Full year revenue increased 14% driven by
strong growth in both B2B and B2C segments
B2B gross operator revenue and B2C sports
margin, number of active customers remain strong and growing
Announces strategic review to evaluate a range
of options to maximize shareholder value
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 and year ended December 31, 2022.
Dermot Smurfit, CEO of GAN, stated:
“Our fourth quarter continued to show strong B2C KPIs as we grew
active customers by nearly 50%. We also ended the year with solid
momentum in our B2B sports betting business as we announced our
partnership to support WynnBet at Encore Boston Harbor and had a
highly successful launch last month. This marks our third GAN
Sports client in the U.S. and we maintain a healthy pipeline of
potential future partners for the platform.
At the same time, it has become apparent to us that the capital
requirements to gain market share for initiatives such as SuperRGS
as well as in certain competitive markets for sports betting like
Ontario, Canada do not provide a path toward achieving an
acceptable ROI in a reasonable period of time. As such, we have
elected to allocate capital away from these endeavors and toward
more appropriate growth strategies. Accordingly, we are focused on
leaning into the value that GAN Sports has demonstrated thus far
and being a market leader in emerging Latin American markets
through our B2C operations.
Lastly, as part of our commitment to improving our returns for
shareholders, we have launched a formal strategic review process to
evaluate options available to hasten our path to better
profitability metrics and a more attractive return profile. We hope
to complete this process in a timely manner and will certainly
provide updates as appropriate.”
Strategic Review
The Company announced today that it has initiated a strategic
review process to assess a range of strategic alternatives to
maximize shareholder value. The intention is to complete the
strategic review process in a timely fashion. However, there can be
no assurance that the review process will result in pursuing or
completing any transaction, and no timetable has been set for
completion of this process. The Company will provide updates, as
appropriate.
In connection with the strategic review process, the Company has
engaged B. Riley Securities as its financial advisor to assist with
the evaluation process.
Fourth Quarter 2022 Compared to
Fourth Quarter 2021
•
Total revenue of $36.9 million
increased 21% compared to the prior year quarter. B2B revenues
increased 26% or $2.9 million and B2C revenue increased by $3.6
million.
•
B2B segment revenue was $14.1
million versus $11.2 million. The 26% growth was driven primarily
by an increase in platform and content license fee revenue from
existing clients and new launches by existing and new
customers.
•
B2C segment revenue was $22.8
million versus $19.2 million. Active Customers increased 49% driven
by growth in Latin America.
•
Total segment contribution was
$26.9 million versus $18.9 million. The increase was primarily
driven by strong growth in the B2C segment revenue driven by the
aforementioned factors, combined with growth in the B2B
segment.
•
Operating expenses were $172.4
million versus $35.3 million. The increase was primarily related to
a $137.1 million non-cash impairment charge during the quarter
ended December 31, 2022, an increase of $133.6 million from the
comparable period in 2021. In addition, Depreciation &
Amortization increased $2.3 million primarily due to content
licensing intangible assets and the amortization of GAN Sports
technology placed in service in the fourth quarter of 2022.
•
Net loss of $147.7 million versus
$12.6 million. The increase in net loss was primarily driven by
increased operating expenses including an increase of $133.6
million in non-cash impairment charges, partially offset by
increased B2B and B2C contributions.
•
Adjusted EBITDA was $(0.4) million
versus $(6.0) million, primarily related to improved segment
contribution and cost saving initiatives implemented in 2022.
•
Cash was $45.9 million as of
December 31, 2022. Cash increases were driven by strong results and
activity generated from the World Cup in our B2C segment.
•
Non-cash impairment of $137.1
million versus $3.5 million. The impairment charge in the current
quarter was a result of material reductions in our expected future
cash flows from the B2B segment, a strategic decision not to pursue
and invest further in our original content strategy, and a
re-assessment of our growth strategy related to the B2C
segment.
•
B2C KPI's during the quarter were
strong as the Company continued to grow its number of active
customers, deposits and turnover. Active Customers increased 49%
from the prior year period driven by growth in Latin America and
strong customer retention.
•
B2B Gross Operator Revenue
(“GOR”) totaled $365.8 million versus $270.6
million in the prior year quarter, a 35% increase. This increase
was driven primarily by expansion of existing clients into new
jurisdictions, such as Connecticut and Ontario, Canada, coupled
with the launch of RMiG solutions for new customers in existing
jurisdictions, such as Michigan.
Full Year 2022 Compared to Full Year 2021
•
Total revenue of $141.5 million
increased 14% compared to the prior year. The increase was driven
by growth in both B2B and B2C revenues.
•
B2B segment revenue was $54.0
million versus $45.6 million. The 19% growth was driven primarily
by an increase in platform and content license fee revenue from
organic growth within the U.S. RMiG business.
•
B2C segment revenue was $87.5
million versus $78.6 million. The segment revenue increase was
primarily due to active customer growth in Latin America.
•
Total segment contribution was
$99.9 million versus $82.8 million. The increase was primarily
driven by strong growth in revenues along with a decrease in lower
margin hardware sales in the B2B segment and improved terms on
payment processing deals in the B2C segment.
•
Operating expenses were $292.4
million versus $114.0 million. The increase was primarily related
to a $166.0 million non-cash impairment charge during the year
ended December 31, 2022, an increase of $162.5 million from the
comparable period in 2021. In addition, Depreciation &
Amortization increased $6.5 million primarily due to content
licensing intangible asset amortization, and Sales & Marketing
increased $5.8 million driven by increases in marketing activities
to attract new customers.
•
Net loss of $197.5 million versus
$30.6 million. The increase in net loss was primarily driven by
increased operating expenses including an increase of $162.5
million in non-cash impairment charges, partially offset by
increased B2B and B2C segment contributions.
•
Adjusted EBITDA was $6.0 million
versus $(2.8) million primarily due to revenue growth and cost
efficiencies.
•
Non-cash impairment of $166.0
million in the current year versus $3.5 million in the prior year.
The impairment charge in the current year was a result of material
reductions in our expected future cash flows from the B2B segment,
a strategic decision not to pursue and invest further in our
original content strategy, and a re-assessment of our growth
strategy related to the B2C segment.
•
B2C KPI's during the year were
strong as the Company continued to grow its number of active
customers, deposits and turnover. Active Customers increased 42%
from the prior year period driven by growth in Latin America and
strong customer retention.
•
B2B Gross Operator Revenue
(“GOR”) totaled $1,224.4 million versus $921.1
million in the prior year, a 33% increase. This increase was driven
primarily by new client launches in the United States as a result
of organic growth, and expansion into Ontario, Canada.
GAN Limited
Key Financial
Highlights
(Unaudited, in thousands unless
otherwise specified)
Three Months Ended
Year Ended
December 31, 2022
September 30, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Revenues
B2B
$
14,140
$
12,685
$
11,220
$
54,045
$
45,569
B2C
22,807
19,435
19,207
87,483
78,594
Total revenues
$
36,947
$
32,120
$
30,427
$
141,528
$
124,163
Profitability Measures
B2B segment contribution (1)
$
11,907
$
10,512
$
8,252
$
42,797
$
33,969
B2B segment contribution margin (1)
84.2
%
82.9
%
73.5
%
79.2
%
74.5
%
B2C segment contribution (1)
$
15,004
$
12,173
$
10,678
$
57,097
$
48,821
B2C segment contribution margin (1)
65.8
%
62.6
%
55.6
%
65.3
%
62.1
%
Net loss
$
(147,709
)
$
(6,941
)
$
(12,547
)
$
(197,498
)
$
(30,594
)
Adjusted EBITDA (7)
$
(368
)
$
2,093
$
(5,975
)
$
6,042
$
(2,769
)
Key Performance Indicators
B2B Gross Operator Revenue (2) (in
millions)
$
365.8
$
277.8
$
270.6
$
1,224.4
$
921.1
B2B Take Rate (3)
3.9
%
4.6
%
4.1
%
4.4
%
4.9
%
B2C Active Customers (in thousands)
(4)
331
261
222
559
394
B2C Marketing Spend Ratio (5)
24
%
23
%
20
%
21
%
15
%
B2C Sports Margin (6)
6.5
%
6.6
%
4.6
%
6.9
%
6.8
%
Brian Chang, Interim CFO of GAN, added:
“Given the range of potential outcomes related to the strategic
review, we do not feel that we currently have an adequate level of
visibility to confidently provide guidance for 2023 within a
reasonable range. That said, we do expect a relatively swift
resolution to the strategic review process and hope to be in a
position to provide our financial outlook for 2023 at some point in
the near future. In the meantime, we are acutely focused on
supporting our key initiatives such as GAN Sports and seeking
additional ways to manage our cost structure and improve our return
profile.”
Conference Call Details
Date/Time:
Thursday, March 30, 2023, at 4:30 PM
ET
Webcast:
https://www.webcast-eqs.com/ganlimited20230330
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 this 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 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, 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
Year Ended
December
31, 2022
September
30, 2022
December
31, 2021
December
31, 2022
December
31, 2021
Revenue
$
36,947
$
32,120
$
30,427
$
141,528
$
124,163
Operating costs and expenses
Cost of revenue(1)
10,036
9,435
11,497
41,634
41,373
Sales and marketing
7,973
6,757
7,028
28,095
22,266
Product and technology
7,205
4,998
6,984
26,345
22,548
General and administrative(1)
13,641
10,185
13,664
46,906
48,881
Impairment
137,149
—
3,500
166,010
3,500
Restructuring
—
—
—
1,771
—
Depreciation and amortization
6,414
5,893
4,122
23,276
16,808
Total operating costs and expenses
182,418
37,268
46,795
334,037
155,376
Operating loss
(145,471
)
(5,148
)
(16,368
)
(192,509
)
(31,213
)
Other loss (income), net
(1,191
)
1,437
(409
)
1,047
(408
)
Loss before income taxes
(144,280
)
(6,585
)
(15,959
)
(193,556
)
(30,805
)
Income tax expense (benefit)
3,429
356
(3,412
)
3,942
(211
)
Net loss
$
(147,709
)
$
(6,941
)
$
(12,547
)
$
(197,498
)
$
(30,594
)
Loss per share, basic and diluted
$
(3.46
)
$
(0.16
)
$
(0.30
)
$
(4.66
)
$
(0.73
)
Weighted average ordinary shares
outstanding, basic and diluted
42,637,897
42,237,226
42,203,724
42,359,523
42,023,327
(1) Excludes depreciation and amortization
expense
GAN Limited
Segment Revenue and Gross
Profit (Unaudited)
(in thousands)
Three Months Ended
Year Ended
December
31, 2022
September
30, 2022
December
31, 2021
December
31, 2022
December
31, 2021
Revenue
B2B
Platform and content license fees
$
12,311
$
9,988
$
9,683
$
43,519
$
36,935
Development services and other
1,829
2,697
1,537
10,526
8,634
Total B2B revenue
14,140
12,685
11,220
54,045
45,569
B2C
Gaming
22,807
19,435
19,207
87,483
78,594
Total B2C revenue
22,807
19,435
19,207
87,483
78,594
Total revenue
$
36,947
$
32,120
$
30,427
$
141,528
$
124,163
Gross Profit
B2B
Revenue
$
14,140
$
12,685
$
11,220
$
54,045
$
45,569
Cost of revenue (1)
2,233
2,173
2,968
11,248
11,600
B2B segment contribution
11,907
10,512
8,252
42,797
33,969
B2B segment contribution margin
84.2
%
82.9
%
73.5
%
79.2
%
74.5
%
B2C
Revenue
22,807
19,435
19,207
87,483
78,594
Cost of revenue (1)
7,803
7,262
8,529
30,386
29,773
B2C segment contribution
15,004
12,173
10,678
57,097
48,821
B2C segment contribution margin
65.8
%
62.6
%
55.6
%
65.3
%
62.1
%
Total segment contribution
$
26,911
$
22,685
$
18,930
$
99,894
$
82,790
Total segment contribution margin
72.8
%
70.6
%
62.2
%
70.6
%
66.7
%
(1) Excludes depreciation and amortization
expense
GAN Limited
Revenue by Geography
(Unaudited)
(in thousands)
Three Months Ended
Year Ended
December
31, 2022
September
30, 2022
December
31, 2021
December
31, 2022
December
31, 2021
Revenue by geography *
United States
$
12,084
$
10,320
$
9,605
$
45,615
$
37,791
Europe
11,749
10,574
10,454
45,092
47,309
Latin America
11,168
9,492
8,723
44,078
32,434
Rest of the world
1,946
1,734
1,645
6,743
6,629
Total
$
36,947
$
32,120
$
30,427
$
141,528
$
124,163
* Revenue is segmented based on the
location of the Company's customer.
GAN Limited
Adjusted EBITDA
(Unaudited)
(in thousands)
Three Months Ended
Year Ended
December 31, 2022
September 30, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Net loss
$
(147,709
)
$
(6,941
)
$
(12,547
)
$
(197,498
)
$
(30,594
)
Income tax expense (benefit)
3,429
356
(3,412
)
3,942
(211
)
Interest expense (income), net
1,758
1,450
(31
)
4,279
(30
)
Other income, net
(3,000
)
—
(378
)
(3,000
)
(378
)
Depreciation and amortization
6,414
5,893
4,122
23,276
16,808
Share-based compensation and related
expense
1,591
1,335
2,771
7,262
8,136
Impairment
137,149
—
3,500
166,010
3,500
Restructuring
—
—
—
1,771
—
Adjusted EBITDA
$
(368
)
$
2,093
$
(5,975
)
$
6,042
$
(2,769
)
GAN Limited
Historical Normalized Revenue
(Unaudited)
(in thousands)
Three Months Ended,
December
31, 2022
September
30, 2022
June
30, 2022
March
31, 2022
Revenue
Revenue
$
36,947
$
32,120
$
34,967
$
37,494
Normalized adjustments (1)
619
493
(81
)
(837
)
Normalized Revenue
$
37,566
$
32,613
$
34,886
$
36,657
Sports Margin
Actual sports margin
6.5
%
6.6
%
7.1
%
7.2
%
Normalized sports margin
7.0
%
7.0
%
7.0
%
7.0
%
Revenue to Gross Gaming Revenue (GGR)
Ratio
Actual revenue to GGR ratio
76.7
%
73.6
%
72.7
%
78.8
%
Normalized revenue to GGR ratio
75.7
%
73.6
%
73.9
%
75.7
%
(1) The adjustments are based on the
effects of a normalized sports margin of 7.0% for quarters in 2022.
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. The revenue to GGR ratio is driven by
customer incentives, including free bets, sign-up and retention
bonuses, and allows management to measure the impact of bonus spend
on net revenue. The revenue to GGR ratio may fluctuate based on the
number of new users acquired during the period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230330005713/en/
Investor: 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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