Growth in B2B revenues coupled with continued
cost rationalization leads to improved results
Expected timeline for completion of merger with
SEGASAMMY remains on track for late 2024 or early 2025
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 second quarter ended June 30, 2024.
Seamus McGill, GAN’s Chief Executive Officer,
said, “I’m very pleased with the continued operational progress
the team is delivering. We achieved top-line revenue growth in the
second quarter while reducing our operating expenses. We continue
to operate the business more efficiently with a focus on improved
profitability.
Mr. McGill added, “Looking ahead, our focus
remains unchanged. We will continue to optimize our overall cost
structure and roll-out product enhancements. We continue to work
through the gaming regulatory requirements for our planned merger
with SEGASAMMY and anticipate a successful closing in late 2024 or
early 2025."
Second Quarter 2024 Compared to
Second Quarter 2023
- Total revenue of $35.6 million increased 5% driven by an
increase in the B2B segment.
- B2B segment revenue was $13.0 million versus $9.9
million. The increase was primarily due to an expansion of our B2B
offerings in the state of Nevada and the recognition of revenue
related to the exit of a B2B partner in Michigan.
- B2C segment revenue was $22.6 million versus $23.9
million. Growth in European markets driven by increased player
activity was offset by reduced player activity in Latin America and
lower margins resulting from unfavorable event outcomes.
- Operating expenses were $25.1 million versus $32.8
million. The decrease was primarily attributable to the Company's
overall reduction of compensation costs and reduced headcount
realized as part of ongoing cost saving initiatives, as well as
lower depreciation and amortization expenses as a result of
intangible assets fully amortizing in the prior year.
- Net loss of $1.7 million versus $18.4 million, which was
primarily due to increased revenues and decreased operating
expenses. Additionally, the prior period included a loss on debt
extinguishment of $8.8 million.
- Total segment contribution was $25.3 million versus
$24.3 million, which was driven by increased revenue in the B2B
segment.
- Adjusted EBITDA was $3.7 million versus $(2.0) million.
The increase was driven by increased revenues and lower operating
expenses resulting from the aforementioned factors.
- Cash was $36.9 million as of June 30, 2024 versus $36.6
million as of March 31, 2024.
- B2C Active Customers declined primarily driven by
limited customer acquisition in Latin America.
- B2B Gross Operator Revenue totaled $609.3 million versus
$436.0 million in the prior year quarter, a 40% increase. The
increase was driven primarily by organic growth in Pennsylvania,
Michigan, New Jersey, Ontario and Connecticut.
GAN Limited Key
Financial Highlights (Unaudited, in thousands unless otherwise
specified)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Revenues
B2B
$
12,990
$
9,895
$
25,341
$
21,174
B2C
22,570
23,863
40,870
47,713
Total revenues
$
35,560
$
33,758
$
66,211
$
68,887
Profitability Measures
B2B segment contribution (1)
$
10,779
$
7,817
$
21,049
$
17,101
B2B segment contribution margin (1)
83.0
%
79.0
%
83.1
%
80.8
%
B2C segment contribution (1)
$
14,537
$
16,456
$
25,595
$
32,140
B2C segment contribution margin (1)
64.4
%
69.0
%
62.6
%
67.4
%
Net loss
$
(1,731
)
$
(18,409
)
$
(5,891
)
$
(16,908
)
Adjusted EBITDA (7)
$
3,730
$
(2,029
)
$
3,162
$
(1,990
)
Key Performance Indicators
B2B Gross Operator Revenue (2) (in
millions)
$
609.3
$
436.0
$
1,241.3
$
858.8
B2B Take Rate (3)
2.1
%
2.3
%
2.0
%
2.5
%
B2C Active Customers (in thousands)
(4)
237
257
328
359
B2C Marketing Spend Ratio (5)
23
%
20
%
23
%
21
%
B2C Sports Margin (6)
8.7
%
8.5
%
7.1
%
7.7
%
SEGASAMMY Transaction
The merger has been approved by GAN shareholders at a special
general meeting of its shareholders and received clearance from the
Committee on Foreign Investment in the U.S. (CFIUS). The gaming
regulatory approval process continues to proceed pursuant to
regulatory requirements and the transaction is expected to close,
subject to customary closing conditions, in late 2024 or early
2025.
Conference Call Details
Due to the expected merger of the Company with SEGASAMMY, GAN
will not be hosting a conference call in conjunction with its
second quarter 2024 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 anticipated trends in revenues (including new customer
launches) and operating expenses, the anticipated improvement in
profitability, expectations that it will meet all closing
conditions or successfully close its planned merger with SEGASAMMY,
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,
extraordinary gains or losses, share-based compensation expense and
related expense, transaction costs, and other items which the Board
of Directors considers to be infrequent or unusual in nature. A
reconciliation of Adjusted EBITDA to Net Income (the most closely
aligned measure under U.S. GAAP) is included in the tables at the
end of this release. 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 June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Revenue
$
35,560
$
33,758
$
66,211
$
68,887
Operating costs and expenses
Cost of revenue(1)
10,244
9,485
19,567
19,646
Sales and marketing
7,056
7,324
13,073
14,508
Product and technology
8,137
11,238
17,753
20,816
General and administrative(1)
7,980
10,029
15,139
20,035
Depreciation and amortization
1,914
4,243
3,753
8,444
Total operating costs and expenses
35,331
42,319
69,285
83,449
Operating income (loss)
229
(8,561
)
(3,074
)
(14,562
)
Interest expense, net
1,157
905
2,289
2,621
Other loss (income), net
27
8,358
1
(934
)
Loss before income taxes
(955
)
(17,824
)
(5,364
)
(16,249
)
Income tax expense
776
585
527
659
Net loss
$
(1,731
)
$
(18,409
)
$
(5,891
)
$
(16,908
)
Loss per share, basic and diluted
$
(0.04
)
$
(0.42
)
$
(0.13
)
$
(0.39
)
Weighted average ordinary shares
outstanding, basic and diluted
45,390,559
44,147,701
45,262,413
43,568,197
(1) Excludes depreciation and amortization expense
GAN Limited Segment
Revenue and Gross Profit (Unaudited) (in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Revenue
B2B
Platform and content license fees
$
8,700
$
7,243
$
18,371
$
15,870
Development services and other
4,290
2,652
6,970
5,304
Total B2B revenue
12,990
9,895
25,341
21,174
B2C
Gaming
22,570
23,863
40,870
47,713
Total B2C revenue
22,570
23,863
40,870
47,713
Total revenue
$
35,560
$
33,758
$
66,211
$
68,887
Gross Profit
B2B
Revenue
$
12,990
$
9,895
$
25,341
$
21,174
Cost of revenue (1)
2,211
2,078
4,292
4,073
B2B segment contribution
10,779
7,817
21,049
17,101
B2B segment contribution margin
83.0
%
79.0
%
83.1
%
80.8
%
B2C
Revenue
22,570
23,863
40,870
47,713
Cost of revenue (1)
8,033
7,407
15,275
15,573
B2C segment contribution
14,537
16,456
25,595
32,140
B2C segment contribution margin
64.4
%
69.0
%
62.6
%
67.4
%
Total segment contribution
$
25,316
$
24,273
$
46,644
$
49,241
Total segment contribution margin
71.2
%
71.9
%
70.4
%
71.5
%
(1) Excludes depreciation and amortization expense
GAN Limited Revenue by
Geography (Unaudited) (in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Revenue by geography *
United States
$
10,454
$
7,296
$
19,546
$
15,812
Europe
14,120
12,107
25,728
24,784
Latin America
8,204
12,388
15,100
23,658
Rest of the world
2,782
1,967
5,837
4,633
Total
$
35,560
$
33,758
$
66,211
$
68,887
* Revenue is segmented based on the location of the Company's
customer.
GAN Limited Adjusted
EBITDA (Unaudited) (in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Net (loss) income
$
(1,731
)
$
(18,409
)
$
(5,891
)
$
(16,908
)
Income tax (benefit) expense
776
585
527
659
Interest expense, net
1,157
905
2,289
2,621
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
1,914
4,243
3,753
8,444
Share-based compensation and related
expense
870
2,069
1,740
3,908
Transaction related costs
744
—
744
—
Adjusted EBITDA
$
3,730
$
(2,029
)
$
3,162
$
(1,990
)
GAN Limited Historical
Sports Margin (Unaudited)
Three Months Ended,
June 30,
2024
March 31,
2024
December 31,
2023
September 30,
2023
Sports Margin
Actual sports margin
8.7
%
5.7
%
6.5
%
6.0
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240809473863/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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