Profit slips at Raketech despite revenue growth

22 February 2019

Online affiliate and content marketing company Raketech has reported a year-on-year decline in profit for 2018, despite enjoying a 49.0% increase in revenue.

Revenue for the 12 months through to December 31, 2018 amounted to €25.6m (£22.3m/$29.0m), up 49.0% on the previous year. This was largely down to organic growth, which accounted for 29.9% of the percentage total.

Raketech has said this positive revenue growth was seen throughout all parts of its operational model, including its core existing assets (Raketech Core), its research and development hub Raketech Lab and from newly-acquired assets. New depositing customers also increased 48.2% from 67,193 to 99,599.

However, total operating expenses were up significantly in 2018, with Raketech spending a total of €14.4m, compared to €8.3m in the previous year.

Direct expenses were up from €900,000 in 2017 to €2.1m, mainly due to higher spend on external SEO, hosting, development and domain expenses. Raketech has said this is in line with an ongoing strategy to capitalise on its scalable model, driven by its internally developed data-warehouse.

Employee benefits expenses also jumped from €3.5m to €4.8m, due to a rise in overall staff numbers, while other expenses increased from €3.1m to €4.2m. The latter of these was down to €1.5m in expenses related to the business' listing on the Nasdaq First North Premier.

Raketech also noted an increase in depreciation and amortisation – up from €700,000 to €1.7m - mainly attributable to intellectual property acquired in 2018.

Higher expenses seemingly had an impact on profitability at Raketech in the past year, with profit down from €5.8m to €4.6m. Profit before tax was also lower at €4.8m, compared to €6.1m in 2017, but operating profit was up from €8.8m to €11.2m.

Reflecting on the past year, CEO Michael Holmberg was mainly upbeat, saying it was a record-breaking 12 months for Raketech. He cited product innovation and growth as an area of the business that he expects to drive growth in 2019.

“Core is all about maintaining and growing old products for tomorrow, or build new products on old assets or domains by releasing product upgrades that matches the search trends of today and tomorrow,” Holmberg said. “We are seeing improvements in ranking of our products and I believe we are in a strong position to further optimise going forward.”

Holmberg also spoke positively about the acquisition of Norwegian assets in the summer of last year, saying this is an area that is interesting Raketech moving forward, and also set out plans for Raketech in the newly regulated Swedish market.

“The regulation of the Swedish gaming market came into effect on January 1 and we put a big focus on activating a new Swedish compliance strategy at the end of 2018 to ensure our sites follow robust compliance criteria,” he said. “We also discontinued partnerships with operators not applying for a Swedish licence.

“With a clear compliance strategy executed, we can now focus resources on driving traffic to our new and existing regulated partners in Sweden with which we have established long-term deals. It is still early days and the operators and players are adapting to the new setting, but we believe the market will normalise over time and we see many opportunities ahead.”

In addition, Holmberg set out his vision for Raketech to expand into new markets in 2019, saying the company is progressing with plans across several areas of the business. This includes the launch of a new casino product, under the Rapidi brand, powered by Trustly's Pay N Play solution.

“Looking ahead, we plan to expand into new markets, optimise our current assets in Raketech Core and launch new products in Raketech Lab, such as the above- mentioned casino product,” he said.