In a strategic move aimed at streamlining its operations, Raketech Group has announced the divestiture of its non-core US advisory business for $2.3 million. The transaction, set to close by August 31, marks a significant shift for the affiliate marketing company as it seeks to focus on core strengths and growth potential in digitalized subscription and affiliate marketing revenues.
Details of the Sale
The deal, which will be settled partially at closing and through an ongoing revenue share agreement, resulted in a non-cash impairment charge of approximately €10 million for Raketech. This divestiture is seen as a pivotal move for Raketech, allowing it to hone in on its main operational objectives and drive improved performance.
"This strategic sale is an important step in streamlining our operations and focusing on our core strengths," said Johan Svensson, CEO of Raketech, underscoring the company's shift towards its primary business areas.
Background and Financial Impact
Raketech's venture into the US market began in December 2021 with the acquisition of ATS Consultants for $15.5 million. This acquisition included popular sites like Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com. However, the sale of this advisory business signifies a retraction from that initial foray.
Financially, the divestiture sends ripples through Raketech's Q2 results. The company reported an adjusted EBITDA drop of 17.2% to €5.1 million, despite a revenue increase of 20.1% to €19 million. Operating expenses shot up by 47.5% to €17.7 million, leading to a stark 93.8% decrease in net profit, which settled at €174,000.
Additionally, Raketech signed an exclusive lead generation agreement ensuring a minimum fee of $250,000 over the next 12 months. This agreement reflects the company's efforts to create additional revenue streams while maximizing the value of its high-quality US operations.
Future Projections
Johan Svensson remains optimistic about the long-term benefits of this strategic move, despite the immediate financial hit from the non-cash impairment. "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 noted.
As Raketech pivots to strengthen its core services, the focus remains on maximizing growth potential through digitalized subscription and affiliate marketing revenues. "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 added.
Conclusion
The sale of Raketech's non-core US advisory business is a calculated decision aimed at optimizing the company's operations and driving growth in its core areas. While the financial implications in the short term include a significant impairment charge, the long-term outlook appears promising. By focusing on its primary strengths and strategic areas, Raketech aims to achieve sustainable growth and value creation, paving the way for a robust future in affiliate marketing and digitalized subscription services.