In a significant move to streamline its operations and focus on core strengths, affiliate business Raketech Group has sold its non-core US advisory business for $2.3 million. The divestiture, which is expected to close by August 31, delineates the company's strategic shift towards maximizing growth potential in digitalized subscription and affiliate marketing revenues.
The transaction will be partially settled at the time of closing, with the remaining amount being handled through an ongoing revenue share agreement. As a consequence of this sale, Raketech will incur a non-cash impairment charge of approximately €10 million. This follows the company's acquisition of the US-facing tipster ATS Consultants in December 2021 for $15.5 million, a deal that also included websites like Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com.
Discussing the strategic decision, Raketech CEO Johan Svensson remarked, "This strategic sale is an important step in streamlining our operations and focusing on our core strengths." Despite the considerable impairment charge, Svensson remains optimistic about the company's trajectory. "We are confident that this move will enhance our focus, drive improved performance, and deliver long-term sustainable growth and value creation," he added.
Financial Highlights and Challenges
The timing of the divestiture coincides with the release of Raketech's Q2 financial results on August 14. The company presented a mixed bag of outcomes, showing an adjusted EBITDA drop of 17.2% to €5.1 million, despite a 20.1% increase in revenue to €19 million. An evident rise in total operating expenses by 47.5% to €17.7 million contributed to the company’s challenges, culminating in a steep 93.8% decline in net profit, which fell to €174,000.
Nevertheless, Raketech's revenue boost and its strategic divestiture are seen as key moves to refocus the company's efforts on profitable ventures. Svensson emphasized the importance of leveraging high-quality US operations. "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 stated.
Moving Towards a Digital Future
In a bid to navigate the complex landscape of the affiliate marketing industry efficiently, Raketech's latest divestiture exemplifies its forward-thinking approach. The newly inked exclusive lead generation agreement further underscores this strategy, committing to a minimum fee of $250,000 over the next 12 months. This agreement is expected to provide a stable revenue stream as the company moves forward.
With the challenging backdrop of increased operating expenses and decreased net profit, Raketech appears poised to pivot towards sectors and strategies that promise long-term sustainability and growth. The social betting community and subscription models, buoyed by targeted affiliate marketing tactics, are likely to be focal points for the company in the near future.
As Raketech continues to cultivate its digital footprint, the sub-affiliate marketing and partnership revenue streams will be increasingly important. This pivot aligns with broader industry trends where data-driven decision-making and consumer subscription models are becoming prevalent.
Conclusion
Raketech Group's proactive divestiture of its US advisory business for $2.3 million represents a calculated move to reclaim focus on its central strengths. Highlighting a dual strategy of enhancing operational focus and leveraging high-quality US operations, Raketech aims to navigate the competitive landscape of affiliate and digitalized subscription marketing. Through these strategic realignments, Raketech positions itself to drive improved performance and forge a path toward sustainable growth.