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Launched B2B sports betting technology and managed trading services in the U.S.

Focus on profitability and cost rationalization efforts yielding improved efficiency and margins

Underlying KPIs in B2B and B2C healthy and growing compared to prior year levels

IRVINE, Calif.–(BUSINESS WIRE)–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 September 30, 2022.

Dermot Smurfit, CEO of GAN stated:

“Our third quarter was highlighted by our launch of B2B sports betting technology and managed trading services in the U.S. along with continued progress toward the domestic launch of GAMESTACK 2.0. Customer feedback around GAN Sports as well as the unique value of our Super RGS portfolio remain key differentiators for GAN as we enhance our status of a leading provider of a true omnichannel gaming experience. We are looking forward to what we expect to be a strong launch cadence of GAN Sports, the upcoming FIFA World Cup, as well as our entrance into the Mexico market.”

“At the same time, we are acutely focused on cost rationalization measures and productivity enhancements in order to better navigate a challenging current environment. Our cost reduction efforts to date are already helping to yield improved margins and we expect to enact new cost cutting measures while ensuring we smartly allocate capital to our highest ROI opportunities to fund our growth plan. We have always remained vigilant for opportunities to best position GAN for future success and to ensure we drive value creation for our shareholders.”

Third Quarter 2022 Compared to Third Quarter 2021

  • Total revenue of $32.1 million was relatively flat compared to the prior year quarter. B2B revenues increased 14% or $1.5 million. The growth in B2B revenue was offset by a $1.7 million decrease in revenue within the B2C segment, primarily due to unfavorable foreign currency fluctuations.
  • B2B segment revenue was $12.7 million versus $11.2 million. The 14% growth was driven primarily by an increase in platform and content license fee revenue from new content and organic growth within the U.S. RMiG business.
  • B2C segment revenue was $19.4 million versus $21.1 million. Active Customers increased 31% driven by growth in Latin America and strong customer retention. Segment revenue declined $1.7 million primarily due to unfavorable foreign currency fluctuations, and to a lesser extent a lower sports margin.
  • Gross Profit was $22.7 million versus $21.5 million. The increase was primarily driven by strong growth in B2B revenue, which was partially offset by a decrease in B2C revenue from the aforementioned factors.
  • Operating Expenses were $27.8 million versus $28.6 million. General and administrative expenses decreased $2.7 million related to a favorable impact of foreign currency fluctuations and cost savings initiatives. In addition, Depreciation and Amortization increased $1.3 million and Sales & Marketing increased $1.1 million to attract new customers.
  • Net loss of $6.9 million versus $8.7 million. The decrease in net loss was primarily driven by an improved gross profit margin and lower general and administrative expenses.
  • Adjusted EBITDA was $2.1 million versus $(0.9) million primarily related to a smaller net loss.
  • Cash was $41.8 million as of September 30, 2022. Cash levels were adversely affected during the quarter by a $3.4 million effect from foreign exchange rates and a decrease of $1.1 million related to fees associated with gaming licenses for new market entry.
  • B2C KPI’s during the quarter were strong as the Company continued to grow active customers, deposits and turnover. Active Customers increased 31% from the prior year period driven by growth in Latin America and strong customer retention.
  • B2B Gross Operator Revenue (“GOR”) totaled $277.8 million versus $214.8 in the prior year quarter, a 29% 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.

GAN Limited

Key Financial Highlights

(Unaudited, in thousands unless otherwise specified)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

Revenues

 

 

 

 

 

 

B2B

 

$

12,685

 

$

14,150

 

$

11,175

B2C

 

 

19,435

 

 

20,817

 

 

21,093

Total revenues

 

$

32,120

 

$

34,967

 

$

32,268

 

 

 

 

 

 

 

Profitability Measures

 

 

 

 

 

 

B2B segment gross profit (1)

 

$

10,512

 

$

11,211

 

$

7,592

B2B segment gross profit margin (1)

 

 

82.9 %

 

 

79.2 %

 

 

67.9 %

B2C segment gross profit (1)

 

$

12,173

 

$

13,293

 

$

13,875

B2C segment gross profit margin (1)

 

 

62.6 %

 

 

63.9 %

 

 

65.8 %

Net loss

 

$

(6,941)

 

$

(38,349)

 

$

(8,678)

Adjusted EBITDA (7)

 

$

2,093

 

$

1,346

 

$

(870)

 

 

 

 

 

 

 

Key Performance Indicators

 

 

 

 

 

 

B2B Gross Operator Revenue (2) (in millions)

 

$

277.8

 

$

283.0

 

$

214.8

B2B Take Rate (3)

 

 

4.6 %

 

 

5.0 %

 

 

5.2 %

B2C Active Customers (in thousands) (4)

 

 

261

 

 

260

 

 

199

B2C Marketing Spend Ratio (5)

 

 

23 %

 

 

22 %

 

 

15 %

B2C Sports Margin (6)

 

 

6.6 %

 

 

7.1 %

 

 

6.8 %

 

 

 

 

 

 

 

Karen Flores, CFO of GAN added:

We remain focused on cost rationalization efforts in order to protect our margins during a volatile and difficult macroeconomic backdrop while ensuring our organic investment behind our key initiatives such as GAN Sports and Super RGS. While we are excited about the launch of GAN Sports and progress around other initiatives, as expected, a continued difficult foreign exchange environment and European headwinds impacted our third quarter performance, and we expect those factors to impact our fourth quarter as well. Although we are expecting a significant increase in activity for the World Cup, the unique nature of the event and the wide range of potential outcomes for the quarter have led us to elect to suspend our guidance for the full year.”

Conference Call Details

Date/Time:

Monday, November 14, 2022, at 4:30 PM ET

Webcast:

https://www.webcast-eqs.com/ganlimited20221114

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 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 revenue guidance, 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 expected 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 SIM, gross gaming revenue from RMiG, and gross sports win 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, 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

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

32,120

 

$

34,967

 

$

32,268

 

$

104,581

 

$

93,736

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

Cost of revenue (1)

 

 

9,435

 

 

10,463

 

 

10,801

 

 

31,598

 

 

29,876

Sales and marketing

 

 

6,757

 

 

7,267

 

 

5,657

 

 

20,122

 

 

15,238

Product and technology

 

 

4,998

 

 

5,188

 

 

5,492

 

 

19,140

 

 

15,564

General and administrative (1)

 

 

10,185

 

 

13,688

 

 

12,888

 

 

33,265

 

 

35,217

Impairment

 

 

 

 

28,861

 

 

 

 

28,861

 

 

Restructuring

 

 

 

 

712

 

 

 

 

1,771

 

 

Depreciation and amortization

 

 

5,893

 

 

6,556

 

 

4,560

 

 

16,862

 

 

12,686

Total operating costs and expenses

 

 

37,268

 

 

72,735

 

 

39,398

 

 

151,619

 

 

108,581

Operating loss

 

 

(5,148)

 

 

(37,768)

 

 

(7,130)

 

 

(47,038)

 

 

(14,845)

Interest expense, net

 

 

1,450

 

 

1,080

 

 

 

 

2,521

 

 

1

Other income

 

 

(13)

 

 

(270)

 

 

 

 

(283)

 

 

Loss before income taxes

 

 

(6,585)

 

 

(38,578)

 

 

(7,130)

 

 

(49,276)

 

 

(14,846)

Income tax expense (benefit)

 

 

356

 

 

(229)

 

 

1,548

 

 

513

 

 

3,201

Net loss

 

$

(6,941)

 

$

(38,349)

 

$

(8,678)

 

$

(49,789)

 

$

(18,047)

 

 

 

 

 

 

 

 

 

 

 

Loss per share, basic and diluted

 

$

(0.16)

 

$

(0.91)

 

$

(0.21)

 

$

(1.18)

 

$

(0.43)

 

 

 

 

 

 

 

 

 

 

 

Weighted average ordinary shares outstanding, basic and diluted

 

 

42,237,226

 

 

42,300,668

 

 

42,061,396

 

 

42,263,462

 

 

41,962,535

(1) Excludes depreciation and amortization expense

GAN Limited

Segment Revenue and Gross Profit (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Revenue

 

 

 

 

 

 

 

 

 

 

B2B

 

 

 

 

 

 

 

 

 

 

Platform and content license fees

 

$

9,988

 

$

10,518

 

$

8,743

 

$

31,208

 

$

27,252

Development services and other

 

 

2,697

 

 

3,632

 

 

2,432

 

 

8,697

 

 

7,097

Total B2B revenue

 

 

12,685

 

 

14,150

 

 

11,175

 

 

39,905

 

 

34,349

 

 

 

 

 

 

 

 

 

 

 

B2C

 

 

 

 

 

 

 

 

 

 

Gaming

 

 

19,435

 

 

20,817

 

 

21,093

 

 

64,676

 

 

59,387

Total B2C revenue

 

 

19,435

 

 

20,817

 

 

21,093

 

 

64,676

 

 

59,387

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

32,120

 

$

34,967

 

$

32,268

 

$

104,581

 

$

93,736

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

B2B

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

12,685

 

$

14,150

 

$

11,175

 

$

39,905

 

$

34,349

Cost of revenue (1)

 

 

2,173

 

 

2,939

 

 

3,583

 

 

9,015

 

 

8,632

B2B segment gross profit

 

 

10,512

 

 

11,211

 

 

7,592

 

 

30,890

 

 

25,717

B2B segment gross profit margin

 

 

82.9 %

 

 

79.2 %

 

 

67.9 %

 

 

77.4 %

 

 

74.9 %

 

 

 

 

 

 

 

 

 

 

 

B2C

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

19,435

 

 

20,817

 

 

21,093

 

 

64,676

 

 

59,387

Cost of revenue (1)

 

 

7,262

 

 

7,524

 

 

7,218

 

 

22,583

 

 

21,244

B2C segment gross profit

 

 

12,173

 

 

13,293

 

 

13,875

 

 

42,093

 

 

38,143

B2C segment gross profit margin

 

 

62.6 %

 

 

63.9 %

 

 

65.8 %

 

 

65.1 %

 

 

64.2 %

 

 

 

 

 

 

 

 

 

 

 

Total segment gross profit

 

$

22,685

 

$

24,504

 

$

21,467

 

$

72,983

 

$

63,860

Total segment gross profit margin

 

 

70.6 %

 

 

70.1 %

 

 

66.5 %

 

 

69.8 %

 

 

68.1 %

 

 

 

 

 

 

 

 

 

 

 

(1) Excludes depreciation and amortization expense

 

 

 

 

 

 

 

 

 

GAN Limited

Revenue by Geography (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Revenue by geography *

 

 

 

 

 

 

 

 

 

 

United States

 

$

10,320

 

$

11,720

 

$

9,107

 

$

33,531

 

$

28,186

Europe

 

 

10,574

 

 

10,205

 

 

11,598

 

 

33,343

 

 

36,855

Latin America

 

 

9,492

 

 

11,193

 

 

9,854

 

 

32,910

 

 

23,711

Rest of the world

 

 

1,734

 

 

1,849

 

 

1,709

 

 

4,797

 

 

4,984

Total

 

$

32,120

 

$

34,967

 

$

32,268

 

$

104,581

 

$

93,736

 

 

 

 

 

 

 

 

 

 

 

* Revenue is segmented based on the location of the Company’s customer.

GAN Limited

Adjusted EBITDA (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(6,941)

 

$

(38,349)

 

$

(8,678)

 

$

(49,789)

 

$

(18,047)

Income tax expense (benefit)

 

 

356

 

 

(229)

 

 

1,548

 

 

513

 

 

3,201

Interest expense, net

 

 

1,450

 

 

1,080

 

 

 

 

2,521

 

 

1

Depreciation and amortization

 

 

5,893

 

 

6,556

 

 

4,560

 

 

16,862

 

 

12,686

Share-based compensation and related expense

 

 

1,335

 

 

2,715

 

 

1,700

 

 

5,671

 

 

5,365

Impairment

 

 

 

 

28,861

 

 

 

 

28,861

 

 

Restructuring

 

 

 

 

712

 

 

 

 

1,771

 

 

Adjusted EBITDA

 

$

2,093

 

$

1,346

 

$

(870)

 

$

6,410

 

$

3,206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAN Limited

Historical Normalized Revenue (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended,

 

 

September 30,

2022

 

June 30,

2022

 

March 31,

2022

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

Revenue

 

$

32,120

 

$

34,967

 

$

37,494

Normalized adjustments (1)

 

 

493

 

 

(81)

 

 

(837)

Normalized Revenue

 

$

32,613

 

$

34,886

 

$

36,657

 

 

 

 

 

 

 

Sports Margin

 

 

 

 

 

 

Actual sports margin

 

 

6.6 %

 

 

7.1 %

 

 

7.2 %

Normalized sports margin

 

 

7.0 %

 

 

7.0 %

 

 

7.0 %

 

 

 

 

 

 

 

Revenue to Gross Gaming Revenue (GGR) Ratio

 

 

 

 

 

 

Actual revenue to GGR ratio

 

 

73.6 %

 

 

72.7 %

 

 

78.8 %

Normalized revenue to GGR ratio

 

 

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.​

Contacts

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