Revenue for the three months to 31 March hit €19.0m (£16.3m/$20.6m), up 20.1% from Q1 last year. This, Raketech said, was driven by growth within its sub-affiliation offering, with revenue here rocketing 149.8%.
However, in contrast, Raketech noted year-on-year declines across both affiliation marketing and betting tips and subscription income. The group said the affiliation marketing drop was largely due to the “unexpected magnitude” of a Google update that completed in April.
Furthermore, increased spending in the quarter, coupled with lower-than-expected revenue, led to a drop in net profit. However, Raketech remained in the black, with acting CEO Johan Svensson positive about longer-term prospects.
“We remain confident in our market-leading product offerings and see promising growth opportunities through our strategic initiatives in sports offerings, exclusive partnerships and media deals,” Svensson said.
“These efforts will position us well for continued growth in the coming years and we remain committed to maximising shareholder value.”
Svensson retakes the wheel at Raketech
Incidentally, Svensson has retaken the helm on a temporary basis at Raketech after Oskar Mühlbach stepped down as CEO in January.
Raketech said Mühlbach left due to different views on the strategic direction of the group. Mühlbach has served as CEO since December 2019, prior to which he had a spell as chief operating officer.
The group completed an operational review in Q1, with Svensson, who was previously CEO of Raketech before stepping aside in 2017, hailing this as a success. Key initiatives to come out of the review included reducing SEO dependency, growing the sports vertical, increasing customised partnerships and broadening overall reach.
“Our analysis resulted in a number of strategic initiatives aimed at repositioning the current affiliation marketing model to ensure we prioritise our long-term organic growth drivers,” he said.
“Additionally, we implemented efficiency measures, including cost-cutting initiatives that will result in increased profitability, improved execution and a sharper focus on our prioritised products and markets.”
The ups and downs of Q1
While Q1 was too early to see the impact of the review, results published by Raketech show several major trends.
Beginning with the only area that posted growth, sub-affiliation revenue increased 149.8% to €9.0m. This rise meant sub-affiliation was the primary source of revenue for Raketech in Q1, ahead of affiliation marketing. This part of the business includes both Raketech Network and AffiliationCloud.
“We are enhancing platform capabilities to improve partner performance and satisfaction, expanding to new markets and onboarding new publishers,” Svensson said. “These initiatives are expected to drive sustained growth in the coming quarters.”
As for affiliation marketing, revenue dropped 18.5% to €8.8m, with Raketech blaming the Google update, particularly on its Casumba assets. Combined with a weaker Q1 from Swedish assets and steady performance elsewhere, this led to overall weaker revenue.
“Completion of the Google update in April prompted a revision of our full-year guidance,” Svensson said. “Drawing from past experience, we are actively addressing this challenge. Working closely with Casumba’s committed founders, we have implemented SEO recovery strategies and improved content quality.”
Finally, revenue from betting tips and subscription income also dropped 14.9% to €1.2m. Raketech put this down primarily to a slight decline at the end of the US sports high season.
“We are actively reviewing strategy for this area, with a continued focus on our subscription-based digital platform,” Svensson said.
Casino growth offsets sports betting decline
On the subject of sports betting, Raketech noted an overall drop in revenue from its sports wagering offering during in Q1. Total sports betting revenue hit €3.5m, down 7.5% year-on-year and accounting for 18.4% of all Q1 revenue.
However, this was more than offset by casino growth, with revenue here jumping 28.8% to €15.5m, accounting for 81.6% of all total revenue.
As for how Raketech generated revenue, 47.9% of Q1 revenue came from upfront payment, a rise of 6.5% on last year. Revenue share accounted for 33.2% of the total, down 1.5%, with flat fee drawing 12.4% of revenue. The other 6.5% came from betting fees and subscription income.
In terms of geographical performance, growth in the Nordics was clear to see. Here, revenue climbed 42.0% to €8.2m in Q1. Rest of Europe revenue was also up 50.1% to €852,000 but US revenue dipped 8.1 to €1.8m. The other €8.2m of revenue was generated in the Rest of World segment, a rise of 8.4%.
In addition, Raketech noted an increase in new depositing customers, with this rising 8.8% to 59,657 during Q1.
Net profit dips as spending increases
While revenue growth is good news for Raketech, this was more than offset by an increase in costs. Total operating expenses were 47.5% higher year-on-year at €17.7m, with the main outgoing being publisher costs at €6.9m.
Raketech noted an additional €855,000 in finance-related costs, meaning Q1 pre-tax profit was €407,000, down 86.6%. The group paid €300,000 in income tax but deferred €67,000 in tax.
As such, bottom-line net profit for the quarter hit €174,000, a drop of 93.8%. In addition, adjusted EBITDA fell 17.2% to €5.1m.
Original article: https://igamingbusiness.com/finance/quarterly-results/raketech-misses-q1-targets-despite-revenue-growth/
