Raketech Q2 revenue dips amid Swedish struggles

Performance marketing specialist Raketech Group has reported a 6.1% year-on-year decline in revenue for the second quarter of 2019, though reduced costs saw it significantly increase its profit for the period.

Revenue for the three months to 30 June amounted to €5.7m, down from €6.0m in the prior year. This fall was blamed on lower player values in the Swedish market, as well as a shift in revenue streams that saw the contribution from cost per acquisition (CPA) deals fall 9.2% to €4.5m.

This, however, was partially offset by increased revenue share, with these agreements bringing in a €1.1m during the quarter, a year-on-year rise of 8.7%.

Q2 also suffered in comparison to 2018, when revenue was boosted by external factors such as the Fifa World Cup and the launch of casinos powered by Trustly’s Pay N Play onboarding and payments solution.

This did not impact traffic delivered to partners, with new depositing customer numbers increasing 21.7% to 24,974.

Despite the decline in Q2 revenue, Raketech saw costs decline, largely due to the prior year including €1.4m in expenses related to its initial public offering. This helped offset increases in revenue related costs to €604,000 and depreciation and amortisation charges of €907,000.

As a result operating profit increased 29.3% to €2.0m. Finance costs fell from €1.3m to €209,000 and despite increased income tax, albeit from a low base, net profit for the quarter soared from €179,000 in Q2 2018 to €1.7m.

The second quarter decline in revenue had little effect on Raketech’s first half performance, with revenue increasing 31.7% to €14.4m. The half-year figure was augmented by a €2.3m gain from to a related party liability that was waived in the first quarter of the year.

If this was stripped out, revenue was up 10.8% year-on-year to €12.1m, which was credited to strong growth in new depositing customers across all verticals.

H1 costs amounted to €7.3m, up marginally from the prior year, with the lack of IPO-related expenses over the period offset by growth in revenue-related costs, depreciation and amortisation.

As a result of higher revenue, this left a significantly improved operating profit of €7.1m, almost double H1 2018’s figure. Again significantly reduced finance costs of €495,000 offset increased tax expenses, leaving a net profit of €6.4m, up from €1.1m in the previous year.

Looking ahead, chief executive Michael Holmberg remained bullish on Raketech’s prospects in Sweden, despite admitting that market growth had “stalled” in H1. He said tough operating conditions were likely to result in a number of licensees pulling out, which in turn would allow the business, as a partner to the largest operators, in a position to play a more important role there.

The key focus, he added, was international expansion.

“We are constantly looking for new ways to use our expertise and optimise existing products in order to scale our portfolio, as well as to expand to new markets,” Holmberg explained. “We are actively looking for acquisition opportunities, and as a debt-free company we are well-positioned to acquire assets that would strengthen our operations.

“We are selective, but we continuously meet with interesting acquisitions targets.”

This has already seen Raketech move into Canada with its CasinoFever.ca site. Moves into additional European markets, Asia and North America are also targets.

In conclusion Holmberg said: “We focus on driving traffic to the larger well-established operators, with whom we have strong and successful relationships.

“Through our scalable business model, we continue to focus on profitability going forward, in combination with the before-mentioned geographical expansion and selective acquisition strategy. I look confidently towards our future and strongly believe in our long-term strategy.”