive that. Therefore, Pia-Lena will come up and talk a bit about how that looks like. Also, we'll conclude about our sustainability work, which is very important to us. In the end, I will then come back, and we'll do a Q&A.
Just to mention that, in the end of each session, we will run a Q&A about 10 minutes, so it will be great if you can, when you come up to your questions, just wait for them until this Q&A in the end of each session, so we can have a productive presentation here. Before we really kick off, I would like to introduce to you Magnus Andersson, who is an analyst that write a lot about various companies here. Instead of me presenting you, I think you do a better job of doing that yourself.
Thank you very much, Per. Perhaps some of you know who I am. I'm writing and analyzing stocks in the iGaming industry mostly. I also do a little bit in beverages and luxury goods. I've covered Catena Media now two years very intensely. I've asked management many, many questions. I'm happy today to be invited to ask some of them in this forum also. Full disclosure, I am also an investor in the iGaming industry in Catena Media and various other companies. I'm going to, after each presentation today, I will start with some questions. We will go to the audience here. After the questions from the audience, we will pick up the questions that have come in from the web portal. Yes. Yeah.
Okay.
That's-
Thank you, Magnus.
Yeah. Thank you.
That is us and our history. To conclude a little bit more about us, we put a full page of text here. It could actually just end here because we're quite super late about what we do, but we thought we should spend today, instead of going through all this, we're trying to stay on this side. Who we are, why we do it, why we're here to stay, and what opportunities we have. Instead of looking into this, I, as the first presenter today, is going to go through a couple of interesting things with you. Maybe this, the first one. Why do we do this? When out traveling with meeting a lot of journalists, when out traveling meeting a lot of investors, I always get the questions: What do you really do?
What is your part in the value chain, and why can everybody else do what you do? How can you make such margins? When will that disappear? Instead of saying, "How can we increase it?" That's the question I get. Is this permanently here to stay or not? I thought we should spend today to make that very clear. My part will be on the overall part, and then my fantastic colleagues will weigh in and give a more detailed view on exactly what we do. The presenters today, as I mentioned, are the ones you see here on the screen. We just have a small part in this build. There's a lot of exciting people here with us, not here today. Some of them are, but that works very hard in the management team.
Underneath this, we have another 344 employees that makes our life very easy because they are such good colleagues and doing a good job. We build our team based on the fact of a lot of different things, not just hire talent. We need to hire the right talent, and we need to have the right structure of the business, and we need to have the right kind of gender equality, et cetera, to do this in the right way. I think we're doing excellent the last couple of years, especially in this industry. Today, we're actually listed in the Allbright Green Report, which is a list here in Stockholm Stock Exchange, that lists companies that have an equal gender distribution within the management team and in the company. We went onto this list this year.
We ended up in half of 47 companies with ambition to become, of course, like in anything else we're trying to do, number one. This were very important to us, Johannes will later go in and say how we build teams and have engaged all our wonderful employees to do this. It might sound like a fancy thing to say in management, but we're actually driving this extremely hard in everything we do in all our sites. We're talking about sites. We have these sites today. These are all sites except the Swedish and the Maltese one that basically have been acquired during the years by us when doing acquisitions. We start from west. We have Michael's hometown, Las Vegas, where we run our U.S. business. We have two different offices in London.
We have offices in Italy, in Rome, in Serbia, in Belgrade, Japan, Tokyo, and Sydney in Australia, where we do around-the-clock work to drive this business forward. If you look at the business model, I think some of you are familiar to this model. This is what we've been showing many times in various form and things. I will spend some time on trying to explain this, but then we'll dig a bit deeper, but also go up a couple levels so you really understand the beauty of this one. It starts to the left-hand side of the picture, where we have somebody out there on Google searching for something. They want to have answers to something. They put in a search word.
When we find a search word that picks up something for our company, we send out and have prepared a website for that to pick up their interest. We're trying to onboard into any of these sites you have here by different methods, either by search word from Google or we pay for it. We do YouTube channels. We do a lot of things to try to attract them to our websites. On that websites, we write about interesting content. We place an offer, if they like it, they go on to our business partners, which you see on the right-hand side. They do whatever they can to make a good journey there. In the journey, they get some customers signing up, spend some money, and when that happens, we charge for our services. Sometimes people want to do more.
They go back to our site, they start from the beginning again by doing search word. That's basically what we do. I don't think it's crystal clear there. We made a little bit another approach to try to explain this in another movie. Here you go.
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 for 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 space flight. 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. As digital solutions
That's what we do. To dig a bit more into details about this, to explain you the kind of conversion journey we do, this is basically how it works. The first thing we do is that we want to identify needs. People search for different things in different verticals, from travel to finance, to gaming, to education, to dating, whatever it is. Within that vertical then that we choose, what is the specific needs? In our case can be that I want to do Forex trading, I need a good tool for it, or I want to place a bet on Manchester United. Where can I do that best? Which casino operators should I not spend time with rather than other ones?
We do that, we want to answer the questions of what kind of question can be answered, what kind of problems can be solved? By that, we build websites for people to come into. How we do that is that we create a lot of information. Today, there is so much information overload, so when you do a search word, you want to be served. You want somebody to create everything and just tell you what to choose. Go back to yourself, searching a hotel room, et cetera, is not very simple to do to all hotel sites and figure out what is best. You want somebody to do it for you. That's where we come in. Once on the site, you're interested and engaged in the site, you want them to be served with offers.
That is according to the search query or something that attracts you, that's what we do. When we have that, people are interested in that, they click on the offer, we have a lead. We have created a lead that we then decide to send to someone out there, our business partners. When we send that, it's not just to send on over. We need to choose to who to send it to because we want to make sure that we and our business partners makes measurable possible winnings and earnings from that. Then we have converted into paying customers. We work in the below with search words. We work with SEO, search engine optimization, to make sure that our web pages are performing very well, the content. Offers, then we convert them, and in the end, we get commission for it.
That's what we do. It's not unique to us. As you see by some brands above me here, there's a lot of businesses doing that, but it's in remarkably few business verticals it happens. Travel has been very dominated, gaming, obviously, but there's a lot of verticals where this hardly exists already. If it does, it's still very early, not matured. That's why our business model has a fantastic future into other industries as well. Every day, our fantastic team is spending time on this around the world. In order to really drive the business forward, our overall strategy has evolved during the years. One thing that we come out and communicated quite a lot is the core focus of our strategy. It's to grow organically by combination of geographical expansion and acquisitions.
As a lot of you know, we have done a lot of acquisitions, history, that made us what we are today. We are going to continue to do acquisitions, but in a different way, as we will explain a bit later. If you look at it, an organic growth, and then geographic expansion and acquisitions, how do we work with them together? First, when it comes to organic growth, there are two elements that you need to be very sure of, and that is how large the market is and how large you can make it. One is first of all, does the market itself grow without us doing anything? We see some markets growing very fast, we see some growing not so fast, but the idea is to understand how much is each market growing.
By understanding that, we also know the potential of that piece of cake that will be ours. There is a lot of internal factors that we can speed up our total market from. That is either we can pay in different ways, pay for digital advertising or AdWords or pay per click, as it is called. We can do traditional advertising like Hotels.com is doing to expand the knowledge about our brands for more people to go directly to us or to click on a banner. We can also land grabbing in this work by doing better job each day to make our market share higher, which is typically we see something happen when the market regulates. In the end, we can also bring our brands to new markets to expand that way.
We have a lot of different multi diagonal ways to grow our business. When we now look at the funnel, this is the funnel we see. We need to fill it up with a lot of things from the top, and in the end, in the bottom should come out something very interesting. That is paying customers or NDCs, that is called in our industries, new depositing customers. We have 3 different stages in this funnel that we work very hard to, and this is what we are good at. A, we do the first, where we do search is going from search on the web to coming into our site. That is the first step of everything we do. To do that, we have experts sitting understanding how Google works. Johannes will tell you why or how later.
We do that to make sure that we improve and get our sites better ranked and more traffic to them all the time. We need a lot of data management, and do that very well. We have done the onboarding part. We do the internal conversion. That is to make sure that you have the person on the site. Now you need to convert them to a lead. I told you how we do that, and the video showed you. That we do by presenting good created content that answer the questions or problems the customer want to have solved. Then we place an offer related to that. Customer click, we have the lead. To do that, we need to have kickass products, which Johannes will tell you a lot of later.
We need attractive partner offerings, then again, a lot of data that we analyze. Last but not least, we have the lead. Now we need to make it money for us and the operator. That's the case where we then send them over to the operator. We make sure that they nurse it in the best possible way to become a paying customers over their sites. It's all about us sending it to the right kind of customer at the right time with the right kind of offer for them to convert into paying. Of course, to do that, we need a lot of good business partnerships, I think that's one of our strengths. We have very good relationships with our partners, both way discussions how to improve the business we do together, of course, we need a lot of data.
As we are a digital company, data is important. When you have done that, we trade. You can imagine that this opening of this funnel is a lot of customers. Then it goes down, and in the end, it comes down a couple of NDCs. Every single improvement we do in that funnel has a major outcome how many NDCs we get. Not the quantity, but the quality. If we do wrong, we will have a lot of NDCs, but they don't generate money. That we don't like. We want to have NDCs that comes down, large volume, that generates money for us and operator. The amount of NDCs is not key. The key is the quality of them, what they can generate for all business partners. Important to remember. This we do for a lot of our brands.
We have a lot of things we're doing. Can you imagine doing all those things every day that we talked so far for thousands and thousands of brands? It's not possible. You need to choose some. You need to choose some brands that give you a good portfolio globally, that answers most of these queries that customers do to make sure that every search word we want to pick up, we send them to the right site that gives the best answer to the customer query. We're using a lot, I think we, in the Q3 report, mentioned that we're doing about 1,200 sites operating today, but it's about 30% doing the bulk of the business, about 80% of the revenues. That's how we're going to continue.
We're going to use those brands, 30 brands across the world, to really fulfill all the search words requirements that are out there. The other ones we will keep on operate, as long as they give us money, but we will not invest a lot in them. The strategy then, of course, in geographic expansion is as well, we have all these brands. Where should we have them? We have today a lot of markets. Our idea has been to come to a situation where we will not have any market being larger than 10% of our revenue. Unfortunately, I cannot stick to that much more because we have some markets today that are a bit above. We mentioned that many times. We have U.K., Germany, and Sweden being a bit more than 10%. Next year that picture will change.
That we'll talk a bit about later, and that's due to U.S. I'm sorry, I cannot stick to the 10% thing, but I think it's a thing you can live with when we explain what we're planning to do over there. The idea is here also that we're doing some of the business. Currently, about 25% of our business is not coming from regulated market. Is that a problem? No, it's not as long we are in markets that don't There's a potential risk for us shutting down. Our idea is that we will not go for 100%. We will go for other, but so-called low-risk gray markets, where we see that, in this case, there's no regulatory risk coming up.
There's very little things that can happen with this, and therefore, we definitely believe that we can operate in those, especially as most of our operators do. The target is to make sure that the vast majority of our business is regulated or taxed, because then we are very safe, but a small part will always be also from non-regulated, but so-called safe markets, like today. Okay, the last thing, acquisitions we talked about. Less is more. What we learned, we've done 34 acquisitions live to date. A lot of them have come in, either as single brands or with a lot of brands underneath them, creating all these 1,200 brands and some 14,000 domain names under our ownership today. The key thing is that we have done a lot of cherry-picking out there.
If you look what is available today, there's a lot of good things out there, but they're either too small or they're too complex built, meaning that if we take them over, we don't really benefit. We increase our cost running them, and we don't get the kind of revenue we need to do so. We've done a lot of acquisitions. We're building them up to what we are today, but at the same time, it did cost a lot of money, a lot of dilution, and EPS has not been growing that much. That be here to change. Of all the 34 acquisitions and 1,200 brands, we don't need more brands. That's clear. Can we say, we have scanned the market and we don't find that much good things anymore to buy, in the markets we're in.
Therefore, we focus all our efforts on grow what we have. We know that if we focus on a couple of things, we will run the business more efficiently. Becomes quite clear, doing all this work that we need to do to rank good, doing that on 1,200 or 30 brands, you figure out that by yourself. It will continue to be a consolidation of our efforts into driving these key brands around the globe, and that will make us also more cost-efficient. To talk about this a bit more, and if you look to your right-hand side of this page, try to explain a bit how we can look out there. There are hundreds and thousands of brands out there and a lot of affiliate companies trying to drive traffic there. There are two different things.
Either it's a kind of cluster of brands that you buy, meaning that it can be a company that has a quite good revenue, but there's a lot of brands within that cluster that generate all that revenue, meaning that you need to have a lot of focus on a lot of different brands. Or there's a single brand, one brand, one team focusing on the brand. When it comes to domain management, it's of course easier to work with one than many. Also the revenue will be more if you do one per brand than if you do a lot. That also means that the way you have to operate this brand efficient is completely different between these two, that we learned during the years, and that's why we're focusing on a few strong brands coming forward.
That also means that you get cost synergy effect because you can use that brand in much more markets. You have a geographical expansion efficiency, and because you can also scale them in any way or form, that would be better. The logical acquisition would obviously be go for the single brand position. The question is that very few out there that fulfill all the quality we want to see, that operate in a good way, that has the revenue we want to see. That's why we have gone down in our acquisition frequency. Why add something if it doesn't give a clear impact to what we do? Doesn't make sense. Going forward, if we look what we do, we are going to build our products focused on what we have.
To do so, we believe we can get very focused and we can also bring this business model to new verticals ahead. As we said in the movie, what we're good at is not specific to vertical. We know very good how the search world works. We are an expert on that. We also know how to build product that really stands out and to get the customer's attention. We help customers to make a choice, to make sure that they come to something that benefit the time why they started the search in the first place. When they have that, we are very good on creating them to a high-quality lead. We create revenues from our business partners, and we maximize profit both for us and for them, because we send them customers that they would otherwise never, ever would have.
As I mentioned, this is not iGaming specific. This can be applied to any kind of business vertical out there. Our message with this one is that we are not a gaming company. We hear that very often. We're not a dedicated iGaming thing. We're a lead generator. What we do on this page you see has nothing to do with gaming. That's why also our promise for the future is that we will be more than gaming. We started with the financial vertical, about 10 months ago. Our mission has become very large on that one, but we're still very early in the life.
At some time, at some point, we will scale into more verticals, but not before we feel that we are ready, what we do, where we are today, because there's a lot of digging to going on in iGaming, U.S., and in financial still. Important thing then is profitability management. Historically, as I mentioned, a lot acquisition drives a lot of people. We actually been growing cost the last couple of years faster percent-wise than revenue, meaning that we're seeing a margin deterioration. We want to change that, and I think the Q3 report showed the first step in this, where we want to see efficiency in our operations, the brands, that we can focus. We will see, that also mean the headcounts will be less growth. We will grow headcounts, but not as fast as before.
We will also have no need of growing other operating expenses as fast because with fewer brands, we can really focus the cost and investments we do to those instead of a lot of others. Acquisitions, as we mentioned, we will do them more focused, meaning that either strategic large important where we can have efficiency of scale and cost synergies or something that strengthen the core in the business where we believe an entire company will benefit from this. It's clear that profit amount and EPS is more important than margin. Does that mean that we intend to reduce the margin dramatically? No, it's not. But we will always sacrifice percentage margin before profit amount and EPS. That's clear for the future. Talking then about profit and this one, I get a lot of questions on this. How is this possible?
You will be halfway in the end of this year, approximately. After that, you have two years to double your business profitability-wise. Ideally, of course, if you double the profit, we should not do a massive dilution so that EPS won't move. We show this business in the third quarter. I want to give some more details to this to give you our idea how we think. Every day, we get more news about what happening in Europe about regulation, et cetera. But if you go back, there's been a lot of talks about regulations for many, many years. We have U.K. regulated, we had France regulated, we had Denmark regulated and so forth, and still we conduct very good businesses there. The thing is that you need to live in regulation.
You need to eat, sleep, and breathe with regulations because otherwise, you will lose your business potential. What we are good at is to make sure that we can generate good business in regulated markets. You will have short-term bumps for sure, but those not taking regulation seriously will have even more bumps and will be wiped off the market. Then we land grab and we increase our market share. Yes, when something happens, we will see impact. Luckily, we have things to mitigate that with by being more cost-efficient, but also with the U.S. opportunity we talk about later.
Therefore, we still believe and are secure about what the efforts we do to grow organically and invest differently, that we will be able to do a double-digit growth going forward, even though we see movements in U.K. to more taxation, even though we see Sweden and all these other markets. That would put us a big way because the idea is that we won't do it without adding a lot of cost. For every single EUR we increase, we'll put a lot of that directly to the bottom line because in these markets, we already operate. The market expansion. We will go into more markets by more brands that we already operate, meaning that we have a quite low additional cost increase for reaching a new market. We run the brands already.
It's translations, it's localization, but that's much, much cheaper and more efficient than acquiring, and entering that market. Add U.S., the opportunity. Mike will talk about that more. If you look today what we have and how we see that market is just growing in terms of reach by more states coming on and still the states that are there not matured yet, we will see a massive growth potential there. Cost efficiency improvement that I talked about. If you take that, we will not hit EUR 100 million, maybe. U.S. is a big bracket. If you exclude U.S. and the things, we will not hit EUR 100 million. We will have a certain delta. The question is, what can make up that delta without diluting?
We could do massive amount of acquisitions, which I think was the original idea, we do not want to do that. We want to do a couple of few acquisitions to strengthen, that build a lot of money because we find synergies in doing so. That will not have the same impact of EPS. What I have said so far is based on what we know in U.S. so far, meaning New Jersey, meaning West Virginia, and meaning Pennsylvania. That will be up and running as it looks now in the end of Q1 or early Q2 next year. We have another seven quarters, I do not think you disagree with me that we can consider some more states going to open up in that time. Everything on that will help us to close the gap to EUR 100 million.
We will be very close even without doing any additional states in U.S. and any acquisitions, the delta there can be filled up with either acquisitions or additional growth in U.S. That's why we feel very confident we can hit that number. It looks very promising. By summarizing, I think the third quarter showed also that we are going that direction. We have taken the steps now to walk away from massive acquisitions frequency. We are putting more control on our costs. We are putting more efforts to grow organically and have a strong rate there. We have the U.S. opportunity, as I mentioned, we have not stopped acquisitions, we are going to do them differently.
That concludes my part, and I think it's time now for Magnus to start doing some questions, and then we open for the floor and potentially from the outside world to answer questions as well.
Okay. Thank you very much. About a year ago, you presented the 2020 targets.
Back then, it felt like very far into the future.
Now it's getting closer and closer. If I were to play the devil's advocate here a little bit and say, what can derail this plan? What are the things that you worry about when it comes to reaching these targets for 2020?
Normally at Catena, we're not the worrying kind of people, but if we're trying to find something to worry about, it's of course something happens in the U.S., change the directions of launching states. I don't think that will happen when they see what we are. I will get the questions, whether you think Google will change. Well, for sure Google will change. If you build size to play with Google likes you. If you try to fool Google, they don't like you. We do the first ones. There are, say, very little plans for either. Additional, very strong regulations, but also then we need to see the upside. We're not seeing a lot of things actually stopping that plan at this stage.
We're looking it up all the time and trying to mitigate, but we haven't come up to something, really the thing that we're thinking of more than others.
Okay. You talked now about bigger purchases.
Fewer and bigger purchases. Traditionally, you have paid those purchases with stocks.
Of course. Is there a risk for further dilution of the stock if you make big purchases now in the future?
I think, first of all, dilution is not the evil. Dilution, if you do it in the right way, will actually grow your business because you buy something that will generate more profits than you would have done before. I think what we look at is that just adding something that just only adds revenue and comes with a lot of cost that you cannot do anything about, that is over. What we want to do is something where you can put these two things together and scale off cost and increase quite dramatically in revenue and secure your brighter future. If you do that, you can also prove that you have an increased shareholder value quite quick. That's how we look at it, more long-term benefits for the company than short-term quarterly increased revenues.
Okay. When you look at the map of the world that you had-
on here before, you could see, perhaps, I thought I could see a little bit of a gap there for the big Spanish-speaking world.
Is that something you're looking at or thinking about now, or what's the plan for
Of course
part of the world?
It is a big language coverage even in U.S. There's a lot of Spanish going on. We need to consider that one as well. Obviously, we start with Spain. Nice movements, taxation difference to the better, more licenses than handed out, and we already have products that we launched there. That is a market that I think a lot of people are looking into to do more business from. By doing so, we'll also have scaling opportunities into other markets due to the language thing. Yes, Spanish is on our list of attention.
Okay. Finally, the Finance vertical, it's growing, of course, it's 6% now.
Is this a focus? Is it more of a focus for your acquisition strategy going forward, do you think?
Why we went in there, because we have a focus area of what to become, and the people working within the Finance are super focused. I think that's exactly how we did it. When we started the Finance vertical, as we started the U.S. vertical within iGaming, we set there a team to run that so that we don't take central resources to do it, to take money from elsewhere. The good thing with this is that they will focus on what their mission is, to become very big in this one. Like Michael is doing for U.S., Nigel is doing that for the Finance team operating from U.K. We have to remember that Finance in Catena is where gaming in Catena was six years ago-
or in the beginning. We're building something there already now, and therefore, we take more cost than income at this stage.
Okay. Thank you very much.
Yeah.
We open up for questions from the audience here.
Hi. Mikael Ossian, Carnegie. I just want to understand your comments about the financial target, EUR 100 million.
That it's possible including the U.S. What part of the U.S. do you really need to reach EUR 100 million?
Yeah
your current presence?
I think if we do nothing in terms of acquisitions and continue business as we do, growing the normal business organically, minimum 10% a year, adding the states we know that will go live on top of what we have today, which is West Virginia and Pennsylvania, we will come very close to EUR 100 million. We need something more to hit EUR 100 million. To do that, either to do one or more acquisitions or that more states will go live until the end of 2020. The delta is very small now with the big growth we see in U.S.
Okay, thanks. Can you maybe explain what the difference is between last year's sort of expectations and the addition of the U.S., what is the difference in Europe mainly? What has happened there?
I think the idea with going there was to continue massive increase of acquisitions. We can see there and also got a lot of comments from the market is that is nice, but on the other hand, the EPS is not growing at all. With profitability increasing, but we don't send value that way to the shareholders, it's also been a big demand that we need to start looking at that. Instead of diluting too much, we'll start to collect more cash, use that to pay off our debt, not only to reduce the debt levels, but also at the same time increase EPS. That's the change of strategy we do.
Yeah. Hi. Martin Arnell with DNB Markets. I have a question on what do you really mean with low-risk gray markets? Can you define that a little bit more and have some examples?
Typically, take an example. We operate in Japan. We run a business there and you can ask us why do we do that if it's not licensed or taxed or in that sense. Because when we acquired that asset, we checked with the local authorities if the way how we run the business, is that okay? What we don't want to do is to run a business and we can make great money from it, and the day after regulatory bodies come in and say this is completely forbidden or something happens, meaning that we overnight can lose a lot of revenue. By that also profitability, that would be hit to our numbers and a risk for our investors.
The 25% of the business we have that is not regulated or taxed today are coming from businesses that are either soon to become regulated like Sweden or markets where we deem it to be no or very little risk that it will ever become regulated or at least impact us, that overnight impact that we will lose in revenue because of it. There are super gray markets like China we don't want to touch in our ways. Other people might decide to do that. We don't want to do it because it's too much risk. There are the markets that are more so-called safe to operate like we do today. We have 25% of our business from such market. When Sweden is regulated, U.S. taking more part, that will close the gap to 100.
On the other hand, we want to grow these markets that are not regulated in that way yet to make sure that we don't lose opportunities out there.
Okay, thanks. Also, what could be a new vertical for you?
It can be a vertical representing very much what we stand for today, meaning that there is a lot of marketers out there that find it very difficult to get efficiencies from the current marketing, that everyday experience that digital marketing in general increase by cost and acquisitions every year. They still have customers they need to connect to. I would say it's pretty much verticals that go in there without being specific.
Thank you.
Yeah.
Yeah, I have a question regarding the financial vertical. When you say that the financial vertical is where Catena Media was 2012-
What are the underlying trends that you see that make you say that?
Well, I think the underlying trends is that finally becomes quite clear in that where you should focus your efforts long time. When you wash away the binary options, these kind of things, which is very volatile. When you wash away the trends having crypto, something stands out that is always in the movement and people are interested to pay for information for, meaning stocks, CFDs, whatever it can be, Forex. Those are the trends that we switch into and the need of information related that we can translate into affiliate lead. I think it's very easy that we go in and say we want to do a lot of advice into crypto stuff, but obviously see it's not the right way to do. You need to bet on the horses that will live a long time, and that's what we're doing now.
How will you be affected if there is tighter regulation or if there is a financial bust maybe?
Well, that's always the case. Like anything, when the business do good, people want to have information about that. When the business is bad, people won't have the information on that. If you create information about something that people are interested, you can always convert a different kind of traffic. I think that's the expertise and trends we are learning now to build this and that's why we're saying that this will not be a EUR 100 million business by itself next year. It's a huge business like we saw last capital markets day that won't address. To do that, we need to do our homework well and understand how this works and build that slowly. You will always have up and downs, definitely. It's about using them in the right way that is important.
Okay, thanks.
Yeah. Okay.
My name is Åsa Hillsten. I work as IR manager in communication. First of all, we have 200 people following us today-
Good
which is great on the webcast. There's a question, a large acquisition, could that be a merge as with XLMedia, for example?
Well, it could be a merge. Of course, we're looking at everything that is in our field. We're looking at our competitors every day to see if it's a good buy. We're looking at different verticals, things that we believe could come into our vertical and destroy our life. We're looking at everything. Just for your information, we're looking at about 50 to 70 cases a month today. We're having our radar out there and doing a lot of that, not only because we want to acquire them, but we also learn a lot from it, that we take opportunities to grow our business. That can be definitely consolidation within a vertical.
Ready. Thank you. Developing Italy.
That's a new question.
Tell us about it.
Well, I think it's quite clear what's going in Italy. There will be an advertising ban coming in, as we know now. Of course, when that happens, we need to act accordingly. How it happens and how it will affect, we will see then. From a long-term perspective, Italy will not stop the sports betting. That's for sure. The question is just that the government needs to make up their mind how they're going to run that efficiently. As any government had tried to regulate, there will be bumps in the road, but in some part they tend to come out quite good for the benefit of the consumer, to be operating in a more safe environment in terms of gambling addictions, et cetera, but also in a way that the states get a fair share of the taxation so they can drive this good.
The road there in Italy now seems a bit more bumpy than other ones, but I think we will program the GPS in a good way in the end to come to our end destination. For now, we act according to what we know.
Thank you. No more questions from the webcasters so far.
Okay, thank you. That was the general stuff. Now you need to know more stuff about how we really do this. I would like to welcome Johannes Bergh, our CEO. Thank you very much.
Thank you. This is me when I'm not wearing a stupid mustache. This is Movember. We do a lot of things in the company to engage in different matters. This year, as last year, we engaged in the Movember Foundation. I think this is a great opportunity for us because in this room and the 200 following us are investors. In this presentation, there is a link where you can click, and you can donate money to men's health. Next year, we'll have a capital market day maybe in December, so I don't need to stand here and look like a Mexican without the hat. Anyhow, I'm here to talk about what we do and how we do things. Operations is running the business.
That means to figure out how to get things done in a really efficient manner, then not be satisfied with that, but start figuring out how can you do that better. There's a lot of talk about innovation. There's a lot of talk about lack of innovation in companies. My experience that if you don't have a sufficient, efficient way of running things, you can never innovate. Innovation is about creating new customer value. Now, I just want to give you a question so you can think of this when I'm going through the other slides. We're in a business where users are expecting everything on the internet to be free. Every piece of information is supposed to be free. We know that newspapers are trying with payment walls and so on. They're not so successful.
If everything is for free, how does that affect what we do and how we do things? I'll hopefully try to explain it. I'm just going to bring this up again. As Per said, on our AllBright report, we're on 24, 27th place. We don't only engage in men's health. Last month it was the pink ribbon. This is pictures from every single location we have. Catena Media people are super engaged. We did pink cupcakes. We sold them for quite a premium to get money. We gave away that to women's health. Again, click the link. Why am I talking about engagement? Well, we come to the point in our company to understand that, yes, we're a tech company, yes, we're a lead generation company, but it doesn't matter. It's still people that build technology.
To my knowledge, luckily, there is not an AI who can do it for us. That's why we need to build people. That's what I'm going to spend a lot of time talking about how we do. The other part is innovation. For those of you who were here last year, we talked about the Dragon's Den that we do, like a big yearly event when we have EUR 10,000 for proof of concept and stuff like that. I'm not going to spend so much time on this today because I can talk about that forever. We did the big Dragon's Den this year. We had an awesome winner. That's something we have to say, yes, we do it everywhere in the company. Everybody talks about culture. That culture is the most challenging thing for a strategy.
If it's people, if it's team, what do we know about teams? We know that diversified teams are much better than homogeneous teams. We have very diversified teams. Diversified teams is way harder to lead than a homogeneous team, when everybody's exactly like I am. That's why we invest a lot in the leaders because if we want to have diversified team to do better, then we need to make sure that we can lead them. On the flip side of all that is that every company has viruses, and there is politics. We don't want that. We try to kill it at first sight. It's not supposed to happen because that's something that's contagious and should be eliminated. Per talked about scaling. Yes, we're going to scale by going into new markets with the same products, meaning we don't need to add as much resources.
In order to be in that position, we have to have a platform to stand on. If we have different platforms in different markets, well, you get it. That's what I'm going to talk about. I know that repetition is a pretty good way of learning stuff. It might be that I'm going over a few things that Per already covered. You just shout out loud, and I skip forward. We have four strategic pillars. One is about products. My colleagues in U.K., they think I'm a bit vulgar when I say create kickass products. That's because insanely great was already taken by Steve Jobs and his team. Why is kickass important? It's because it's a moving target. Status quo kills companies.
We need to set moving targets, and that's why kickass is a pretty good thing to have in mind because what's kickass today will not be kickass tomorrow. If our job is to figure out how to do kickass products, we need to do that. The other part is about relationships, and this started off like us being trying to set a different standard within the affiliation industry in gaming, which we sort of growing away from. Typical affiliates never met a customer. They never met the operator who paid the bill. They just clicked on join the affiliate program, send traffic, money in bank account. We understand that if we can have strong relationships with our paying customers, we can help them grow further. If we can help them grow further, we become a much more important partner to them. That's a long-term competitive advantage.
We have culture, then we have innovation. However, we're a data-driven company as well. Everything we can do, we can measure. I'm basically saying, if we can't measure it simply doesn't work. Because if you can't figure out how to get metrics on something, forget about it. It's not a discussion. It simply doesn't work. If I'm talking about relationship and culture, how on earth do you measure that? Does anyone in this room know how you measure culture? I'm not talking about painting three sexy words in the cafeteria, like curiosity and something like that. How do you actually measure it? I'm going to talk about that now.
Because if we want to build technology, we need to build people, then we need to have the right metrics so we know what we're doing, and if it's not working, we know where to fix, and if we figure out what works, that's where we want it to grow. This is a slide from last year, which I think is amazingly interesting. What it does, it shows global engagement at work. They measure on two scales. It's how happy I am at work or how unhappy I am at work, how engaged I am or how disengaged I am. If you take these numbers, the 21 plus 13 that are highly satisfied and highly engaged, that's 34. Then on the other side, you have 37. It's a delta of 3%.
That means over the globe, there is a negative productivity if you believe in those numbers, and this is a pretty big study. You can go and dig into country specific as well, and yes, guess what? All the countries you think have low productivity have much more of the workforce in the lower corner. The countries where you would expect to have high productivity, yes, they're in that direction. Engagement matters. We measure engagement. We've been doing this for almost three years now. What's super interesting is that we see a 100% correlation with the offices, meaning Belgrade, U.K., Japan, Malta, and U.S., that has high engagement and the profitability. There's 100% correlation. When we see engagement go down, I know profitability go down.
Then we measure 10 different other subcategories, so we can see where is the fault, where is the error, how do we fix engagement. This is working really good when you have the profitability number, which is a revenue number and a cost number, and what you have left. How do you measure other parts of the company, like HR or finance or tech department? Because they don't generate revenues. We need to put in metrics for productivity, and we're working on that, and I'm going to bet my mustache on that. We will see the same correlation, high engagement, high productivity. Now everybody's thinking, what is the next thing? Yes, how do you get engagement?
This is a book, I stole this from Nicholas Taleb, he wrote, "The Black Swan" and "Beat the Dealer," and his latest book is actually called "Skin in the Game." I enjoyed reading it. This is the biggest thing that confirmed that we're doing the right thing in this sense. If you have no skin in the game, that means that you take all the upside and you transfer all the downside to someone else. If you have skin in the game, that means you take care of the downside. I get this done. I'm responsible for errors, but I also take risks to get rewards. If I have soul in the game, I take the downside of everybody. You agree on this? If you think of companies or people or other areas, bureaucrats, they have no skin in the game.
They take all the upside and transfer all the risk to citizens. Consultants rarely have risk. I give you an advice, you pay me for that advice. Did it work out? Eh. Did I suffer? No. Did you suffer? Yes. Entrepreneurs, however, they take risk. They suffer when things go down, and they are successful when things go up. Crazy innovators that are over here that have this passion for something, they take all the risk. If you can figure out a way to get people in an organization to get the piece of skin in the game, they will be engaged. That is not related to share option programs, bonus schemes, or anything like that. It is related to only one thing. It is called ownership. If I can go to work and affect what I can do, I will grow. I will have my skin in the game.
If we can reward them because they are doing a great job on top of that is even better. That was the whole idea when we designed the organization. We want people to have a skin in the game. Last year, we talked about us being a product-centric company. This has evolved, and we talk about Pods and Roots. Basically, the concept of this is all big companies are super efficient most of the times, but they are very silo structured and things happen, input, output, top-down, and so on. Good. Really boring place to work at for most people. That thing over there with all the little circles is a startup. Super high energy, super creativity. If you have been there, it is like just a bus. People drinking your cola or whatnot, working 24 hours. They are really crap at getting things done.
They are very rarely you find a startup with high productivity numbers. What we want to do is we want to take what is good in the big corporation, what is good in the startup, and combine that. We call it Pods and Roots. When we start looking into this, the sexiest word in a world right now is being agile, being modular. This is actually a very agile and modular design because the definition of a pod is the amount of resources you need to create a revenue or value. The definition of a root is something that you need to support that effort. Meaning all our pods is our products. If we see one product is growing, we could easily allocate resources to that pod. Or if we see it is shrinking, we might, as you do in your garden, cut that pod off. It does not affect anything else.
If you have everything in departments like this and you need to figure out how to carve stuff out, very difficult. Here you get the skin in the game and the Pods. The thing with the Roots, though, is they are not departments. We do not have an HR department. We have an HR company, and that is when you get the whole entrepreneurship. The HR team is supposed to be the best HR team in the world from a company perspective, not the department, because there is a big difference in this. Might be just a wording, but it tells everything about engagement. Then on the good side of that, it is really easy for us to track financially, and it is easy for us just put on the engagement numbers. Let us see. On the right-hand side of that.
It wouldn't be so engaging to work in a cost center, because that's what HR actually is. It's not super engaging to go to work and work for a cost center. Being a really, really strong and the best HR company in the world is pretty engaging. If they fail, the Pods will fail. If the Pods fail, the HR department will fail. This is the whole idea and the concept between Pods and Roots, and that's how we build people. From people to leaders. Question, Ona? Okay. No, you're not allowed to ask questions at all. Moving on to leaders. This is a question I get quite often. We invest a lot of money in our people, that investment just went out the door. Smart.
The other side of this, if we don't invest in the people and they stay, we will end up with the dumbest workforce in the whole world, and that is not a good investment. That's why invest in leaders. We have two different programs. We have one where we talk about on-the-job training. It's doing it now. You need to be better as a leader. We call it BLAC. It's an acronym for Big Size Leadership Assessment and Coaching, that's ongoing, ongoing. When I started looking into the amount of time it takes for us to find a leader, for that person to be able to join, because most good people are already at a job, and then onboard that person and still having the risk of that person leaving.
What if we just invest a little bit in identifying the future leaders in the company? That's what we're doing right now. We have one program that's focusing solely on the future leaders, identifying them, help them to grow, and that could be people who are not in a leadership position at all. Invest in people. Now we should talk about products. To me, our product strategy or basically strategy is about defining where do we play and how do we win. If we can do that, it makes us very easy for us to decide where to allocate resources and where to focus. First, where do we play? I think we have a great opportunity. Per's been tapping into that all the time. We're a lead generation company.
That means our opportunity is everywhere there is a need for new customers, that's something that's going to be lasting for forever. There are two different things as well in this aspect. In a mature market, you need to be best. In a growth market, you need to be fastest. In the U.S., we have a growth market, it's very important to be fast. On other markets, we're very mature, we need to be better. That's where products come into play. Number one in lead generation in the world, that's Google, end of story. We will not beat them, what I can see. Where is our space? We talk about Expedia and Booking and so on. That's transactional things. I want to go from Stockholm to Copenhagen tomorrow after lunch. That's all the information I want to have.
When you need to spend time collecting information about 800 casinos, you can't do that. We can do that. We can aggregate that all information to help you to make a decision. On top of that, we can help you sort problems when something happens. Since time is going away from me, I'm going to skip a few slides, but you have this in the presentation material as well. If we want to help people make decisions, we need to understand what they search for. I search for an online casino I can trust. I end up at AskGamblers. I choose to go to Rio Vegas and I play. Boom. Super easy. Data points we get. We get the total amount of traffic going into AskGamblers. This is just fake numbers, but so you can understand the funnel.
I always get questions about, "Oh, JohnSlots is going down. Why is it going down?" It could be because we decide not to rank for certain search words, or it could be that Google changed the algorithm. Anyhow, that's total sessions. Of those, 75,000 decides to move on to an operator. Of those 75,000, 39,000 decides actually to register. We still haven't made any money because they haven't deposited anything. Of those 39,000, 5,600 decides to play. We have three areas where we can optimize, but we cannot optimize the end Z, because that's the player's job, the operator's job with the player. Every step in between, we can figure out how to do things better. It gives us data points all the time so we can start, hmm, okay, we get a lot of traffic, but they don't convert. What's the problem?
We get a lot of conversion, but they don't sign up. What's the problem? We can sit down with an operator and say, "Hey, might be this, might be this," because we get data what actually works. Back to the relation thing. PPC versus SEO. That's a very common question as well. All of you that searches for something, most of the times you see ads on top. There are 4 slots for ads. That's the pay per click. Underneath is the SEO. It's what Google thinks should be ranked one, two, three, four, five, six, apart from the ads. The ads basically works like you decide to have a campaign for something, and when your money is out, because you bid on these keywords, you're invisible. Every now and then you search for something, there are no ads. You notice that?
That's because no one is paying for those keywords. Anyone who's into investment will say, "Why don't you do only PPC then? Then you will always be one, two, three, four. End of story. Boom. You won." You could. The thing is, though, what if you search for something, an online casino I can trust, and the first thing you see is an ad. Would you click on that? Probably not. The data we have is that the click-through for PPC is way lower than SEO. That's why SEO is so much more important, and it's free because we don't pay for the click. We need to do a lot of stuff. The data we have is that the click-through is 29 to 71. The first 4 slots that PPC spend get 29% of the click-throughs, and everything else gets 71%. What?
Remove those. What happens then? This is why we think position one, two, three is the most important one. The data we have is about 60% of all traffic goes through position one to three. Position four to 10 gets around 20. Everything else, position 10 to 2 billion and whatnot, get the rest. Those are the only position that matters. How do you get them? This is where it's going to be really interesting because as Per said, we said that we had a few thousand websites. I know a few of our competitors says they have a few thousand websites. To rank on Google, you need to, first of all, make sure you have really, really good content that is on topic. Google looks into how the user behaves on that site. Does he stay or she stay on the site?
Does he click through to another site or does he just drop off because it was crap? I searched for an online casino I could trust, I ended up somewhere else, I drop it. That improves your ranking. They look into technical aspects like mobile and if it's a secure website and other things. They look into your user experience, meaning how easy is it to navigate on the site. They look into user signals, meaning do I tweet? Do I share? Do I do anything on Facebook with this site? They look into all the links going into that site. All that combined, is that possible to do for a few thousand sites? No, it's not. When someone is talking about that, something is wrong. In order to rank, no one knows how Google works.
They don't disclose this, but they say they look at these things. That's why SEO takes a lot of time and effort to get done. I'm going to use AskGamblers as an example. I was looking for an online casino I could trust. I found top four or five things. I choose to click on AskGamblers. This is AskGamblers website. It has a lot of information. It has a top list of casinos, it has information how to play, and a lot of stuff going on. It can help me to make a decision. AskGamblers is 5,000 sites under this one. 5,000. You think of what I just showed you, the six areas you need to be good at, and then you think of that times 5,000. You think of that times several thousand websites, and you see where I'm trying to get.
This is what helps people to make a decision. We also help them to sort out problems. We generated EUR 19,300,000 something and change back to players because we help them sort issues they have with the casinos. It's not only getting money back, it could be basic things. The casinos actually like this because we become their source of information how they can improve. That's why make decisions and sort problems. Back to the kickass product and focus. Most of you are probably familiar with the network effect, and this is what we think. At one point, our product, because there are more users on it increases the value. Facebook would be pretty boring place to hang around on if it was only me and Per there. The amount of users create the value for the paying customer.
It could potentially have a little tipping point where there is a winner takes it all effect, like this typical critical mass. We see that here in Sweden with Blocket, we see that with Lendo in finance, we see that in a lot of areas. That's why focusing on the product and make them really good matters. I was asked prior this to have a little quick idea of acquisitions and what that means. To me, this is acquisitions. The 34 different companies we bought all are built on different platforms. Back to the scalability. No, we're not there. To get everything to one platform is key for us. That's Stockholm Bypass exercise. It's an infrastructural program. Everything will be crap while we do that. Everything will go slower. We need to add more resources to fix the problems.
Once they're done, we have Stockholm Bypass, and then we just need to maintain it. In the presentation material, you have this. It's what we're aiming for. It's typical Lego, bits and pieces, and I could only describe it like this. If everything is on the same platform and we want to deploy a chatbot, we need to build one chatbot, and then we can deploy it on 34 different products at one click, and we only need to maintain that chatbot. If we have 34 different platforms, we need to build 34 different chatbots, and we need to maintain and develop them in 34 different environments. That's why this is key, and that's also why costs are not slowing down as fast as I know Per wants them to do, because we're building Stockholm Bypass.
Until we're done, there will be some gray hairs coming out here and here. Finally, I just want to say, we talk about focusing on brands, now you understand why. Metrics, scalability, and hopefully a network effect sometime down the road. Questions?
Yes. You touched on this in the presentation here that seemingly your site fluctuates sometimes a lot in traffic, or at least according to people who know how to measure these things. I don't, but they tell me. The question then is, do you experiment a lot with the sites? Now that you have so many sites, can you afford to make experiments? That is also the reason why sometimes you can see someone say, "Oh, no, this is going down," and so on. How does it work?
We don't really experiment with the keywords per se, because that's a bit scary, but we track them very carefully and see if we rank on this, what happened over here. If we see something is going down, like best example I can give in U.K., everything that's related to free spins is not compliant. We were super strong on free spins. If anyone followed the traffic on our site, freespins.com, they can see that that's going down because it's completely useless for us to rank on that keyword because we can't make money on it. Sometimes from Google, we had a little bump upwards in August on a few sites because Google decided to look at it a little bit different, and we started rank on a keyword that was not important for us because it didn't add any value over here.
Okay. Now when Google did the new algorithm update in October, things got back to normal. Yes, but if you only look at that, you're like, yeah, dramatic. If we go below where we were big time, then it would be dramatic, but no.
Okay. You talked also about the NDC. Catena historically has spoken a lot about NDC. It's been really a focus point on the quarterly presentations, Albino and so on. Now, lately, you have tried to downplay NDC a lot and talked about the problems with this. How do you see NDC going forward? Has it now plateaued a bit, or do you think it will still see growth even though you try to focus on driving value with them?
NDCs should grow over time, naturally. If you look at the revenue mix, we have 10% from fixed fees now, that's meaning that operators do not care exactly for the numbers they get from what we give to them. They just want to be exposed in this environment, just the exposure is important for them. That means that every time we get fixed fees, we're sacrificing NDCs, of course.
Okay. Thank you.
Any questions?
There's a lot of-
See some arms.
I have a three-part question. Can you tell me more about your core product and how far you've come with that, and develop a little bit in your
Yeah. The core is our core of the technology. You have that in the presentation, it's something that's been building for a long time. It's fully working, now it's integrated with a few back-end systems, so we're improving a lot on that. The next step is between core and our websites. Now we're building Catena Press, is what we call it, that's Stockholm Bypass.
If you look at the global market right now, it's probably 80% offline and 20% online. Talk about that.
In terms of any industry?
Yeah. iGaming, though.
iGaming. I think most things are moving in a digital space, so I just expect that to continue in that way.
Thank you.
One over there.
Yes. Last thing you talked about, you have a new way to evaluate your leaders or managers. Have you seen any results from that? Also, what is your employee turnover on a yearly basis?
We see really, really good results in leadership, and we built that into the bonuses for them as well. We measure in the 360 perspective, and then we see where the gap is, and if they can close that gap, that actually impacts their bonus. Turnover of employees is really difficult to measure, and we need to go into each different sites because we have some sites where people never leave, and some sites where Malta is a typical place. People come in for two years, live in a warmer climate, and then they go and pass on. We try to benchmark where we are operating and see if we have any deltas there. I don't see we have any higher or lower than what we compare it to.
Okay, the number I've heard as an average on Malta is 50% on a yearly basis.
Yeah. If you were like Evolution Gaming, for instance, that has a lot of people going in and doing the live casino, I just suspect they have very, very high turnover. We're not close there. We're not at 50%.
Okay, so you're at the same level as your peers, perhaps.
No, I think we're better.
Okay, thanks.
All right, any more questions? It seems like you have been crystal clear, Johannes, because you have no questions from the web.
Everybody wants to have coffee.
Yeah.
Okay.
That might be the case.
Yeah.
We're actually ahead of schedule. If we don't have any questions up for the moment, I suggest that we have.
Regulations.
Yeah.
Yeah. No more questions in this area. That moves us into the topic I'm also covering, which is. I just assume there will be more questions around this. In your presentation material, there are a few details, but I think we can just shoot with questions because I'm not going to just read this from top to bottom.
No. Okay. Well, you say now that you don't think you will have any impact on Sweden. I think the market is more worried than that. We have a new situation from the 1st of January with taxes, which we haven't had before, and we had lots of new rules regarding how your customers are supposed to operate and so on. Could you please give us the puts and takes why you think that there will be more or less no effect
Yeah
on your business?
I always hear who are our competitors, and the most common competitor is the mom-and-pop or the two guys in the garage. When the market regulates, you have to be compliant. If you're two guys in the garage, it's very difficult to be compliant. What we saw in U.K. this spring where the operators were like, "If you're not compliant, you're out." A lot of small companies, two guys in the garage, they just went out of business, basically. Even though the market got tighter, and you could say we wouldn't have dropped, I think we stayed on the same because we got that back.
I simply assume that would be the case here in Sweden as well, because if you pay for a license and you know that if you're not compliant, you won't be fined, you don't want to do business with someone cutting corners.
Okay. Italy has been a topic also this year regarding compliance and regarding regulatory frameworks. How do you look at this now? Knowing what you know today, would you still have bought this company? Also, what do you think you have learned from this experience, which I guess was a little bit of a surprise to you that it could.
Yeah.
Looking back and having additional data points is always easier to understand or say we wouldn't have done it that way. If you look at the data points we have, acquisition-wise, this is exactly what we wanted. It's in sport, it's a single brand, it's been very, very established in the market, super good product. Tick, tick, every box. Italy decided to approve 60 new more licenses. Yeah, very good market. We get it, then all of a sudden Italy decides, "No more advertising." Which is completely in the other direction why they did open up the market because they want to get rid of all the black money and all the mafia and all those things. We would definitely have done exactly the same decision again, because the data points we had was perfect acquisition, market is opening up. Yeah.
Okay. Thank you. Any questions in the room?
Yes. Regarding legislation in the financial vertical, do you see a big difference in profitability between perhaps Europe or U.S., depending on what is allowed regarding CFDs or binary options, or is there a big difference in profitability between different regions?
Too early to say. I would say, if you look into the finance products we have, like Hammerstone, it's a subscription model. That's a very, very good product because selling another extra subscription doesn't add any extra costs. Hopefully we can continue to grow that, we see how the whole finance market evolves.
Okay, thanks. Another. Sorry. Hello?
Yeah.
Yes. Per mentioned in the Q3 about your products that you're probably going to release in the U.S. market. What's the hold-up? If you look at RF, you see that AskGamblers has a lot of traction in the U.S., why don't we go there and pick up the money?
Yeah. Thanks for asking that question, we see exactly what countries we have traffic from. In AskGamblers, we have quite a good traffic. However, none of that is from New Jersey. We're not monetizing. We have a lot of U.S. traffic, absolutely, I'm just hoping for states to open up so we can monetize that. Unfortunately, not that much from New Jersey. That might change.
Thanks.
Regulation's done, operation's done. Coffee break? Okay, thanks.
Thank you.
Welcome back again. It's now time to start the second session of the day. I'm once again happy to welcome our GM in U.S. iGaming, Michael Daly, to the stage to explain to you a bit more about what's going on in the USA and how we see for that for a long time ahead to be a very important business to us. Michael, welcome.
Thank you, Per. Good afternoon, everyone. I'm Michael Daly. I have been with Catena since the spring. I've been in the U.S. gambling space for the last 15 years and the iGaming space since about 2010 and have watched that grow in some work in Europe and then some work in the U.S. since we took off in 2012 or so when we started passing iGaming legislation first in New Jersey. Catena came to the U.S. in December of 2016. We made our first acquisition of a group called i15 Media, which had been one of the acquisitions working in New Jersey since the opening of that market. That consisted of a company that was doing, this we announced at the time, about EUR 1 million per quarter, and New Jersey at that point was doing about EUR 214 million a year.
This company also included some additional assets that we had the option to, which were for future markets and things such as sports. You recently saw that we announced that we had finalized in some of those acquisitions of those secondary assets, which we announced a few months ago. Our second asset acquired in the U.S. was a company called PokerScout, which we picked up in November of 2017, the same month that Pennsylvania passed a bill legalizing online gambling, casino. That is currently expected to go live in Q1 of 2019. We also, in the spring of this year, picked up our third acquisition, which at the time was our second-largest competitor in New Jersey for lead generation, Bonus Seeker, which made a great add to our portfolio for not just New Jersey, but for future states for the gambling and sports betting space.
From all these acquisitions, we will then build out the team that will become the organic growth for the U.S. because, while we may look at some acquisitions, it is mostly going to be an organic play from here because we are essentially the largest lead generator in the U.S. for iGaming at this point. We are the leader in New Jersey, which is today the only place where we see real competition in the iGaming casino poker space. There is one or two other states doing a little bit of poker. Nevada, we work there, but there is only one operator doing online poker in Nevada today. You have states like Delaware, which is run by the lottery, and so it is a less competitive environment. New Jersey, though, has been very healthy.
Since the opening of the market, it has been growing at a 20% year-over-year in the online space. Catena has been even healthier there. We have grown at faster than market rate in terms of our own revenues in market as we gain more and more market share. Today, we make up by our estimations and talking to our customers, probably about 70% of the lead generation acquisition marketing in New Jersey. Catena has also become the leading acquisition channel now leader for sports betting, which started in August of 2018 in New Jersey. We work with most of the operators and the market as has been announced by various parts of the press, including our sites like Legal Sports Report, is off and running very healthily.
New Jersey sports could probably double the size of the market over the next year, between that and the 20% growth rate that they have been seeing annually on the casino side. Where are we in this? If you were to look up in Google, New Jersey online casino, everything in a red box here is a Catena-owned site. This is page one of Google search for New Jersey in New Jersey. We have multiple sites, multiple brands, somewhat of a different strategy than what we are doing in Europe, where we are consolidating brands. In the U.S., in its early stages, lots of brands out there to make sure the consumers have choice of the type of site they go to, where they can look at then the types of sites they are going to go and be led to in their follow-through clicks and become NDCs.
The same is true now for sports betting. Everything in red here on the front page of Google under this search for New Jersey sports betting is Catena. We are doing very well in New Jersey. It has been a very good business for us and will continue to be a very good business regardless of everything else that is going on in the U.S. There is other things going on in the U.S. 2019, Per reference that West Virginia and Pennsylvania will regulate or go live. They have allowed it legally and they are voting their regulations. Both have now gone live with land-based sports betting, but both will go online probably in Q1 of the coming year. West Virginia, maybe it makes it by the end of this year, but most likely Q1 is our pessimistic view at this point.
What are we doing to be ready for these states? Catena, for years, has been building up traffic and site credibility for both these states, for both casino and for sports betting. We knew it was not a matter of if, it was a matter of when that these states would come. That is Catena's strategy, especially in the U.S., where pay per click is essentially not allowed by Google for the gambling space. Organic is not only the most important and the most effective, it is pretty much the only thing allowed. Those that are there early and those that are able to maintain position on the front pages of Google will be the winners of the game, we believe. In West Virginia, for example, we have playwv.com, we have wvonlinesportsbetting.com, we have wvsportsbooks.com. We rank very well for all various search terms.
New to Pennsylvania, here is just a few of the sites we have. We have seven sites today with a PA in it somewhere, Pennsylvania, under sports, poker, casino, because all are expected to come live in Q1. In addition to that, we have numerous nationwide brands that we have in the U.S., such as PlayPicks, TheLines, sports betting sites, Legal Sports Report, PlayUSA, Bonus Seeker, all sites that are well ranked within the coming states. For example, it is hard to see, I apologize, in Pennsylvania, everything in a red box under the search PA Online Casino were three of the top five sites. The others are casinos that are in Pennsylvania who have been running social casinos and will run real money and will be partners of ours. The same is true for PA Online Sports, we are three of the top five spots today.
The market is not even open yet. Just like we did in New Jersey, where, unlike the operators, we can be driving and building traffic and email lists of players long before the markets open. The day one, the first customers to open, we have a plethora of customers to deliver to the casinos and get paid for our CPA rates for doing so. That is what is known about for 2019. That has already been passed. It is going to happen. Yes, it may shift a month or two this way or that, but it is going to happen, and Catena is confident that it will happen in 2019. Just those things alone will probably make it two times the market size of the current market in the U.S. Between sports and New Jersey going live, Pennsylvania Casino and sports, easily two times.
Even with tax impact or per capita spend per state, we're looking at doubling the size of the U.S. business in the next 12 months. That's just the start, because in the spring of this year, the Supreme Court struck down the PASPA, or Supreme Court struck down the Professional and Amateur Sports Protection Act, which made sports betting illegal in the U.S. Doesn't make it legal, just turns it over to the states to allow them to decide for themselves, such as we saw in New Jersey, who already had a bill passed that said when the Supreme Court did this, they could go live, and they did. Pennsylvania, same thing. Now we've seen other states. 14 states in 2018, by my count, put up bills in their state legislatures to pass online sports betting. Only a few of those, West Virginia, Rhode Island, passed them.
None of them have gone live yet. What happens next year is probably something similar. More bills go up, more states are already talking about it. We're at 18 and climbing in terms of the number of states that are presenting something. Some portion of those will pass. That's not just for sports betting. This has also been a resurgence of casino and poker bills being put up because some recognize more than others that tax revenues from sports is not nearly going to be as lucrative as it might be if you also had casino and poker. But casino and poker will roll out at a slower rate than sports betting. In the U.S., it's probably that sports is considered more acceptable than casino gaming in the online, so some will roll faster than others.
Let's start with the slower of those two and talk about casino and poker. This is where we are today in the U.S. New Jersey and Delaware have online casino and poker. Nevada has online poker. That's 3% of the U.S. population, about 13 million people. That's made a very healthy business for Catena. That's justified our acquisitions there and our spend and the returns on those investment have been, I'll say fantastic. I'll let our CFO disagree otherwise. This is what happens in 2019. One state, the fifth largest state in the U.S., Pennsylvania, goes live. More than doubles the population that will have casino and poker.
Even though 40% larger population, higher tax rate, about double the tax rate, but the net effect of that is you're probably talking a two times as current market in terms of those that Catena can touch for lead generation. Nevada will continue on with poker. 2020 to 2022, things get interesting, and things may accelerate, especially as sports moves along. These are all the states that so far in the last few years have put up casino and poker bills, shut down, internal infighting, who's going to get the money, what have you. They're all talking about it again. Catena has had representatives meet with people in the state legislatures of New York, Michigan. We have people out who do interviews and have talked to various state legislatures, and they are putting up bills. They have publicly announced these things.
Some of these will pass, some each year. It doesn't take a lot to again grow that population. New York, it's almost the size of Pennsylvania and New Jersey put together. Illinois, another high likelihood. Michigan, been talked about a lot, a little bigger than New Jersey. Tons of states or 12 states talking about casino and poker. Some go each year, makes a very healthy growth rate for Catena Media. That's casino and poker. 2018, growing at a very healthy 15%, I say here, it's more like 20% at the moment. Growth from the states of PA in Q1. In 2019, we talked a little bit about net values probably be the same, maybe some potential launch issues.
That means by 2020, we can expect the historic growth of New Jersey, plus Pennsylvania will at least grow another 25% if they don't launch until Q1 of this year, means they pick up Q1 as part of the growth the following year. Plus, they'll have their own growth. There'll be more brands entering. There'll be more competition. Competition is good for marketing spend, marketing spend is good for lead generation. Being the top of the lead generation pile, that's good for Catena Media. 2020 or 2021, excuse me, if half of the possible states go live that were just on that slide, then we could be at 2 times where we are at 2019, which is 4 times where we are today. I'd say that's pretty healthy growth. That's not the most interesting part of the U.S.
Sports betting is the most interesting thing in the U.S. right now and perhaps the world, but I've got an American view, perhaps. We always have been known to be a little self-focused. Today, sports betting for Catena Online, New Jersey, went live in August. They've been growing. Their handle grew 40% last month-over-month. Many more operators launching, still a number to come. Again, more competition, good for Catena Media. Pennsylvania and West Virginia have passed bills for online sports betting. They're expected to go live in Q1. Pennsylvania's right now saying they'll go live with casino and sports at the same time, and West Virginia is saying sometime in the next few months. Optimists might say November, December. We'll say safely Q1 of next year, they'll be live by.
They both have recently, in the last few weeks, gone live with their land-based. I should have changed them to orange, like these other states which have launched land-based sportsbook. Some people got confused when Pennsylvania announced the other day that it had gone live. It's land-based only so far. Land-based is a good thing for our business, too, in that it starts to drive the momentum. The more states that have sports betting going online and then land-based, the land-based ones will go, "Wait a minute, we're not nearly the same revenues and tax dollars as those guys that have online available as well," which then further accelerates their decisions to change their laws and regulations to allow online as well.
Conversely, there may be opportunities for Catena to look at how do we do lead generation in the digital space for some of the land-based casinos. It has historically not been there, but it is another channel, especially as those businesses get more sophisticated in how they track players, because that is usually been the challenge. How do you track who comes through the door in order to get a CPA or determine an NDC? Those days are changing, and Catena will be there for the times. Today we are 2.75% of the population with sports betting online. Next year, December 2019, West Virginia, Pennsylvania, and Nevada, which goes from a quasi land-based sports betting, you have to go into the casino to register, and then you can use a mobile device. They are looking like their governing body, Nevada Gaming Control Board, is reviewing whether they can just do full online.
That adds another market for us. Not a big market, but it is a third the size of New Jersey. If New Jersey has been a healthy business, we will take an additional ad from Nevada. Then 2020 to 2022, it could just explode. You have more than 14 states, this Washington, D.C., which is not a state, but a very rich province, if you want to call it, in the United States, all talking and all have. These are all the states that have put up in 2018 some sort of sports betting bill or discussion in their legislature. There are some very big states in there, New York, Arizona, Illinois, Ohio, Michigan, and some small ones. Just a couple of them each of those years, very healthy business, very good business.
Very high likelihood, in my view, that some of these are going to make it each year, especially as we see West Virginia and Pennsylvania go live, which will prove to the rest of our states that states outside of New Jersey, which is more known as a gambling market like Nevada, that this can be done in these other states and replicated. These guys get live, these other bills will start to pass, and the market will grow. On the front side of that will be Catena. 2018, we launched New Jersey in the middle of Q3, the start of the American football season. It is probably the top of the sports betting season in the U.S. Lots of good acquisition, which helped with handle in September, which grew in October, thanks to leads brought in in September.
CPAs are lower than casino, just as they are, I think, everywhere in the world, that was expected. But it is a volume play. There are more sports bettors than there are online casino players in New Jersey and every other state. We will see the seasonality, though, in sports that we do not really see as much in casino in the U.S. U.S. casino does not really have the same summer fall-off online quite the same as we see in Europe, but sports betting will have a very unique and strong fluctuation in acquisition based around various sports, such as football, playoffs, Super Bowl, and then hockey and baseball, and basketball will be to some lesser extent. 2019 will be about market expansion, with New Jersey growing more customers, more of them live for the full year because nobody has been live except since August. Pennsylvania and West Virginia.
We have talked about some of the challenges in Pennsylvania with casino and their tax rate. In sports betting, the tax rate is effectively the same as New Jersey. It makes it a pretty healthy market in Pennsylvania, with 40% more population. They do have a slightly lower per capita income, but that may or may not have an impact in particularly the first year or two. 2020, from just some of those states we showed that might pass a bill in 2019, could double the market effectively. 2021, same thing. Some who project probably more optimistically than I do, come up with numbers of 4x or higher. I am happy to see if we can do 2x. We probably can, based on the number of states talking about it. That is just the beginning. This is Eilers & Krejcik Gaming, who is an analyst for the U.S.
This is talking about sports betting overall, not just online. If you look at them, they are talking about by 2022, we could be up to 60-ish% of the U.S., 50-ish% of the U.S. with sports betting and some portion of that. You have still got another 38% that will go in some time in the years after that. Is it possible that we could see double ourselves in the U.S. again after 2022? Quite probable. There will be t hings like competition coming in and other challenges that Catena will have to position for, and we are. We are in what we describe as pole position for that. This is Catena today in the U.S. We have two states in red where we are fully monetizing. As we talked about New Jersey, casino, poker, sports betting, and then some poker in Nevada.
The states in blue are the states that we believe are closest to passing or have already passed something. Catena for the last few years, in many cases, has been building up sites there, building up traffic, building up site credibility with Google, being ready to build customer bases or pass off customer bases when those states go live. In certain states, Pennsylvania and Michigan, we call them pre-monetized. They actually are making money from the iLottery groups, the Michigan Lottery, Pennsylvania Lottery, which is a whole other area that could expand in the U.S. as sport s and casino goes across the U.S., so may iLottery. We have not even delved into what that could mean for us. We have build-out sites. These are the states that are not quite close to the bone, not a 2020 launch, most likely.
Catena spends our time when we have down cycles, when New Jersey has launched now, but West Virginia is behind. West Virginia sites are good and healthy, and we are growing those. We use some of those build-out teams to work on some of these other states that are a little further out, so that with the same number of resources, we can build out a lot more states to be ready when they come and start to grow traffic, but not have to, when every state goes double the size of our operation. Because the idea is to bring some of this to the bottom line. We have the national sites.
Outside of the last slide I showed, which were where we were building state-specific sites like Pennsylvania or paonlinecasino.com or PlayPA or PlayWV, here we have, if you were to look up legal online sports betting in the U.S. or online gambling or sports gambling, PlayUSA would come up number one in the Google search. I guarantee you on that front page, there will also be some others of our sites anywhere in the U.S. Same thing for PA sports betting or Illinois sports betting. Top of those searches right now, Legal Sports Report, and that holds true for Wisconsin sports betting, most likely. Many other states that are much further out. We have a national presence on top of the state-specific. Lots of very strong national brands that we'll roll out along with state-specific ones.
As Per and Johannes talked about, I believe, bringing other brands of the company to the U.S. Someone asked about AskGamblers traffic. Well, it's low in New Jersey today. It is in the U.S., and we recognize it. AskGamblers has launched in New Jersey now. We did that a little while ago. It's going to be a slow build, but building up its credibility to be the same as it is so well-respected in the rest of the world, but it is coming to the U.S. Some of these other brands we'll bring across as well. You might say, "Wait a minute, I thought you were just talking about decreasing brands worldwide." We are, over time. The U.S. is a nascent market, it's not at that position quite yet.
Right now, we need to flood the field a bit, if we can do it efficiently with our same size teams, that we can be whatever anybody in the U.S. wants, sports, casino, poker, find the right niches for them. As we figure out what's working best, we consolidate, move traffic over, shut down those sites that don't make sense. You're going to see us try more things in the U.S. than we might be doing in Europe. Remember, each state in the U.S. is somewhat like a separate country. Each state is going to have its own sports flavor, its own keyword searches. People talk differently, different dialects in the U.S. While Per said the U.S. might make it so that it's more than 10% of the overall company, you have to think of the U.S. sort of each state.
I'll say we'll try to keep each state under 10% of the overall company. What are we doing in the U.S.? We are focusing on the sports betting preferences. We're trying to make sure we understand what makes people tick, what makes for a good lead generation site for sports. It's different from a casino audience. We have lots of things to draw on from Europe, from their experiences, but there are different and unique flavors that we need to focus in on the U.S. and various states. We're analyzing our products. We're figuring out what do we need for content writers for the various sports. The good thing is we don't need a lot of newer resources for 2019. We've done most of that. Most of what we make in 2019 should not be eaten up in more personnel costs.
We're infusing sites with more video and audio content, because that seems to be what Google is preference, and that seems to be more what sports bettors prefer and it's the way they consume. We want to stay on top of the tongue, the top of the search, that's what we do. Continue SEO work, because it is an SEO play. Niche markets, education, training, advice, those things are all very important, especially in launching markets. Proved very well for us in New Jersey, and will be very important here. Strategic acquisitions. There will be some. There will be some competitors. There will be some technologies that may make sense for us. Most of our growth in the U.S. is going to be organic. That's a quick turn discussion of the U.S., and I'll turn it over to questions.
Okay, thank you very much. For us in Europe, this land-based sports betting is rather peculiar. I don't think we have had anything of that in here. How does it work? Is it a strong culture where it exists now in Nevada and so on in America? Could there be a chance that this goes against the current of everything going online? Do you think this is something just that they will try for various reasons, and then it will just blow away?
Sports betting, land-based is our history in the U.S. for casinos. Obviously, the technology for online didn't exist for the longest time. Most of our regulations and laws make it easier to pass land-based bills first to manage, and that's often controlled by the casinos, who want to make sure they stay on top of the pile in terms of their businesses. They manage to keep out businesses that they don't quite understand. Start with sports betting land-based is a good thing for Catena. Again, I said there may be opportunities for us to do some lead generation there, but those states that do that will inevitably, I would argue, move to online over a period of years.
That will drive other states around them when they look at, oh, Nevada's making this much from land-based, New Jersey's making this much from online and land-based, where New Jersey is over 60% last month of the handle came from online for sports betting. I think it will show the new states more and more that online needs to be part of the equation.
Okay. These different states where you are in a pre-monetized state, are you already in discussions with operators, or thinking about contracts and so on, if you know that they will soon or sometime in the future go live as a regulated market? How much can you do there before it kicks off for real?
Yes, to the degree that we can. The operators and ourselves being a regulated entity can't obviously strike deals in states where it's not legal to do so. We do have discussions with various operators in Pennsylvania where it's legal and they're waiting for their licenses to kick in with ourselves who are waiting for our licenses to go into effect in such states. We have some discussions, precursor. We also do things in these pre-monetized states, like I said, with lottery, where it is legal in certain states, and with social casino and other things that help offset the cost of some of these works in pre-monetized sites, where we can monetize into things that are not regulated in the U.S. and are safe to touch.
Okay. I don't know if you agree, it seems that if there are any obstacles here, they are about competition and taxes and something that you have in common with lots of industries, of course. What is your feeling regarding taxes? As you said, Pennsylvania has rather high taxes. Do you think more states will aim to have as high taxes as possible, or do you think there will be a competition generally between the states because where they want casinos to start operating and so on?
Taxes are higher in Pennsylvania than New Jersey. They're a little higher if you look at it than we see in some other countries in the world, potentially. I think that higher tax rate, if it works in Pennsylvania, which I would argue it will still make for a healthy business, otherwise casino groups there wouldn't be spending EUR 10 million or EUR 20 million for the licenses. That if it works, that will show other states that it can work outside of New Jersey and at a higher tax rate that will drive more states to adopt these businesses. I think the tax rate, while it's a negative in terms of how it might impact margins for the operators in particular, it will help drive business.
For us as Catena, because those customers in Pennsylvania are spending EUR 10 million or EUR 20 million for licenses, those groups have obligations now to show that they can do something with these businesses. That means driving customers. Those first years, they are already not expecting to be profitable. It is going to be heavy marketing and lead generation in order to drive customers to their businesses. Catena will be there, and Catena will be in a good position for that for the first few years. CPAs may be higher than they should be, and the business may be stronger than the tax rate might effectively mean it should be over time. It will come down potentially over time. We said the same thing about New Jersey, though, and CPA rates have gone up, I think all five years since that market opened.
The next couple of years could be not so impactful for our business from the tax rates.
Okay. I remember from the third quarter presentation that you made, that you talked about there not being even a clear number two in America. It sounds a bit too good to be true. Isn't there any real competition, or can you see that it's coming now or people are starting to get their act together and compete with you?
It'd be very egotistical to say there is no number two. It's just that there is no large affiliate organization like Catena in the U.S. space today. Our number two against us in New Jersey, well, it was BonusSeeker, but we own them now. The number two there is different from the number two in Pennsylvania or West Virginia. They're smaller mom and pops or two guys in a garage, as Johannes might say. That's what we're seeing right now. We are very cognizant of the fact that as the U.S. becomes more interesting to everybody, that other large competitors will enter the space. We are always working on how to improve ourselves, how to grow our team and protect our team from pilfering as these guys enter, and how to stay number one, because we will be the largest target.
Of course. Okay, thank you. Are there any questions here in the room?
Thank you. When we say we're investing in organic growth in the U.S., could you just give us a feel for the flavor of the costs? Are they more like legal and lobbying and regulatory, or are they more like SEO professionals in the unmonetized states sort of building out our online footprint there? Help us visualize the cost.
Sure. It's more the latter than the former. It's more SEO work and development of the resources in our own team for more social media focus, more SEO focus, more sites that we have to run means site runners to run those and finding the right writers. That's organic growth. It's not so much the legal. There is always a legal portion of things, and there's some work with lobbying groups that we participate in for various states to help move them along and ensure that people don't forget or people even in the U.S. even understand what affiliate marketing is, because we want to make sure that's legal and part of the infrastructure of the states.
Hi. Mikael Sandgren, Carnegie. I have a few questions. The first one is about lead generation as % of total gambling marketing in New Jersey. Do you have statistics or figures on that?
Nothing solid to share in that way, but it's in the realm of the 20%-30% of total marketing, similar to rest of world is what we get from what we're told by various operators of what their spend is, but I don't know that I have it in a true released statistic.
Okay. Can you talk about the operators in New Jersey, how they use affiliate marketing so far? Some of them are performing quite well in sports. FanDuel and DraftKings, while others seems to be lagging a bit. Can you discuss how they sort of performed so far and how they use affiliate marketing in general?
Various partners had different approaches to starting with affiliates or not starting with affiliates. Some of those that had worked in the European front decided to see if they could start without affiliates, I'd say, or weren't set up with their new U.S. systems yet to do so effectively, so they decided to start or hold off till tracking was effectively working. The more U.S.-focused ones, U.S. startups, let's say, they're not really startups, but DraftKings, FanDuel, they went from day one. SugarHouse went from day one with affiliate marketing with us, and I think they have performed exceptionally and have proven out to everyone that the affiliate model works in sports betting, works in the U.S., and is a critical piece to making sure that your site is top right.
Okay. Do you have some comments on the October statistics in New Jersey, the sports betting activity, revenues from that, and casino, how the sports market has affected casinos?
Absolutely. Casino market continues to grow healthily in October. Was not impacted negatively, though I don't know that it was impacted super positively by the sports rollout, but I think that is because the sports rollout is so new. The casinos operating groups will eventually roll over from having sports entries roll over to their casino side and do the same things that is done in Europe in terms of cross-selling players. I think they're just getting off the ground on that. Sports handle in this New Jersey in October was 40% up from September. Revenues were down for the operators, that's, I think, probably because everybody's investing in their infrastructure, getting things ironed out, doing more marketing, improving things that will help their businesses longer term, so they're not taking the short-term approach. Catena is doing very well.
September was the start of the NFL season, it's by far the best month, and with six operators, I think, launching that month, great month for us. October also a very good month for us. Now we'll see some of the sports cycle, that will be offset a little bit by the launches of different operators. For example, Golden Nugget Casino has yet to launch their sportsbook, and they're a prime player in the online casino space. We have new market entrants talking about coming to the U.S. Bet365, Playtech at the Las Vegas gaming show this year was making a big presence and saying they're coming. Those coming will also help even change the first year, at least, the sports acquisition curve we might expect in the U.S.
Thanks. Just a final one. How many employees do you need to do this during 2019?
We're pretty much built out for our 2019 team. We're at 19 in the U.S. today, employees. There may be a few more sports writers to come along, depending on markets and things that we can rely on in Europe and how things go here. There may be another employee here or there in BI or the like. Other things would be depending on what states pass in 2019 and how many and when, might mean we might need to scale up near the end part of the year to have more team people ready for additional states. If the states time right, our core launch teams can move from state to state, while the runners and the riders for those states that are already live can remain at smaller numbers.
Yes, I have a question over here. Exceptional presentation. A lot of energy from you. I like that. Over to New York. Can we elaborate a little bit more about New York? We Swedes don't understand about the election system. As I've heard, the Democrats have taken over the trifecta system, and it's common sense that New York should open up sooner than later because it's just a bridge to New Jersey. Accordingly to Eilers & Krejcik Gaming, they say like New York is going to be a bigger market than U.K. 2023. Can we talk a little bit more about New York?
I won't argue with Eilers & Krejcik Gaming on their predictions on how big New York could be. They are very good at what they do. New York, it's inevitable with Pennsylvania coming online, to me, that at some point they have to move. Pennsylvania, New Jersey, we see players, we have the data, so do our operators, so does the state, I am sure, on how many are going across the bridge or the tunnel to open up their mobile and then place bets and then drive back into the city or back into the New York State. It will come. We are U.S., and we are a political animal. Often the issue in the States is not, should we do this, but if I do this, what happens to this other group?
We have tribal entities in New York, and the states are sometimes concerned, well, if we open it up, the tribes get it, too, but the tribes don't get taxed on this, so should we not do this? Let's give up 90% of the revenue because we might give up 10% of the revenue if we actually did it. Michigan's in the same state or the same situation. I think New York will move. Having had some discussions with the various state legislatures, New York is very close, I think, on sports and online casino, not that far out. May not happen together because I'm pessimist, and I can't see them getting it all together at once, but I think we'll see something happen. I think Eilers has said they believe next year for New York will pass an online bill. I think they have said that.
Yes. Thank you.
Any more questions from the audience?
Hi, Victor from Pareto. Could you talk about the renegotiated terms with the acquisition bid two years ago in the U.S.?
Certainly. As I had said in the first slide, we had some secondary assets that were part of the deal. The initial deal was focused on New Jersey, because at that point, that was what was live, and that was what could be calculated essentially into what was the value of those assets.
With the changes in sports betting and some other regulation since the time of that deal in December 2016, it allowed us to work with the parties that we bought it from to finalize the secondary assets so that over the course of the next year, they have an earn-out with a maximum cap on that. Allowing them to go their separate ways, us to have full control of them, still use their guidance for an input, but instead of being a protracted five or 10-year situation where multiples could have got significantly larger based on the number of states that could regulate.
Are there any implication restrictions up until that time when you can go separate ways?
In terms of the business we do together, they're encouraged and incentivized, just as we are, to grow that business as rapidly and in a way that's sustainable for the future. I think we're pretty well-aligned. It was a very well-constructed term or deal.
Okay, thanks.
Okay. We have one question from the webcast. What about the current casinos such as Hard Rock's? What's their view on lead generators and affiliates?
I think Hard Rock is definitely talking to us, that they're interested in lead generation. They went with a platform for both sports betting and for casino that was new to the U.S. market. Just like some of the companies in 2013 probably discovered, there were some number of regulations and other things that had to be incorporated into the platform. They told us they were not quite ready for a lead and affiliate tracking, they launched without it. The casino next door to them, essentially, that launched at the same time, Ocean Resort Casino, became a very good partner of ours using a platform that was already in the U.S. Hard Rock will come as well.
All right. Thank you. No more questions from the webcast.
Thank you, everyone.
Okay.
Thanks, Michael. As you can see, warm winds blowing from the west. Normally Mike and Colin sends the pessimistic one. I think you need to rephrase that a bit after this presentation. All this we do should generate money, of course. That's why we're here. I guess that there's nobody better knowing what's happening with our money once we bring in the PLM. Warm welcome here for presentation.
Thank you, Per. Catena Media has an outstanding financial track record. The compounded annual growth rate of our total revenues has grown with 113% from 2015 to 2017. We're still growing fast. We're not living on old merits. We don't give forecasts. I just want to share with you our run rate in the third quarter. If you take that times four, you reach total revenues of EUR 110.8 million. That's our run rate. We've been able to do this with high profits. Our compounded annual growth rate in adjusted EBITDA was 87% per year during 2015 to 2017. Again, if we look at our run rate for the third quarter, we would be at EUR 54.4 million. Catena Media total growth in revenues in Q3 was 60% to EUR 27.7 million.
The only quarter where we didn't have growth was in the second quarter 2017. That was due to there were no major sports event during that summer. We used less to pay for pay-per-click to Google. We thus got lower paid revenues. As you can see, in search, we have been growing every year, even in Q2 last year. We've been growing with a combination of high organic growth in conjunction with acquired growth. Our total growth in search revenues in the third quarter was 63% to EUR 23.7 million. We are focusing on organic growth. The organic growth that solely was generated in Catena Media was 17%, both for the quarter and for the first nine months.
When we say solely generated in Catena, that's the assets that we have for at least one year, how much they have been growing within Catena for the last 12 months. We will focus more, as Per said, on organic growth going forward. Of course, we will make some strategic acquisitions also going forward, but more focused on organic growth. Our platform continues to generate a large number, a vast number of new depositing customers to the operators. In the third quarter, we generated more than 138,000 new depositing customers to the operators. This was slightly lower than the Q2, which was spiked by the FIFA World Cup. Still, it's a large number. It's not only the number of NDCs that's important, but also the quality of the leads. That is the one that predicting what value we really get from the NDC.
You can look at the other graph that we have here and see the amount of euros that we have received per NDCs. You see that that is increasing. In the third quarter, we received more than EUR 200 per NDC. This is, of course, spiked by that we get a lot of payments from the U.S. We get about double the amount per NDC in the U.S. market compared to European market. Catena Media has a diversified revenue base with a healthy mix of different revenue streams. 50% of our revenues in the third quarter came from revenue share. That is when we receive 50% of net winnings from the end customers over their lifetime at the operator. We could close down Catena Media today, and we would still receive revenues for months or even years on these contracts. 39% came from cost for acquisitions.
That is when we get one payment upfront. 10% came from flat fees. That is pure marketing on our website, since we have so much traffic on our website. 1% came from subscriptions, which is our fairly new revenue stream, that first came from the financial segment from Hammerstone, but we now also have in the sports segment in Paris Sportif. We also have a healthy diversification when it comes to our segments. In our iGaming segment, for example, sports betting has been growing and now stands for 37% of the total revenues. Casinos for 56%, and our new segment, financials, 6% in the third quarter. We prefer to be on regulated markets. We're not here for the short term to just make short-term profits on black markets.
We want to be sure that we can sustain and have our long-term revenues, that's why we prefer to be on regulated markets, where we know the rules and we know how to comply by them. In the third quarter, 75% came from regulated or taxed markets. We know that Sweden will also regulate next year, so this portion will increase even further. Catena Media is one of the companies that have the highest EBITDA margin on the Stockholm Stock Exchange. We're living with high margins. In the third quarter, we had an adjusted EBITDA margin of 49.1%. It was a little bit lower than we have had before. This was due to mainly the investments that we make from the U.S. market, but also for the financial segment.
Even if we take that account, we have slightly lower margins than we had during 2016 and 2017. If you look at the earnings per share during that time, we have not been able to grow that that fast during these years, but we have grown our earnings per share substantially in the third quarter. We grew it with 50% from the third quarter 2017 to the third quarter 2018. That is what we're going to do. We're always aiming for high margins, but we will focus even more on having a good growth in earnings per share going forward. We have a very strong cash conversion in the underlying business. That, of course, is our main funding. It's our own cash that we generate. We generated more than EUR 29 million during the first month 2018.
Of course, we also have other sources of funding. In the third quarter, we also secured a multicurrency revolving bank facility with Swedbank, which is attractively priced. It's over Euribor three months plus 2.5%, and it is on EUR 30 million, and it matures 15th of January 2021. We have the bond that we've already issued, the senior unsecured bond, that we have issued EUR 150 million at Euribor plus 5.5%. That we have a total framework of EUR 250 million, so we still could issue more on that. Looking at our balance sheet, we had total assets at the end of Q3 of EUR 354 million. Most of our assets was our intangible assets that came from our acquisitions. On the liability side, we have equity of EUR 126.8 million. We have the amount committed to acquisitions. That was EUR 65.8 million.
Of them, up to 50% can be paid in shares if we choose to do so. That's our decision. We will be more willing to pay them in cash going forward, not to dilute our earnings per share. The borrowings is the EUR 150 million senior unsecured bond that we have on the market at fair value. We have not used anything of the Swedbank facility during Q3.
Okay. You talk about 75% regulated markets right now, pretty soon you will have Sweden as well. Could you give us some kind of indication how much this will influence this number?
We don't give guidance on our markets, we have said that Germany, U.K., and Sweden is one of our largest markets, that they are close to 10%. We say that we aim not to have any market more than 10%, and they're just above that. That gives you an indication about what Sweden would give.
Can't blame me for trying.
Yeah.
Organic growth. You have now a new, very strict definition on organic growth. Do you have any kind of ideas about this number, or are you optimistic or pessimistic here?
We're always optimistic. We haven't guided on that either. We have, however, in our financial target, the 2020 goal, that we should grow organically with a double-digit figure. That is what we're aiming for, absolutely, to have a double-digit organic growth.
Okay. Could you comment a little bit more on this new diagram that you had regarding your revenue divided by the NDC number? It shows a very healthy trajectory there.
That one?
Elaborate a little bit more on this, or?
This one?
Yeah.
Yes. Of course, we have an effect of that now here on the U.S. market, since we're getting so well paid for NDCs. We also have a larger portion of CPAs, but also we see that we have a higher lifetime value in the NDCs on our revenue share. Especially in the sports betting and in the financial service segment, we have longer lifetime values per NDC also.
Okay. Any questions here from the audience?
Yeah, I have a question regarding the bond, about the unsecured bond. What is the expiry date, or is there an expiry date on that one?
Yes, we have an expiry date. It expires in March 2021.
How worried are you about having to refinance it at a much higher interest rate if interest go up? Will it have a big impact on you think?
We'll of course try to refinance it long before it's due in that case, but also we'll look at alternatives ways of funding. We have now a credit facility with Swedbank, and we will look at different possibilities, of course, to optimize how we fund our business also. It's not only the only alternative that we have, another bond.
You're looking at refinancing it quite soon?
I haven't said what timing
Okay
We would do that before it matures, of course.
Okay, thanks.
Thanks. Yeah. Regarding the investments into the Catena Core platform that Johannes' talked about.
Sounds like it's a drag on margins at the moment, that margins should bounce sometime. Could you elaborate on that and also tie that into the 2020 target? Will it be margin expansion or revenue expansion that will take you to the 2020 target?
I would say it would be a combination of both. Of course, we aim for higher revenues, but we also see economies of scale going forward. You could see in our Q3 reports that we had economies of scale, both with direct costs and personal costs. The investments that we made are hitting other OPEX, that's why our margin was lower. We believe we will get even more economies of scale going forward. When it comes to development, new development, we capitalize some of that over three years, we'll not have that effect all at once, but it will spread over three years.
Okay, thanks.
Okay. I have a question here from the webcast, and it's about debt. Do you expect the debt to go lower, or could you say something about the debt level and the working-
Yeah, we have a very good cash conversion in the underlying business, and of course, we will use this. Before we have used that cash to acquire new companies. If we don't acquire in the same pace as we've done before, we'll use that cash and primarily pay out the earn-outs in cash instead of diluting the share.
Okay. Thank you. Do we have any more questions from the audience? Okay, well then I move on. Just briefly, just like to inform you that we have started a project with an analysis to be the backbone of the report that we'll provide in terms of sustainability for Catena Media, and we plan to have the report ready in the beginning of Q2. Obviously, one person can't do anything, but we can do something all together, and corporate social responsibility is about doing something together. There are a lot of things done by Catena Media already that's very good. We have actually, or Catena's employees have collected tons of plastics. I think I went too quick here. In terms of joining the Catena day or the Malta cleanup day to actually collect the plastics.
That is just one of the activities done by the company already, and that will also be presented in the report, of course. As you can see today, you will not get a lot of merchandise and something to bring home that you won't use anyway. We have actually decided to donate EUR 100 a person that will be for you and the guests attending today. Using the plastics that we're collecting on the West Coast in a project that actually makes new boats out of litter and plastics. That's the contribution as of now. I think that Per will do a wrap up for today and the key takeaways and, yeah.
Excellent. Thank you very much. As you can see, plastic is not fantastic. I think what we now need to do is to start to summarize today and what we have learned so far. You can see that, yes, we are the company that has gone up to a very nice position, generate a lot of money, builds a nice margin from iGaming. I think you also can start to see that what we do is a small part iGaming. We do a lot of things really to understand how we bring interesting sites in front of people eyes that makes them answer the questions, the inquiries they have, propose offers, send them on, monetize, and there we go. That is applicable for basically any industry we do. We are a lead generator. That's what we are.
We're not a gambling company, we're not an operator, we're nothing. We generate leads. We're very good at it. We have obviously built the company now, invested a lot into a very scalable business model and platform. Johannes mentioned before that today we're coming up to a situation where we don't really need to program things we do for all the sites. That we can apply and launch things from one place into the entire business and get efficiency from that, meaning that we can also, with the same kind of investments, launch more things and bring our business further. To do that, we need great employees, as I said, they need to be motivated, they need to be very engaged, and they need to run more miles per gallon than anybody else on this planet.
We need to work hard. Obviously, with the track record we see now and what we have ahead of us, it looks very promising. Fantastic, optimistic things for U.S., as we mentioned. I mentioned before, I got the questions that what will U.S. bring? Maybe I was the pessimistic one there, Mike, because I said, what we're planning now, we only plan in our books what we can see. That is Pennsylvania and West Virginia. Questions comes up, what happened about New York? What happened about these other states? What will happen with them? Yes, something will happen. If I get the question, what can I predict from what I know? I put that, I put the normal business, I do the cost efficiency. We're getting very close to the EUR 100 million without even doing one single acquisitions. Will we do acquisition?
Yes, we will. Will more states open up? Yes, we will. Will we hit the EUR 100 million target? Yes, we will. That's how we look at it. I think these steps is just the beginning of a long journey. I suggest you buckle up and join the ride because we'll be back here. If you didn't have enough on us, you can meet us tomorrow again in The May Fair Hotel in London, where we do the same show again. You're more than welcome. Before that, a couple of more dates that you need to remember, 7th of February, 2nd May, and 6th of August, we're going to present very good results. Thank you so much for showing up and welcome back