Raketech has released preliminary figures for Q1, with revenues expected at EUR19m and adjusted EBITDA at EUR5.1m. The preliminary revenue figure is around 13% below our estimate for the quarter, while the deviation on adjusted EBITDA is 12%. The reason for the poor results is that, just as we flagged in our preview, the company has been hit by Google’s large update during Q1 and into early Q2. The update has primarily affected Raketech’s affiliate assets, which hold the highest gross margins. Given the poor start to the year, the company has cut its full-year EBITDA guidance from EUR24–26m to EUR20m. The key reason for this is that the Casumba assets have seen worse results since the update.

The company expects its cash flow for 2024 to be just below its EBITDA guidance, corresponding to almost 40% of its market cap. During the year, however, earn-outs of EUR15m will be paid to the sellers of Casumba. We believe the share will continue to trade at a discount to peers given that the assets to which the earn-outs relate have performed worse than last year. The profit warning also highlights the shift in Raketech’s revenue mix, with a higher share of upfront payments that increase the risk in estimates and render the company more vulnerable to larger changes in Google’s algorithms. We thus see an ongoing discount versus peers as justified, but we believe the cash flow valuation is particularly interesting.

Estimate changes on hold but an updated fair value