In a strategic move to streamline operations, affiliate business Raketech Group has announced the divestiture of its non-core US advisory business for $2.3 million. This transaction is set to close by August 31 and will be settled partially at the closing with the remainder through an ongoing revenue share agreement.
The divestiture marks a significant step for Raketech, which has decided to focus more intensively on its core competencies. CEO Johan Svensson articulated the rationale behind the move, describing it as "an important step in streamlining our operations and focusing on our core strengths." He further explained, "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."
Raketech acquired the US-facing tipster ATS Consultants in December 2021 for $15.5 million. This acquisition included notable sites like Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com. However, the sale of this business segment will result in a non-cash impairment charge of approximately €10 million for Raketech.
Q2 Financial Performance
The announcement comes just as Raketech is set to publish its Q2 results on August 14. The preliminary figures reveal mixed results. On one hand, Raketech's revenue for Q2 saw a notable increase of 20.1% to €19 million. Conversely, the adjusted EBITDA dropped by 17.2%, coming in at €5.1 million.
Furthermore, Raketech’s total operating expenses surged by 47.5% to €17.7 million, leading to a dramatic 93.8% decline in net profit, which fell to €174,000. This sharp drop in profitability underscores the financial challenges the company faces.
However, in a bid to bolster its financial health, Raketech has also signed an exclusive lead generation agreement that guarantees a minimum fee of $250,000 over the next 12 months.
Future Focus
The divestiture is a strategic element of Raketech's broader vision to drive growth in areas that align more closely with its core strengths. "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," said Svensson. The company believes that by narrowing its focus, it can better harness growth opportunities in its specialized areas.
Overall, Raketech’s strategic sale and refocused ambition reflect its commitment to adapt and evolve in an ever-changing market landscape. The company is making deliberate moves to pivot towards sustainable growth, even if that entails taking some short-term financial hits.
The coming weeks and months will be crucial as Raketech integrates these strategic changes and aims for profitability through its focused efforts in digital subscription and affiliate marketing revenues. Certainly, all eyes will be on the company as it navigates this pivotal moment in its business trajectory.