In a significant move to streamline its operations, leading affiliate business Raketech Group has announced the sale of its non-core US advisory business for $2.3 million. The transaction is expected to be finalized by August 31 and will be settled partially upon closing and through an ongoing revenue share agreement.
Raketech's CEO, Johan Svensson, pointed out the strategic importance of this divestiture. "This strategic sale is an important step in streamlining our operations and focusing on our core strengths," Svensson emphasized. Although the sale will result in a non-cash impairment charge of approximately €10 million for Raketech, Svensson remains optimistic about the decision. "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 added.
Background and Financials
Raketech had initially dived into the US market with the acquisition of the US-facing tipster ATS Consultants in December 2021 for a significant $15.5 million. This acquisition included prominent sites such as Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com. However, the recent decision to divest indicates a strategic pivot towards other growth avenues.
Financial figures paint a complex picture for Raketech. The company's Q2 results revealed a mixed bag of performance metrics. Adjusted EBITDA dropped by 17.2% to €5.1 million, though revenue saw a substantial increase of 20.1%, reaching €19 million. Notably, total operating expenses surged by 47.5% to €17.7 million, significantly impacting the bottom line. This combination of factors led to a dramatic drop in net profit by 93.8%, leaving Raketech with a net profit of just €174,000 for the quarter.
Strategic Shift and Future Prospects
The divestiture is not merely a financial decision but a strategic one aimed at maximizing growth potential in more promising areas. "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 articulated. This move allows Raketech to focus on digitalized subscription services and affiliate marketing, sectors that the company believes hold substantial growth potential.
In addition to the divestiture, Raketech has secured an exclusive lead generation agreement, guaranteeing a minimum fee of $250,000 over the next 12 months. This agreement is set to bolster Raketech's revenue streams and align with its strategic focus on digitalized subscriptions and affiliate marketing.
The sale of the US advisory business underscores Raketech's commitment to refining its operations and concentrating on its core strengths. Through these efforts, the company aims to drive improved performance and achieve long-term sustainable growth. As the market adapts and evolves, Raketech is positioning itself to navigate these changes effectively, with a clear focus on digital and affiliate marketing avenues.
While the non-cash impairment charge may weigh heavily on the immediate financial reports, the strategic shift bodes well for Raketech's future endeavors. The divestiture and strategic realignment signify a pivotal moment for Raketech as it seeks to capitalize on high-growth areas and streamline operations to ensure sustained success in an increasingly digital-driven marketplace.