New Customer Wins and Readiness for Michigan
Launch Drives 86% Year-over-Year Increase in Quarterly Revenue
Coolbet acquisition to bring additional scale
and provides near-turnkey capabilities in Online Sports Betting to
enhance GAN’s Business-to-Business platform offerings
GAN Limited (the “Company” or “GAN”) (NASDAQ: GAN), a leading
business-to-business supplier of internet gaming
software-as-a-service solutions primarily to the U.S. land-based
casino industry, today reported its unaudited financial results for
third quarter ended September 30, 2020.
Third Quarter Highlights Compared to
Prior Year Quarter
- Quarterly revenue of $10.3 million, up 86% from $5.5
million
- Real money Internet gaming (“RMiG”) revenue of $7.7 million, up
from $4.1 million
- Simulated gaming revenue of $2.6 million, up from $1.4
million
- Gross profit of $6.4 million, up from $2.4 million
- Net loss attributable to equity holders was $4.1 million, or
$0.14 basic and diluted per share, compared to net loss
attributable to equity holders of $1.8 million, or $0.09 basic and
diluted per share
- Gross Operator Revenue(1) increased 76% to $142.3 million
- Active Player-Days(2) and Average Revenue per Daily Active
User(3) (“ARPDAU”) increased 38% and 27%, respectively
- Adjusted EBITDA(4) was $(0.1) million, up from $(0.4)
million
- Pending acquisition of Vincent Group p.l.c.(“Coolbet”) for
€149.1 million, a best-in-class RMiG platform with both Online
Sports Betting (“OSB”) and iGaming offerings, and a diversified
revenue stream across Northern Europe, Latin America and
Canada
Dermot Smurfit, CEO of GAN stated:
“We built strong momentum in the third quarter and our results
were in-line with our expectations. We added multiple new RMiG and
Simulated Gaming customers over the last several months,
demonstrating the unique and highly differentiated capabilities of
our SaaS platform for integrated iGaming and Online Sports Betting.
GAN continues to prove it’s the leading partner of choice for
land-based casinos through an expanding solution offering, that
allows our customers to quickly and efficiently expand their reach
across the online gaming space. Our new customer pipeline in the
U.S. remains strong and we’re building exciting relationships that
we believe have the ability to scale across our customers’ casino
portfolios as more states come online in the future. Our business
remains strongly positioned to leverage the momentum of online
sports betting and iGaming, which is clearly accelerating across
the globe.”
“I am also excited to announce the strategic acquisition of
Coolbet, as we continue developing and investing in our
capabilities. Coolbet is a best-in-class RMiG provider, with both
Online Sports Betting and iGaming offerings. The acquisition will
allow GAN to provide near-turnkey capabilities in Online Sports
Betting, rounding out our B2B platform offering in the U.S. We view
this acquisition as the next strategic move in our growth strategy
as we look to diversify our business model and geographic exposure.
Enhancing our B2B platform with Coolbet’s solutions will allow us
to leverage their proprietary OSB technology, engineering and
know-how. We look forward to welcoming the Coolbet team to GAN and
have already started to work diligently around our integration
plans as we look to finalize the transaction over the next few
months.”
Third Quarter 2020 Compared to Third
Quarter 2019
Key Financial Highlights
(Unaudited) Three Months Ended September 30, 2020 and 2019 (in
thousands of US$)
Three months ended September
30,
2020
2019
Revenue
RMiG Revenue
7,689
4,127
Simulated Gaming Revenue
2,577
1,389
Total Revenue
10,266
5,516
Profitability Measures
RMiG gross profit margin
73
%
64
%
Simulated Gaming gross profit margin
58
%
57
%
Net loss attributable to equity
holders
(4,078
)
(1,834
)
Adjusted EBITDA(4)
(114
)
(372
)
Key Performance Indicators
Gross Operator Revenue(1) (US$
millions)
142.3
80.8
Active Player-Days(2) (in millions)
7.5
5.4
ARPDAU(3) (US$)
18.93
14.89
Gross Profit - Gross Profit for the third quarter of 2020
was $6.4 million or 62% compared to $2.4 million or 44% for the
third quarter of 2019. RMiG gross profit increased by $3.0 million
which was primarily attributable to new customer launches and
organic growth, partially offset by the impact of lower margin
hardware equipment sales in the third quarter of 2020. Simulated
Gaming gross profit increased by $0.7 million, which was
attributable to organic growth. The Company’s depreciation and
amortization included in cost of revenue was $0.8 million, a
decrease of $0.3 million from the third quarter of 2019 due to
certain development assets becoming fully amortized prior to third
quarter of 2020.
Administrative Expenses - Administrative expenses for the
third quarter of 2020 were $10.4 million compared to $4.1 million
for the third quarter of 2019. The increase in administrative
expenses was primarily attributable to (i) personnel and related
costs of increasing from approximately 141 employees to 215
employees, (ii) share-based compensation for directors and key
personnel, and (iii) increased professional services related to
capital markets advisory, consulting, accounting advisory, tax
advisory and legal expenses incurred in connection with corporate
infrastructure and expansion projects, and additional compliance
requirements as a result of becoming a public company in the United
States in May 2020.
Additionally, the Company incurred $0.9 million of charges
related to estimated tax provisions. These estimated tax provisions
are the result of tax advisory services and internal audits
pertaining to VAT, as well as potential application of the South
Dakota v. Wayfair Supreme Court decision on June 21, 2018 as it
related to U.S. sales and use taxes.
Net Loss Attributable to Equity Holders - Net loss
attributable to equity holders was $4.1 million, or $0.14 per
diluted share, compared to net loss attributable to equity holders
of $1.8 million, or $0.09 per diluted share for the third quarter
of the prior year.
Adjusted EBITDA - Adjusted EBITDA for the third quarter
of 2020 was $(0.1) million, compared to $(0.4) million for the
third quarter of 2019. The increase was primarily driven by growth
partially offset by higher administrative expenses.
Cash and Cash Equivalents - Cash and cash equivalents
were $57.5 million at September 30, 2020, compared to $10.1 million
at December 31, 2019. Increased cash and cash equivalents primarily
reflect the net proceeds received from the Company’s initial public
offering residing in an interest-bearing account.
Coolbet Share Exchange
Agreement
GAN announced today that it entered into a Share Exchange
Agreement to acquire the Vincent Group p.l.c., and its flagship
Coolbet brand for total consideration of €149.1 million (subject to
adjustment as provided in the Share Exchange Agreement). The
acquisition is expected to close in the first quarter of 2021,
subject to regulatory review and the satisfaction of certain
closing conditions. GAN expects to fund the acquisition with €80
million in cash and the remainder through an exchange of the
Company’s ordinary shares. Please see GAN’s release on the
announcement of the acquisition that was issued today for more
details.
Outlook
Dermot Smurfit, CEO of GAN concluded:
“We look forward to the potential launch of multiple customers
in Michigan, which are anticipated to go live in December. We are
reiterating our previous outlook of $37 to $39 million in revenue
this year, which includes IP licensing related deals subject to
timing variability. Our pipeline remains robust, and we expect to
see gross operator revenue accelerate as we progress through 2021.
We also look forward to finalizing the acquisition of Coolbet in
early 2021 and believe it will bring advantageous scale, geographic
diversity and opportunity, as well as near-turnkey capabilities in
Online Sports Betting that will help us further differentiate and
enhance our U.S. platform. We remain confident that our unique
position, differentiated solutions, strong management team, and
solid financial position will enable us to continue to grow
throughout 2021 and beyond.”
Conference Call Details
Date/Time:
Monday, November 16, 2020, at 4:30 PM
EST
Webcast:
https://www.webcast-eqs.com/ganlimited20201116/en
U.S. Toll-Free Dial In:
(877) 407-0989
International Dial In:
(201) 389-0921
To access the call, please dial in approximately ten minutes
before the start of the call. An accompanying slide presentation
will be available in PDF format on the, “Results and Presentations”
page of the Company’s website
(http://gan.com/investors/results-and-presentations) after issuance
of the earnings release.
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. GAN has developed a proprietary
internet gambling enterprise software system, GameSTACK™, which it
licenses to land-based casino operators as a turnkey technology
solution for regulated real-money internet gambling, encompassing
internet gaming, internet sports gaming and virtual Simulated
Gaming.
Non-GAAP Financial Measures
(1) The Company defines Gross Operator Revenue as the sum of its
corporate customers’ gross revenue from Simulated Gaming, gross
gaming revenue from real money regulated iGaming, and gross sports
win from real money regulated sports betting. Gross Operator
Revenue, which is not comparable to financial information presented
in conformity with GAAP, gives management and users an indication
of the extent of transactions processed through the Company’s
corporate customers’ platforms and allows management to understand
the extent of activity that the Company’s platform is
processing.
(2) The Company defines Active Player-Days as unique individuals
who log on and wager each day (either wagering with real money or
playing with virtual credits used in Simulated Gaming), aggregated
during the calendar year period. By way of illustrative example:
one (1) unique individual logging in and wagering each day in a
single calendar year would, in aggregate, represent 365 Active
Player-Days. Active Player-Days provides an indicator of consistent
and daily interaction that individuals have with the Company’s
platforms. Active Player-Days allows management and users to
understand not only total users who interact with the platform but
gives an idea of the frequency to which users are interacting with
the platform, as someone who logs on and wagers multiple days are
weighted heavier during the period than the user who only logs on
and wagers one day.
(3) The Company defines Average Revenue per Daily Active User
(“ARPDAU”) as Gross Operator Revenue divided by the identified
number of Active Player-Days. ARPDAU allows management to measure
the value per daily user and track user interaction with the
platforms, which helps both management and users of financial
statements to understand the value per user that is driven by
marketing efforts and data analysis obtained from the Company’s
platforms.
(4)Adjusted EBITDA is a non-GAAP financial measure that is
provided as supplemental disclosure which is defined as net income
(loss) attributable to equity holders before finance costs, income
taxes, depreciation and amortization, share-based payment expense
and related expense, initial public offering related costs and
other items which our Board of Directors considers to be infrequent
or unusual in nature. The infrequent or unusual items related to
accruals for resolution of outstanding VAT taxes and outstanding
U.S. sales and use taxes for the three and nine months ended
September 30, 2020.
Management uses the non-GAAP measure Adjusted EBITDA to measure
its financial performance. Specifically, it uses Adjusted EBITDA
(1) 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 (2) 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 presentation of Adjusted EBITDA is not
intended to be used in isolation or as a substitute for any measure
prepared in accordance with GAAP. Adjusted EBITDA, as defined, may
not be comparable to similarly titled measures used by other
companies in the industry, and Adjusted EBITDA may exclude
financial information that some investors may consider important in
evaluating the Company’s performance. Adjusted EBITDA, as
calculated by the Company, along with a reconciliation to net
income (loss) attributable to equity holders, the comparable GAAP
equivalent measure, is included below.
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
pending acquisition of Coolbet and the anticipated benefits to the
Company related thereto, the timing of closing the Coolbet
acquisition, the Company’s 2020 revenue guidance, the strength of
the Company’s customer pipeline and ability to scale as more states
legalize real money iGaming, the Company’s competitive position
with respect to iGaming and online sports betting, anticipated
trends in revenues (including new customer launches), operating
expenses and gross operator revenue, and management’s expectation
of continued growth throughout 2021 and beyond, 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. 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.
No Offer of Securities
This press release does not constitute an offer to sell or the
solicitation of an offer to buy any securities. Any offers,
solicitations or offers to buy, or any sales of securities will be
made in accordance with the registration requirements of the
Securities Act of 1933, as amended (“Securities Act”).
GAN LimitedInterim Condensed Consolidated Statement of
Operations (Unaudited)Three and Nine Months Ended September 30,
2020 and 2019(in thousands of US$, except share data)
Three months ended September
30,
Nine months ended September
30,
2020
2019
2020
2019
Revenue
10,266
5,516
26,259
19,280
Cost of revenue
3,894
3,099
9,338
10,177
Gross profit
6,372
2,417
16,921
9,103
Administrative expenses
10,430
4,079
28,540
10,146
Operating loss
(4,058
)
(1,662
)
(11,619
)
(1,043
)
Net finance costs
25
31
454
93
Loss before income taxes
(4,083
)
(1,693
)
(12,073
)
(1,136
)
Income tax (benefit) expense
(5
)
141
312
409
Net loss attributable to equity holders
of the Parent
(4,078
)
(1,834
)
(12,385
)
(1,545
)
Loss per share attributable to ordinary
shareholders, basic and diluted
(0.14
)
(0.09
)
(0.48
)
(0.07
)
Weighted average shares outstanding, basic
and diluted
29,571,905
21,362,133
25,782,776
21,349,572
GAN LimitedInterim Condensed Consolidated Statement of Financial
Position (Unaudited)(in thousands of US$)
September 30, 2020
December 31, 2019
ASSETS
Non-current assets
Intangible assets
6,008
5,164
Property, plant and equipment
655
190
Right-of-use assets
782
1,334
Lease deposits
68
115
Contract costs
291
57
Total non-current assets
7,804
6,860
Current assets
Cash and cash equivalents
57,489
10,098
Trade and other receivables
9,079
5,974
R&D tax credit receivable
-
1,127
Inventory
416
883
Prepayments
3,099
1,061
Lease deposits
77
80
Contract costs
55
29
Total current assets
70,215
19,252
Total assets
78,019
26,112
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities
Trade and other payables
13,358
6,760
Contract liabilities
1,561
3,023
Current portion of lease liabilities
299
692
Total current liabilities
15,218
10,475
Non-current liabilities
Lease liabilities
355
535
Total liabilities
15,573
11,010
Equity
62,446
15,102
Total liabilities and equity
78,019
26,112
GAN LimitedInterim Condensed Consolidated Statement of Cash
Flows (Unaudited)(in thousands of US$)
Nine months ended September
30,
2020
2019
Cash flows from operating
activities
Net loss attributable to equity
holders
(12,385
)
(1,545
)
Adjustments to reconcile net loss to cash
(used in) provided by operating activities
8,960
4,207
Changes in working capital accounts
848
1,709
Net cash (used in) provided by
operating activities
(2,577
)
4,371
Cash flows from investing
activities
Interest received
4
10
Purchase of intangible assets
(3,110
)
(2,279
)
Purchase of property, plant and
equipment
(560
)
(380
)
Net cash used in investing
activities
(3,666
)
(2,649
)
Cash flows from financing
activities
Proceeds from issuance of shares in
initial public offering, net
57,445
-
Payment of deferred offering costs
(1,678
)
-
Payment to previous shareholders
(2,525
)
-
Proceeds from exercise of share
options
2,279
79
Payment of finance costs
(385
)
-
Capital element of lease liabilities
payments
(609
)
(524
)
Interest paid on lease liabilities
(66
)
(105
)
Net cash provided by (used in)
financing activities
54,461
(550
)
Effect of exchange rate on cash and cash
equivalents
(827
)
442
Increase in cash and cash
equivalents
47,391
1,614
Cash and cash equivalents, beginning of
period
10,098
6,967
Cash and cash equivalents, end of
period
57,489
8,581
GAN LimitedSegment Revenue and Gross Profit (Unaudited)Three and
Nine Months Ended September 30, 2020 and 2019(in thousands of
US$)
Three months ended September
30,
Nine months ended September
30,
2020
2019
2020
2019
RMiG
SaaS Revenue
4,803
2,868
13,706
7,235
Service Revenue
1,413
1,259
4,453
2,798
Other
1,473
-
1,473
4,904
RMiG Revenue
7,689
4,127
19,632
14,937
Simulated Gaming
SaaS Revenue
2,111
1,084
5,563
3,467
Service Revenue
466
305
1,064
876
Simulated Gaming Revenue
2,577
1,389
6,627
4,343
Total Revenue
10,266
5,516
26,259
19,280
RMiG
Revenue
7,689
4,127
19,632
14,937
Cost of sales (excl. depreciation and
amortization)
2,062
1,484
4,322
4,988
RMiG Segment Gross Profit
5,627
2,643
15,310
9,949
Segment gross profit margin %
73
%
64
%
78
%
67
%
Simulated Gaming
Revenue
2,577
1,389
6,627
4,343
Cost of sales (excl. depreciation and
amortization)
1,074
598
2,727
1,744
Simulated Gaming Segment Gross
Profit
1,503
791
3,900
2,599
Segment gross profit margin %
58
%
57
%
59
%
60
%
Cost of sales, depreciation and
amortization
758
1,017
2,289
3,445
Total Gross Profit
6,372
2,417
16,921
9,103
Gross profit margin %
62
%
44
%
64
%
47
%
GAN LimitedRevenue by Geography (Unaudited)Three and Nine Months
Ended September 30, 2020 and 2019(in thousands of US$)
Three months ended September
30,
Nine months ended September
30,
2020
2019
2020
2019
Revenue by Geography*
United States
8,662
4,455
21,957
15,887
Italy
1,279
1,047
3,714
3,315
U.K. and Channel Islands
10
1
253
4
Rest of the world
315
13
335
74
Total
10,266
5,516
26,259
19,280
* Revenue is segmented based upon the
location of the legal entity of the Company’s customer
(in thousands of US$)
Three months ended September
30,
Nine months ended September
30,
2020
2019
2020
2019
Net loss attributable to equity
holders
(4,078
)
(1,834
)
(12,385 )
(1,545
)
Income tax (benefit) expense
(5
)
141
312
409
Loss before income taxes
(4,083
)
(1,693
)
(12,073 )
(1,136
)
Non-operating expense
Net finance costs
25
31
454
93
Depreciation expense
269
195
610
627
Amortization expense
716
961
2,166
3,264
1,010
1,187
3,230
3,984
EBITDA
(3,073
)
(506
)
(8,843
)
2,848
Share-based payment and related
expense
2,020
134
9,503
392
Initial public offering transaction
related
-
-
2,831
-
Tax related provisions
939
-
939
-
Adjusted EBITDA
(114
)
(372
)
4,430
3,240
Adjusted EBITDA margin %
(1
)%
(7
)%
17 %
17
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201116005978/en/
Investor Contacts:
GAN Jack Wielebinski Head of Investor Relations (214)
799-4660 jwielebinski@GAN.com
Alpha IR Group Sofia Byrne or Chris Hodges (312) 445-2870
GAN@alpha-ir.com
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