TMCnet News

GAN Reports First Quarter 2021 Financial Results
[May 17, 2021]

GAN Reports First Quarter 2021 Financial Results


GAN Limited (the "Company" or "GAN") (NASDAQ: GAN), a leading full-service Internet gaming software-as-a-service provider to the real money internet gaming, online sports betting, and simulated gaming industries, today announced its operating and financial results for the first quarter ended March 31, 2021.

Dermot Smurfit, CEO stated:

"We started the new year on a strong note with 263% top-line growth year-over-year, fueled by both organic growth as well as the Coolbet acquisition. We completed a record five RMiG partner launches during the first quarter, highlighted by our groundbreaking launch and strong results in Michigan, plus our exciting new partnerships with Wynn and Churchill Downs. We carried that momentum into the second quarter, with now 10 launches year-to-date, exceeding all of 2020. Most notably, we completed a successful multi-faceted transition onto our platform for Churchill Downs' TwinSpires branded sports betting and iGaming across five states leveraging our scarce multi-State 'One Account, Any Product, Any State' technical capability. Additionally, we secured a long-term exclusive content deal with Ainsworth to further enhance our market offering. This key partnership will increase the Company's overall 'take rate' on Gross Operator Revenue from iGaming, and help us secure a fast-growing share of existing iGaming revenues from B2C Operators who are not already partners of GAN. Looking ahead, our pipeline continues to expand with new opportunities for our industry-leading B2B offering here in the U.S. Lastly, we are thrilled with Coolbet's strong contribution this quarter and how seamlessly we've been able to integrate the team. Coolbet offers a dual growth platform with our anticipated launch of their B2B sportsbook engine in the U.S. later this year and its exciting B2C international growth opportunity."

First Quarter 2021 vs First Quarter 2020 Financial Highlights:

  • Total revenues of $27.8 million versus $7.7 million, a 263% increase driven by the $14.3 million contribution from Coolbet to our Business-to-Consumer ("B2C") segment and growth of $5.8 million from our Business-to-Business ("B2B") segment.
  • Closed acquisition of Coolbet sports betting technology and operations in early January 2021, continuing the development of their sports betting technology for U.S. deployment.
  • GAN's business has grown to two segments: (1) B2B - which includes Real money Internet gaming ("RMiG") and Simulated gaming ("SIM"), and (2) B2C - which includes Coolbet's assets and international operations.
  • B2B segment revenues up 76% to $13.5 million, driven by a RMiG increase of 68% to $10.5 million and a SIM increase of 114% to $3.0 million.
  • B2C segment revenues of $14.3 million, derived from Coolbet's existing and proven international sports betting and casino gaming operations. Key performance indicators remain at exceptional levels.
  • Segment gross profit of $19.1 million versus $6.0 million. The 220% increase was driven by an $8.3 million contribution from the acquisition of Coolbet to our B2C segment, plus strong organic growth and new customer launches within our B2B segment.
  • Net loss of $4.5 million versus net income of $0.7 million, driven primarily by increased amortization related to acquired intangibles from the Coolbet acquisition ($2.9 million), increased share-based compensation ($1.2 million), and operating expenses related to marketing, organizational expansion to meet market and customer demand, and costs related to regulatory requirements.
  • Adjusted EBITDA of $1.7 million versus $2.5 million. The decrease in Adjusted EBITDA was driven by increased operating costs in the current year related to regulatory requirements and organizational expansion to meet market and customer demand.
  • Cash of $52.2 million at March 31, 2021 compared to $152.7 million at December 31, 2020. The decrease is driven primarily by the cash paid to acquire Coolbet, net of cash acquired ($92.4 million), in January 2021.




GAN Limited

Key Financial Highlights

(Unaudited, in thousands unless otherwise specified)

 

 

 

 

 

 

 

Three Months Ended

March 31,

 

 

2021

 

2020

Revenues

 

 

 

 

B2B

 

$

13,530

 

 

$

7,670

 

B2C

 

14,312

 

 

-

 

Total revenues

 

$

27,842

 

 

$

7,670

 

 

 

 

 

 

Profitability Measures

 

 

 

 

B2B segment gross profit (1)

 

$

10,788

 

 

$

5,978

 

B2C segment gross profit (1)

 

$

8,335

 

 

N/A

 

B2B segment gross profit margin (1)

 

79.7

%

 

77.9

%

B2C segment gross profit margin (1)

 

58.2

%

 

N/A

 

Net income (loss)

 

$

(4,464)

 

 

$

694

 

Adjusted EBITDA (7)

 

$

1,700

 

 

$

2,549

 

 

 

 

 

 

Key Performance Indicators

 

 

 

 

B2B Gross Operator Revenue (2) (in millions)

 

$

214.2

 

 

$

141.9

 

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

 

9.5

 

 

9.0

 

B2B ARPDAU (4) (in whole dollars)

 

$

22.48

 

 

$

15.72

 

B2C Active Customers (5) (number of customers)

 

111,566

 

 

N/A

 

B2C Marketing Spend Ratio (6)

 

14

%

 

N/A

 


Performance Highlights

  • B2B Gross Operator Revenue(2) of $214.2 million versus $141.9 million, a 51% increase, driven by the strong performance from our new B2B casino iGaming partners.
  • Launched major new B2B customers in four new states with Churchill Downs (sportsbook for MI and TN), Wynn (sportsbook and iGaming for MI) and FanDuel (iGaming for MI) during the first quarter. Additionally, in April 2021, we launched Churchill Downs in three additional states (sportsbook and iGaming in PA; sportsbook in CO and IN) followed by FanDuel iGaming in WV in early May 2021.
  • Secured three new B2B partnerships, including SuperBook (sportsbook and iGaming for NJ and sportsbook for CO), Gila River (SIM for AZ) and Seneca Gaming (SIM for NY), all of which bring multi-year, recurring revenue opportunities.
  • Ainsworth iGaming online slot portfolio secured 70+ active gaming titles, anticipated to grow to nearly 200 over the term, exclusively for the long-term benefit of all partners of GAN in the U.S. for both RMiG and SIM, as well as partners of GAN's Super RGS. The platform offering stands to benefit from an enhanced online gaming portfolio of exclusive high-value online slot games recognized and valued by casino patrons coast-to-coast, with titles derived from counterparts present on America's retail casino gaming floors.
  • Operating costs and expenses increased from $6.8 million to $31.6 million driven primarily by the addition of Coolbet in the current year (acquired January 1, 2021), plus increased amortization related to acquired intangibles ($2.9 million), increased share-based compensation ($1.2 million), and operating expenses related to marketing, organizational expansion to meet market and customer demand, and public company and regulatory costs.

2021 Outlook

Karen Flores, CFO added:

"Our first quarter financial results exceeded our expectations, and the outlook remains positive for the balance of 2021. We are increasing our full year revenue guidance to a range of $103 million to $108 million. As we gain scale, become more efficient, and move through a period of significant investment for growth, we anticipate to drive improved profitability. These factors will yield better operating leverage across the business over the long-term and further bolster our strong financial position as we execute our growth strategy, support new and existing customer launches and launch the B2C sports book technology later this year."

Conference Call Details

Date/Time:

   

Monday, May 17, 2021, at 4:30 PM EDT

Webcast:

   

https://www.webcast-eqs.com/ganlimited20210517/en

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. Coolbet, a division of GAN, is a market-leading operator of proprietary online sports betting technology with market leadership positions in selected European and Latin American markets. GAN has developed a proprietary Internet gambling enterprise software system, GameSTACK™, which it licenses to land-based casino operators as a turnkey technology solution for regulated real money Internet gambling, encompassing Internet gaming, Internet sports gaming and virtual 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 2021 revenue guidance, the Company's anticipated trends in revenues (including new customer launches) and operating expenses, the anticipated impact of the COVID-19 pandemic on the Company's operations and industry, the resilience of the Company's business in the pandemic, the anticipated launch of regulated gaming in new U.S. states, the expected integration of Coolbet's sports betting technology and international B2C operations, the anticipated launch timing of the B2B sportbook technology solution in the U.S., the recurring nature of the Company's revenue relationships with customers and the Company's ability to leverage its intellectual property portfolio, 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. 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

(1) The Company excludes depreciation and amortization from certain line items in certain calculations, including segment results and operating costs and expenses.

(2) The Company defines B2B Gross Operator Revenue as the sum of its B2B corporate customers' gross revenue from Simulated gaming, gross gaming revenue from real money regulated iGaming, and gross sports win from real money regulated sports betting. B2B Gross Operator Revenue, which is not comparable to financial information presented in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"), gives management and users 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 Active Player-Days as unique individuals who log on and wager each day (either wagering with real money or playing with virtual credits used in Simulated gaming), aggregated during the respective period. By way of illustrative example: one (1) unique individual logging in and wagering each day in a single calendar year would, in aggregate, represent 365 B2B Active Player-Days. B2B Active Player-Days provides an indicator of consistent and daily interaction that individuals have with the Company's platforms. B2B Active Player-Days allows management and users to understand not only total users who interact with the platform but gives an idea of the frequency to which users are interacting with the platform, as someone who logs on and wagers multiple days are weighted heavier during the period than the user who only logs on and wagers one day.

(4) The Company defines B2B Average Revenue per Daily Active User ("ARPDAU") as B2B Gross Operator Revenue divided by the identified number of B2B Active Player-Days. This measure allows management to measure the value per daily user and track user interaction with the platforms, which helps both management and users of financial statements understand the value per user that is driven by marketing efforts and data analysis obtained from the Company's platforms.

(5) 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.

(6) 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 and compare across jurisdictions. Management and the users of the financial statements can use this metric as a comparison to peers and track the success of marketing costs over time versus revenue levels, plus as an indication of return on marketing investment.

(7) Adjusted EBITDA is a non-GAAP financial measure that is provided as supplemental disclosure which is defined as net income (loss) before interest costs, income taxes, depreciation and amortization, share-based compensation expense and related expense, impairments, initial public offering related costs and other items which our Board of Directors considers to be infrequent or unusual in nature. Management uses Adjusted EBITDA to measure its financial performance. Specifically, it uses Adjusted EBITDA (1) 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 (2) 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 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. Adjusted EBITDA, as defined, may not be comparable to similarly titled measures used by other companies in the industry, and Adjusted EBITDA may exclude financial information that some investors may consider important in evaluating the Company's performance. Adjusted EBITDA, as calculated by the Company, along with a reconciliation to net income (loss), the comparable U.S. GAAP equivalent measure, is included below.

This presentation uses certain non-GAAP financial measures as defined in Securities and Exchange Commission rules. The Company reports financial results in conformity with 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.

GAN Limited

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except share and per share amounts)

 

 

 

 

 

 

 

Three Months Ended

March 31,

 

 

2021

 

2020

Revenues

 

$

27,842

 

 

$

7,670

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

Cost of revenues (1)

 

8,719

 

 

1,692

 

Sales and marketing

 

4,101

 

 

863

 

Product and technology

 

4,850

 

 

1,024

 

General and administrative (1)

 

10,011

 

 

2,391

 

Depreciation and amortization

 

3,963

 

 

853

 

Total operating costs and expenses

 

31,644

 

 

6,823

 

Operating income (loss)

 

(3,802)

 

 

847

 

Interest expense, net

 

1

 

 

8

 

Income (loss) before income taxes

 

(3,803)

 

 

839

 

Income tax provision

 

661

 

 

145

 

Net income (loss)

 

$

(4,464)

 

 

$

694

 

 

 

 

 

 

Income (loss) per share

 

 

 

 

Basic

 

$

(0.11)

 

 

$

0.03

 

Diluted

 

$

(0.11)

 

 

$

0.03

 

 

 

 

 

 

Weighted average ordinary shares outstanding

 

 

 

 

Basic

 

41,986,083

 

 

21,512,225

 

Diluted

41,986,083

 

23,040,345

 

GAN Limited

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share amounts)

 

 

 

 

 

March 31, 2021

 

December 31, 2020

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash

 

$

52,185

 

 

$

152,654

 

Accounts receivable, net

 

11,945

 

 

6,818

 

Prepaid expenses

 

2,800

 

 

1,912

 

Other current assets

 

3,423

 

 

2,112

 

Total current assets

 

70,353

 

 

163,496

 

 

 

 

 

 

Capitalized software development costs, net

 

8,134

 

 

6,648

 

Goodwill

 

152,734

 

 

-

 

Intangible assets, net

 

43,855

 

 

468

 

Other assets

 

3,926

 

 

2,634

 

Total assets

 

$

279,002

 

 

$

173,246

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

 

$

4,329

 

 

$

4,926

 

Accrued compensation and benefits

 

6,127

 

 

4,956

 

Accrued expenses

 

4,414

 

 

3,363

 

Liabilities to users

 

6,916

 

 

-

 

Other current liabilities

 

3,944

 

 

4,067

 

Total current liabilities

 

25,730

 

 

17,312

 

 

 

 

 

 

Deferred income taxes

 

2,167

 

 

-

 

Other noncurrent liabilities

 

559

 

 

370

 

Total liabilities

 

28,456

 

 

17,682

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

Ordinary shares, $0.01 par value, 100,000,000 shares authorized, 42,004,100 and 36,635,362 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

419

 

 

365

 

Additional paid-in capital

 

312,715

 

 

203,842

 

Accumulated deficit

 

(50,230)

 

 

(45,766)

 

Accumulated other comprehensive loss

 

(12,358)

 

 

(2,877)

 

Total stockholders' equity

 

250,546

 

 

155,564

 

Total liabilities and stockholders' equity

 

$

279,002

 

 

$

173,246

 

GAN Limited

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

 

 

 

 

 

 

Three Months Ended

March 31,

 

 

2021

 

2020

Cash Flows From Operating Activities

 

 

 

 

Net income (loss)

 

$

(4,464)

 

 

$

694

 

Adjustments to reconcile net income (loss) to net cash used in operating activities

 

5,694

 

 

1,179

 

Changes in operating assets and liabilities, net of acquisition

 

(5,375)

 

 

(3,312)

 

Net cash used in operating activities

 

(4,145)

 

 

(1,439)

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

Cash paid for acquisition, net of cash acquired

 

(92,404)

 

 

-

 

Expenditures for capitalized software development costs

 

(2,153)

 

 

(534)

 

Purchases of gaming licenses

 

(34)

 

 

-

 

Purchases of property and equipment

 

(426)

 

 

(437)

 

Net cash used in investing activities

 

(95,017)

 

 

(971)

 

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

Payments of offering costs

 

(604)

 

 

(909)

 

Proceeds from exercise of stock options

 

315

 

 

87

 

Principal payments on finance leases

 

-

 

 

(44)

 

Net cash used in financing activities

 

(289)

 

 

(866)

 

 

 

 

 

 

Effect of foreign exchange rates on cash

 

(1,018)

 

 

(850)

 

 

 

 

 

 

Net decrease in cash

 

(100,469)

 

 

(4,126)

 

Cash, beginning of period

 

152,654

 

 

10,279

 

Cash, end of period

 

$

52,185

 

 

$

6,153

 

GAN Limited

Segment Revenues and Gross Profit

(Unaudited, in thousands)

 

 

 

 

 

 

 

Three Months Ended

March 31,

 

 

2021

 

2020

B2B

 

 

 

 

Platform and content fees

 

$

9,184

 

 

$

5,933

 

Development services and other

 

4,346

 

 

1,737

 

Total B2B revenues

 

13,530

 

 

7,670

 

 

 

 

 

 

B2C

 

 

 

 

Gaming

 

14,312

 

 

-

 

Total B2C revenues

 

14,312

 

 

-

 

 

 

 

 

 

Total revenues

 

$

27,842

 

 

$

7,670

 

 

 

 

 

 

B2B

 

 

 

 

Revenues

 

$

13,530

 

 

$

7,670

 

Cost of revenues (1)

 

2,742

 

 

1,692

 

B2B segment gross profit (1)

 

10,788

 

 

5,978

 

B2B segment gross profit margin (1)

 

79.7

%

 

77.9

%

 

 

 

 

 

B2C

 

 

 

 

Revenues

 

14,312

 

 

-

 

Cost of revenues (1)

 

5,977

 

 

-

 

B2C segment gross profit (1)

 

8,335

 

 

-

 

B2C segment gross profit margin (1)

 

58.2

%

 

-

 

 

 

 

 

 

Total segment gross profit (1)

 

$

19,123

 

 

$

5,978

 

Total segment gross profit margin (1)

 

68.7

%

 

77.9

% 

GAN Limited

Revenues by Geography

(Unaudited, in thousands)

 

 

 

 

 

 

 

Three Months Ended

March 31,

 

 

2021

 

2020

Revenues by geography *

 

 

 

 

United States

 

$

11,473

 

 

$

6,251

 

Europe

 

11,064

 

 

1,410

 

Latin America

 

3,603

 

 

-

 

Rest of the world

 

1,702

 

 

9

 

Total

 

$

27,842

 

 

$

7,670

 

 

 

 

 

 

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

GAN Limited

Adjusted EBITDA

(Unaudited, in thousands)

 

 

 

 

 

 

 

Three Months Ended

March 31,

 

 

2021

 

2020

 

 

 

 

 

Net income (loss)

 

$

(4,464)

 

 

$

694

 

Income tax provision

 

661

 

 

145

 

Interest expense, net

 

1

 

 

8

 

Depreciation and amortization

 

3,963

 

 

853

 

Share-based compensation and related expense

 

1,539

 

 

295

 

Initial public offering transaction related

 

-

 

 

554

 

Adjusted EBITDA

 

$

1,700

 

 

$

2,549

 

 


[ Back To TMCnet.com's Homepage ]