Gentoo Media suffered a sharp share price decline of 26% after the gaming affiliate company slashed its revenue and earnings guidance for the full year.
Second-quarter revenue fell 9% to €22.9m in the three months to June 30, compared with €25m in the restated prior-year quarter.
Despite the revenue decline, EBITDA before special items rose 5% to €8.9m, with the margin widening to 39% from 34% a year earlier.
The company posted a quarterly profit of €2.7m, a notable turnaround from the €0.5m loss recorded during the same period last year.
Operating profit climbed to €5.8m from €1.2m, helped in part by lower depreciation and amortisation charges during the quarter.
First-half revenue declined 7% to €46.9m, while EBITDA before special items improved to €19.3m from €17.2m over the same period.
Gentoo reduced its full-year revenue guidance to a range of €97m-€100m, down from its previous target of €100m-€115m.
The company also lowered its EBITDA before special items forecast to €44m-€47m, having previously anticipated a range of €49m-€54m.
Management attributed the guidance cut to weaker-than-expected first-half revenue, current trading conditions, delayed commercial initiatives, and lower World Cup earnings than anticipated.
CEO Jonas Warrer addressed the results directly, stating: “Returning the business to top-line growth is our clearest priority for the remainder of the year.”
Warrer added: “The operational and organisational changes implemented over the past year have created a leaner business with a structurally stronger margin profile.”
He also noted: “We enter the second half with a larger and more active player base, a more scalable Paid channel and a Publishing organisation increasingly focused on its highest-potential brands.”
Despite the revenue shortfall, player activity indicators pointed toward future growth potential for the business.
Gentoo generated €207m in deposits during the quarter, representing its highest quarterly total on record.
First-time depositors rose 25% from the first quarter to 101,900, while Paid Media first-time depositors surged 46% quarter-on-quarter.
Revenue share agreements, which account for 60% of total revenue, contributed to the timing gap between player acquisition and recognised income.
Those agreements accrue earnings across a player’s lifetime rather than at the point of acquisition, meaning World Cup player gains will feed through gradually over time.
Softer sports margins during the tournament period also weighed on the second-quarter revenue figure, the company confirmed.
Marketing spending fell to €6.8m from €8.4m year-on-year, though it rose 25% from the first quarter as Gentoo chased World Cup demand.
Personnel and other operating costs declined 12% to €7.2m, with total operating expenses falling €2.6m to €14m during the quarter.
The company said it had already achieved its previously announced €8m-€10m annualised savings target and expects further operational reductions ahead.
Cash flow from operations fell to €6.4m from €7.4m, though underlying cash conversion reached 95% when adjusted for accelerated supplier payments.
Gentoo ended June with €2.1m in cash and bank deposits, with net interest-bearing debt at €112.2m, down €10.6m year-on-year.
The leverage ratio improved to 2.58 times trailing 12-month EBITDA before special items, compared with 2.99 times a year earlier.
The company has €91.5m of bonds maturing in December and confirmed it is evaluating a replacement bond alongside private debt structures to address that obligation.
