In a strategic move aimed at refining its focus, Raketech Group, a prominent affiliate business, has announced the divestment of its non-core US advisory business for a sum of $2.3 million. This transaction is anticipated to be finalized by August 31, with partial settlement on closing and an ongoing revenue share agreement forming part of the deal.
While the sale marks a significant shift in Raketech's portfolio, it will result in a non-cash impairment charge of approximately €10 million. This decision comes as part of Raketech's broader strategy to streamline operations and concentrate on key areas of growth. CEO Johan Svensson described the sale as "an important step in streamlining our operations and focusing on our core strengths." Despite the financial hit from the impairment charge, Svensson maintains an optimistic outlook, believing that the move will bolster the company’s performance in the long run.
Raketech had initially acquired the US-facing tipster ATS Consultants in December 2021 for $15.5 million. The acquisition included high-traffic sites such as Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com. However, the recent divesture indicates a strategic pivot by Raketech to focus on maximizing growth potential within digitalized subscription and affiliate marketing revenues.
Financial Performance in Q2
Coinciding with the announcement of the sale, Raketech also released its Q2 financial results. The report highlighted a 17.2% decline in adjusted EBITDA to €5.1 million, juxtaposed with a 20.1% rise in revenue, which reached €19 million. Despite the impressive revenue growth, the company's total operating expenses surged by 47.5%, ending at €17.7 million. This surge in operating costs heavily impacted profitability, leading to a staggering 93.8% drop in net profit, down to €174,000.
The challenging financial performance underscores the importance of Raketech's decision to refocus its efforts. Svensson stated, "Despite the one-off non-cash impairment charge, we are confident that this move will enhance our focus, drive improved performance, and deliver long-term sustainable growth and value creation."
Outlook and Future Strategies
As part of its long-term strategy, Raketech has signed an exclusive lead generation agreement that guarantees a minimum fee of $250,000 over the next 12 months. This agreement is seen as a significant step towards strengthening the company's core business.
Svensson remarked, "By leveraging our high-quality US operations, our strategy is to maximize the growth potential in digitalized subscription and affiliate marketing revenues and expand our sub-affiliate marketing and partnership revenue streams." This clearly outlines Raketech's intent to harness its established US operations to drive future growth.
With these strategic pivots, Raketech aims to navigate the challenging waters of the digital marketing landscape, streamlining its focus to ensure sustainable performance and value creation for its stakeholders.