Raketech Group, an established name in the affiliate business, has initiated a notable shift in its focus by divesting its non-core US advisory business for $2.3 million. This strategic move aims to streamline operations and emphasize the company’s core strengths, ultimately maximizing long-term growth and value creation.
The transaction, slated to close by August 31, includes a partial cash settlement at closing combined with an ongoing revenue share agreement. This innovative approach allows Raketech to maintain a financial interest in the divested business while re-aligning its resources towards more profitable avenues.
A Strategic Decision
Johan Svensson, CEO of Raketech, underscored the importance of this sale in a statement: “This strategic sale is an important step in streamlining our operations and focusing on our core strengths.” Despite the anticipated non-cash impairment charge of roughly €10 million resulting from the sale, Svensson expressed confidence in the long-term advantages, stating, “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 journey in the US market began with its acquisition of ATS Consultants in December 2021 for a significant $15.5 million. This acquisition included notable websites such as Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com, which have now been part of the divested business.
Financial Implications and Future Focus
The company’s divestiture decision comes with various financial implications. Raketech’s Q2 results, set to be published on August 14, already highlight the tightening margins faced by the company. Despite a revenue increase of 20.1% to €19 million, operating expenses surged by 47.5% to €17.7 million, leading to a staggering 93.8% drop in net profit to €174,000. Adjusted EBITDA also fell by 17.2% to €5.1 million. These challenging figures underscore the necessity for Raketech to refocus on more promising facets of its business model.
The exclusive lead generation agreement signed recently, which guarantees a minimum fee of $250,000 over the next 12 months, is a testament to Raketech’s adaptability and keen strategic planning. This agreement aligns with the firm’s goal to harness the potential of digitalized subscription and affiliate marketing revenues.
Maximizing Growth Potential
Svensson elaborated on the broader strategy driving these decisions: “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.”
The divestiture is more than a financial maneuver; it reflects a deliberate pivot towards digital and subscription-based models, which are poised to offer more stable and scalable revenue streams. This shift is especially pertinent in the rapidly evolving affiliate marketing landscape, where digital strategies increasingly dictate competitive advantage.
As Raketech recalibrates its operations and strategy, industry observers will undoubtedly watch closely to see how these changes impact the company’s performance and market position. With a focus on the long-term horizon, Raketech aims to navigate the complexities of the market and emerge more robust and streamlined, delivering sustainable growth and value to its shareholders.