This week, Raketech Group, a prominent affiliate business, announced the divestiture of its non-core US advisory arm for a sum of $2.3 million. This strategic decision involves the sale being settled partially at closing and supplemented by an ongoing revenue share agreement, and it is expected to be finalized by August 31.
The divestiture will result in a non-cash impairment charge of approximately €10 million for Raketech. This impairment is a significant note on Raketech's financial statements, but it is viewed as a necessary step to refine its operational focus. Raketech had initially acquired the US-facing tipster business, ATS Consultants, in December 2021 for $15.5 million. The acquisition included popular sports prediction sites such as Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com.
Q2 Financial Performance
Raketech is also set to publish its Q2 results on August 14. Early insights into these results reveal a mixed financial performance for the quarter. The company’s revenue in Q2 rose by an impressive 20.1% to €19 million, reflecting strong business growth. However, this growth was marred by a significant increase in total operating expenses, which surged by 47.5% to €17.7 million. The increased expenses contributed to a drop in adjusted EBITDA by 17.2%, amounting to €5.1 million. Furthermore, net profit plummeted by an astonishing 93.8%, falling to a mere €174,000.
Strategic Redirection
Johan Svensson, CEO of Raketech, emphasized the strategic rationale behind the sale, stating, "This strategic sale is an important step in streamlining our operations and focusing on our core strengths." Svensson is optimistic about the long-term benefits of this move despite the immediate financial implications. He affirmed, "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's decision to sell off its US advisory business allows the company to concentrate on optimizing its digitalized subscription and affiliate marketing revenues, areas where Raketech sees substantial growth opportunities. Svensson articulated this vision, noting, "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."
In line with its strategic shift, Raketech also announced an exclusive lead generation agreement that guarantees a minimum fee of $250,000 over the next 12 months. This agreement underscores the company's commitment to diversifying and enhancing its revenue streams while focusing on its core business areas.
The sale of the US advisory business marks a pivotal moment for Raketech as it aims to streamline its operations and return to stronger profitability. As the company gears up to release its detailed Q2 results, stakeholders will be keen to understand how these strategic decisions play into the longer-term vision of sustainable growth and value creation. Raketech remains undeterred by short-term financial setbacks and is focused on harnessing its core competencies to drive future success.