Catena Media plc (CTM) Earnings Call Transcript & Summary

Hello, and welcome to the Catena Media Audiocast with Teleconference Q2 2021. [Operator Instructions] And just to remind you, this conference call is being recorded. Today, I'm pleased to present Michael Daly, CEO. Please go ahead with your meeting.

Thank you very much. Good morning, everyone. I appreciate you joining us to talk about Catena Media, and appreciate your interest in the organization. I'm Michael Daly, the Chief Executive Officer. And I have with me today, Peter Messner, our group's CFO. Today, we're going to talk through our interim report for January to June, focusing on our Q2 and talk about our future expectations. Next slide, please. In the presentation, we'll go through the highlights. I will then talk about our Q2 acquisition of Lineups.com in North America. Peter will then go in further into the financials of Q2. We will then talk through the strategy and outlook for the company for the remainder of the year and years to come. And then we'll go into questions and answers. Next slide, please. In Q2, we saw solid revenue growth and absolutely forward momentum of the business. Revenues were EUR 30.4 million in the quarter. That's up 9% over last year's comparable quarter. Now I need to take a moment to remind everyone of what last year's comparable looked like. Q2 last year was Catena Media's strongest quarter of the year. That was due to -- while North America was in its low sports season, which is low sports season is really Q2 and most of Q3, all around the world, we've seen sports delayed or canceled due to the COVID restrictions going on. So sports was offtrack. However, Catena Media was very well positioned globally for the casino surges we saw as land-based casinos and entertainment venues of all types around the world closed due to COVID, and players or potential players went online looking for opportunity to play in online casinos, et cetera. We had an exceptionally strong quarter, thanks to that positioning. So the fact that we're 9% above that quarter in this quarter this year in revenues to me speaks very highly of the potential for this organization going forward. This will not be our strongest quarter of the year. It already is not, Q1 was even stronger than Q2. So given that this was our strongest quarter last year, I think the comparable, that's what one should take away from that. Also, organic growth was 9%, excluding -- 17%, excluding the now-regulated German market. That 9% growth is the same-store sales, let's say. So that's removing Lineups, which was only part of the quarter anyway. And again, the low sports season of North America, we acquired it for future-looking potential, which we'll talk about Lineups in a moment. And without Germany in there, which I think like every operator and affiliate out there that we've seen in the German market in any way, shape or form, we are all experiencing the changes of the now-regulated market, which, again, I have great expectations for it in the coming years as it is now regulated as of July, as operators start to become comfortable with the regulations and start to invest marketing dollars, we'll start to see that market become a good market for affiliation. We continue to do what we can there, which is to have the products that the operators need when they are ready for those. Whether that is -- it's not going to be a 24-hour or a 24-day turnaround of the German market. But over the next 24 months, I expect this becoming a strong market for many of us in that space who can work within a regulated environment. Speaking of regulated environments, North American iGaming for us was up 37%, now an equivalent of 41% of our total Q2 revenues. Strong growth in both Casino, which again speaks to the strength there considering last year's casino spike; and Sports, partially due to the negative effect of COVID last year in Sports. We also, in North America as well as more importantly globally, saw events in sports have a positive impact in the quarter, such as the Euro 2020, which happened in 2021. We saw impact on that in the North American business where we were able to bring in European sport interest. We also saw that, of course, in our Sports business in Europe, which is a smaller portion of our business in Europe. We are stronger in Casino as our numbers will show. But this shows you the great potential as we grow in the Sports business globally. Our new depositing customers were up significantly, 34% year-on-year. Again, speaking to great forward momentum of this business. Next slide, please. Adjusted EBITDA growth was up 1%, again, despite a strong Q2 2020 as well as things we are doing now that we probably were not doing quite so much last year at this time due to the COVID pandemic. We are heavily investing in North America as our results show and I think, as you will see, our future growth will show. It's the transformation program we have announced in Europe. We're working on our Casino products, working on the German reregulation, working on areas where we see opportunity to optimize our business as markets have changed through regulations and markets having shifted in maturity. So not what one might expect in terms of a giant EBITDA growth number. But being over a very strong quarter last year in a much stronger business of Casino, which has a higher margin, and thanks to the pandemic, was driven up considerably, I am very happy with having EBITDA growth in this quarter. Lineups was added during this quarter. Lineups.com should add significant value for the NFL season, which starts late Q3 this year and for many years to come. We'll talk again further about that in a moment. We also saw a successful completion of our refinancing this quarter, replacing old bonds of EUR 88.5 million, and we're issuing new bonds of EUR 55.0 million. Peter Messner will talk more about our financial position later in the presentation. Our operating cash flow, down slightly from EUR 16.4 million, again, relates to those investment activities, refinancing, et cetera. We have a solid financial position, providing a strong foundation for future growth and flexibility and efficient capital usage. It is our intention to commence some share buybacks in this autumn. And we also intend to be able to use capital for strategic acquisitions, which remain a key growth tool in our toolbox of opportunities. Next slide, please. Speaking of opportunities, Lineups.com, we view, is a perfect strategic fit with our North American business. We added the Lineups.com, seeing it as a second national sports website alongside TheLines.com. As we know in this business, it is often about positioning within the search engines and having #1 and #2 position. And instead of competing for #1 with the other strongest -- what we view as the strongest sports product in North America outside of those Catena already owned, adding Lineups to our portfolio makes it that much stronger and gives us that much more potential upside as we go into the NFL season, which is still the key affiliation season for the North American sports betting market. Lineups is also a key player for upcoming markets. We have a number of states we'll talk about later, which are poised for entry in this year or early next year. And Lineups sits very well in where it was positioned for those alongside Catena's own positioning prior. The integration was completed during Q2 to get us ready for the sports season, which is why we acquired during now and Q2 to be ready for the start and an exceptional start to the NFL season and any new state that may launch in September, October, November, et cetera. We acquired at the beginning of May, contribution was only for 2 months. It is 100% sport-focused. So Q2 is traditionally the slowest quarter for revenues. Q3 also very slow until the very end of it. That's what makes this Lineups not a major contributor to this quarter. And thus, the organic growth -- you didn't see anything outside really to organic growth. So Lineups is not a contributor really in this quarter, but expect it in the next quarter and beyond. Next slide, please. After the period of significant events, we received from a Board -- investor AGM and -- an EGM, authorization to acquire our own shares, required 2 majorities which were received. The Board has moved forward with plans to start a share buyback program during the autumn of 2021. Precise timing remains under consideration. We will look for what is in the best interest of our investors and execute accordingly. Current trading for July to give comparables. Organic revenues grew 2% in July or 11% excluding the nonregulated German market -- or the now-regulated German market, excuse me. Again, July is a low season. July and August, probably some of the slower parts of Q3 for us as you have a lull in sports globally. We've come out of the Euros. We're heading towards U.S. and Premier League. So expected later in the quarter, we should see those sports kick off and thus one might expect a stronger segment of the quarter. But I'm very happy again to be on a constantly growing trajectory. I will now turn it to Peter Messner to talk more specifically about the financials.

Thank you very much, Michael, and good morning, and welcome to our second quarterly earnings call also from my end. Let's turn to the next slide and then to the next slide so that we can take a look at revenues and our new depositing customers and the continued revenue growth. So as Michael mentioned, total revenue was at almost EUR 30.5 million, which grew 9% compared to last year. The organic growth was likewise 9% or 17% when we exclude the German iGaming market that started in a regulated setup now in the beginning of July. In line with the previous quarters, the majority or 93% now during the second quarter of our total revenue is organic search revenue, which grew 10% as compared to last year. The other part is paid revenue, and that increased by 25%, and it's mainly attributable to the Sports segment and the COVID impact that we have seen last year during the second quarter. The new depositing customers, a very key indicator that we use, increased by 34% year-on-year, and that is also mainly driven by the Sports segment and likewise the COVID impact that we have seen during the last year. The Casino NDCs have been pretty much on the same level as last year, and that's despite the surge in the Casino segment last year due to the COVID impact, and Michael talked about that before as well. As one can see, all the KPIs show a decline versus the previous quarter, the first quarter this year, and that was fully expected on our end. Q1 had a spike due to the market launches in Michigan and Virginia in the beginning of the quarter. And overall, it was a strong sports quarter in North America due to the NFL's Super Bowl in February and also the college basketball's March Madness during March. The second quarter is traditionally the lowest quarter in North America from a sports calendar perspective, and that is simply reflected in the overall performance here. Let's go to the next slide then, please, and take a closer look at our revenue segmentation and how that developed over time. The share of Sports was lower during the second quarter as compared to the first quarter as a natural consequence of the lower sports season in North America. And also, North America has increased share of our total business, which was 41% during this quarter. The Financial Trading segment represented again a stable 3% of total revenue, and that's in line with the previous quarters. As compared to last year, that share decreased due to the divestment of the Hammerstone new subscription service during the last quarter of 2020. This also meant that there was no more subscription-related revenue during the quarter to be shown. From a sourcing perspective, revenue from CPA, cost per acquisition, was down versus the previous quarter as likewise expected to -- due to the aforementioned reasons of the general trend from Q1 to Q2 and also the strong performance in the first quarter with the launches in Michigan and Virginia. CPA's share is nevertheless higher than in previous quarters with the exception of, yes, Q2 last year. And that is all due to the increased share of the North American business where revenues are only CPA-based for us for the time being. All in all, from a sourcing perspective, as you see, there is a continuous healthy balance of revenue share versus CPA and versus our fixed fees. Let's turn to the next slide and delve into our various segments, starting with the biggest one, which is Casino. Casino has historically been our biggest segment and represented 69% of group revenue and 89% of the group's adjusted EBITDA during the second quarter. As said before, Q2 last year was a particularly strong Casino quarter due to the COVID impact. Casino North America still showed a very solid growth also because of Michigan having launched earlier this year, not only in sports, but also as a casino market. And for the European part of Casino, we have seen and witnessed relaxation of COVID restrictions all over the continent and that those have shifted some players offline. And likewise, it is still too early to see the results of our transformation program, which very much focused on the European-facing casino brands. Also, there are continued headwinds in Germany, which particularly affect Casino products in that market. Let's turn to the next slide and the second biggest segment, which is our Sports segment. Sports represented 28% of total group revenue and 9% of our group's adjusted EBITDA. And revenue has increased by 65% and adjusted EBITDA by even above 100% with 105% and new depositing customers with 151%. And that, again, is all -- or a part of that is, of course, the result of Sports having been particularly low during the second quarter of the comparable quarter last year due to the COVID-19 impact. We saw a very strong performance in North America year-on-year as well, boosted by the recent launches in Michigan and Virginia and, of course, overall, the return of sports as compared to last year despite that it was a low season in North America. As Michael mentioned before, the recent acquisition of Lineups only contributed now roughly 2 months during the quarter. We made this acquisition in the early days of May. And due to its 100% sports and very NFL heavy focus as well, the contribution was as expected. And we expect much, much more in the coming months when the NFL season starts in September. European Sports showed a very solid growth when we exclude the German iGaming market that is now regulated. And as with Casino, there are certain headwinds that still exist because the regulated market still shows a certain uncertainty for our customers, for the operators in terms of what is happening there. Let's go to the next slide and our third segment, Financial Trading. And that is our smallest segment, as said before, represented 3% of total group revenue and 2% of our group's adjusted EBITDA. For a like-for-like comparison, when we exclude the divested Hammerstone business, that revenue decreased by 16%, and that was also a result of the COVID-induced demand that really surged during the second quarter last year due to the uncertainty and the volatility in the trading markets. Also, strong crypto-related trading in the first quarter due to the market developments, ebbed out a bit during this quarter with the market movements -- or following those market movements. The flagship brand in that segment is really AskTraders, and that had a very solid performance and showed very positive momentum with an uptick in traffic. These are our segments. Let's turn to the next page then and follow the path through our costs and investment into our products and staff to explain our results and also in the adjusted EBITDA. So the total cost for the second quarter, when we exclude items that have been affecting our comparability, was EUR 15.4 million, and that represented a cost ratio of 51% of revenue. The direct costs increased mainly as a result of sports having returned as compared to the second quarter last year. The personnel expenses, as we have shown during the previous quarters, they have been pretty stable as compared to Q1 this year and increased by roughly EUR 900,000 versus the last year, and most of that is due to our continued heavy investment in North America where the total personnel and other operating expenses altogether increased by more than 50% year-on-year. So you understand the cost transformation that is built into our overall cost picture with a very strong investment into our growth areas. Else, all other operating expenses have been below the previous quarter, but they are really up versus the last year. Last year, we have been particularly cognizant about cost spending in the very beginning of the pandemic. We, as every other company, didn't know what is that going to mean for the world, for our industry and for us as a company. We have since then went back to a more normalized view and, as a consequence, also invested more into -- in particularly SEO and ICT. ICT relates mostly to technology, business intelligence, AI and development services. And it's a function simply of our increased product investments. The extraordinary expenses, the items that affect our comparability and, hence, are treated as adjustments for the adjusted EBITDA, were EUR 2.3 million. And that mostly related to refinancing costs in relation to our new bond issuance and the replacement and redemption of the old one as well as restructuring and reorganizational costs as a function of our transformation program. Let's turn to the next slide and the result of the revenues and the cost as reflected in the adjusted EBITDA. So adjusted EBITDA was EUR 14.9 million in the second quarter, which is an increase of 1% year-on-year and a margin of 49% as compared to 53% last year. And again, this reflects our continued growth investments, in particular in North America. The last 12 months of adjusted EBITDA show now a trend of, yes, in the middle of EUR 60 million to EUR 70 million, and that's a very good trend. Let's go to the next slide and a short summary of the profit for the quarter. So the operating profit was EUR 10.4 million, an increase by 5% with a margin of 34%. The interest payment, as we have previously also shown, were significantly reduced as an effect of our refinancing from last year where we issued the hybrid capital securities, which do come with an interest payment, but that one is accounted directly in equity and, therefore, not affecting our profit for the period. With a strong financial performance, the company has quite some flexibility in relation to more efficient capital usage. And Michael mentioned that before as well, opening up in our toolbox for various alternatives. The earnings per share were EUR 0.09 before dilution, and that would be EUR 0.06 after dilution. I will talk about the outstanding warrants in the market in a few slides. Let's turn to the next slide and our cash development. The cash development is -- or the cash flow is one of the strongest areas really in our business. Catena Media has historically shown a very strong cash flow and a very solid cash conversion. The operating cash flow decreased by 6% and was EUR 16.4 million, which represented a cash conversion of 130%. And that is in line with the trends that we also saw last year, if you take a look at the chart where it's peaked in the second quarter at 134%. Why a decrease? Well, that was due to the slight decrease in EBITDA. EBITDA decreased by 3% as an effect of the items that affected our comparability and then, of course, had a cash outflow related to that. During the quarter, we had overall a cash outflow of EUR 20.8 million, and that was in relation to the initial purchase price consideration of Lineups, which again we acquired in the early days of May. So as a result, the cash and cash equivalents balance at the end of the quarter was at EUR 29.1 million. Let's turn to the next slide and look at the company's improved capital structure as a result of our strong deleveraging, which has been going on for quite a while. So as you see on the graph on the right, we have been on a journey of significant debt reduction since pretty much the start of last year. The key element in that journey has been the successful refinancing and the issuance of the hybrid capital securities during the summer last year, which exchanged parts of that into equity. Since then, and as a result of the continued strong cash generation in the business, we have further deleveraged from a net debt to adjusted EBITDA ratio of 1.68 at the end of the second quarter last year to 0.79 at the end of this second quarter. The slight increase versus the first quarter is the effect of the Lineups acquisition on the cash balance, of course. During this quarter, we have replaced the previous outstanding bonds of EUR 88.5 million in nominal value with newly issued bonds of EUR 55 million in nominal value. Those new bonds have a tenor of 3 years. And we also signed a new bank term loan agreement with an amount of EUR 25 million, which is repayable in equal installments over 3 years or 12 quarters until the end of April 2024. And in addition, have secured a revolving credit facility of EUR 10 million, which for the time being is undrawn as of now. And that all in all led us to a net interest-bearing liability balance of EUR 50.9 million at the end of the second quarter. And as I mentioned, the leverage ratio of 0.79, well in line with our target range. Let's switch then to my final slide, summarizing the balance sheet and certain changes that we can see there. So total assets were EUR 372.9 million at the end of the second quarter. On the equities and liabilities side, our total equity was EUR 263.1 million, and that included the hybrid capital securities of EUR 44.8 million. The outstanding nominal value there or nominal amount there is EUR 53.3 million. The balance is net of certain issuance costs, which essentially have been the guarantees to the guarantors mainly in part of warrants. Approximately 34.7 million warrants were outstanding at the end of the quarter. And these warrants expire during the exercise window after the second quarter's interim report in 2024. So those can be exercised until then. And they are responsible for the EPS after dilution, so they will further dilute our share capital accordingly. What you see in our balance as compared to the balance here on the right-hand side at the end of the first quarter is that we also now considered amounts that are committed on acquisition of EUR 11.7 million, and that's the euro equivalent of the remaining U.S. dollar commitment that has been agreed and is a deferred purchase price consideration for the Lineups acquisition that we did. The borrowings, as mentioned on the previous slide, consist now of the new bonds and the bank term loan and other liabilities comprise in particularly the trade and other payables. And with that view on our strong balance sheet, we can switch to the next slide, and I hand back to Michael who will continue with an update on our strategy and outlook.

Thank you, Peter. Next slide, please. I think Peter used the word journey during his discussion of our quarter. And I think journey is the right word for Catena Media. We are on a journey. We continue on that journey, and we continue with our strategic growth focus. We remain consistent with this, and that is an important part of our strategy is to be focused on how and where and when we grow the business. So we focus on organic growth. Organic growth is the highest-margin business. It is the most regulated -- regulatorily acceptable, it is manageable and controllable by ourselves and limited on the outside influence. Organic growth is our business. We will, of course, take advantage of market opportunities where there are performance marketing and other types of opportunities, but organic will remain our focus for this company. Geographic expansion of our existing products is also a major focus. We are continuing to look at how to take products we have that are doing well in the U.S. into places like Canada and how we take products that are doing very well in Europe into Asia, Latin America, Africa, et cetera. There is a lot of opportunity for expansion of those current products as well as adding additional products where they make sense and issues that exist. Cost efficiency improvements, this is particularly important in those more mature markets. And that is the efforts we go through in places such as the U.K. and Sweden and Germany, where there is opportunity to optimize our business and to improve the margins through cost efficiency and increase our niches within those areas. And then there is strategic M&A. Lineups is a clear example of that. There are opportunities that are going to exist globally that are good for Catena Media. It is not the key -- it's not the #1 item here, that is organic growth. But strategic M&A will be a tool in our toolbox. So talking to the markets really quickly, you've got the growth markets, which are our U.S. business, Japan, Central and Southern Europe. And then you've got the mature markets still, which are the U.K. and Sweden and Germany, where regulations are changing how those markets exist. Everyone's talked about Germany. Germany will continue to be the talk and the focus for many months to come as everyone is figuring out exactly what the market will look like post regulation. We expect it to be a good market for those that can work in a regulated environment, which is Catena Media. There is opportunity there. We expect to exploit those opportunities as they exist. And then we have our incubation, which we're going to talk more about in the next few slides. Incubation is the future business growth opportunities of the globe. That is the U.S., the new states, that is Canada, that is Latin America, that is Asia Pacific. Also probably added to that, there are areas within Europe that are incubation, places like the Netherlands and other areas that are starting to open up in Europe. Those are long-term potentials that we are doing investments this quarter and future quarters to be ready for the when and not the if of them to come. Next slide, please. Speaking about the when versus the if, North America, incredible opportunity for those companies like ourselves that are well positioned within this market. We are the leader in affiliation, in iGaming and in sports betting in North America, and we intend to stay in that position. We -- right now, there is about 70 million people in the U.S. population in states that have access to online gaming, sports betting mostly, some casino. That's about 21% of the total population of the states that will likely eventually have sports betting and/or iGaming casino. In the upcoming, which are Illinois, which is on land-based, went online for a little bit, went back offline end of this year or so, should go back online; Maryland, Arizona, Louisiana, South Dakota, Wyoming, Connecticut; also Ontario, the first Canadian province to bring on online casino. And then at some point, we'll see some more intended on sports betting as well given laws passed there. Over the next couple of quarters, we're going to see those come online. And that's about 15% more of that total addressable population. And then we've got, the timing is still unknown, but more traction seen in the last few months in activity in New York and Florida and California and Texas thereafter. But that -- those 4 states alone make up 33%. So almost those 4 states alone would almost double the current and upcoming states in the total addressable population, states with population of the addressable markets we're expecting. And then larger but further out, you've got states like Ohio, Massachusetts, South Carolina, Missouri, et cetera, very exciting, another 21% of the population, essentially the same size as the current. And then you've got the remnants, which might be discounted for their size because it's states in the 1 million to 5 million population, but that's still bigger than some other population that we address globally. And that's still another 10% of the business that over some of this period we'll start to see come along, such as now in the upcoming Wyoming which was probably in the remnants prior. So less than -- 1 million-ish people, but still adds to the bottom. And in each of these markets, we can be a high-margin business with growth opportunities. If you look at this slide, you'll see what that growth opportunity means for Catena Media. North America, in 2019 to 2020, grew 72%; 121% in 2021 H1 compared to 2020 H1. It's becoming a larger portion of our business. We are focusing heavily on the opportunities in North America because it is the largest and fastest-growing market worldwide for iGaming and sports betting. And Catena Media is and will continue to dominate in that space. Next slide, please. I don't want to spend -- or discount the rest of the world opportunities. While North America is by far the largest opportunity and we will maximize that, it is not our only focus. We are a global organization, and we intend to be globally dominant as we grow in casino and sports outside of North America. Our European transformation program is expecting to start to show positive results towards the end of this year. Again, a transformation is a journey. It starts with an affiliation and getting your traffic flows right, getting your SEO right, getting key word positioning right, working on the fundamentals of the business, content, SEO traffic, which leads to conversions, which leads to revenues. And if you set the business up right, if you start your journey correctly, it leads to a long and successful and prosperous journey ahead. And that is what Catena Media has embarked on in our Q1 this year, and we will continue working on that transformation and optimizing our businesses around the world. We expect the now-regulated German iGaming market to return to growth. Timing is uncertain. It will grow as the operators become more certain of their regulations they're working within. We will see it roll like we've seen probably some states in North America where it starts slow and then momentum comes. As the momentum comes, affiliation becomes more and more important, particularly in important markets that are regulated where the operators have more rules and restrictions around how they can market. So they need to look to those that can help them maximize in those marketing channels. Catena Media is an expert in this, and we will be there for them in the German market as they are ready to start those marketing efforts. Latin America, still in incubation, but showing positive results for us and globally for the overall opportunity for sports betting and casino online. Brazil, in particular, Brazil is a massive market. Brazil has a massive opportunity. It's not a this-quarter opportunity, but we are there and we are positioning and building to be ready for those future days when we're talking as much about Brazil as we are about some of the other markets globally. Asia Pacific region, significant growth driver for us with just Japan for the Casino segment, and recently, Malaysia for the Financial Trading segment. Great opportunity in Asia Pacific. We're putting a focus on that part of the business. We're growing our team there to focus on opportunities beyond Japan and looking at how that will work as they become more regulated and more, let's say, safe markets for operating in, in the type of business Catena Media intends to be in. Next slide, please. So I think the key takeaways from our business for this quarter is solid performance given the comparable quarter last year was heavily affected by COVID-related surge in casino. And we are continuing now to grow and focus our investments and do growth-focused investments for our future state and for this journey ahead. We have a strong balance sheet and cash generation for growth investments and financial flexibility. We will be looking at a share buyback program this autumn. We will continue to look at strategic acquisitions where they make sense, like the Lineups.com did to us. Strong seasonal uptake expected in Q3 and Q4. North America is a growing portion of our business, the growing portion of the iGaming and sports betting business globally. That means that those cycles of the seasonality will affect us and as we become more and more invested in the North American growth. NFL season starts at the end of Q3. We will expect to see some states start to launch in the end of Q3 and into Q4. Arizona is making the most noise about being the first to launch, but there are other states behind that. There are other provinces behind that. There is a long road ahead of places that Catena Media is operating today, being ready for the markets to open. And we have significant growth potential in North America in the coming 6 to 12 months. And I would say that extends well beyond 12 months into 24 and 36 and 48 as we see states talk about opening up sports betting. And then if you take an indication from what has happened in Michigan with casino online being added to that state, there are so many more states that will come online in the coming years with online casino that the road ahead looks exceptionally bright for those that know how to manage and grow in the North American regulated environment. That is Catena Media. With that, I thank you for listening to our presentation. And now we will open up to questions.

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

To start off with the trading update here, they were up 2% organically in July. If I recall correctly, July last year, you were up 7%, but then you finished the quarter with a 5.8% year-over-year decline. So this indicates obviously considerably easier comps from now on. But going forward, where we're entering the peak season in the U.S., if you could elaborate a bit on how we should think regarding the dynamics and the ramp-up in growth there.

Thanks, Erik. Yes, July is the start of the third quarter. The start of the third quarter, we see a tailing off in European sports for a period of time. We see the seasonality of casino in Europe as we have the summer holidays, which go through July and August. We have the low season in North American sports. The end of Q3 is where you start to see North American sports pick back up. Also being now a global operation, we are looking at how to maximize traffic we have on other sites around the world for more interest in North American sports, how to take advantage of our AI investment -- our investments in AI content, et cetera. So the end of Q3, one would expect to be stronger than the start. I don't know that I want to comment specifically on August and September, but NFL starts in September and then it runs boringly through to late January or early February of next year. So yes, in the quarter, we'll be stronger than start. There is just not a lot of sports going on right now in the world for July and early parts of August.

Understood. And on the European side, you touched on Germany earlier. Obviously, it's hard to assess when this market will come back to normalized levels. But would you say that we have seen the trough here in July and that we will see improvements from now on?

I think, Erik, as I look at it, that's how I view Germany at this point. I think there is so much uncertainty that it's probably, to use the expression, you're putting your finger up in the wind a little bit to try and judge the direction. It seems to make sense logically that this would be near the bottom of that as we are now -- operators are now at least able to understand the regulations and the tax implications to start making their plans. The things that are unknown are how much and how fast they're going to invest in the various. We've seen the federal rules. It's down to the states within Germany who are regulating. And so the rollout timing is unclear. But to me, it seems like the darkest days should be ending because there is at least now a stable fundamental for the businesses to start to operate and build their operation models within.

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

A follow-up on Germany there. How much of your revenue came from Germany this quarter, Q2? And also, can you say something about how that country developed in Q3 last year through the quarter? If it started -- that trend ended weaker.

Peter, I'm not sure what we broke out on Germany, so I'll leave it to you to say what specifically you're willing to say here.

Well, if I may chip in. So what we mentioned previously, Mikael, was that, I mean, Germany historically had a share of total group revenues of above 15%, right? And that continuously declined towards the end of last year. And then as we reported, with a 50% decline of our German market, so that is roughly where we are in that quarter as well. And the third quarter last year was exactly in that trend. It was right before the tolerance period started. I mean the tolerance period started, if I recall correctly, by the middle of October or in the first half of October. So we have seen certain impacts during October, but then much, much more during the fourth quarter when the real impacts have been hitting, in particular, the casino operators in that market.