In a strategic move to sharpen its focus, affiliate business Raketech Group has announced the divestiture of its non-core US advisory business for a sum of $2.3 million. The sale, which is set to finalize by August 31, will involve partial settlement upon closing and an ongoing revenue share agreement.
The divestiture results in a non-cash impairment charge of approximately €10 million for Raketech. This charge stems from the initial $15.5 million acquisition of the US-facing tipster ATS Consultants in December 2021—a deal which included popular sites such as Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com.
Discussing the strategic rationale behind the sale, Raketech's CEO Johan Svensson emphasized the importance of streamlining operations. "This strategic sale is an important step in streamlining our operations and focusing on our core strengths," he said.
Despite the substantial one-off non-cash impairment charge, Svensson remains optimistic about the long-term benefits of this decision. "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," he remarked.
Financial Picture
The timing of the divestiture aligns with the recent release of Raketech's Q2 financial results. The firm reported a 17.2% decline in adjusted EBITDA, dropping to €5.1 million. However, it's not all doom and gloom; Raketech's revenue for Q2 saw a significant rise of 20.1%, amounting to €19 million.
Total operating expenses surged by 47.5%, reaching €17.7 million, which heavily impacted the net profits. Consequently, the company's net profit plunged by 93.8%, totaling just €174,000.
These figures underline the necessity for Raketech to recalibrate its business model. Svensson highlighted this strategic need: "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."
Looking Ahead
In addition to the divestiture, Raketech has signed an exclusive lead generation agreement promising a minimum fee of $250,000 over the next 12 months. This move aligns with the company's strategy to focus on growth areas within digitalized subscription services and affiliate marketing.
Ultimately, the retrenchment from its US advisory business should allow Raketech to sharpen its focus on maximizing growth potential in its core areas. This aligns perfectly with their overall business strategy, aiming for streamlined operations and enhanced performance.
Svensson concluded with a forward-looking perspective: "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 vision showcases a clear pathway toward fostering long-term growth and value creation in the digital and affiliate marketing sectors.
As Raketech prepares for the transaction's closure and its ambitious future plans, industry stakeholders will be watching closely to see how this strategic shift influences the company's trajectory in the competitive affiliate marketing landscape.