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Raketech fails to meet Q1 revenue targets, despite growth

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Raketech, an affiliate business, has announced that it failed to meet expectations for the first quarter. The company’s revenue growth was overshadowed with declines in adjusted EBITDA as well as net profit.

The revenue for the quarter ending 31 March was EUR19.0m ($20.6m/£16.3m), an increase of 20.1% over Q1 2013. Raketech stated that this was due to the growth of its affiliate offering. Revenue here grew by 149.8%.

Raketech, on the other hand, noted a decline in both betting tips and affiliate marketing income. According to the group, the drop in affiliate marketing was due to an “unexpected magnitude”, of the Google update completed in April.

A drop in profit was also caused by increased expenses in the third quarter and lower than expected revenue. Raketech, however, remained profitable, and acting CEO Johan Svensson is optimistic about the company’s long-term prospects.

Svensson stated, “We are confident that our product offering is the best on the market and we see growth potential through our strategic initiatives regarding sports offers, exclusive partnership and media deals.”

We remain committed to maximizing shareholder value.

Svensson returns to the Raketech wheel

Svensson, incidentally, has temporarily taken over the CEO role at Raketech following Oskar’s resignation in January.

Raketech stated that Muhlbach resigned due to differing views about the strategic direction for the company. Muhlbach is the CEO of Raketech since December 2019. Prior to that, he was chief operating officer.

Svensson, the former CEO of Raketech who stepped down in 2017 hailed this review as a great success. The review resulted in a number of key initiatives, including reducing SEO dependence, expanding the sports vertical and increasing custom partnerships.

He said that “our analysis led to a series of strategic initiatives designed to reposition the current affiliate marketing model in order for us prioritise organic growth on a long-term basis.”

We also implemented cost-cutting measures that resulted in improved performance, increased profitability and sharper focus on the products and markets we prioritise.

What happened in Q1?

Raketech’s results, published in Q1, show that there are several trends.

Sub-affiliation revenues grew 149.8%, to EUR9.0m. Sub-affiliation revenue grew 149.8% to EUR9.0m in Q1, surpassing affiliate marketing. Raketech Network, AffiliationCloud and other parts of this business are included.

Svensson stated that “we are improving platform capabilities in order to improve partner satisfaction and performance, expand to new markets and welcome new publishers.” These initiatives should drive sustainable growth over the next few quarters.

Raketech blamed the Google updates, especially on Casumba, for the 18.5% drop in revenue. This was combined with the weaker performance of Swedish assets in Q1 and the steady performance across other regions to result in a lower overall revenue.

Svensson stated that the completion of Google’s April update prompted us to revise our guidance for this year. We are actively working to address this problem, based on our past experiences. We have improved the quality of content and implemented SEO recovery techniques in collaboration with Casumba’s dedicated founders.

Finaly, revenues from subscriptions and betting tips also fell 14.9%. They now total EUR1.2m. Raketech attributed this to the slight drop in revenue at the end the US high sports season.

Svensson stated that “We are reviewing our strategy in this area and continue to focus on the digital subscription platform we have developed.”

Growth in casinos offsets declines in sports betting

Raketech has noted a drop in the revenue generated by its sports wagering offerings in Q1. The total sports betting revenue reached EUR3.5m in Q1, down 7.5% on an annual basis and representing 18.4% of the entire revenue for Q1.

This was offset more than anything by the growth in casino revenue, which jumped 28.8%, to EUR15.5m. That’s 81.6%, of total revenues.

Raketech’s revenue was generated in a number of ways. 47.9% came from the upfront payment. This is an increase of 6.5% over last year. The revenue share was 33.2%, which is down by 1.5%. Flat fee generated 12.4%. Other 6.5% of revenue came from subscriptions and betting fees.

The Nordics showed a clear growth. In Q1, revenue in the Nordics grew 42.0%, to EUR8.2m. The revenue for Rest of Europe was up by 50.1% at EUR852,000, but the revenue in US fell by 8.1 percent to EUR1.8m. Other EUR8,2m of revenues were generated by the Rest of World, an 8.4% increase.

Raketech also noted an 8.8% increase in the number of new customers who deposited money, which amounted to 59 657 at Q1.

Spending increases cause a drop in net profit

Raketech’s revenue increase was a positive development, but it has been more than countered by the rise in cost. The total operating costs were EUR17.7m (47.5% more than the previous year), with publisher expenses at EUR6.9m being the largest outgoing.

Raketech reported an additional EUR855,000 of finance-related expenses, meaning that Q1 profit before tax was EUR407,000. This is a decline of 86.6%. The group deferred EUR67,000 of tax while paying EUR300,000.

The bottom line net profit was EUR174,000 for the third quarter, which is a decline of 93.8%. The adjusted EBITDA also fell by 17.2%, to EUR5.1m.

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