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.

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

GAN (NASDAQ:GAN)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more GAN Charts.
GAN (NASDAQ:GAN)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more GAN Charts.