In a strategic move aimed at refining its core operations, Raketech Group, a leading affiliate business, has announced the divestiture of its non-core US advisory business for a sum of $2.3 million. The transaction, poised to close by August 31, marks a significant step for Raketech as it continues to reposition its business focus.
A Move Towards Efficiency
The decision to sell the US advisory segment is part of Raketech’s broader strategy to streamline its operations and concentrate on its primary strengths. CEO Johan Svensson emphasized the importance of this transaction, stating, "This strategic sale is an important step in streamlining our operations and focusing on our core strengths." The sale will be partially settled upon closing and supplemented with an ongoing revenue share agreement, illustrating a flexible approach to the divestiture.
This divestiture, however, will result in a non-cash impairment charge of approximately €10 million for Raketech. Despite this financial hit, Svensson remains optimistic: "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."
Background of the Acquisition
Raketech's involvement in the US advisory business began in December 2021 with the acquisition of the US-facing tipster ATS Consultants for $15.5 million. This deal included well-known websites such as Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com, which have since been integral components of Raketech's US operations.
Financial Performance in Q2
The timing of this divestiture coincides with the release of Raketech’s Q2 financial results. In Q2, the company's adjusted EBITDA saw a 17.2% decline to €5.1 million, while revenue increased by 20.1% to €19 million. These mixed financial results were further compounded by a significant 47.5% rise in total operating expenses, which reached €17.7 million. Notably, Raketech's net profit experienced a drastic drop of 93.8%, bottoming out at €174,000.
A Focus on Digital Subscription and Affiliate Marketing
Svensson is nevertheless confident in the company’s strategic redirection. "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," he remarked. This illustrates Raketech’s commitment to honing in on digital subscriptions and affiliate marketing as key growth areas.
Additionally, Raketech has signed an exclusive lead generation agreement, which guarantees a minimum fee of $250,000 over the next 12 months. This deal underscores Raketech's intention to enhance its revenue through targeted marketing efforts.
The Road Ahead
The divestiture of the US advisory business aligns with Raketech's ongoing efforts to refocus its business model and optimize growth avenues. The sale allows Raketech to concentrate on areas with higher digital engagement and profitability, enhancing its core strengths and paving the way for improved financial health in the long run.
As Raketech transitions towards a sharper focus on its core business areas, stakeholders will be closely monitoring its performance, particularly in the burgeoning digital subscription and affiliate marketing segments. The anticipated closure of the divestiture by the end of August will be a critical milestone in the company's evolving strategy.
The forthcoming months will be crucial for Raketech as it works to translate its strategic initiatives into tangible outcomes, solidifying its footing in the competitive landscape of affiliate marketing.