GAN Reports Third Quarter 2021 Financial Results

B2B Segment Revenues Grow 5% Sequentially

Announced First Sports Betting Customer Red Rock Resorts Subsequent to Quarter-end

Outlined Plan to reach $500+ million of revenue by 2026 and set a long-term Adjusted EBITDA margin target of 30-35% at October Investor Event

 

IRVINE, Calif., November 11, 2021--(BUSINESS WIRE)--GAN Limited (NASDAQ: GAN) (the "Company" or "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 reported its unaudited financial results for the third quarter ended September 30, 2021.

Dermot Smurfit, CEO of GAN stated:

"Our third quarter financial results were in line with our expectations as our B2B segment revenues rose 5% compared to the prior quarter, while our B2C revenues experienced seasonality following a record second quarter. We added the iconic Treasure Island Hotel & Casino to our growing list of SIM clients during the quarter, and continued to demonstrate the value of our ‘multi-state, one app’ capability as we launched Churchill Downs’ online sports betting operation in Arizona. We also built upon our existing relationship with FanDuel, helping to deliver their iGaming platform in the state of Connecticut subsequent to quarter-end. Lastly, we continued to allocate our capital spending toward its most productive uses – ensuring it is deployed behind our people and technology – as we opened a new tech hub in Miami to leverage a rich and growing technology-oriented labor pool."

"The last few weeks have been eventful as our management team debuted GAN Sports (our sports betting kiosk), our Super RGS platform and other new products at the Global Gaming Expo ("G2E") in Las Vegas. Our growing portfolio of products and content that roll up into our B2B product suite will further expand our position as a premier, holistic provider of technology solutions, popular games and original, exclusive content. We also provided a deep dive into our B2B and B2C strategies, the complexity and value of our technology, and showcased the depth and experience of our broader leadership team at our inaugural Investor Event in October. We believe these initiatives will ultimately yield over $500 million of revenue by 2026 and a long-term Adjusted EBITDA margin of 30-35% at scale. We continue to make exciting progress in each of our business segments and initiatives and are well-positioned going forward."

Third Quarter 2021 Financial Highlights vs Second Quarter 2021:

  • Total revenue was $32.3 million versus $34.6 million, a 7% decrease driven by sports seasonality and lower sports betting margins than the prior quarter, despite an increase in the number of active customers.

  • B2B segment revenue was $11.2 million versus $10.6 million, driven primarily by an increase in hardware sales during the third quarter.

  • B2C segment revenue was $21.1 million, a $2.9 million decrease from $24.0 million, driven by lower sports betting margins as event results favored customers during the third quarter. The decrease was partially offset by organic growth in casino and poker revenues within the segment.

  • Consolidated segment gross profit, excluding depreciation and amortization, was $21.5 million versus $24.3 million. Gross profit decreased primarily due to decreased margins within the Company's B2C segment.

  • Net loss was $7.9 million versus net loss of $2.7 million. The quarter over quarter increase was primarily related to the impact of lower B2C sports book margin, as well as a total of $1.5 million adverse impact due to an additional tax provision expense, foreign currency effects and a purchase accounting adjustment related to the Coolbet acquisition.

  • Adjusted EBITDA was slightly higher than breakeven versus $4.6 million. The decrease was primarily driven by lower segment gross profit, higher operating costs related to people, facilities and marketing spend, and unfavorable foreign currency effects.

  • Cash was $50.3 million as of September 30, 2021, which was a decline of $1.8 million primarily related to payments for exclusive rights for leading online gaming content. The Company does not have any debt obligations.

   

GAN Limited

Key Financial Highlights

(Unaudited, in thousands unless otherwise specified)
               
   

Three Months Ended
   

September 30,
2021

  

June 30,
2021

  

September 30,
2020

Revenue

              

B2B

  

$

11,168

    

$

10,646

    

$

10,266

  

B2C

  

21,093

    

23,982

    

—

  

Total revenue

  

$

32,261

    

$

34,628

    

$

10,266

  
               

Profitability Measures

              

B2B segment gross profit (1)

  

$

7,585

    

$

8,339

    

$

7,183

  

B2B segment gross profit margin (1)

  

67.9

%

  

78.3

%

  

70.0

%

B2C segment gross profit (1)

  

$

13,875

    

$

15,933

    

$

—

  

B2C segment gross profit margin (1)

  

65.8

%

  

66.4

%

  

N/A

  

Net loss

  

$

(7,920)

    

$

(2,730)

    

$

(2,913)

  

Adjusted EBITDA (7)

  

$

39

    

$

4,642

    

$

(434)

  
               

Key Performance Indicators

              

B2B Gross Operator Revenue (2) (in millions)

  

$

214.8

    

$

221.4

    

$

142.3

  

B2B Active Player-Days (3) (in millions)

  

9.0

    

9.1

    

7.5

  

B2B ARPDAU (4) (in whole dollars)

  

$

24.00

    

$

24.38

    

$

18.93

  

B2C Active Customers (5) (number of customers)

  

198,884

    

186,942

    

N/A

  

B2C Marketing Spend Ratio (6)

  

15

%

  

12

%

  

N/A

  
                   

Performance and Operational Highlights

  • B2B Gross Operator Revenue ("GOR") (2) totaled $214.8 million versus $221.4 million last quarter, a 3% decrease. The decrease was primarily driven by lower seasonal-related GOR performance in Italy, which is typically not as strong in the third quarter versus the second quarter.

  • Launched new B2B commercial operators in two U.S. states. The GAN-powered TwinSpires, Churchill Downs Incorporated’s online wagering platform for sports, has commenced operations in the state of Arizona. This brings the GAN platform to Arizona for the first time and leverages the Company’s ‘multi-state, one app’ approach. Additionally, in October, the Company announced it is partnering to operate FanDuel’s online casinos in Connecticut.

  • B2C Strong KPI's. Strong momentum continued in Active Customers, which reached nearly 200K in the third quarter, which was up 6% from the prior quarter and 136% from the prior year. Casino turnover (amount wagered) increased 17% or $58 million from the prior quarter.

  • GAN won five awards across B2B & B2C. These include EGR B2B Award for White Label Partner of the Year, GGB Gaming Technology Award for Best Interactive Product, Norwegian TIPS Magazine for Bookmaker of the Year, Innovator of the Year and Mobile Sports Product of the Year by the International Gaming Awards.

  • After the 2021 third quarter-end, the Company announced an agreement with Red Rock Resorts to power their online and retail race and sports betting throughout Nevada. Additionally, the Company recently announced an agreement with existing simulated gaming client the Island View Casino Resort in Mississippi to provide retail Over-the-Counter, Kiosk-based and on-site mobile sports betting.

2021 Outlook

Karen Flores, CFO of GAN added:

"We are reiterating our full-year revenue expectation for $125 million to $135 million. We maintain a robust cash position and zero debt leaving us in a strong position to add to our Super RGS portfolio, invest in our people and technology, launch GAN Sports and support new client launches. We expect our profitability to continue to trend positively going forward as we build additional business scale, lap periods of high investment and begin to generate stronger returns on capital spending."