In a strategic move aimed at fine-tuning its core business, Raketech Group has announced the sale of its non-core US advisory arm for $2.3 million. The divestiture is set to close by August 31, with the transaction to be settled partially at closing and through an ongoing revenue share agreement. This move marks a critical pivot for Raketech, a firm well-known in the affiliate business arena.
CEO Johan Svensson articulated the rationale behind the sale, emphasizing the importance of concentrating on Raketech's primary strengths. "This strategic sale is an important step in streamlining our operations and focusing on our core strengths," Svensson said, underscoring the company's commitment to honing its focus.
Financial Implications
The divestiture isn't without its financial repercussions. Raketech is poised to incur a non-cash impairment charge of approximately €10 million as a result of the sale. Notably, the assets being sold include ATS Consultants, a US-facing tipster service that Raketech acquired in December 2021 for $15.5 million. Sites like Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com were part of that acquisition.
"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," Svensson added.
Q2 Financial Performance
Coinciding with the announcement of the sale, Raketech has also revealed its financial results for the second quarter. The company's Q2 numbers paint a mixed picture. On one hand, revenue surged by 20.1% to hit €19 million. On the other hand, adjusted EBITDA fell by 17.2% to €5.1 million. These figures were further compounded by a significant increase in total operating expenses, which soared by 47.5% to €17.7 million.
Perhaps most strikingly, Raketech's net profit plummeted by 93.8%, landing at just €174,000. The sharp decline in net profit, juxtaposed against rising revenue, highlights the challenges Raketech faces even as it trims its portfolio to better align with its strategic goals.
Strategic Partnerships and Future Focus
Raketech's approach to sustaining growth amid these financial shifts is evident in a recent landmark deal. The company has signed an exclusive lead generation agreement that guarantees a minimum fee of $250,000 over the next 12 months. This agreement reflects the company's shift towards maximizing growth in digitalized subscription and affiliate marketing revenues.
Svensson spoke to this strategy: "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."
While the sale of its non-core US advisory business might seem like a step back in the competitive affiliate market, it’s a calculated decision by Raketech to refocus its resources and sharpen its strategic direction. The ultimate goal is clearer pathways to revenue growth and enhanced operational efficiency.
As Raketech prepares for the closure of this significant sale by the end of August, all eyes will be on its performance metrics in the upcoming quarters. With strategic realignment and strong partnerships in place, Raketech aims to navigate the complexities of the market, leveraging its concentrated focus to drive long-term value creation.