In a strategic move to streamline its operations, Raketech Group has announced the divestiture of its non-core US advisory business for $2.3 million. This transaction, expected to close by August 31, marks a pivotal moment for the affiliate business as it focuses on enhancing its core strengths.
The transaction will be settled partially at closing, with the remainder achieved through an ongoing revenue share agreement. Despite the immediate financial implications, including a non-cash impairment charge of approximately €10 million, Raketech is confident in its long-term vision.
Shifting Focus
This sale underscores Raketech's commitment to refining its business strategy. "This strategic sale is an important step in streamlining our operations and focusing on our core strengths," said Johan Svensson, CEO of Raketech. His remarks highlight the company’s mission to drive improved performance and deliver sustainable growth.
Raketech's decision to divest comes nearly two years after acquiring the US-facing tipster ATS Consultants for $15.5 million in December 2021. This acquisition included prominent sites like Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com.
Financial Impact
The divestiture is expected to significantly impact Raketech's financial statements. In its Q2 results, published on August 14, the company reported an adjusted EBITDA drop of 17.2% to €5.1 million. Nonetheless, revenue rose by 20.1% to €19 million, indicating strong performance in certain areas of its operation.
However, the rise in total operating expenses by 47.5% to €17.7 million and a staggering 93.8% drop in net profit to €174,000 illustrate the financial challenges Raketech faces. This strategic sale is a calculated move to alleviate some of these pressures and refocus resources.
Future Prospects
According to Svensson, the sale will allow Raketech to "maximize the growth potential in digitalized subscription and affiliate marketing revenues and expand our sub-affiliate marketing and partnership revenue streams." The commitment to these areas reflects a broader industry trend towards digitalization and optimized affiliate marketing.
Moreover, Raketech recently signed an exclusive lead generation agreement, which guarantees a minimum fee of $250,000 over the next 12 months. This agreement underscores the company’s intent to strengthen its market position and create new revenue streams.
Svensson remains optimistic about the benefits of this strategic pivot, despite the financial setbacks. "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 added.
Raketech's decision to divest its US advisory business is a testament to its adaptive business strategy in a dynamic market environment. By shedding non-core assets, Raketech sets its sights on consolidating and growing its core operations, promising a more streamlined and focused approach to future endeavors.