In a significant move within the affiliate business landscape, Raketech Group has opted to sell its non-core US advisory business for a sum of $2.3 million. This strategic decision, aimed at streamlining operations and honing in on the company's primary strengths, reflects a calculated shift in focus.
Transaction Details
The transaction, set to be finalized by August 31, will be partially settled upon closing, with the remainder of the payment flowing through an ongoing revenue share agreement. Despite the financial manoeuvre appearing beneficial on the surface, it comes with a conspicuous downside: a non-cash impairment charge amounting to approximately €10 million for Raketech.
Raketech originally acquired the US-facing tipster ATS Consultants in December 2021 for a more substantial $15.5 million deal. This acquisition brought in well-known sites such as Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com under the Raketech umbrella. However, the current decision to divest marks a strategic pivot back towards core activities.
Q2 Financial Performance
Highlighting Raketech's recent financial performance, the company’s Q2 results unveiled a mixed bag of outcomes. Adjusted EBITDA experienced a 17.2% drop to €5.1 million. On the brighter side, revenue ascended by 20.1%, reaching €19 million. Nevertheless, this revenue growth was accompanied by a substantial rise in total operating expenses, which surged 47.5% to €17.7 million, cumulatively overshadowing the uptick in revenue.
Raketech's net profit exhibited an alarming decline, tumbling 93.8% to just €174,000. This sharp drop reflects the significant impact of operating costs and the aforementioned impairment charge on the overall profitability.
Strategic Focus
Johan Svensson, CEO of Raketech, emphasized the importance of the sale in enhancing operational efficiency and focusing on core strengths. "This strategic sale is an important step in streamlining our operations and focusing on our core strengths," Svensson remarked.
Svensson remains optimistic about the future despite the immediate financial setback. "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," he stated.
Additionally, Svensson highlighted the company’s forward-looking strategy centered around maximizing growth potential within their digitalized subscription and affiliate marketing revenues. "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," Svensson added.
Looking Ahead
In line with its strategic objectives, Raketech has signed an exclusive lead generation agreement that guarantees a minimum fee of $250,000 over the next 12 months, further bolstering its focus on growth within targeted areas.
As Raketech prepares to publish its Q2 results on August 14, the divestiture is poised to play a crucial role in the company’s renewed endeavor to channel resources and energy into areas with the most substantial growth potential. This decisive step is seen as a reaffirmation of Raketech's commitment to enhancing shareholder value and paving the way for sustainable success in the competitive landscape of affiliate marketing.