Raketech Group, a prominent player in the affiliate business sector, has made a notable move by divesting its non-core US advisory business for $2.3 million. The transaction, expected to finalize by August 31, aims to streamline Raketech's operations and sharpen its focus on areas with higher growth potential. The sale agreement includes a partial settlement at the time of closing and an ongoing revenue share component.
This strategic decision represents a significant shift for Raketech, which had initially ventured into the US market by acquiring ATS Consultants in December 2021 for $15.5 million. ATS Consultants brought several well-known sports sites under Raketech's umbrella, including Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com. Despite the initial promise of this acquisition, the sale of the advisory business indicates a recalibration of Raketech's priorities.
As part of the divestiture, Raketech will incur a non-cash impairment charge of approximately €10 million. Despite this financial hit, CEO Johan Svensson remains optimistic about the long-term benefits of the sale. "This strategic sale is an important step in streamlining our operations and focusing on our core strengths," Svensson stated. He further emphasized that the company's confidence in this decision is unwavering, noting, "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."
Financial Implications
The divestiture comes at a crucial time for Raketech as it navigates a mixed bag of financial results. The company's Q2 results, scheduled for release on August 14, reveal a decline in adjusted EBITDA by 17.2% to €5.1 million. On a brighter note, Raketech's revenue rose impressively by 20.1% to €19 million during the same period. However, this growth in revenue was counterbalanced by a substantial increase in operating expenses, which surged by 47.5% to €17.7 million, leading to a significant drop in net profit by 93.8%, bringing it down to just €174,000.
Amid these financial challenges, Raketech managed to sign an exclusive lead generation agreement, which guarantees a minimum fee of $250,000 over the next 12 months. This agreement is a testament to the company's efforts to secure steady revenue streams even as it reassesses its operational focus.
Looking Forward
The decision to divest the US advisory business is strategically aligned with Raketech's ambition to capitalize on digitalized subscription and affiliate marketing revenues. Johan Svensson elaborated on this objective, saying, "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."
This move underscores Raketech's commitment to honing in on its core strengths and areas with the highest potential for sustainable growth. By shedding non-core operations, the company aims to bolster its performance in the rapidly evolving landscape of digital marketing and subscriptions.
Ultimately, Raketech's latest transaction represents a calculated step towards a more focused and efficient operational model. While the immediate financial impact includes a considerable impairment charge, the long-term vision is geared towards enhanced performance and robust growth. As the company continues to navigate the complexities of the market, this divestiture could very well mark the beginning of a more streamlined and profitable era for Raketech.