Affiliate business Raketech Group has made a significant move in streamlining its operations with the divestiture of its non-core US advisory business for a sum of $2.3 million. The transaction, expected to close by August 31, will be settled partially on closing and through an ongoing revenue share agreement.
The Stockholm-based company has indicated that the sale will result in a non-cash impairment charge of approximately €10 million. This strategic decision marks a substantial transition for Raketech, which had acquired the US-facing tipster ATS Consultants in December 2021 for $15.5 million. The acquisition included notable lead-generating tipster sites like Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com.
Strategic Shift and Financial Implications
Reflecting on the recent developments, Johan Svensson, CEO of Raketech, emphasized the importance of this divestiture: "This strategic sale is an important step in streamlining our operations and focusing on our core strengths." The divestment not only reallocates resources but clarifies Raketech's aim to bolster its primary business areas.
Despite the anticipated one-off non-cash impairment charge, Svensson remains optimistic about the long-term benefits: "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 has already seen increased traffic to its US tipster sites, a pivotal factor that influenced the decision to transition the business model from a manual process to a digital lead conversion model for multi-capper picks and predictions (MCP). Together, these sites attract approximately 50 million sessions annually, underscoring their significant reach and influence in the US market.
Financial Performance
However, Raketech’s latest financial report paints a mixed picture. The group is set to publish its Q2 results on August 14, revealing an adjusted EBITDA drop of 17.2% to €5.1 million. This decline occurred despite a 20.1% rise in revenue to €19 million, highlighting the company’s struggle with escalating costs. Total operating expenses soared by 47.5% to €17.7 million, significantly impacting the bottom-line net profit, which plummeted 93.8% to €174,000. These figures illustrate the challenges Raketech faces amidst its restructuring efforts.
Future Prospects
In light of these changes, Raketech has signed an exclusive lead generation agreement, guaranteeing a minimum fee of $250,000 over the next 12 months. This move aligns with the company’s strategic focus on maximizing growth potential in digitalized subscription and affiliate marketing revenues. As Svensson noted, "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."
Raketech’s divestiture underscores a broader strategy to consolidate its strengths and streamline its operational focus. By exiting the non-core US advisory sector, the company can channel resources and expertise into high-growth areas, enhancing its value proposition in the highly competitive affiliate marketing industry.
As the transaction finalizes, stakeholders will be keenly observing its impact on Raketech’s financial health and market positioning. The coming months will be crucial in assessing whether this strategic sale can indeed translate into improved performance and sustainable growth, as asserted by the company’s leadership.