Strong profitability improvement driven by B2B
revenues and continued cost rationalization
Planned Merger with SEGASAMMY now expected to
close in 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 third quarter ended September 30, 2024.
Seamus McGill, GAN’s Chief Executive Officer,
said, “I couldn’t be more pleased with the progress our team
members have made to deliver revenue growth while concurrently
lowering our cost structure. Our top-line growth of 24% compared to
the prior year was driven by B2B revenue growth of more than 60%
while operating costs fell by nearly 10%. We remain focused on
delivering a leading product offering for our US B2B clients and
our international B2C business.”
Mr. McGill added, “In September, we recently received
approval from the Nevada Gaming Commission for our planned merger
with SEGASAMMY. We continue to work through the remaining
regulatory requirements and anticipate a successful closing in
early 2025."
Third Quarter 2024 Compared to
Third Quarter 2023
- Total revenue of $37.1 million increased 24% driven by
an increase in the B2B segment.
- B2B segment revenue was $16.4 million versus $10.2
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 a partner exit in Michigan.
- B2C segment revenue was $20.7 million versus $19.6
million. Growth in Europe was driven by increased player activity,
which was offset by reduced player activity and unfavorable
exchange rates in Latin America.
- Operating expenses were $25.1 million versus $27.8
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 income of $2.1 million versus a net loss of $8.2
million improved primarily due to increased revenues and decreased
operating expenses.
- Total segment contribution was $27.2 million versus
$20.6 million, which was driven primarily by increased revenue in
the B2B segment.
- Adjusted EBITDA was $5.4 million versus a loss of $2.5
million. The increase was driven by increased revenues and lower
operating expenses resulting from the aforementioned factors.
- Cash was $36.5 million as of September 30, 2024, versus
$36.9 million as of June 30, 2024.
- B2C Active Customers declined primarily driven by
limited customer acquisition in Latin America.
- B2B Gross Operator Revenue totaled $610.4 million versus
$424.1 million in the prior year quarter, a 44% increase. The
increase was driven primarily by organic growth in Pennsylvania,
New Jersey, Ontario and Connecticut.
GAN Limited
Key Financial
Highlights
(Unaudited, in thousands unless
otherwise specified)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Revenues
B2B
$
16,375
$
10,178
$
41,711
$
31,353
B2C
20,723
19,639
61,598
67,351
Total revenues
$
37,098
$
29,817
$
103,309
$
98,704
Profitability Measures
B2B segment contribution (1)
$
14,097
$
8,123
$
35,141
$
25,224
B2B segment contribution margin (1)
86.1
%
79.8
%
84.2
%
80.5
%
B2C segment contribution (1)
$
13,081
$
12,452
$
38,681
$
44,592
B2C segment contribution margin (1)
63.1
%
63.4
%
62.8
%
66.2
%
Net loss
$
2,083
$
(8,160
)
$
(3,808
)
$
(25,068
)
Adjusted EBITDA (7)
$
5,412
$
(2,522
)
$
8,574
$
(4,512
)
Key Performance Indicators
B2B Gross Operator Revenue (2) (in
millions)
$
610.4
$
424.1
$
1,851.7
$
1,273.1
B2B Take Rate (3)
2.7
%
2.4
%
2.3
%
2.5
%
B2C Active Customers (in thousands)
(4)
226
244
382
432
B2C Marketing Spend Ratio (5)
24
%
26
%
23
%
22
%
B2C Sports Margin (6)
7.2
%
6.0
%
7.1
%
7.2
%
SEGASAMMY Transaction
The merger has been approved by GAN shareholders at a special
general meeting of its shareholders, has received clearance from
the Committee on Foreign Investment in the U.S. (CFIUS) and
received approval from several gaming regulatory agencies including
the Nevada Gaming Commission. 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 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 third
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 September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Revenue
$
37,098
$
29,817
$
103,309
$
98,704
Operating costs and expenses
Cost of revenue(1)
9,920
9,242
29,487
28,888
Sales and marketing
6,778
7,196
19,851
21,704
Product and technology
8,467
9,150
26,220
29,966
General and administrative(1)
7,823
7,060
22,962
27,095
Depreciation and amortization
1,978
4,339
5,731
12,783
Total operating costs and expenses
34,966
36,987
104,251
120,436
Operating income (loss)
2,132
(7,170
)
(942
)
(21,732
)
Interest expense, net
1,160
1,264
3,449
3,885
Other loss (income), net
—
—
1
(934
)
Income (loss) before income taxes
972
(8,434
)
(4,392
)
(24,683
)
Income tax (benefit) expense
(1,111
)
(274
)
(584
)
385
Net income (loss)
$
2,083
$
(8,160
)
$
(3,808
)
$
(25,068
)
Net income (loss) per share:
Basic
$
0.05
$
(0.18
)
$
(0.08
)
$
(0.57
)
Diluted
$
0.04
$
(0.18
)
$
(0.08
)
$
(0.57
)
Weighted average ordinary shares
outstanding
Basic
45,478,359
44,699,951
45,334,921
43,949,594
Diluted
48,887,335
44,699,951
45,334,921
43,949,594
(1) Excludes depreciation and amortization expense
GAN Limited
Segment Revenue and Gross
Profit (Unaudited)
(in thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Revenue
B2B
Platform and content license fees
$
8,516
$
7,240
$
26,886
$
23,110
Development services and other
7,859
2,938
14,825
8,243
Total B2B revenue
16,375
10,178
41,711
31,353
B2C
Gaming
20,723
19,639
61,598
67,351
Total B2C revenue
20,723
19,639
61,598
67,351
Total revenue
$
37,098
$
29,817
$
103,309
$
98,704
Gross Profit
B2B
Revenue
$
16,375
$
10,178
$
41,711
$
31,353
Cost of revenue (1)
2,278
2,055
6,570
6,129
B2B segment contribution
14,097
8,123
35,141
25,224
B2B segment contribution margin
86.1
%
79.8
%
84.2
%
80.5
%
B2C
Revenue
20,723
19,639
61,598
67,351
Cost of revenue (1)
7,642
7,187
22,917
22,759
B2C segment contribution
13,081
12,452
38,681
44,592
B2C segment contribution margin
63.1
%
63.4
%
62.8
%
66.2
%
Total segment contribution
$
27,178
$
20,575
$
73,822
$
69,816
Total segment contribution margin
73.3
%
69.0
%
71.5
%
70.7
%
(1) Excludes depreciation and amortization expense
GAN Limited
Revenue by Geography
(Unaudited)
(in thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Revenue by geography *
United States
$
14,082
$
7,459
$
33,628
$
23,271
Europe
12,159
10,890
37,887
35,674
Latin America
8,356
9,132
23,456
32,790
Rest of the world
2,501
2,336
8,338
6,969
Total
$
37,098
$
29,817
$
103,309
$
98,704
* Revenue is segmented based on the location of the Company's
customer.
GAN Limited
Adjusted EBITDA
(Unaudited)
(in thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Net (loss) income
$
2,083
$
(8,160
)
$
(3,808
)
$
(25,068
)
Income tax (benefit) expense
(1,111
)
(274
)
(584
)
385
Interest expense, net
1,160
1,264
3,449
3,885
Gain on amendment of Content Licensing
Agreement
—
—
—
(9,719
)
Loss on debt extinguishment
—
—
—
8,784
Revaluation of contingent liability
—
(509
)
—
(288
)
Depreciation and amortization
1,978
4,339
5,731
12,783
Share-based compensation and related
expense
1,258
818
2,998
4,726
Transaction related costs
44
—
788
—
Adjusted EBITDA
$
5,412
$
(2,522
)
$
8,574
$
(4,512
)
GAN Limited
Historical Sports Margin
(Unaudited)
Three Months Ended,
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
Sports Margin
Actual sports margin
7.2
%
8.7
%
5.7
%
6.5
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241108987713/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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