Catena Media plc (CTM) Earnings Call Transcript & Summary

[ Welcome to the Catena Media Q1 Report 2021. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I am pleased to present Peter Messner, CFO; and Michael Daly, CEO. Please begin your meeting. ]

Good morning, everyone. Welcome to the interim report. We're happy to report on a very successful quarter. Next slide, please. Today, we will talk through the highlights of the quarter, including our acquisition of Lineups.com and some post quarter activity. And I will cover the financials for Q1 and then talk about our strategy and outlook and then take questions. Next slide, please. Quarter 1, we saw rapid growth in the company, driven by the U.S. business, particularly. It was an exceptional period for revenues, with revenues at $40.7 million, which is 53% above the same quarter last year. This was contributed with a 61% increase in organic search revenues, which made up about $38.4 million of the total revenues, which demonstrates our focus on optimizing this high-margin revenue type. The 158,000 new depositing players, which was 32% up year-on-year, also makes up part of this story. The drivers of the new states launching in Michigan and Virginia are significant to the quarter. The U.S. iGaming rose more than 200%. It's making up 55% of the total Q1 revenue. But we did also see positive momentum in Italy, Japan and continued global growth of AskGamblers. We continue our transformation work of the European casino markets, and we see strong headwinds in markets like Germany, which declined by more than 50%. However, we remain with our solid focus on driving global portfolio of affiliation brands. Next slide, please. We saw a massive 94% growth in adjusted EBITDA to EUR 25.1 million, very high-margin of 62% and a strong operating cash flow of $20.8 million, which is up 85% year-on-year. That solid financial positioning provides a strong foundation for further deleveraging. And flexibility regarding a more effective -- efficient capital usage. Such capital usage might include dividends or share buybacks, depending on financing conditions of our bonds and allow such things as our acquisition of Lineups.com, which is an excellent strategic fit, which I will talk about a bit further. Overall, this provides a strong foundation for continued profitable growth for the rest of the year and for the years to come. Next slide, please. The acquisition of Lineups.com, it is a perfect strategic fit. It is part of the U.S. sports betting market landscape. It is a site that sat complementary to our own market-leading position. We had TheLines.com, and it was a competitor and now complementary to that site in terms of national sports presence across all the states that are currently live and the future states. It was a purchase price of USD 39.6 million, all cash. It's last 12-month revenues ending April were at $7.5 million. This corresponded to about 10% of the Q1 revenue sales of what Lineups made up would have equaled if it were -- it would have made 10% of the Q1 revenues. It does have an immediately positive effect. We expect EBITDA margins to be above 70%. It's a highly profitable business. It is a type of business we run with our organic search, and it is the type of business we want to look at if we look at an M&A, so we are very happy with the fold in of Lineups. We look forward to the upcoming NFL season with this new strong brand as part of our portfolio, and we expect great things out of the continued U.S. business with this added. Next slide, please. Significant events after the period. We had the annual General meeting on 12 May, and we'd like to welcome 2 new Board members Esther and Austin. These 2 women come with strong digital marketing backgrounds and help further round out our extraordinary Board. So we're very happy to see them joining the company -- join the Board. We've also have announced a share buyback program during the AGM, and we'll have an extraordinary general meeting on the 14th of July to further vote on that because all conditions were not met regarding. Refinancing. We kick-started a process as announced to refinance our existing bond loans, including bank term loan and a new bond loan. And update on our April performance post quarter, we saw organic revenue growth was 15% over the last -- over Q2 2020. That's 24% when you exclude Germany, and it should be noted that Q2 2020 was our highest quarter of the year, last year. So we're exceptionally pleased with the performance going into April and into Q2 and what it indicates for the road ahead. Next slide, please. I'll now turn it over to Peter Messner to go further into the numbers.

Thank you, Michael, and good morning, and welcome to our Q1 earnings call. Let's turn to the next slide and have a look at our overall revenue development and development in our new depositing customers. So total revenue was at an all-time high. We're close to EUR 41 million and grew above 50%, both compared to previous quarter and also the first quarter last year. Almost 95% of that is organic search revenue, which grew even further with 61% as compared to last year. As we've seen in the previous quarter as well, our paid revenue was below the previous year's levels, and that has been an intentional decision on our end. During Q4 last year, we've changed our performance marketing setup, and we'll continue to complement our organic revenue with paid revenue, where there is an attractive return on investment. The total number of new depositing customers increased by 32% year-on-year, which is mainly due to the Sports segment and the key events during the first quarter, which in particularly was the Super Bowl and March Madness in the U.S. Let's go to the next slide and a closer look at our revenue segmentation. So the share of sports and casino has been fairly stable when compared to the previous quarters, with the exception really of the second quarter 2020 when the Casino segment was much larger due to the COVID-19 restrictions on Sports and surge in the Casino sales in the U.S. We saw and we further expect much less volatility in sports due to the COVID-19 leasing and the overall improvement that we see around the world with vaccination programs and so forth coming in. From a sourcing perspective, revenue from CPA that is cost per acquisition was exceptionally high during this first quarter, and that's mainly due to our U.S. performance and the launches in the new states, Michigan and Virginia, and the strong sports development there, all of which are purely CPA-based for now. The Financial Trading segment represented 3% of total revenue, which is slightly less than it has been in the previous quarters, and that's due to our divestment of the Hammerstone new subscription service at the end of the last quarter 2020. It's also meant that there was no more subscription revenue during that quarter. Let's turn to the next slide then and take a closer look at our single segments. Casino. Casino had a strong quarter in the U.S. It was bolstered by the launch in Michigan. Michigan became the fifth state that offered casino and/or poker. We have casino operations in New Jersey, Pennsylvania, West Virginia and now in Michigan as well. But we also saw very strong growth in Japan, which is a casino-only market for us for the time being. Also saw continued solid growth in Italy and with our flagship global brand AskGamblers. On the European side, we continuously saw a declining trend on the casino brands that we previously also talked about and for which we started an internal transformation that has not yet fully recovered, but we see improvements there. In Germany, and particularly, we have continuous headwinds, and Michael talked about that before as well. As a result of these developments in Europe and in particular in Germany, but also the increases in the other areas, such as Italy, Japan and the U.S., the total NDC is the net depositing customers, have been fairly almost stable versus first quarter last year, that was a minus 1%. Total casino revenue increased by 54% and the adjusted EBITDA in that segment by even 94% year-on-year. Let's turn to the next page then and have a look at our second largest segment, which is the Sports segment. Sports had an even stronger quarter in that respect than Casino from a growth perspective, and that's due to the key events in the U.S. with Super Bowl and March Madness, which is a college basketball event, plus in addition, the launches in Michigan and Virginia in the second half of January. Just to put that into context. So the Super Bowl is the biggest acquisition event in the U.S., and that is not only for us, we had a massive more than 300% year-on-year increase just for this event, which also was, of course, fueled by the fact that we have been live in many more states this year as compared to last year, 5 more states as compared to last year in fact. March Madness, a college basketball event, is after the Super Bowl and after the start of the NFL, the third biggest acquisition sports event in the U.S. sports calendar, and that didn't even have a comparison last year as the event was canceled due to the COVID-19 situation in 2020. In Europe, excluding Germany, where we likewise see continued headwinds prior to the regulation in July, we saw a very solid growth. Italian market, in particular, performed very strong. And also the U.K. showed quite pleasing results, also supported by the Cheltenham Festival, a 4-day horseracing festival. As a result, a very simple [ sport ] situation. The net depositing customers grew by 91% year-on-year. Keep in mind that we're already towards the end of the first quarter last year, we had impact in the Sports segment from the COVID-19 situation. Total Sports revenue increased by 64% and the adjusted EBITDA by even 149% on a yearly comparison. Let's turn to the next slide and our final segment, Financial Trading. Financial Trading had a slight decrease from a year-over-year perspective when we exclude the Hammerstone divestment, so to really take a look on a like-for-like basis, which we, however, consider to be quite a solid performance because last year, in Q1, we already have seen a surge in demand in Financial Trading related requests and searches due to the volatility in the markets as a result of the COVID-19 pandemic. Our flagship brand, which is AskTraders had a solid performance and is very well positioned. And all-in-all, as we have streamlined the segment operationally a little bit during the autumn, our adjusted EBITDA increased by 65% versus last year. Let's turn to the next page then and our entire company cost development. So the full cost for the quarter, excluding items that affect the comparability was EUR 15.6 million, that represented a cost ratio of 38% of revenue. The direct costs increased slightly versus the previous quarter due to simply increased opportunities that we always have seen in Sports and the other operating expenses have been fairly stable. The personnel expenses had the largest increase with roughly EUR 900,000 versus the previous quarter and over the last year. And most of which is due to our continued investment in North America. We hired dedicated staff to work and prepare, for example, for upcoming markets, including the Canadian markets. And also versus last year, had a shift from contractors to employees, which positively affected our other operating expenses. Other than that, with biweekly payrolls in the U.S. such affected the March numbers a little bit, with an extra payroll cycle as compared to last year. And in addition, we also considered certain bonus accrual adjustments during the quarter, that altogether amounted to roughly EUR 0.5 million that can be considered to be a little bit extraordinary in these Q1 personnel expenses. Items affecting comparability totaled to some EUR 1.8 million, the huge part of that, EUR 1.7 million related to restructuring cost [ stores ] in relation to our transformation program and the remaining part is primarily in relation to refinancing-related costs. Let's turn to the next slide. Taking the revenue development of our segments and overall and our cost development together, adjusted EBITDA was in the first quarter at EUR 25.1 million, an increase of 94% year-on-year and a very high-margin of 62% as compared to 48% last year. Taking a look here at the last 12 months development, we see now a trend here of adjusted EBITDA above EUR 60 million. Let's turn to the next slide and the profit for the quarter. The operating profit for the quarter was EUR 21 million and increased by 131% with a margin of 52%. Interest payments were significantly reduced, and that's also the effects of our refinancing from last year and the issuance of hybrid capital securities. They do come with an interest payment, but that is accounted directly in equity. Fair market value movements on existing bonds differed quite significantly from last year as you see here, and there's a pure accounting-related item. All-in-all, profit increased by more than 100%, and earnings per share were at EUR 0.26, which represents an increase of 73% year-on-year. This altogether shows quite the continued strong performance and considering the cash generation behind opens up for deleveraging and the flexibility regarding the usage of capital that also Michael talked about. Talking about cash, let's turn to the next slide and have a closer look at our cash development, operating cash flow and cash conversion. So our business is one that shows a very strong cash flow generation and a strong and solid cash conversion. The operating cash flow increased by 85% year-over-year and was EUR 20.8 million, which represented a cash conversion of 89%, in line with what we have seen during the first quarter last year. There are certain seasonality effects, of course, in terms of the cash collection after strong quarters. Due to the strong cash situation, we also made a voluntary prepayment of EUR 6 million in nominal value and repurchased some further EUR 3.3 million and total EUR 9.3 million in relation to our existing bonds. And as a result of that, our cash and cash equivalent balance at the end of the quarter was EUR 37.5 million. Let's then turn to the final slide of my section where we take a look at the company's debt and our deleveraging journey that we have been on since our refinancing during the summer of last year. So as you see on the graph, we have been on a significant debt reduction journey since pretty much the start or the second quarter of last year. The key element in that journey has been the successful refinancing and issuing of our hybrid capital securities during the summer. And since then, as a result of the strong cash generation in the business, we have further deleveraged from a leverage ratio, which was 1.32 after the rights issuance in the summer down to 0.64 now at the end of the first quarter. Our net interest-bearing liabilities were at EUR 40.8 million and hence, reduced by EUR 100 million as compared to the end of the first quarter last year. That brought us into a much better position. And as announced only 2 weeks ago, we started to explore refinancing options for the existing bonds, which otherwise have a maturity in March 2022. And with that, I hand back to Michael, who will continue with an update on strategy and outlook, and we can switch to the next slide.

Thank you, Peter. And I'll ask you to go on to the next slide as well to the strategic growth focus slide. Talking about our focuses going forward. Catena Media is focused on organic growth. This is the highest return investment we can make is working on our own teams and the products we have currently in Europe and North America and continuing to expand their positions. We are working on geographic expansion of our existing products as well. AskGamblers, which we've mentioned. So is JohnSlots Slotsia, new casinos are brands that we believe have global power that we will continue to bring across multiple markets. We're also continuing to look at cost efficiency and improvements, particularly when we talk about the more mature markets in Europe, such as Germany and Sweden and the U.K. Those are still markets that we believe we can improve margins and continue to run strong businesses in those markets as the markets develop with regulations. And we will look at strategic M&A. But it must be strategic, and it must be in line with our multiyear strategy. Talk about our markets a little bit. We do separate our world into 3 types of markets. We have the growth markets, which are our highest priority. Those are the existing businesses in the U.S. in the current 11 states: Japan, Central and Southern Europe, such as Italy. We have the mature markets, which are the U.K., Sweden, Germany, where regulations are making changes, but we believe there are still attractive markets for an affiliate that can work within the regulated space like ourselves, but time will tell a little bit as how it looks for markets and operators in terms of countries like Germany, but we worked on efficiencies and improving our products and improving margins. And then we have the incubation phase. This includes the Latin America, which we see great potential for in the future; Asia, which Japan is working well for us today, but has great additional potential; and in the U.S., which has many new states, which, if we go to the next slide, I'll spend a minute to talk about. North America has significant potential. Today, if you look at the landscape, it's about 65 million of the U.S. population in states that have access to sports betting. About 40 million of the population have access -- will have access in the upcoming months. Arizona, Maryland have regulated -- are moving towards it in later this year, potentially later this year, it could be early next year. Illinois, will go to online later in this year officially. Ontario, speaking of North America, not just the United States, a very large province in Canada, bigger than Michigan, is expected to come online later this year with sports betting. And Canada itself is talking about nationwide sports betting. Catena Media is operating already in all of these states and provinces to be ready for those launches. We've been operating for quite some time in many of these places, such as Canada, where we have been operating sites for years to build up authority, not doing affiliation per se because it's not allowed yet, but being ready with authoritative sites. And [ projecting ] about what is beyond the next 12 months potentially, you've got the giant states. About 100 million of the population at the same size we will have access currently in the next 12 months, in just 4 states of New York, Florida, California and Texas. New York and Florida are already talking about regulating. California and Texas could be much further out. Catena Media operates in all these states because we know it's a matter of when, not if, that they are going to regulate, and they're going to become a significantly important markets in North America and Catena Media will be the leader there. And then we have another about 100 million people sort of in the size of the market in all the states that are otherwise not included in this list, which are the other big states, states like Massachusetts, Ohio, which are talking about regulating and are over 5 million in population each, and then you have another dozen states that are under 5 million, but still have good presence if we can run those with an effective business, which we know we can. So we see great potential in North America, and that's just to looking at the sports betting landscape. Consider that at some point, many of these states, like Michigan, as Peter referenced, added Casino initially, many of these states will also add Casino, which gives Catena Media another affiliation segment to then bring to all of these markets. So we see great potential for the future in North America, but also, as I mentioned on the incubation slide, in many other places; Latin America, Asia as well as parts of Europe. The Netherlands launching later in this year looks encouraging to us, the reregulation of Germany. But while it's unclear what exactly it looks like, we expect that, that market will be a good market for us in years to come because it is a large country with an interest in sports and casino and as long as there are operators there, we believe an affiliate like Catena Media can thrive there. Next slide, please. Finishing with the key takeaways for the quarter. We did see exceptional organic revenue growth in Q1, driven by the North American openings and the performance of teams around the world. We've strong earnings and cash generation, opening us up for growth-focused investment and financial flexibility in the quarters and years to come. Lineups.com, our first acquisition in quite some time, strengthens our market-leading position in the U.S. and is an excellent strategic fit. We have a strong start to the year and the second quarter is starting out to look just as strong -- or as strong as -- stronger than last year's Q2 on average. And more organic revenue growth for 2021 is expected to be well above target. And remember, our targets are double-digit organic growth on a yearly basis, with North America being the core driver, and operate on a net interest-bearing debt, adjusted EBITDA interval of 0 to 1.75, which we are well within. With that, I'll finish the presentation, and we will open it up for questions.

[Operator Instructions] Our first question comes from the line of Erik Moberg at ABG.

To start off, in regard to the European business, if we exclude for Germany, could you perhaps elaborate on the year-over-year performance and whether you were up, down or flat year-over-year?

Peter, do you want to start with that one?

Yes, I can start on that one. So that differs a little bit when taking on different segments. Let's focus on the Sports and the Casino segment. There's no impact on the Financial Trading segment when it comes to that question. So the Sports segment when you take away German and the German headwinds and that impacts there, there is a very positive growth over the entire market. When you take a look at Casino and you take the German market away, we continuously have certain European-facing casino brands, for which we started the transformation program, where we have not yet returned into a positive development yet.

Got it. And in regards to the casino vertical, would you say that this one still has stabilized on a Q-on-Q basis?

Yes. That is certainly true. We have seen definitely an improvement in the European Casino segment in comparison to the previous quarter. That doesn't mean that it is growing as compared to the previous quarter, but it has stabilized to use that word, yes.

Great. And then just thinking sequentially here into Q2, are there any regions in Europe that you expect will face any headwinds here?

So I think on that, we've already mentioned Germany. Germany is in headwinds and remains in headwinds in Q2. The markets are reopening or reregulating is sometime this summer, and that will be -- it's unclear whether that will be a one day, it's not and the next day it is and everything is running, or is it going to be a slow entry of the operators and the like. So a lot of those things will play into the Q2. So Germany is the focus there when it comes to headwinds in Q2.

So aside from Germany, there are no other markets that you foresee any headwinds here in Q2?

Not really. We expect lots of good things as we go into the European football season this summer across Europe. We're seeing good traction in -- in the U.K. and other, Italy, as we spoke before. So don't foresee any headwinds. But of course, we are still not quite out of things like COVID exactly. So there is still potential for unexpected events.

Got it. And then just looking into the second half here of 2021. Obviously, we also have some tailwinds from Netherlands starting in Q4, but is there anything that speaks against the notion that you will be back at year-over-year growth for Europe during the second half?

I think it's hard to say with the unknowns in Germany. Outside of Germany, yes, it does all look positive. Germany is just unclear for me to be able to say that, yes, where it will be by end of year. Netherlands. Again, Netherlands looks like it should launch later in the year, as you noted, it should give an uptick. There's also, as we've learned in many markets regulating in North America and other places over the years, there's always a potential for those dates to slide, and they never slide -- they never move in, they always move out. So there is also the potential that those states are next. So that could be impactful depending on what we see.

Great. And then while we're on the European market, could you perhaps elaborate a bit on the cost side of things in the mature markets and give us some flavor regarding the margin trajectory and how much more cost that you can take out from these regions?

Not sure how much we're really prepared to answer that on this call, as we continue the transformation efforts, we continue to look at where costs and efficiencies and duplications may exist. Our focus is -- well, we always look for reduction of costs, the opportunities do [ inquire ] investments as well. And we believe that in a business such as ours, that those opportunities may outweigh even some of the costs required for them. And some of those costs do have to come ahead of the opportunity. I don't know, Peter, if you want to say anything else regarding.

No, exactly. It's important to understand that the transformation program is not a margin improvement or cost efficiency program in its core, it is a growth acceleration program to turn around those cases that we talked about. Germany is part of that, but certain casino brands in Europe are the other one. The other part of cost efficiencies are our normal business anyway. And I believe we have shown that during last year that we have a very good cost control so you can expect that we go on that journey, but that is nothing that should be additionally expected out of the transformation program other than that we anyway work on that. It's a little bit too early to really elaborate on the details of let's say, certain European markets and the cost in relation to that exactly, as Michael said.

Got it. And just a question here on CPA versus rev share. Is the increase solely attributed to U.S. increasing its share of total revenue?

Yes. The majority you've got. Yes.

Okay. So if we compare CPA in Europe versus Q1 '20, it's roughly around the same levels?

That would be correct, I believe.

Got it. And on the U.S. side of the business, I'm just trying to understand the dynamics better here. Obviously, you posted a very strong performance. But could you perhaps help us understand sort of the underlying performance better? I assume that you get a bit of a onetime effect from new states such as Michigan and Virginia once they launch. Could you perhaps give us some flavor on this and how much these 2 states inflated the numbers?

You definitely get a onetime impact from new states when they launch, especially if you are like Catena Media that were in Michigan, for example, we've been working on our state sites there for 2.5 years or more, prior to the launch. So we had built up traffic and authority. So when those markets open with 10 operators at the end of January, that we were working with, we were able to drive a lot of traffic to them. So you do see initial -- an influx. But it also means that post that influx, as we saw as we get towards March and March Madness, there is just a higher run rate now with these additional large states on board. That's a little difficult to project what exactly that run rate looks like because we now enter the off-season of American Sports essentially. Whether there's baseball and the end of the NBA going on, it's really not until the NFL season picks up in the fall when the sports calendar really starts again in the North America acquisition for sports betting. So until we reach that, sort of like we saw this year where our NFL season was stronger because we had, as Peter mentioned, 5 more states on by the time Super Bowl happened. We expect a higher base run rate across the sports business in North America with these 2 states, but it might be a little early to say exactly how much higher that is.

Got it. Fair enough. And just lastly, on Canada and Ontario, more specifically, could you perhaps give us a flavor on your strategy and what you currently are doing to build up their presence there?

Absolutely. So Canada is obviously a very large country with a pension for betting an interest in it. They've had land-based casinos and government-run for quite some time, and they're also looking at sports betting now. So we've been operating [ Play Canada ] as one of our main domains up there for a number of years. It's not an affiliation, but it talks about news and information regarding sports betting -- online -- or casino, et cetera, to be ready for the day that these markets would regulate because we knew, again, it was a matter of when, not if, in many cases. So we are seeing operators. There've been operators there who have done some things feeding into Canada, but we've been focused more on building up for being ready when Canada regulates. And that now looks like it's on the horizon. So we have now been started to launch more sites to be ready for, particularly Ontario, now that we know that would be the first province, so just like our North American, U.S. approach where we have national brands and we have state-specific brands, we will do the same thing in Canada, where we have countrywide brands and province-specific brands. So we'll bring those together, which gives us more coverage and also more protection from competition.

Our next question comes from the line of Mikael Laséen of Carnegie.

I was just wondering here if you have changed the 2021 revenue guidance or targets? Or is it exactly the same?

Not [indiscernible] ...

[indiscernible] ...

Sorry. Go ahead, Peter. Go ahead, Peter.

No, we do not have any guidance on our end when it comes to the revenues other than our financial targets, which we stated and reiterated last time in our Q4 call as well, achieving and sustainably having profitable double-digit growth organically. And we are well in line with exactly that and should deliver that well above.

Okay. So it's no changes there.

Yes, no changes there. Correct.

Okay. Yes, and like when it comes to the start of Q2, 15% growth, can you say something about how the U.S. has started now in Q2, both the year-on-year and quarter-on-quarter?

U.S. is stronger year-on-year, as we have new states. Again, we are in the slower of the sports betting cycle. And the more states that go to sports betting, the larger that cycle will be, and it's dips and peaks as we go to off-season, on season. As we add more states with casino, that gets more stabilized. So year-over-year growth, but I don't know that we're breaking out specifically yet on our -- talking about April or Q2 the performance of any particular market.

Okay. Fair enough.

Just a little too early, let's say, to give that clarity.

Okay. Can you also comment on how you performed in New Jersey and Pennsylvania during the first part of 2021? You have been active there for quite some time, just to understand the run rate.

New Jersey remains a strong market for us. It is a casino and sport market. So it, like all other places, had strong Super Bowl, and it continues to have a very strong casino business in any time of the year. Pennsylvania, we've seen the development of that market and a very happy and a successful way, started with sport and casino, but slow number of operators entering the market. And the more operators that enter, the more competitive it becomes, the more they look to companies like Catena Media to assist with new depositing customers. So we have seen improvements in Pennsylvania as that market matures and perhaps even better than the market. I couldn't be specific on that, but we are very happy with our Pennsylvania performance and our New Jersey, and those remain core parts of our U.S. strategy is take the state, keep the state and then drive into new states. And that's what we do with that capital -- capital that we're bringing in from the CPA, which the market is mostly there at this point. And so we're able to use that cash and infuse in the future state. So the current states are absolutely important to keep growing as well.

Got it. Good. And when it comes to the price per new depositing customer in the U.S., can you talk about that, how that has changed maybe in Q1, if anything? And talk about maybe the differences between states and the products, give an update on that, please?

Well, we won't discuss actual rates of CPAs. They are developing in the sense that new states tend to come on with historical areas so far with a lower starting point because there is that pent-up demand the operators knew it. However, with the race of operators to gain market share we have a number of operators we have relationships with now where we have multistate deals or nationwide deals, but when states launch, they want to be in a certain position on our sites and are willing to pay a rate that they're paying in a more mature market in order to be in that position in the new market. So we're seeing higher CPAs in states like Michigan than maybe we saw in states like Pennsylvania at the initial point of launch. These things are all positive impacts for Catena Media and also raised the bar for the starting point for rates to go up from there as the markets get tighter on operators trying to find new depositing customers where they, again, turn to Catena Media for assistance.

Okay. Can you also, if I may, ask a question about competition in the U.S., how the competitive side is looking right now? And how you ensure that your key sites remain competitive and relevant in the market?

Oh, it's a good question. We obviously pay attention to not just our own product, but also how our competitors are doing and what is working well and what is not. We have lots of competitors in not just North America, but globally, and some are global competitors, and some are local. And in some cases, those local competitors, like the Lineups.com was for us, become also a target of acquisition. Not so much for us as others perhaps. We are focused again on organic growth, but there are opportunities in there. Some of the best competitors are often some of the smaller competitors who are focused very specifically on certain states and markets versus being everywhere. We are seeing more competitors. They are acquiring other competitors. So the landscape and the number of competitors is decreasing, the total number of sites that we compete against seems to be relatively stable at this point. I'm not saying a lot of new entries, seeing, again, acquisition of others by their consolidation of competitors. So we stay aware of that. As an affiliate, the way we stay on top is having the right team of the right size, bringing the right technologies to bear, using data where we can from our global operations to maximize our individual units and to look at player behaviors worldwide and optimize on the state or the province or the country and to drive that forward with technology, to be doing things newer and more interesting in bringing affiliation techniques from outside our industry, into our industry first and staying cutting-edge essentially is what is required in this industry. There's not a deep moat between different affiliates. It's how well you execute. And we tend to be the best at execution.

Okay. One final question for me, if I may, regarding Lineups. How we should think about this company and the revenue outlook? Will it follow the sports activity more in general? Or do they have something there in the products offering or on the sites that are particularly competitive and then they can support them and grow that part of the business well above the markets?

So yes and yes. They will follow the sports cycle. It is a sports-focused site, while we'll infuse some more probably casino and other things onto it for assisting in the off-season, let's say. It is a sports-focused site. It had some interesting sports tools and widgets and the like in it that were not in the rest of our portfolio. So we plan to further invest in those and potentially bring those across some of our other sites, which will see uptick across our portfolio, not just in this one particular site. And some of those, which in some things we're meant to better compete with some of the other affiliates out there than we had been using to compete against -- we were looking at different affiliates each on which we competed against and which tools and techniques we develop to be more competitive in that realm. So adding the Lineups into our portfolio, gives us a number of tools in the toolbox for all of our sites. And so we expect that will increase the growth of both Lineups [ without ] putting a team dedicated and focused on that in our margin strategy playing in with that and the work from the Lineups team coming into our company to add new infusion of product.

And there's currently just one further question in the queue. [Operator Instructions] And the next question comes from the line of Hjalmar Ahlberg of Kepler Cheuvreux.

Maybe just one more question on the Europe and the kind of outlook here for Q2 and the start of April. And you mentioned Italy, for example, as being a strong market in Q1 in Europe. What do you see -- do you see any impact this far from markets where lockdowns have east maybe and the west, and do [indiscernible] conclusion from that to the European markets?

We monitor that. I don't know that we've really seen significant impact, not like last year anyway, in any of the lockdowns or any of the things going on in various markets related to COVID spikes, et cetera. The sports season in Europe looks to be moving along at a good trajectory. As you said, Italy is doing well. We benefit from that. European football season coming. We've had good deals in place and set up for the European football events. And so at the moment, it looks all very positive in terms of what's going on in Europe for us versus anything such as where we were at Q2 last year when we were in the midst of a very gloomy outlook for COVID.

Got it. And on the Lineups, you did mention that site looks to have some data or information that you might not have on other sites, is that a proprietary data? And how it will be to used on your other assets? I mean is it a simple integration, you can start to use it in the next couple of months or quarters? Or is it a longer work to be able to use this on other assets that you have?

So to be clear, it's not specifically unique data. Data is pretty much provided from the various sports. And so it's how you, let's say, slice and dice that data and how you present it and how the tools and the products are integrating and using that to make further projections on events or information that players are looking for. So that's what they were doing in their -- they had looked at the sports data and said, "We can use it for this and that within this site." And so those were things that have basically become learning lessons for Catena Media. And how fast do those integrated into our sites? I'm not 100% clear on that yet. A lot of them look like they could roll over relatively quickly and be in place for the NFL season and some of them may be a little longer run to get across the sites. And some of those we won't bring across because we do still want to have Lineups having a different strategy than, say, the Lines.com because having 2 sites that sit as equals, but approach the market slightly differently gives us a larger share of the target audience.

Okay. And on M&A. I mean you mentioned selective M&A and now did Lineups in U.S. Will you mainly do M&A in the growth market? Or do you see potential to, for example, M&A in Europe to improve your position in some markets where you might have, I mean, slow growth or assets that is not the best assets, let's say?

I would say that nothing should be ruled out because that is how a mature organized company looks at things in our strategy. What is our strategy to the market and where might M&A fit into that? Obviously, in the growth markets, there is probably a stronger case for M&A than in others. But with a good case and a good strategic outlook in a market, that could be M&A anywhere in the world. U.S. is interesting in ways, but you also look at the multiples going on and some of the acquisitions there, and they are getting quite high. So are there better opportunities since we already have a strong organically growing team there or are there better opportunities in Latin America, Asia or, as you say, in parts of Europe, where we see great potential for the future, but know that we need something else added to our portfolio to be ready for that. So it's open. And again, I don't expect you will see a high volume of M&A from Catena Media because we just -- when you do the return on investment on organic growth versus M&A, our organic growth just seems to outweigh most of the M&A cases at this point.

Okay. And as you mentioned, valuation there, I mean, of course, with more completions that come up in some markets. Can you say anything on online Lineup? Was there any competing bids? Or was this something that you kind of found yourself? And -- yes, and acquired assets?

So I don't know that I've ever been in an acquisition where they weren't competing bids or at least the buyer telling you that they were. So -- yes. So as far as we know there were, and I do believe, in this case, there were, as you would expect, on pretty much any strong product in North America, we're not the only ones who would be looking at it.

As there are no further questions in the queue at this time. I'll hand back to our speakers for the closing comments.

Thank you. We all appreciate your joining us for this interim report. Again, we are very proud of our teams and the performance in this quarter and the outlook for the rest of the year and the coming years. So we thank you for your time, and we look forward to speaking to you again about the next quarter.