Affiliate business Raketech Group has initiated a significant shift in its corporate strategy by divesting its non-core US advisory business for $2.3 million. The sale, expected to close by August 31, comes as part of Raketech's broader effort to streamline operations and bolster its primary revenue streams.
Strategic Sale for Streamlining Operations
CEO Johan Svensson emphasized the importance of this divestiture in a statement, noting, "This strategic sale is an important step in streamlining our operations and focusing on our core strengths." The transaction will involve a partial settlement upon closing and will be structured through an ongoing revenue share agreement, reflecting a calculated approach to maintaining some degree of engagement with the divested assets.
The sale will, however, lead to a substantial non-cash impairment charge of approximately €10 million for Raketech. The company originally acquired the US-facing tipster ATS Consultants in December 2021 for $15.5 million, which included prominent sports betting advisory sites like Winnersandwhiners.com, Statsalt.com, and Picksandparlays.com.
Financial Performance and Adjusted Strategy
The timing of this divestiture coincides with Raketech's recent Q2 financial results, revealing a mixed bag of outcomes. On the one hand, the company saw a 20.1% rise in revenue, reaching €19 million. On the other hand, adjusted EBITDA dropped by 17.2% to €5.1 million, and total operating expenses ballooned by 47.5% to €17.7 million. Most starkly, net profit took a dramatic hit, plummeting by 93.8% to €174,000.
Svensson maintains a positive outlook despite these figures, 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."
Focus Shift Towards Core Strengths
Raketech’s strategic pivot is also highlighted by a new exclusive lead generation agreement, guaranteeing a minimum fee of $250,000 over the next 12 months. This move underscores the company's renewed focus on its core competencies, particularly in digitalized subscription and affiliate marketing revenues. "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 remarked.
Future Prospects
The divestiture aims to keep Raketech on course for its ambitious growth plans, even as it sheds non-core operations. Svensson believes that these strategic actions will streamline Raketech's business model, allowing the company to concentrate on high-growth and high-margin areas, ultimately contributing to sustained profitability and enhanced shareholder value.
As Raketech moves forward, stakeholders will be carefully watching the impacts of this latest transaction on its operational and financial performance. With the company's Q2 results painting a complex picture of revenue growth but flagging profits, the next phases of Raketech's evolution will likely draw close scrutiny from industry analysts and investors alike.