Sequential Revenue Growth of 24%, Driven by
Strong International Results in B2C Segment
Reiterates Revenue Guidance of $125 - $135
Million, or 270% yr/yr Growth at the Mid-point
Signed Exclusive Deals with Ainsworth and
Incredible Technologies Further Augmenting Content Portfolio
GAN Limited (the “Company” or “GAN”) (NASDAQ: GAN), a leading
full-service internet gaming software-as-a-service provider to the
real money internet gaming (RMiG), online sports betting, and
simulated gaming (SIM) industries, today announced its operating
and financial results for the second quarter ended June 30,
2021.
Dermot Smurfit, CEO of GAN stated:
“Our business momentum accelerated through the first half of
2021, as we continue to scale the business and build significant
brand awareness across our key business-to-business (B2B) and
consumer facing (B2C) end-markets. This was highlighted by a very
strong second quarter, which included nearly 70% sequential
top-line growth in our B2C segment compared to the first quarter.
Additionally, our B2B US gross operator revenue grew 4%
sequentially, despite a seasonably slower U.S. sports calendar. We
have now supported 11 successful real money gaming launches
year-to-date, including the highly successful and multi-faceted
transition of Churchill Downs onto the GAN platform during the
second quarter.”
“Most importantly, we made great progress in executing our
long-term growth strategy during the first half of the year. This
included significant development work in the integration of our new
sportsbook engine into our B2B product suite, which we plan to
debut at Global Gaming Expo this fall. It also was highlighted by
two exciting, exclusive content deals with Ainsworth and Incredible
Technologies. We continue to emphasize the importance of possessing
exclusive content and an industry-leading library of the most
recognizable and popular retail games. These efforts and agreements
will allow us to grow our take rate from U.S. iGaming revenue and
position GAN as a content supplier of choice for large operators
with diverse content line-ups.”
Second Quarter 2021 Financial
Highlights vs First Quarter 2021:
- Total revenues of $34.6 million versus $27.8 million, a
24% increase driven by strong growth in the B2C segment primarily
in Latin America and Northern Europe, with sports results
benefitting from higher-than-expected sports betting margin.
- B2B segment revenues of $10.6 million versus $13.5
million. The first quarter of 2021 included $3.0 million of patent
licensing revenue.
- B2C segment revenues of $24.0 million, which was a 68%
or $9.7 million increase. The second quarter included the Copa
America and UEFA European Championship tournaments.
- Consolidated gross profit of $24.3 million versus $19.1
million. Gross profit increased primarily due to increased margins
within our B2C segment sports revenue stream.
- Net loss of $2.7 million versus net loss of $4.5
million. Operating expenses increased $4.7 million to $36.4 million
driven by increased personnel expense related to near-term
investments in talent and technology to meet the strong demand
environment.
- Adjusted EBITDA of $4.6 million versus $1.7 million. The
increase was primarily driven by higher revenue offsetting
strategic investments in talent and technology.
- Cash of $52.1 million as of June 30, 2021, which was
in-line with the prior quarter. The company has no debt.
GAN Limited Key Financial Highlights (Unaudited, in
thousands unless otherwise specified)
Three Months
Ended June 30,2021 March 31,2021 June
30,2020 Revenues B2B
$
10,646
$
13,530
$
8,323
B2C
23,982
14,312
-
Total revenues
$
34,628
$
27,842
$
8,323
Profitability Measures B2B segment gross profit (1)
$
8,339
$
10,788
$
6,200
B2C segment gross profit (1)
15,933
8,335
-
B2B segment gross profit margin (1)
78.3
%
79.7
%
74.5
%
B2C segment gross profit margin (1)
66.4
%
58.2
%
N/A
Net loss
$
(2,730
)
$
(4,464
)
$
(9,669
)
Adjusted EBITDA (7)
$
4,642
$
1,700
$
1,638
Key Performance Indicators B2B Gross Operator Revenue
(2) (in millions)
$
221.4
$
214.2
$
129.1
B2B Active Player-Days (3) (in millions of days)
9.1
9.5
5.6
B2B ARPDAU (4) (in dollars)
$
24.38
$
22.48
$
23.02
B2C Active Customers (5)
186,942
111,566
N/A
B2C Marketing Spend Ratio (6) 12.% 14.%
N/A
Performance and Operational
Highlights
- Gross Operator Revenue (“GOR”) (2) of $221.4 million
versus $214.2 million, a 3% increase, driven by the strong
performance of GAN’s new and existing client partners, most notably
in the state of Michigan. Excluding Italy, GOR increased 4% from
the prior quarter to $219.0 million. GOR excludes our B2C
segment.
- Launched major new B2B tribal and commercial operators in
six states. As previously announced, the Company launched
Churchill Downs in three additional states (sportsbook and RMiG in
PA; sportsbook in CO and IN) followed by FanDuel RMiG in WV in
early May 2021. Additionally, the Company went live with Gila River
(SIM for AZ) and Seneca Gaming (SIM for NY).
- Incredible Technologies, Inc online slot portfolio.
Obtained exclusive online rights to all current and future
Incredible Technologies' online games, which will grow to over 110
games during the term of the contract. Clients of GAN for both RMiG
and SIM have access to nearly 1,200 games which now includes
proven, exclusive land-based content from two leading gaming
suppliers.
- In May, GAN won two EGR North America Awards:
Full-Service Platform Provider and Freeplay Gaming Supplier. GAN
then followed that up with an EGR B2B Award in July for White Label
Partner of the Year.
- After the 2021 second quarter-end, the Company extended its
relationship with WinStar and the Chickasaw Nation tribe in
Oklahoma (SIM) and added Treasure Island on the Las Vegas
Strip as a SIM client.
2021 Outlook
Karen Flores, CFO of GAN added:
“Our strong second quarter financial results were in-line with
our preannounced expectations in early July and support our
confidence behind the decision to raise our full-year revenue
outlook to between $125 million and $135 million. We remain in a
strong financial position as we support new and existing customer
launches, pursue our content acquisition strategy, grow our team
and evaluate new geographies. Looking out to the second half of
2021, we expect continued strong performance from our B2C segment –
particularly in Latin America and Northern Europe – as well as from
our B2B segment as we gain new client wins in major markets. We
also expect improvement in our profitability metrics as revenue
growth begins to align with the increased scale needed to support
our expanded operations.”
Conference Call Details
Date/Time:
Monday, August 16, 2021, at 4:30 PM
EDT
Webcast:
https://www.webcast-eqs.com/GAN20210816/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 “Events & Presentations”
page of the investor relations portion of the Company’s website
(http://investors.gan.com) 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. Coolbet, a segment of GAN, is a
market-leading operator of proprietary online sports betting
technology with market leadership positions in selected European
and Latin American markets. 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 2021 revenue guidance, the Company’s anticipated trends
in revenues (including new customer launches) and operating
expenses, the anticipated improvement in profitability for the
second half of 2021, the anticipated launch of regulated gaming in
new U.S. states, the expected integration of Coolbet’s sports
betting technology and international B2C operations, the
anticipated launch timing of the B2B sportbook technology solution
in the U.S., 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.
Key Performance Indicators and Non-GAAP Financial
Measures
This presentation uses certain non-GAAP financial measures as
defined in Securities and Exchange Commission rules. The Company
reports financial results in conformity with 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
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 GAAP.
(1)
The Company excludes depreciation and
amortization in certain segment calculations.
(2)
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,
including B2C casino and sports-betting platform gross gaming
revenue. Gross Operator Revenue, which is not comparable to
financial information presented in conformity with generally
accepted accounting principles in the United States of America
(“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.
(3)
The Company defines B2B 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 respective 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 B2B Active Player-Days. B2B Active Player-Days
provides an indicator of consistent and daily interaction that
individuals have with the Company’s platforms. B2B 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.
(4)
The Company defines B2B Average Revenue
per Daily Active User (“ARPDAU”) as B2B Gross Operator Revenue
divided by the identified number of B2B Active Player-Days. This
measure 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 understand the value
per user that is driven by marketing efforts and data analysis
obtained from the Company’s platforms.
(5)
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 measure allows management to measure the
platform traffic and related trends.
(6)
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 measure allows management to compare across
jurisdictions and other sub-sets, plus comparison to peers with
tracking overtime as an additional indication of return on
marketing investment.
(7)
Adjusted EBITDA is a non-GAAP financial
measure that is provided as supplemental disclosure which the
Company defines as net income (loss) before interest costs, income
taxes, depreciation and amortization, share-based compensation
expense and related expense, impairments, initial public offering
related costs and other items which the Board of Directors
considers to be infrequent or unusual in nature. Management uses
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), the comparable U.S.
GAAP equivalent measure, is included below
This presentation uses certain non-GAAP financial measures as
defined in Securities and Exchange Commission rules. The Company
reports financial results in conformity with 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
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 GAAP.
GAN Limited Condensed Consolidated Statements of
Operations (Unaudited, in thousands, except share and per share
amounts)
Three Months Ended June 30,2021
March 31,2021 June 30,2020 Revenues
$
34,628
$
27,842
$
8,323
Operating costs and expenses Cost of revenues (1)
10,356
8,719
2,123
Sales and marketing
5,480
4,101
1,642
Product and technology
4,055
4,850
5,173
General and administrative (1)
12,326
10,011
7,786
Depreciation and amortization
4,149
3,963
716
Total operating costs and expenses
36,366
31,644
17,440
Operating loss
(1,738
)
(3,802
)
(9,117
)
Interest expense, net
-
1
382
Income (loss) before income taxes
(1,738
)
(3,803
)
(9,499
)
Income tax provision
992
661
170
Net loss
$
(2,730
)
$
(4,464
)
$
(9,669
)
Loss per share, basic and diluted
$
(0.07
)
$
(0.11
)
$
(0.37
)
Weighted average ordinary shares outstanding, basic and
diluted
41,931,948
41,986,083
26,227,944
GAN Limited Condensed Consolidated Balance
Sheets (Unaudited, in thousands, except share amounts)
June 30,2021 December 31,2020 ASSETS Current
assets Cash
$
52,086
$
152,654
Accounts receivable, net
11,976
6,818
Prepaid expenses
2,384
1,912
Other current assets
2,099
2,112
Total current assets
68,545
163,496
Capitalized software development costs, net
11,555
6,648
Goodwill
154,534
-
Intangible assets, net
41,611
468
Other assets
7,647
2,634
Total assets
$
283,892
$
173,246
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Accounts payable
$
4,146
$
4,926
Accrued compensation and benefits
7,987
4,956
Accrued expenses
5,405
3,363
Liabilities to users
7,389
-
Other current liabilities
3,716
4,067
Total current liabilities
28,643
17,312
Deferred income taxes
2,192
-
Other noncurrent liabilities
463
370
Total liabilities
31,298
17,682
Stockholders' equity Ordinary shares, $0.01 par value,
100,000,000 shares authorized, 42,015,675 and 36,635,362 shares
issued and outstanding at June 30, 2021 and December 31, 2020,
respectively
420
365
Additional paid-in capital
315,055
203,842
Accumulated deficit
(52,960
)
(45,766
)
Accumulated other comprehensive loss
(9,921
)
(2,877
)
Total stockholders' equity
252,594
155,564
Total liabilities and stockholders' equity
$
283,892
$
173,246
GAN Limited Condensed Consolidated Statements of
Cash Flows (Unaudited, in thousands)
Six Months Ended June
30,
2021
2020
Cash Flows From Operating Activities Net income (loss)
$
(7,194
)
$
(8,975
)
Adjustments to reconcile net income (loss) to net cash used in
operating activities
12,202
6,062
Changes in operating assets and liabilities, net of acquisition
(712
)
4,621
Net cash from operating activities
4,296
1,708
Cash Flows From Investing Activities Cash paid for
acquisition, net of cash acquired
(92,404
)
-
Expenditures for capitalized software development costs
(6,479
)
(1,748
)
Purchases of property, plant and equipment
(1,093
)
(630
)
Advance payment for gaming content
(3,500
)
-
Purchases of gaming licenses
(207
)
(12
)
Net cash used in investing activities
(103,683
)
(2,390
)
Cash Flows From Financing Activities Proceeds
received from issuance of ordinary shares in initial public
offering, net
-
57,445
Payments of offering costs
(604
)
(1,678
)
Proceeds from exercise of stock options
337
2,197
Cash consideration paid to GAN plc shareholders
-
(2,525
)
Principal payments on finance leases
(54
)
(90
)
Net cash from (used in) financing activities
(321
)
55,349
Effect of foreign exchange rates on cash
(860
)
(888
)
Net increase (decrease) in cash
(100,568
)
53,779
Cash, beginning of period
152,654
10,279
Cash, end of period
$
52,086
$
64,058
GAN Limited Segment Revenues and Gross Profit
(Unaudited, in thousands)
Three Months Ended
June 30,2021 March 31,2021 June 30,2020
B2B
Platform and content fees
$
9,325
$
9,184
$
6,422
Development services and
other
1,321
4,346
1,901
Total B2B revenues
10,646
13,530
8,323
B2C
Gaming
23,982
14,312
-
Total B2C revenues
23,982
14,312
-
Total revenues
$
34,628
$
27,842
$
8,323
B2B
Revenues
$
10,646
$
13,530
$
8,323
Cost of revenues (1)
2,307
2,742
2,123
B2B segment gross profit (1)
8,339
10,788
6,200
B2B segment gross profit margin
(1)
78.3
%
79.7
%
74.5
%
B2C
Revenues
23,982
14,312
-
Cost of revenues (1)
8,049
5,977
-
B2C segment gross profit (1)
15,933
8,335
-
B2C segment gross profit margin
(1)
66.4
%
58.2
%
0.0
%
Total segment gross profit
(1)
$
24,272
$
19,123
$
6,200
Total segment gross profit margin
(1)
70.1
%
68.7
%
74.5
%
(1) Excludes depreciation and
amortization
GAN Limited Revenues by Geography (Unaudited, in
thousands)
Three Months Ended June 30,2021
March 31,2021 June 30,2020 Revenues by geography *
United States
$
8,608
$
11,473
$
7,044
Europe
14,193
11,064
1,268
Latin America
10,254
3,603
-
Rest of the world
1,573
1,702
11
Total revenues
$
34,628
$
27,842
$
8,323
* Revenues are segmented based on the location of the
Company's customer.
GAN Limited Adjusted EBITDA
(Unaudited, in thousands)
Three Months Ended June
30,2021 March 31,2021 June 30,2020 Net
income (loss)
$
(2,730
)
$
(4,464
)
$
(9,669
)
Income tax provision
992
661
170
Interest expense, net
-
1
382
Depreciation and amortization
4,149
3,963
716
Share-based compensation and related expense
2,231
1,539
7,762
Initial public offering transaction related
-
-
2,277
Adjusted EBITDA
$
4,642
$
1,700
$
1,638
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210816005673/en/
Investor Contacts: GAN Robert Shore VP, Investor
Relations & Capital Markets (610) 812-3519 rshore@GAN.com
Alpha IR Group Ryan Coleman or Ashley Gruenberg (312)
445-2870 GAN@alpha-ir.com
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