GAN Reports Second Quarter 2023 Financial Results
- Total revenue decreased compared to the prior year quarter
- B2B segment revenue decreased due to lower contractual revenue rates
- Net loss decreased compared to the prior year quarter
- GAN Sports now live in 9 US states
- None.
Successful deployment of GAN Sports continues now live in 9 states
Company continues evaluation of strategic alternatives
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
“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
decreased$33.8 million compared to the prior year quarter.$1.2 million -
B2B segment revenue was
versus$9.9 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.$14.2 million -
B2C segment revenue was
versus$23.9 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.$20.8 million -
Total segment contribution was
versus$24.3 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.$24.5 million -
Operating expenses were
versus$32.8 million . The decrease was primarily attributable to a$62.3 million impairment charge in the prior year quarter.$28.9 million -
Net loss was
versus$18.4 million . The net loss this quarter includes a loss on debt extinguishment of$38.3 million as a result of the Company entering into the Amended Credit Facility (as defined below) on April 13, 2023.$8.8 million -
Adjusted EBITDA was
versus$(2.0) million . The decline was primarily related to the decline in revenue in the B2B segment.$1.3 million -
Cash was
as of June 30, 2023 versus$43.4 million as of the prior quarter. The increase was due to proceeds from the Amended Credit Facility and a favorable change in working capital.$40.8 million -
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 theOntario market. The B2C Marketing Spend Ratio was down 170 basis points from the prior year to20.3% driven by increased revenues as a result of strong margins in our sportsbook and casino offerings. -
B2B Gross Operator Revenue (“GOR”) totaled
versus$436.0 million in the prior year quarter, a$283.0 million 54% increase. The increase was driven primarily by organic growth inPennsylvania ,Michigan ,New Jersey , andConnecticut . 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
to$30.0 million with accrued paid in-kind (“PIK”) interest of$42.0 million 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 , andColorado . 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
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
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
(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
(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
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 * |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,296 |
|
|
$ |
11,720 |
|
|
$ |
15,812 |
|
|
$ |
23,211 |
|
|
|
|
12,107 |
|
|
|
10,205 |
|
|
|
24,784 |
|
|
|
22,769 |
|
|
|
|
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,
|
|
|
March 31,
|
|
|
December
|
|
|
September
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
View source version on businesswire.com: https://www.businesswire.com/news/home/20230809299544/en/
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
Source: GAN Limited