Successful deployment of GAN Sports continues
now live in 9 states
Company continues evaluation of strategic
alternatives
GAN Limited (NASDAQ: GAN) (the “Company” or “GAN”), a leading
North American B2B technology provider of real money internet
gaming solutions and a leading International B2C operator of
Internet sports betting, today reported its unaudited financial
results for the quarter ended June 30, 2023.
Dermot Smurfit, CEO of GAN stated:
“Our second quarter saw solid execution and progression of our
business plan. We continued to see strength in international
markets for B2C, expanded our roll-out of GAN Sports, and made
significant progress on the new GameSTACK 2.0 version of our
technology platform. With GAN Sports now live in nine U.S. states
and the encouraging momentum we are seeing in our international
markets, we would expect our top-line performance to improve over
the coming quarters and into 2024.”
“As an update on our strategic initiatives, we have received
indications of interest from prospective bidders interested in
acquiring all or part of our business. A special committee of our
Board of Directors, comprised of non-executive directors, is
evaluating those alternatives. The indications of interest are
non-binding; no definitive agreements for a strategic transaction
have been reached at this time. There is no assurance that a
transaction will take place, and no timetable for completion of any
transaction.”
Second Quarter 2023 Compared to Second
Quarter 2022
- Total revenue of $33.8 million decreased $1.2 million
compared to the prior year quarter.
- B2B segment revenue was $9.9 million versus $14.2
million. The decrease was primarily attributable to a decrease in
our contractual revenue rates pursuant to the agreement regarding
an exclusivity period with a B2B customer.
- B2C segment revenue was $23.9 million versus $20.8
million. The increase was primarily related to growth in both our
European and Latin American operations that was driven by a higher
sports and casino hold percentage.
- Total segment contribution was $24.3 million versus
$24.5 million. The increase in B2C segment contribution related to
increased revenues, which was largely offset by a decrease in B2B
segment contribution relatively consistent with the decline in
revenue.
- Operating expenses were $32.8 million versus $62.3
million. The decrease was primarily attributable to a $28.9 million
impairment charge in the prior year quarter.
- Net loss was $18.4 million versus $38.3 million. The net
loss this quarter includes a loss on debt extinguishment of $8.8
million as a result of the Company entering into the Amended Credit
Facility (as defined below) on April 13, 2023.
- Adjusted EBITDA was $(2.0) million versus $1.3 million.
The decline was primarily related to the decline in revenue in the
B2B segment.
- Cash was $43.4 million as of June 30, 2023 versus $40.8
million as of the prior quarter. The increase was due to proceeds
from the Amended Credit Facility and a favorable change in working
capital.
- B2C Active Customers decreased modestly from the prior
year period primarily related to limited customer acquisition in
Latin America and the strategic decision to exit the Ontario
market. The B2C Marketing Spend Ratio was down 170 basis
points from the prior year to 20.3% driven by increased revenues as
a result of strong margins in our sportsbook and casino
offerings.
- B2B Gross Operator Revenue (“GOR”) totaled $436.0
million versus $283.0 million in the prior year quarter, a 54%
increase. The increase was driven primarily by organic growth in
Pennsylvania, Michigan, New Jersey, and Connecticut. Additionally,
Ontario supplemented the growth through achievement of greater
market share.
- During the quarter, and as previously mentioned, the
Company successfully amended its Credit Facility to waive all
events of default, amend certain financial covenants, assign the
rights to the Credit Facility from its existing lender to a third
party, and increase the principal balance from $30.0 million to
$42.0 million with accrued paid in-kind (“PIK”) interest of 8.0%
per year (together, the “Amended Credit Facility”).
- Subsequent to quarter end, the Company successfully
launched its B2B sports betting technology and trading solution,
GAN Sports with WynnBET in six states: Indiana, Tennessee, Arizona,
Louisiana, Virginia, and Colorado. GAN Sports is now deployed
across nine US states.
GAN Limited
Key Financial
Highlights
(Unaudited, in thousands unless
otherwise specified)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Revenues
B2B
$
9,895
$
14,150
$
21,174
$
27,220
B2C
23,863
20,817
47,713
45,241
Total revenues
$
33,758
$
34,967
$
68,887
$
72,461
Profitability Measures
B2B segment contribution (1)
$
7,817
$
11,211
$
17,101
$
20,378
B2B segment contribution margin (1)
79.0
%
79.2
%
80.8
%
74.9
%
B2C segment contribution (1)
$
16,456
$
13,293
$
32,140
$
29,920
B2C segment contribution margin (1)
69.0
%
63.9
%
67.4
%
66.1
%
Net loss
$
(18,409
)
$
(38,349
)
$
(16,908
)
$
(42,848
)
Adjusted EBITDA (7)
$
(2,029
)
$
1,346
$
(1,990
)
$
4,317
Key Performance Indicators
B2B Gross Operator Revenue (2) (in
millions)
$
436.0
$
283.0
$
858.8
$
580.8
B2B Take Rate (3)
2.3
%
5.0
%
2.5
%
4.7
%
B2C Active Customers (in thousands)
(4)
257
260
359
347
B2C Marketing Spend Ratio (5)
20
%
22
%
21
%
20
%
B2C Sports Margin (6)
8.5
%
7.1
%
7.7
%
7.2
%
(1) Excludes depreciation and amortization
Strategic Review
The Company continues to work toward a swift resolution to its
strategic review process and remains pleased with both the status
of negotiations and the options available to maximize shareholder
value. The Company hopes to be in a position to offer a definitive
update in the near term.
Conference Call Details
Due to circumstances related to the strategic review, GAN will
not host a conference call to discuss its quarterly financial
results for the quarter ended June 30, 2023.
About GAN Limited
GAN is a leading business-to-business supplier of internet
gambling software-as-a-service solutions predominantly to the U.S.
land-based casino industry and is a market-leading
business-to-consumer operator of proprietary online sports betting
technology internationally with market leadership positions in
selected European and Latin American markets. In its B2B segment,
GAN has developed a proprietary internet gambling enterprise
software system, GameSTACK™, which it licenses to land-based U.S.
casino operators as a turnkey technology solution for regulated
real money internet gambling, encompassing internet gaming,
internet sports betting and social casino gaming branded as
Simulated Gaming.
Forward-Looking Statements
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
All statements contained in this release that do not relate to
matters of historical fact should be considered forward-looking
statements, including, without limitation, statements regarding the
Company’s strategic review, potential transactions, the Company’s
anticipated trends in revenues (including new customer launches)
and operating expenses, the anticipated improvement in
profitability, the anticipated launch of regulated gaming in new
U.S. states, the continued integration of Coolbet’s sports betting
technology and international B2C operations, as well as statements
that include the words “expect,” “intend,” “plan,” “believe,”
“project,” “forecast,” “estimate,” “may,” “should,” “anticipate”
and similar statements of a future or forward-looking nature. These
forward-looking statements are based on management’s current
expectations. These statements are neither promises nor guarantees,
but involve known and unknown risks, uncertainties and other
important factors that may cause actual results, performance, or
achievements to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements including those risks detailed under
“Risk Factors” in our Annual Report on Form 10-K and subsequent
periodic reports. Readers are cautioned not to place undue reliance
on any forward-looking statements, which speak only as of the date
on which they are made. The Company undertakes no obligation to
update or revise any forward-looking statements for any reason,
except as required by law.
Key Performance Indicators and Non-GAAP Financial
Measures
This release uses certain non-GAAP financial measures as defined
in Securities and Exchange Commission rules. The Company reports
financial results in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”)
and also communicates with investors using certain non-GAAP
financial measures. These non-GAAP financial measures are not in
accordance with, nor are they a substitute for or superior to, the
comparable U.S. GAAP financial measures. These non-GAAP financial
measures are intended to supplement the presentation of the
Company’s financial results that are prepared in accordance with
U.S. GAAP.
(1) The Company excludes depreciation and amortization in
certain segment calculations.
(2) The Company defines B2B Gross Operator Revenue as the sum of
its B2B corporate customers’ gross revenue from virtual simulated
gaming (SIM), gross gaming revenue from RMiG, and gross sports wins
from sportsbook offerings. B2B Gross Operator Revenue, which is not
comparable to financial information presented in conformity with
U.S. GAAP, gives management and users of our financial statements
an indication of the extent of transactions processed through the
Company’s B2B corporate customers’ platforms and allows management
to understand the extent of activity that the Company’s platform is
processing.
(3) The Company defines B2B Take Rate as a quotient of B2B
segment revenue retained by the Company over the total Gross
Operator Revenue generated by our B2B corporate customers. The B2B
Take Rate gives management and users of our financial statements an
indication of the impact of the statutory terms and the efficiency
of the commercial terms on the business.
(4) The Company defines B2C Active Customers as a user that
places a wager during the period. This metric allows management to
monitor the customer segmentation, growth drivers, and ultimately
creates opportunities to identify and add value to the user
experience. This metric allows management and users of the
financial statements to measure the platform traffic and track
related trends.
(5) The Company defines B2C Marketing Spend Ratio as the total
B2C direct marketing expense for the period divided by the total
B2C revenues. This metric allows management to measure the success
of marketing costs during a given period. Additionally, this metric
allows management to compare across jurisdictions and other
subsets, as an additional indication of return on marketing
investment.
(6) The Company defines B2C Sports Margin as the ratio of wagers
minus winnings to total amount wagered, adjusted for open wagers at
period end. Sports betting involves a user placing a bet on the
outcome of a sporting event with the chance to win a pre-determined
amount, often referred to as fixed odds. Our B2C sportsbook revenue
is generated by setting odds that are intended to provide a
built-in theoretical margin in each sports bet offered to our
users. This metric allows management to measure sportsbook
performance against its expected outcome.
(7) Management uses the non-GAAP measure of Adjusted EBITDA to
measure its financial performance. Specifically, it uses Adjusted
EBITDA (i) as a measure to compare its operating performance from
period to period, as it removes the effect of items not directly
resulting from core operations, and (ii) as a means of assessing
its core business performance against others in the industry,
because it eliminates some of the effects that are generated by
differences in capital structure, depreciation, tax effects and
unusual and infrequent events. The Company defines Adjusted EBITDA
as net loss before interest expense (income), net, income tax
expense (benefit), depreciation and amortization, impairments,
share-based compensation expense and related expense, restructuring
costs, and other items which the Board of Directors considers to be
infrequent or unusual in nature. The presentation of Adjusted
EBITDA is not intended to be used in isolation or as a substitute
for any measure prepared in accordance with U.S. GAAP and Adjusted
EBITDA may exclude financial information that some investors may
consider important in evaluating the Company’s performance. Because
Adjusted EBITDA is not a U.S. GAAP measure, the way the Company
defines Adjusted EBITDA may not be comparable to similarly titled
measures used by other companies in the industry.
GAN Limited
Consolidated Statements of
Operations (Unaudited)
(in thousands, except share and
per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Revenue
$
33,758
$
34,967
$
68,887
$
72,461
Operating costs and expenses
Cost of revenue (1)
9,485
10,463
19,646
22,163
Sales and marketing
7,324
7,413
14,508
13,511
Product and technology
11,238
8,403
20,816
17,357
General and administrative (1)
10,029
10,327
20,035
19,719
Impairment
—
28,861
—
28,861
Restructuring
—
712
—
1,771
Depreciation and amortization
4,243
6,556
8,444
10,969
Total operating costs and expenses
42,319
72,735
83,449
114,351
Operating loss
(8,561
)
(37,768
)
(14,562
)
(41,890
)
Interest expense
905
1,080
2,621
1,071
Other loss (income), net
8,358
(270
)
(934
)
(270
)
Loss before income taxes
(17,824
)
(38,578
)
(16,249
)
(42,691
)
Income tax expense (benefit)
585
(229
)
659
157
Net loss
$
(18,409
)
$
(38,349
)
$
(16,908
)
$
(42,848
)
Loss per share, basic and diluted
$
(0.42
)
$
(0.91
)
$
(0.39
)
$
(1.01
)
Weighted average ordinary shares
outstanding, basic and diluted
44,147,701
42,300,668
43,568,197
42,276,798
(1) Excludes depreciation and amortization expense
GAN Limited
Segment Revenue and Gross
Profit (Unaudited)
(in thousands)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Revenue
B2B
Platform and content license fees
$
7,243
$
10,518
$
15,870
$
21,220
Development services and other
2,652
3,632
5,304
6,000
Total B2B revenue
9,895
14,150
21,174
27,220
B2C
Gaming
23,863
20,817
47,713
45,241
Total B2C revenue
23,863
20,817
47,713
45,241
Total revenue
$
33,758
$
34,967
$
68,887
$
72,461
Gross Profit
B2B
Revenue
$
9,895
$
14,150
$
21,174
$
27,220
Cost of revenue (1)
2,078
2,939
4,073
6,842
B2B segment contribution
7,817
11,211
17,101
20,378
B2B segment contribution margin
79.0
%
79.2
%
80.8
%
74.9
%
B2C
Revenue
23,863
20,817
47,713
45,241
Cost of revenue (1)
7,407
7,524
15,573
15,321
B2C segment contribution
16,456
13,293
32,140
29,920
B2C segment contribution margin
69.0
%
63.9
%
67.4
%
66.1
%
Total segment contribution
$
24,273
$
24,504
$
49,241
$
50,298
Total segment contribution margin
71.9
%
70.1
%
71.5
%
69.4
%
(1) Excludes depreciation and amortization expense
GAN Limited
Revenue by Geography
(Unaudited)
(in thousands)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Revenue by geography *
United States
$
7,296
$
11,720
$
15,812
$
23,211
Europe
12,107
10,205
24,784
22,769
Latin America
12,388
11,193
23,658
23,418
Rest of the world
1,967
1,849
4,633
3,063
Total
$
33,758
$
34,967
$
68,887
$
72,461
* Revenue is segmented based on the
location of the Company's customer.
GAN Limited
Adjusted EBITDA
(Unaudited)
(in thousands)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net loss
$
(18,409
)
$
(38,349
)
$
(16,908
)
$
(42,848
)
Income tax expense (benefit)
585
(229
)
659
157
Interest expense
905
1,080
2,621
1,071
Gain on amendment of Content Licensing
Agreement
(427
)
—
(9,719
)
—
Loss on debt extinguishment
8,784
—
8,784
—
Revaluation of contingent liability
221
—
221
—
Depreciation and amortization
4,243
6,556
8,444
10,969
Share-based compensation and related
expense
2,069
2,715
3,908
4,336
Impairment
—
28,861
—
28,861
Restructuring
—
712
—
1,771
Adjusted EBITDA
$
(2,029
)
$
1,346
$
(1,990
)
$
4,317
GAN Limited
Historical Normalized Revenue
(Unaudited)
(in thousands)
Three Months Ended,
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
Revenue
Revenue
$
33,758
$
35,129
$
36,947
$
32,120
Normalized adjustments (1)
(2,331
)
(529
)
619
493
Normalized Revenue
$
31,427
$
34,600
$
37,566
$
32,613
Sports Margin
Actual sports margin
8.5
%
7.1
%
6.5
%
6.6
%
Normalized sports margin
7.0
%
7.0
%
7.0
%
7.0
%
(1) The adjustments are based on the effects of a normalized
sports margin of 7.0% for quarters in 2023. Normalized revenue to
gross gaming revenue ratios are based upon a rolling four-quarter
average for each quarter within the B2C segment. Sports margin is
the ratio of GGR to total amount wagered, which allows management
to measure sportsbook performance against the expected outcome.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230809299544/en/
Investors: GAN Robert Shore Vice President, Investor
Relations & Capital Markets (610) 812-3519 rshore@GAN.com
Alpha IR Group Ryan Coleman or Davis Snyder (312) 445-2870
GAN@alpha-ir.com
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